I could literally watch this all day.

The Price of the "slight" Tax Increase

In typical popular rhetoric, we were told that a "slight" increase in taxes on those that "could afford it" was the right thing to do. The market continues to question why the Federal Reserve keeps pumping money into the system (QE 1, 2, 3...). The reason is they had to. The following graph show the impact on nominal GDP of the Obama tax increases. Note that the increases were only half of what he originally sought. GDP gas continued its upward trend, but only thanks to the enormous economic stimulus being provided by the Fed.

Soccer time

Katie's soccer team finished the season against Waconia. They lost two of their best players this Fall to another team, so scoring was a struggle. Here is a couple clips of her.

Dance time

Prior to heading out to competitions in the Winter, the Dance Team practices by performing at halftime of the football games. Katie is one of three eight graders on the team. Those three are unfortunately relegated to the back row. As such it's tough to find/see her sometimes.   But she's there.   See:

North Shore Demo Day

Emily's gymnastics program runs a mock competition to get the kids used to the meet format.   It is also a chance to show off for the parents who aren't normally supposed to take video during class sessions.



Although unclear whether she was invited to join, or we asked if she could join, but the instructor for one of the team programs came up to us about Emily moving on from her class programs to the girls Xcel Team starting this Summer.

Katie's 7th Grade "Graduation"

grad·u·a·tion  (grj-shn)  n.

1. a. Conferral or receipt of an academic degree or diploma marking completion of studies.

1. b. A ceremony at which degrees or diplomas are conferred; a commencement.
 

Not so sure I  buy into the use of the word, but Congrats to Katie for completing the 7th grade, and thus Grandview Middle School.   It was not long ago that I couldn't believe she was going to middle school.  Now Emily is finishing her 1st year there, and Katie is moving on to the High School.  Yikes!

Middle Singers

Friday night, both Emily and Katie participated in the Middle Singers Cabaret. Middle Singers is an after-school program at the Middle School. The kids work with the instructor to pick a song, and then create their own choreography. Each had a group performance and a solo (if they wished). A few kids in the production chose not to do a solo.

Emily was assigned a tough song to sing, but did an admirable job with it. To be honest, Katie shocked us. She was in the school play, but had few speaking/singing lines. This is from the same kid that was unable to walk down the aisle for her pre-school graduation for fear of being in front of people. Yet, watch her amazing stage presence and lovely voice. She rarely - if ever - practiced at home, so her performance was a total surprise.

Rand Rubio

Speeches from Marco Rubio and Rand Paul at CPAC 2013. A good preview of the 2015 race (not including Bobby Jindal). I have always liked Rubio. His speech is good, and he is solid. I'm not a huge fan of Rand's father, Ron Paul. As a result, I have often viewed Rand with some skepticism and distance. His speech was good, especially when talking about some of the pork. Other parts are naive and populous. Both of the Pauls' libertarian roots take a right-sided populous view without thought for unintended consequences. The speeches are worth listening to:

Winter Activities Summary Video

Yup

Bobby Jindal's Funny Speech at the Gridiron

I've always had a bit of indifference towards Bobby Jindal, but I like him that much more after reading these exerts from his Gridiron speech:


I’m honored to be here tonight, and to have this opportunity to represent my people.
As you know, my people are one of our nation’s most accomplished minority groups – doctors…lawyers…business owners…and of course, I’m referring to the Republican Party.

They say this is a place where you can come and tell jokes about the President…poke fun at yourself…set political ambition aside and just generally say anything you want.
Kind of like the Romney campaign.

I spoke to Mitt the other day…told him that I was doing the Gridiron dinner…he said that 47 percent of you can’t take a joke.

This of course is the night for the Washington press corps and the President to kick back, share a few laughs, not take things seriously and just generally enjoy each other’s company.
 Kind of like the President’s interview on 60 Minutes.

The Gridiron Dinner used to be known as the night the media and the administration set aside their differences — back in the days when they had some.

I was on the treadmill the other day and I caught something about the supreme and infallible leader ordained from on high stepping down, and I got all excited, but then I realized it was just the Pope not the President.
...
But…what a difference a day makes…now some people have asked me if I intend to run for President in 2016?

And the answer is that I have no plans to run. I’ve made that clear, over and over again…in Iowa…in New Hampshire…and in South Carolina.

...
The truth is – I am too skinny to run. At least that’s what my friend Chris Christie keeps telling me.
Chris pointed out that my biceps are half the size of Obama’s guns. Not the president’s, Michelle’s.
...
I was one of Rick Perry’s strongest supporters. I supported Rick because he’s a loyal friend, a great governor, and…oops…I forget the third reason.
...
You’ll have to excuse me for a second. I’m drying up. I need a drink of water.
I was hoping to finally meet Mayor Bloomberg here tonight………that’s a lie
I was also hoping to see Harry Reid…..that’s another lie
...
The Menendez scandal is disturbing. Soliciting prostitution is completely unacceptable. We would never put up with that in Louisiana.

Great to see the new Senator from Massachusetts – Elizabeth Warren. My staff tells me we’ve got a lot in common.

Well from one Indian politician to another, I want to wish you all the best in your new job.

I ran into Joe Biden earlier today. I don’t think he recognized me though. He asked me to go get him a Slurpee.
...
I see Eric Holder is with us tonight. I actually heard a rumor that due to sequestration, the attorney general can only afford to ship a couple hundred illegal guns across the border this year.

I saw a bumper sticker on the way over here that said, “Honk if you’ve been released by Janet Napolitano.”
I understand that to save money – the President’s Secret Service detail is being replaced by Joe Biden with a shotgun.

Mr. President, I see a lot of famous people here tonight. Some of our top journalists. I don’t see Bob Woodward, though. He sends his…regrets.
...
You know, a lot of people warned me that if I voted for Mitt Romney, a Wall Street robber baron who hid his money in secretive Grand Cayman bank accounts would end up running the U.S. Treasury.

I see Jack Lew is here tonight. Good thing that job went to you instead, Jack.
...
This may surprise you, but I’m looking forward to President Obama’s second term.
It will be refreshing to hear him stop blaming all the country’s problems on the last four years.

People say that the President and I both have trouble laughing at ourselves.
We can’t laugh at ourselves. That would be racist.

Driving Factors of Income Inequality

In January of this year, Economist Thomas Hungerford released his study, "Changes in Income Inequality Among U.S. Tax Filers Between 1991 and 2006: The Role of Wages, Capital Income, and Taxes"   Yes, quite a title.

Back in September 2012, he was the author of a study by the Congressional Research Office,  “Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945.” The study was used by Obama as basis for his economic tax policies, and criticized by conservatives for partisan language about tax cuts.   He also personally gave thousands of dollars to both Democrat campaigns of 2008, and 2012.   He is hardly a tax conservative.

He has a number of points in his January paper - as seen by his title.  However, I found a number of interesting conclusions in his final remarks.

He notes that gross wages as a percentage of income significantly decline from 92% in 1991 to 77% in 2006.    The largest gains that eat bigger chunks of the pie are capital gains/dividends and business income.



The gross numbers add up to more than 100%, because they are before deduction of taxation.  It should be noted that despite significant tax law changes, individual taxation was not materially different between the two years.  However, 2001, the year before the Bush Tax cuts, individual taxes were the highest of any of the four groupings.   The biggest decline over the fifteen years was payroll taxes, which is an equitable progressive savings decline across income groups.

Income inequality does widen between 1992 and 2006; however, the reasons are not based in salary.  In Hungerford's words, "Wages had no or a small disequalizing effect when other incequality [sic] measures are used. Overall, changes in labor income does not appear to be a significant source of increased income inequality between 1991 and 2006."

What about tax policy? "Federal individual and corporate income taxes had an equalizing effect on inequality regardless of the inequality measure. Federal taxes had a slightly greater equalizing effect in 2006 than in 1991—taxes appear to have been slightly more progressive in 2006 than in 1991."  That is AFTER the Bush Tax Cuts. He continues, "The top marginal tax rate in 1991 was 31% compared to 35% in 2006; the lowest tax marginal rate was 15% in 1991 and 10% in 2006."  Another benefit of the Bush Tax Cuts often overlooked.  "[T]he increased equalizing effect of the individual income tax is likely due to bracket creep—more income is taxed at the highest rates—than to tax law changes."

So why the progression of income inequality?  Investment.  

The highest earners are making more money by investing in growing businesses, or taking equity in their own businesses.  Individual investment made leaps and bound between 1991 and 2006 (and beyond).  As you can see in the chart above, income from capital gains/dividends rapidly increased over the 15 years.  Some of that is the CEO options effect.  CEOs and higher level managers received options grants that are not considered wages.   So a CEO who once made $1.2 million a year, now makes $2.0 million plus significant equity grants.   Many argue that CEOs are paid too much, and maybe they are.  However, in most cases today, they aren't making the huge sums unless they are creating value - preferably long term, although the 2008 bubble showed that too much was short-term.

It's not all CEOs and Hedge Fund Managers.  Obviously, the highest income earners have the greatest ability to make investments.  The improved investment income isn't a zero sum game.  Investment is improving our standard of living significantly.  The poorest quintile of income earners all have cars, cell phones, cable TV, DVRs, and xBoxes.  That's from innovation, which is a direct result of investment.   The top earners are benefiting from investment gains, but society is benefiting from job creation and improved standards.

On a side note, the study was done in 2006.  Part of capital gains is real estate.  2006 was close to the height of the real estate bubble.  Therefore, the increased effect of capital gains may be substantially overstated.  Every house flipped was a capital gain, and those in the highest income brackets tend to have the most expensive homes.

Second note, one flaw with income inequality arguments is that the participants don't remain the same.  The U.S. has one of the greatest income bracket mobilities of any country on earth.  The average taxpayer in today's top 1% isn't likely to be in that group again.  Similarly, many in the bottom quintile and not likely to be in that quintile when surveyed again. 

Income mobility makes the numbers very difficult to draw conclusions from.   Yes, the rich are getting richer, but 1. it's not the same people, and 2. it's a result of how their money is invested.

Classic Schadenfreude

Reposting from Ace of Spades:

Lower Costs ... ha

The CBO now estimates that the subsidies, which are to be offered through exchanges beginning in 2014, will cost 29 percent more than the CBO initially projected in 2010. The projected 10-year cost has increased by $233 billion.

Assuming their own beliefs are just common sense

Bill O’Reilly tonight highlighted findings that liberals on the internet tend to be less tolerant of opposing views than conservatives. Democrat Kirsten Powers agreed with this sentiment, relaying from her own personal experiences engaging with liberals and conservatives, surmising that the former tend to be less tolerant because they are used to controlling the media.  Powers has worked for the New York State Democratic Committee, was the press secretary for Andrew Cuomo for Governor and Communications Director on the mayoral campaign of C. Virginia Fields.

O’Reilly said the study finds liberals are far more sensitive about criticism, and a significant percentage of them have ended online relationships due to political differences. Powers explained that after getting out of her own “Democratic bubble,” she noticed that conservatives tend to be more open to hearing opposing viewpoints than liberals.

“Liberals, because they are used to controlling all the media, pretty much, academia, that for them, when they hear things that don’t jibe with what they want to hear, it’s very disconcerting and unsettling to them.”  Powers added that most of these liberals are generally shocked about dissenting views because they just assume everyone believes their beliefs are just common sense.

The on-going myth that never dies

Maureen Dowd of the New York Times wrote a scathing editorial on Obama (shocking, I know). But couldn’t help herself with this line:

“But the cost of W.’s misbegotten wars and his mishandling of the economy overwhelmed Obama’s first term.”

Are you kidding me? Do we have to live with this PR bs for the rest of our lives?
 

A. Afganistan is now a misbegotten war? What happened to Afganistan is a legitimate war and Iraq, the war that got virtually unanimous approval, is illegitimate?

B. The actual cost of Afganistan, Iraq and "Pakistan" (whatever that includes) was $757 billlion over 7 years (2003-2010). Only 75% of Obama's PROPOSED deficit going forward for one year.

C. The media and think tanks have rolled out a $3bn proposed estimate for the cost of all the wars.

1. That figured includes "interest." Even if all the $750 billion were borrowed on day one, the aggregate cost to now is $225 billion at most, and $22bn going forward (less than Sandy pork).

2. It also includes $1 trillion of FUTURE healthcare costs for veterans for the next 50 YEARS. Again, per year, less than Sandy pork.

3. The next $1 trillion estimate must be rounding because I can't find support for that - unless it is 30 years worth of the above mentioned interest pulled forward.

D. Now in retrospect, what exactly was the mishandling of the economy that GWB is responsible for?

1. The tax cut? Can't be. Obama just campaigned across these great lands that restoring the Bush-tax cuts were ESSENTIAL to maintaining our economy.

2. The Federal involvement in the housing crisis? Yes, he can be criticized for pushing the "home-owner" society like many others at the time, but when he proposed curtailing the expansion of Fannie and Freddie (the lead players in the creation of the housing crisis) as early as 2005, he was shouted down by Barney Frank and Chris Dodd for being anti-middle class.

3. The banking crisis? Albeit dangerously, the banks were operating all legally and under the supervision of the non-political Federal Reserve limits and regulations.

4. The bailout through TARP? - The bailout of the nations' banks was the efforts of Bush's Treasury Secretary, Hank Paulsen, but in conjunction with soon-to-be Treasury Sectretary Tim Geitner. Therefore it must have been a bi-partisian approach.  Plus, TARP has been repaid and actually MADE the government money!

So someone please explain how Bush's activities have gotten us into this "mess" that is no one's fault but his?

I re-read an article written in 2003 by a self-proclaimed "moderate independent" that discussed whether or not GWB was reponsible for the recession of 2001-2002. The conclusion was that he WAS responsible - not for any of his fiscal actions or tax cuts - but rather that for the months leading up to his election and the six months that followed his inauguration, he talked down the economy by saying it was "bad" or "weak."  Clinton, OBL nor anyone else was to blame for the malaise, but rather harsh words scared everybody. That blogger no longer writes, I would love to hear what he has to say now.

Who's Not Fair?

Estimated  Effective Federal Tax Rates for 2013:

Bottom fifth: 1.9%
Second fifth: 9.5%
Middle fifth: 15.6%
Fourth fifth: 19.0%
Top fifth: 28.1%

80-90 percentile: 21.5%
90-95 percentile: 23.4%
95-99 percentile: 26.3%
Top 1 percent: 36.9%

Top 0.1 percent: 39.6%

And this isn't fair share, why?    The middle class - which by definition would be the middle fifth - pay 15.6% of income to the federal government.  The top fifth pays almost double.   The top 1% pays almost 2.5x.

If you make $92k a year or better, you are in the top fifth.   To make the top 1%, you would need to make $350,000 or more.   Therefore, if you make $100k, your additional federal tax over the middle fifth is $6,000 per year.    And that is not considering any impact of the Alternative Minimum Tax (AMT) which limits deductions and creates a minimum tax rate, and was originally created in 1969 in an Congressional attempt to nab a handful of millionaires (155 people) that "weren't paying their share," because they were not paying any income tax at all.  Sound familiar??  For years since then, Congress has passed one-year "patches" aimed at minimizing the impact of the tax.   Nevertheless, despite its attempt to be a "millionaire tax" on just 155 people, the tax has creeped to nabbing 3.9 million people in 2008 (and going higher), and hits some with incomes as low as $75,000 per year.  

#LawofUnintendedConsequences

The Negotiator - not

Obama says we DON'T have a spending problem.  He is soooo wrong, but the reality is he doesn't care.  His potential legacy is winning things that change the country.  If he focuses on the spending problem, he won't be able to do his legacy things.

Therefore compromise isn't an option.  My way or the highway.

The Fiscal Cliff deal was tragic.  Not because it raised taxes on those making greater than $400k per year (although that affects about 750,000 small businesses), but rather because it does nothing to fix the deficit.  In fact, with some new spending snuck in, it actually ADDS to the deficit by $4 trillion over 10 years according to the non-partisan CBO.   $4 trillion!   great.  Nice job everyone.

But in the end, Obama only wanted to raise taxes, and knew that if we went off the cliff, the general population would blame the Republicans.  The Dems and their media lapdogs have done enough PR to make that so.   Instead Obama gets to put out press releases touting that now we have the "most progressive tax code in decades."   I don't recall that being the Fiscal Cliff objective.

Peggy Noonan of the WSJ writes this good article regarding Obama, the negotiator:

We're all talking about Republicans on the Hill and their manifold failures. So here are some things President Obama didn't do during the fiscal cliff impasse and some conjecture as to why.

He won but he did not triumph. His victory didn't resolve or ease anything and heralds nothing but more congressional war to come.

He did not unveil, argue for or put on the table the outlines of a grand bargain. That is, he put no force behind solutions to the actual crisis facing our country, which is the hemorrhagic spending that threatens our future. Progress there—even just a little—would have heartened almost everyone. The president won on tax hikes, but that was an emotional, symbolic and ideological victory, not a substantive one. The higher rates will do almost nothing to ease the debt or deficits.

He didn't try to exercise dominance over his party. This is a largely forgotten part of past presidential negotiations: You not only have to bring in the idiots on the other side, you have to corral and control your own idiots.

He didn't deepen any relationships or begin any potential alliances with Republicans, who still, actually, hold the House. The old animosity was aggravated. Some Republicans were mildly hopeful a second term might moderate those presidential attitudes that didn't quite work the first time, such as holding himself aloof from the position and predicaments of those who oppose him, while betraying an air of disdain for their arguments. He is not quick to assume good faith. Some thought his election victory might liberate him, make his approach more expansive. That didn't happen.

The president didn't allow his victory to go unsullied. Right up to the end he taunted the Republicans in Congress: They have a problem saying yes to him, normal folks try to sit down and work it out, not everyone gets everything they want. But he got what he wanted, as surely he knew he would, and Republicans got almost nothing they wanted, which was also in the cards. At Mr. Obama's campfire, he gets to sing "Kumbaya" solo while others nod to the beat.

Serious men don't taunt. And they don't farm the job of negotiating out to the vice president because no one can get anything done with the president. Some Republican said, "He couldn't negotiate his way out of a paper bag." But—isn't this clear by now?—not negotiating is his way of negotiating. And it kind of worked. So expect more.

Mr. Obama's supporters always give him an out by saying, "But the president can't work with them, they made it clear from the beginning their agenda was to do him in." That's true enough. But it's true with every American president now—the other side is always trying to do him in, or at least the other side's big mouths are always braying they'll take him down. They tried to capsize Bill Clinton, they tried to do in Reagan, they called him an amiable dunce and vowed to defeat his wicked ideology.

We live in a polarized age. We have for a while. One of the odd things about the Obama White House is that they are traumatized by the normal.

A lot of the president's staffers were new to national politics when they came in, and they seem to have concluded that the partisan bitterness they faced was unique to him, and uniquely sinister. It's just politics, or the ugly way we do politics now.

After the past week it seems clear Mr Obama doesn't really want to work well with the other side. He doesn't want big bipartisan victories that let everyone crow a little and move forward and make progress. He wants his opponents in disarray, fighting without and within. He wants them incapable. He wants them confused.

I worried the other day that amid all the rancor the president would poison his future relations with Congress, which in turn would poison the chances of progress in, say, immigration reform. But I doubt now he has any intention of working with them on big reforms, of battling out a compromise at a conference table, of having long walks and long talks and making offers that are serious, that won't be changed overnight to something else. The president intends to consistently beat his opponents and leave them looking bad, or, failing that, to lose to them sometimes and then make them look bad. That's how he does politics.

Why?

Here's my conjecture: In part it's because he seems to like the tension. He likes cliffs, which is why it's always a cliff with him and never a deal. He likes the high-stakes, tottering air of crisis. Maybe it makes him feel his mastery and reminds him how cool he is, unrattled while he rattles others. He can take it. Can they?
He is a uniquely polarizing figure. A moderate U.S. senator said the other day: "One thing not said enough is he is the most divisive president in modern history. He doesn't just divide the Congress, he divides the country." The senator thinks Mr. Obama has "two whisperers in his head." "The political whisperer says 'Don't compromise a bit, make Republicans look weak and bad.' Another whisperer is not political, it's, 'Let's do the right thing, work together and begin to right the ship.'" The president doesn't listen much to the second whisperer.

Maybe he thinks bipartisan progress raises the Republicans almost to his level, and he doesn't want to do that. They're partisan hacks, they're not big like him. Let them flail.

This, however, is true: The great presidents are always in the end uniters, not dividers. They keep it together and keep it going. And people remember them fondly for that.

In the short term, Mr. Obama has won. The Republicans look bad. John Boehner looks bad, though to many in Washington he's a sympathetic figure because they know how much he wanted a historic agreement on the great issue of his time. Some say he would have been happy to crown his career with it, and if that meant losing a job, well, a short-term loss is worth a long-term crown. Mr. Obama couldn't even make a deal with a man like that, even when it would have made the president look good.