Dumb, Silly, Sad and Ridiculous

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Congress let FUTA die on June 30th. What's a FUTA?, you might ask.

FUTA (Federal Unemployment Tax Act surtax ) was, get this, a temporary tax on wages that was established thirty five years ago. It was supposed to help replenish the unemployment benefit accounts after the 1973-74 recession. It has already been extended 9 times.

The Republican let it die. House Ways and Means Committee Chairman Dave Camp, R-Mich., refused to extend the tax. Completely consistent with current Republican thinking Camp had this to say:

“The fact that it has taken 35 years for this ‘temporary' tax to expire clearly illustrates the dangers of higher taxes—once in place, they are unlikely to ever go away.”

As far the dollar and cents go, FUTA is no big deal. It comes to about $14 per person per year. The absence of this tax will only add a couple of billion onto the annual deficit.

We are in a crisis with unemployment this 4th of July. We have been for three years now. We are going to be in crisis next 4th of July too. There is an enormous social cost to this. The "solution" is to borrow from the future to pay for it today.

That's the American way. Democrats or Republicans the same. One day the lot of them will wake up to a capital market that says, “No mas!” I'm amazed that those bright folks in D.C. don't see it coming. Maybe they're not so bright after all.




I love this story. I'm going to try to write a screenplay about it. This is sort of “Law and Order” combined with the “Sopranos”. This is a very big legal case that might set some troubling precedents. The Supreme Court has already been involved. Now it is back in the United States Court of Appeals for the Second Circuit. A quick summary:

One company (Ideal Steel) sued another (Natl Steel) for damages due to competition by allegedly evading taxes and thereby giving customers a discount and filing fraudulent sales and income tax returns to cover up the scheme, and further allegedly damaged plaintiff by using proceeds of the scheme to open a new store resulting in additional competition. From the court filings:

Defendants' establishment of a competing commercial enterprise through the investment of income derived from a pattern of racketeering activity—to wit, mail fraud and wire fraud in violation, in the filing of fraudulent tax returns and related information enabling the evasion of income taxes.

This is a fight between two “family” owned businesses. One in the Bronx and one in Queens NYC. This is a RICO (racketeering) suit. Some of the arguments put forward in the case:

When organized crime infiltrates a legitimate business, its whole method of operation counters our theories of free competition and acts as an illegal restraint of trade.

The syndicate-owned business, financed by illegal revenues and operated outside the rules of fair competition of the American marketplace, cannot be tolerated in a system of free enterprise.

So you get the connection to the Sopranos. But on the other side is a parade of very talented (and expensive) lawyers. A good chunk of the judicial system has been involved as this case has proceeded. At this point the costs must be staggering. There is a lot at stake.

I'm not sure how often companies can prove their competitors are doing stuff like what is alleged, but people would definitely be motivated to sue. So if Ideal Steel wins, a ton of additional lawsuits against other major companies would soon follow. And that is why this case is so important. None other than Supreme Court Justice Breyer has already opined:

The (prior court decision) has warped civil RICO into a tool that aggrieved business interests will use to harass and undermine competitors engaged in legitimate, competitive business activities. This in turn will put the courts in the nearly impossible position of having to ascertain which otherwise legal marketplace activity can be directly linked to ill-gotten investments and which cannot.

When I look at this I see a very busted system. One that can only be laughed at. One that it is struggling to survive. We are a nation of laws. Our effort to keep it that way is killing us. Everybody hates the bankers these days. Actually it is the lawyers who are making a hash of it.

There is a few thousand word legal brief on this story. I ran it through that Wordle thing. Should be worth a screen play. A tragi-comedy.




This report (Link) concluded the following regarding young adults and personal debt:

Researchers found that the more credit card and college loan debt held by young adults aged 18 to 27, the higher their self-esteem and the more they felt like they were in control of their lives.

That's the thinking of teenagers today? The same report found that those older than 27 had a very different perspective.

Those aged 28 to 34 – began showing signs of stress about the money they owed.

There's something very wrong here.




This is the cover page for the new CBO report on the cost of the military: (I love the pic of the dog jumping out of the plane)


Inside the report is this chart:


A few observations:

* That horribly big dark blue hump from 2002 to today is what is referred to as “OCO” (Overseas Contingency Operations). I really think they should call a spade a spade. OCO might confuse some folks. A more appropriate description could be WAR.

* The good folks at the CBO make the (dangerous) assumption that there will be no OCO/WAR over the next twenty years. That the mistakes of the past won't be repeated again. Here's hoping on that one.

But look at the conclusions of this. On the assumption that there are no more OCOs/WARs, the military is still going to cost $650 billion a year. $13 trillion is the “plan” that we are on.

On paper, this “plan” will not work. We are not such a rich country any longer. We can't afford to be the cop on the beat. But the question is, “Can we afford to not be?” Time will tell.