Fixing The Income Tax Code Once And For All - Fairly and Finally

Ex-Treasury Secretary William Simon once said: "The United States should have a tax system that looks like someone designed it on purpose." Our current tax code and system could not be any further from that objective. It has adapted, mutated, morphed, and changed over time as the political class has tinkered with it to serve various purposes, most of which involved garnering votes for politicians currently in office to enable them to stay in office.

As a result, we end up with the following abominations:

• Just under half of all American households (46%) paid no Federal income taxes in 2010, many of them actually using the income tax process to earn money via various deductions, credits, and other special treatments. Despite not paying anything in income tax, these same Americans get to enjoy all of the benefits of government services and programs including the nation's defense, infrastructure, housing, education, etc.
• The top 1% of all U.S. taxpayers pay 38% of all Federal income tax dollars received. The top 10% pays 70% of all income taxes. If these high payers should ever decide to leave the country or earn less because of the heavy tax burden, the burden on the rest of the American taxpayers, including the large numbers that do not pay any income taxes, would skyrocket. Relying  on a smaller and smaller base of taxpayers is a sure long term formula for economic disaster.
• A recent Wall Street Journal article, that was summarized in the April 29, 2011 issue of The Week magazine, estimated that U.S. taxpayers expend about $431 billion a year to comply with the complexity of the U.S. tax code. This money could be so much better spent on productive expansion of the economy and employment rather than tax paperwork.
• From a business perspective, the tax code now does such inane things like giving tax credits to companies for their expense of moving their domestic factory production to factories off shore, i.e. we pay companies to reduce U.S. employment. Insanity.
• The tax code can be so punitive that U.S. companies leave foreign profits overseas since it is less expensive to invest their profits overseas, expanding foreign economies, or they let their profits sit in an overseas bank, which is a better economic and tax decision than to bring those profits home to the U.S. for economic expansion.
• The tax code can also be so non-punitive that companies like General Electric can have billions and billions of dollars in profit but end up getting billion dollar tax credits from the U.S. government in any one year.

Much like Obama Care, the tax code is thousands and thousands of pages long, resulting in many unintended consequences and is virtually indecipherable by most educated people.

What a mess. How can a business, a family, or a government do long term, constructive planning when the tax code is such a mine field, a mine field that can be changed at any time by the whims of the political class? How do you explain the inequities in the code when everyone in this country is supposed to be treated equally: some people get full access to government services while others pay for those same services or how do billion dollar companies get away with paying no taxes? Craziness.

Thus, there should be no argument that we need to streamline, simplify, and interject equity into the tax code. This is relatively easy to do if we adhere to the following guidelines:

• In any tax reform initiative, the Federal government cannot end up with more revenue than if no changes had been made.
• The changed tax code needs to be locked in place for at least ten years so that certainty is introduced into business and family plans. No exceptions.
• The reformation would be a gradual process in order that businesses and families adjust their spending and purchases gradually over time in order to avoid any financial shocks and hardships.
• No additional "fees" or taxes would be implemented by the political class with the sole purpose of sidestepping the new tax code.

This would take a load of political discipline and leadership from the political class, qualities that always seem to be lacking. However, they are essential if we are to get ourselves out of this tax bog we are stuck  in now.

The basis of this proposed tax reform process is that it is a flat tax with only one or two tax brackets and absolutely no deductions. All income is treated the same so that wages, dividends, interest, capital gains, etc. are the same from a tax perspective, i.e. a dollar earned in any way is treated the same. How do we get from where we are now to this vastly simplified process without drastic financial pain and agony?

Simple. Given that most Americans now complete, compile and pay their taxes via a tax computer program, it is not that difficult for those programs to be adjusted to compute two different tax views, a business as usual view and a flat tax view. In fact, many taxpayers already compute two tax views in to comply with Alternative Minimum Tax requirements. In the first year, the difference  between the two views would be adjusted ten percent in the direction of the flat tax view. This would be the final tax bill for the first year of the reform process.

In the second year, the difference in the two views would be adjusted twenty percent in the direction of the flat tax view. This process would continue for ten years until we got to a flat tax view only.

This relatively simple concept is best illustrated with some examples. In the first example, let's assume that a family earns $50,000 a year from all forms of income. Via deductions, credits, etc. they end up owing $8,000 in income taxes. If the flat tax bracket is 15%, their flat tax liability would be $7,500. The difference between the two plans is $500. 10%  of $500 is $50 so they would end up paying only $7950 in taxes rather than $8,000 as they begin the move to the flat tax plan.

If this exact same situation was to occur in the second year then 20% of the $500 is $100. The family would owe $7,900 in taxes, $8,000 less $100. This would repeat every year for ten years with the difference between the two views increasing 10% a year.

Consider another example of another American family, also  making $50,000. However, given the numerous tax credits, tax deductions, and other favorable tax treatments, this family ends up paying no income taxes at all and, in fact, the Federal government sends them a check for $2,500. This American family falls into the category of those that pay nothing for all the government services they enjoy.

In this case, the difference in the first year of the reformation process is $10,000, $7,500 - (-$2,500). 10% of the difference is $1,000. Thus, in order to move to the flat tax plan, this family would no longer receive a check from the government for $2,500 but would receive a check for only $1,500, the original $2,500 reduced by the 10% difference movement of $1,000 to start bringing this family in line with the flat tax.

Let's look at General Electric for a business example. They recently announced they had 2010 profits of $5.1 billion on their U.S. operations. Very impressive. However, more impressive is that they paid no Federal income tax on those profits. Even more impressive, they were able to legally work the complexity of the tax code so that they actually received a $3.2 billion tax credit from the United States government.

This is really nice work if you can get it. Earn billions of dollars, pay no taxes on those billions, and the government will give you billions more. In our simple flat tax reformation plan at 15% tax rate, General Electric would have paid about $765 million on those $5.1 billion of profits. However, they got money back so we need to start making the adjustment.

The difference between what they should have paid ($765 million) and what they paid (actually received $3.2 billion back from he government) is about $4 billion. Under our ten percent rule, in the first year, their $3.2 billion credit would have been reduced to $2.8 billion ($3.2 billion less 10% of the $4 billion). Over a ten period General Electric would migrate to the flat tax calculation.

Now, business taxation is a little more complicated then maybe we presented it. The flat tax requirements might have to be adjusted so that it also becomes and more and more unattractive for General Electric to keep its overseas profits overseas. Thus, that is a wrinkle that may need to be planned into the business side of the flat tax plan so that we do not negatively impact the domestic economy with a new tax approach.

However, it is pretty obvious to everyone except General Electric and the political class that this is not a level playing field. According to a New York Times article by David Kocieniewsski that appeared in the may 13, 2011 issue of The Week magazine, business taxation in the United States comes out to about 1.3% of our GDP, making that about half of what the most industrialized countries receive from their businesses. Thus, there is probably benchmark reasons why companies like General Electric can and should pay more in taxes.

Another interesting assertion in the article is that the United States has one of the highest corporate tax rate levels (35%) vs. other countries. However, the complex U.S. tax code can be worked so well that 55% of companies studied in a seven year period, that was included in a 2008 government study, had at least one year where they paid zero in Federal income taxes.

Almost half of American families pay nothing in Federal income taxes. Companies can earn billions of dollars in profits and pay no Federal income taxes. The government gives companies tax credits to shutter American factories and move jobs and production overseas. Looks like William Simon got it right long ago. Our tax code is unfair, complex, and can be used to disadvantage American families and American businesses that actually pay their fair share of taxes.

By going to a simple, flat tax plan the chances of mischief and unfairness is reduced significantly. It also provides the political class less leverage and tricks to favor their campaign donors, both corporate and individuals. Most importantly, it would allow Americans a large degree of certainty in their tax and business planning and divert some of the money and resources from tax preparation to business expansion.

Isn't that what America used to stand for - fairness? About time we got back to the concept of a level playing field when it comes to taxes.



Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at http://www.loathemygovernment.com/. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.
Please visit the following sites for freedom:

http://www.loathemygovernment.com/
http://www.cato.org/
http://www.robertringer.com
http://realpolichick.blogspot.com
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment.com

The Economic Uncertainty Caused By Political Uncertaintly

Although every single economic enhancement program launched by this administration has been a failure, you do have to give it credit for trying since the failures happened is so many different ways:

- Failure Type 1 - these failures spent a lot of taxpayer money to incentivize economic behavior that would have happened anyway. Two prime examples are the Cash For Clunkers program and the First Time Homeowner Rebate program. While these two programs created a temporary blip in demand, once the incentives ended, demand fell below a business as usual expectation, indicating that demand was moved up but not created since the uptick in demand during the program was offset by the down tick after the program ended.

- Failure Type 2 - these failures were programs that did not even have the temporary uptick to any substantial degree. Cash For Caulkers, which provided monetary incentives to people who insulated their homes, and Cash For Appliances, which provided monetary incentives for people to buy new, energy efficient appliances, never get mentioned in the administration's list of accomplishments. This implies that they even recognize how lame these programs were.

Another component of this type of failure was the HAMP program which was supposed to get mortgage relief for homeowners in distress and having difficulty paying their mortgages. The program severely underperformed relative to its forecasted participation rate and for many homeowners that did participate, they ended up with worst mortgage plans than when they started, the exact opposite of the intended consequence of this program. The inspector general of the program himself called it a failure and it was quietly put to death without much fanfare.

- Failure Type 3 - This failure is focused mostly on the massive waste of money called the economic stimulus program. Remember, this administration claimed that if this economic stimulus program was not passed, unemployment could go as high as 8%.

Well, it was passed and unemployment has soared to 9% and beyond and has stayed high for months on end. Thus, relative to the stated objective of the program, keep unemployment well under 8%, it was an utter failure.

Recent Congressional Budget Office estimates put the cost of the stimulus program at about $830 billion. The administration believes the program was a success since it claims the stimulus created about 3 million jobs. However, if you do some simple math and divide the 3 million jobs into the $830 billion cost, you end up with a cost of over $275,000 per job created, a ridiculous price to pay, assuming that 3 million jobs were even directly created by the stimulus.

Given what the stimulus money was wasted on, it is no surprise that it was an utter failure from an unemployment perspective and cost per job perspective.

- Failure 4 - this is an interesting and often overlooked type failure since it is self inflicted by the political class on itself. Back in the first quarter of 2010, the political class passed a $35 billion small business jobs incentive program. But listen to the comments after the bill was passed from various politicians (and reported by the Associated Press on March 4, 2010):

• "If that's the only thing that I can vote on, I'll vote on it," said a New Jersey Congressman.
• "It's really not a jobs bill. It's only one small piece," said a California Congresswoman.
• "It's an insipid, weak piece of legalisation," said a Washington Congressman.
• "It's not that good but it's better than nothing," said a Massachusetts Congressman.
• "It simply encourages conduct that would occur anyway," said a Texas Congressman. See Cash For Clunkers  above.

If the people who constructed and passed the legislation think it stinks, what chance does the bill have of being successful? With everybody bad mouthing it and having no confidence in it before it is put in place, $35 billion is wasted since the bill was dead on arrival in the real world.

Wow, who thought that the political class could fail in so many ways? It would be comical if they were not wasting hundreds of billions of taxpayer dollars and driving us deeper and deeper into debt without any resultant benefit.

If all of these programs failed miserably, maybe it is time to take a totally different approach to managing the economy. The one area that the Obama administration and the political class has not tried is to do less, rather than more. Every time they do something, given their bungling, they interject more and more uncertainty into the market and economy. The last thing a business owner or operator wants in their business life is uncertainty. You can at least plan in a certain world, you cannot plan effectively in an uncertain world.

With high levels of uncertainty, retrenchment is a wiser business strategy than advancement. Consolidation is a wiser business strategy than expansion. Doing nothing is wiser than taking a risk. Certainty, even bad news certainty, is better than wide open uncertainty.

How has this administration and the political class as a whole contributed to uncertainty?  The ways are many and wide ranging:

- For a year, the two parties viciously debated the merits and downside of eliminating the Bush tax cuts for people earning over $250,000 a year. Within that set of taxpayers are millions of small businesses who file their business taxes within their personal tax returns who could en dup paying more in taxes. Given this uncertainty the political class injected into reality, will small business have to pay more in income taxes, small businesses went the safe route and did not hire since they did not know if they would have extra tax expenses.

- Continuing with the same insanity, when the political class finally decided to extend the Bush tax cuts for everyone including the rich, they could only agree on a two year extension. More uncertainty. What happens at the end of two years? Why should a small business owner hire more employees when his Federal income tax bill could go up significantly within two years? Better to stay put, business wise, until the uncertainty clears.

- There are not enough days to go into details about the uncertainty that Obama Care has injected into the thinking of all types of businesses but the uncertainty generally falls into four categories:

• Is it more tax advantageous to the business to drop health care for my employees and save money because of Obama Care?
• How many more scarce business resources will I have to devote to just filling out Obama Care paper work?
• How many more different taxes will I have to pay as a business owner under Obama Care?
• How much more in total business taxes will I have to under Obama Care?

The list goes on and on. And the truth is, no one, including the clowns who wrote the legislation, knows the answers to these questions. In the past two weeks we have seen totally unexpected bad consequences of this law arise as people plow through the 2,500 page legislation.

Given the people who wrote and hyped the law did  not foresee the latest snafus, it is highly unlikely that business owners and operators know what is going to happen either. More and more uncertainty.

The House Of Representatives Energy and Commerce Subcommittee had hearings last week on Obama Care. Presented at that hearing was a 3,500 page stack of forms, requirements, regulations, etc. that Oabma Care has already spawned. No one knows what is going on or what will fall out of these 3,500 pages. More uncertainty.

- Boeing wants to move some of its airplane production from Washington state to South Carolina in order to be more competitive. More competitive means more business means more jobs. They do not want to move these jobs to South Korea. They do not want to move these jobs to South Yemen. They want to move them to South Carolina, totally within the continental United States and give them to Americans.

However, the Obama administration via the National Labor Relations Board has intervened and sued Boeing over the move. Why? The real answer is so that Obama can protect some union votes for himself in 2012 since the jobs being moved from Washington to South Carolina will less likely still be union jobs when the move is done. Pure politics, more uncertainty.

Why would a business plan and try to improve its business and expand emloyment when the heavy hand of the government could intervene at any time and stop the plans purely for political gain proposes? Why bother going through the motions to expand when the sword of interference and uncertainly could chop down like it did on Boeing? Better to just hunker down, stay within the current business plan and operations, not hire more people, and avoid the potential government interference.

Given that any proactive economic program this administration has come up with has failed, maybe it is time to change strategies. Rather than continuing to waste taxpayer money we should be looking to remove uncertainty from the market and let the market heal itself? Wasting money has not worked,  no matter how it was spent or intended, maybe trusting the free market and private sector to act for its own good in a more certain business climate would work. There is no downside.

Zachary Karabell, writing in the July 4, 2011 issue of Business Week says the same thing better then me. His article examines the issue of whether government intervention in the market is a good thing. His conclusion:

"The government is one vital element among many, and society will thrive only when neither too much or too little is expected of it. This may not be as stirring as revolutions and crusades, but its better to accept limitations and work constructively within them than pin our hopes on policies such as the massive attempts to juice consumption that the U.S. government has repeatedly tried - and are bound to disappoint. Bold plans with no chance of success won't change employment patterns or make a nation competitive in a global system that is increasing complex and dynamic. Today's leaders need the humility to recognize what they can't change so that they can meaningfully change what they can."

Well said. And what they can change is to stop bickering over voting blocs, stop bickering over tax plans, stop bickering over programs that are doomed to failure, have a little humility, and start injecting some sound long term planning into the economy which would remove the blockade of uncertainty without wasting hundreds of billions of taxpayer money

By the way, repealing the abomination that is Obama Care would go a long way to breaking that blockade.




Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at http://www.loathemygovernment.com/. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.


Please visit the following sites for freedom:

http://www.loathemygovernment.com/
http://www.cato.org/
http://www.robertringer.com
http://realpolichick.blogspot.com
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment.com

Another Week, Another Obama Care Fiasco

Newspaper reports last week sent me looking for an old, inane Nancy Pleosi quote she made during the run up to the forced passage of Obama's health care reform legislation. During the debate, Ms. Pelosi stated: "We have to pass it (Obama Care) so you can find out what is in it away from the fog of controversy." The YouTube video of her actually saying this can be viewed at:

http://www.youtube.com/watch?v=KoE1R-xH5To

This statement was so wrong on so may levels:

• Why should the American public have to wait until this massive legislation was passed? Shouldn't we have a right to understand how it is going to affect our lives BEFORE it becomes law?
• Isn't it the job of our elected representatives to explain what is any the bill rather than blindly passing it and hope it works after passage?
• What she sees as a fog of controversy I see as healthy debate. This legislation will significantly affect the lives of just about every American if it stays in effect, debate is certainly warranted rather than demonizing debate as controversy and a fog.
• But we should not be surprised by this suppression of legitimate debate and her condescending attitude, i.e., we all will see what is in it after it is passed, since Pelosi publicly accused all of those opposed to Obama Care as being un-American.

My distaste for Ms. Pelosi's attitudes and negative impact on this country's financial situation and freedom is no secret. But at least now we can follow her advice and actually see what is actually in the legislation.

Keep in mind that Pelosi, Reid, and Obama claimed that Obama Care would reduce the Federal government's deficit by about $125 billion over the first ten years. However, subsequent unbiased analysis by the Congressional Budget Office identified about $105 billion of additional expenses not included in the $125 billion estimate. Thus, at best, using the administration's own numbers from the Congressional budget office, Obama Care would reduce the Federal deficit by $20 billion over ten years or a measly $2 billion a year. Again, best case.

An Associated Press article on June 30, 2011 reported that, due to wording in Obama Care, older Americans of the same age and same income with similar medical histories would pay substantially different amounts of dollars for private health care insurance, another unintended consequence of the legislation.

The article went through the math for hypothetical neighbors:

1. Both neighbors are 62 years old.
2. The both have the same income of $39,500 a year.
3. One neighbor gets all of his $39,500 from working at a real job while the other neighbor gets $20,000 from part time work and collects $19,500 from Social Security.
4. Neither of them gets health insurance at work so they have to purchase it individually from a private insurer since they cannot get Medicare insurance until they are 65 years old.
5. If this was happening in 2014, they could purchase their health insurance from a health insurance exchange and also get Federal subsidies to make their premiums more affordable.
6. The neighbor who is receiving early Social Security payments would pay $206 a month in the exchange to receive health care insurance.
7. The neighbor who is not draining the Social Security budget and is working full time to get his $39,500 would have to pay $313 a month for the exact same coverage of his neighbor, 50% more.

The article quotes an expert in the field who believes that the more of your income that is in the form of Social Security benefits, the bigger the size of the savings you will get on your health insurance.

Now, Ms. Pelosi, how does this make sense? The good American, working full time, earning a living, paying taxes into both the income tax pool and Social Security tax pool, not pulling down scarce Social Security funds, gets penalized so heavily relative to his neighbor who is not paying in as many taxes to the government and who is actually draining down scarce Social Security funds? How fair is that? We have passed the bill, now see what is in it, and it is not pretty, government regulations arbitrarily rewarding less productive citizens vs. more productive citizens.

This snafu comes on the heels of another finding/screw up reported two weeks ago.  Medicare's top actuary found that up to 3 million middle class/middle income Americans, who get at least some of their household income from Social Security, could become eligible for nearly free health care coverage via Medicaid and Obama Care, and the American taxpayer, even though they could afford to pay for it. The actuary summed up his findings with the understatement that the situation "just doesn't make sense." How true.

And we can use this same statement to describe this week's unintended consequence from Obama Care. How pathetic, Pelosi says we needed to forego debate and just pass this thing to see what is in it. Well we did it that and it is not a pretty sight. Didn't anybody in Congress or on their staffs read this legislation before it was passed? These are some relatively simple things to figure out, why did we have to figure them out after the fact? Are those in Washington that math deficient?

Back to the deficit numbers we laid out above. If we take the average of the $206 and $313 numbers above that would be required to insure our neighbors, an annual equivalent of about $3,000, and hit it up against the additional 3 million Americans who will get free health care via Medicaid, the Federal government, and the American taxpayer, will unnecessarily be shelling out an additional $9 billion a year under Obama Care just in this small example.

This will totally wipe out the hypothetical $2 billion savings we discussed above and add about $70 billion to the Federal deficit over ten years. Tell me again Ms. Pelois, why this is a good deal? We are adding to the deficit, unnecessarily giving away taxpayer money, and institutionalizing government  discrimination against hard working Americans.

I can hardly wait to see what happens next week.



Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at http://www.loathemygovernment.com/. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.


Please visit the following sites for freedom:

http://www.loathemygovernment.com/
http://www.cato.org/
http://www.robertringer.com
http://realpolichick.blogspot.com
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment.com

Political Class Insanity - July Edition

My monthly issue of Reason magazine showed up yesterday so it is that time of month for a regular feature - political class insanity. Our insanity posts are quick reviews of how poorly the American political class, and the government it operates serve the citizens of the country. Despite the politicians' poor performance, the costs incurred for this performance is extremely high relative to high taxes, lost freedoms, wasteful behavior, and never solved problems and issues.

As always, Reason magazine is a fantastic resource for those interested in freedom and liberty, providing insightful and in-depth analyses relative to the great issues of our times and our continual erosion of freedom.

The first three situations are from the August issue of Reason magazine:

- The state of Florida is working on legislation so that people working in 20 occupations would no longer have to get a license from the state of Florida. One of those occupations is interior decorating. However, during the legislative discussion of the issue, the interior design lobby testified that the state "regulations are necessary to protect public safety." Huh? Without government regulation of the interior decorating industry, we could be in danger?

It gets better. A professor, testifying on behalf of the Miami Dade College's School of Architecture and Interior Design, told a legislative committee that by removing the licensing requirement what "you're basically doing is contributing to 88,000 deaths every year." However, the state attorney general investigated the claim and concluded that having an unregulated interior design industry would not endanger the public.

The good news: the Florida political class is finally doing something to downsize the unnecessary bureaucracy of government. The bad news is that these kinds of taxpayer waste probably exist everywhere across the country, wasting taxpayer money and slowing down commerce. Government bureaucrats overseeing private sector activities that need no oversight. Better to let interior decorators and other such non-lethal industries police themselves, let the free market decide who is a worthwhile company to do business with, and bank the savings of taxpayer money.

- A little bit of hypocrisy from Health and Human Services Secretary Kathleen Sebelius. As many of you know, Congressman Paul Ryan has put forth a coherent approach to getting out of control Medicare spending under control. It would involve allowing Americans under the age of 55 to get a tax deduction for buying health care insurance vouchers as a replacement for Medicare. The strategy is that if someone has control and responsibility for their health care expenses under this voucher program, they will be much more cost efficient than the government's totally inefficient Medicare bureaucracy.

This is necessary since Medicare costs are already over $500 billion a year and are likely to rise to over a TRILLION dollars a year within three to four years. Something has to be done to get Medicare spending under control and Ryan's plan is the best alternative to Medicare's current trend towards financial suicide.

However, the Secretary obviously has no understanding of the situation, given her recent quote that appeared in Reason: "If you run out of the government voucher and then run out of your own money, you're left to scrape together charity care, go without care, die sooner."

Talk about demagoguery. Ms. Sebelius takes a swipe at Ryan's plan as if there is nothing wrong with Medicare. The same thing is going to happen to Sebelius' beloved Medicare as usual, we cannot afford to keep the program intact as it is. Thus, the hypocrisy. She blasts Ryan's plan without giving an viable alternative, and status quo is not a viable alternative. It will eventually break the country financially and people will die sooner anyway.

- We have often discussed how bad the financials are for all levels of government in California. Some of the reasons include the reality  that some California lifeguards earn over $200,000 a year in wages and the AVERAGE employee salary for San Francisco's local train system is $114,000. Now Reason magazine provides another reason that California is so bad off.

The California city of Montebello is in serious financial trouble. The city desperately needs a bridge loan in order to not default on a $126 million bond debt due at the end of 2011. It's general budget is only $46 million. It gave it's own redevelopment agency $17 million that is unlikely to be paid back. The state controller ordered an investigation because of poor financial record keeping.

What was one of the first issues the investigation found? The city apparently had given a politically connected real estate developer $1 million in 1999 to fund the development of a Latin-themed chain of restaurants in the Montebello area. The chain of restaurants never materialized and the developer just ended up opening an Applebee's instead.

Why taxpayer money, $1 million, was given to a private firm to build some restaurants defies explanation. The bigger question is how many other handouts did the Monetebello political class give out over the years that have not yet been identified but still continue to contribute to the city's financial distress.

- The Week magazine reported in its July 1, 2011 issue that even though dishonored ex-Congressman Anthony Weiner was in Congress for 14 years and sponsored 191 legislative bills, none of the 191 bills ever became law. This comes out to an average of over one bill a month over 14 years without one success.

In any other line of business, going 0 for 191 probably gets you fired. In politics, this level of failure gets you elected seven times. Any wonder why we are in such dire straits in this country? Being unsuccessful in politics has no bearing on whether you get elected...and elected... and elected...

- A few days ago we talked about the uncaring and incompetence that continues to emulate out of the TSA, the government agency responsible for insuring our airline safety. That post covered the incident where TSA employees made a cancer stricken, 95 year old grandmother get out of her wheel chair and adult diaper before allowing her to get to her flight. Pathetic government intrusion.

But at least the TSA kept us safe from the 95 year old, cancer stricken, grandmother terror cells. However, a CNN report from June 30, 2011 reported that a U.S. citizen from Nigeria somehow got through TSA security checkpoints and got onto a New York to Los Angeles commercial airline flight without a valid boarding pass and was not listed on the flight's manifest. Not only did he complete the flight but he was able to walk away from the landing in LA even though the flight crew was suspicious.

However, police finally arrested him when he tried to fraudulently get onto another commercial flight bound from LA to Atlanta. They found that he was in possession of ten bogus boarding passes. He was lucky: he was a male, was not 95 years old (he is 24), and not in a wheel chair. Otherwise, TSA would have been all over him on that first flight. Feel safe now?

- Several weeks ago, the St. Petersburg Time carried an article that covered a Congressional trip to Iraq. During the trip, Congressman Dana Rohrabacher suggested to Iraqi authorities that at some point in time, Iraq pay back some of the expenses the United States incurred overthrowing Saddam Hussein and allowing the current set of Iraqi politicians to have their current government positions. The Congressman did not say the payments had to start immediately. He just suggested that at some point in the the unspecified future, once Iraq was stable, that some form of payments be made.

The Iraqi government immediately responded that "Iraq would pay not a cent." Thanks for nothing. The mere suggestion of maybe paying us for freeing the Iraqi citizens from one of the worst despots of our time gets this kind of rebuke. Plus, it also resulted in the Iraqi government asking the Congressional delegation to leave the country immediately. Maybe the Congressional delegation should have taken our 50,000 troops with them when they left so that the American taxpayer "would not pay a cent" more supporting this TRILLION dollar disaster any more.

As always, you cannot make up this stuff when it comes to the political class. Unfortunately, their antics and insanity are not made up. They are real: real money wasted, real troops killed without gratitude, taxpayer money given away, a TSA that cannot keep undocumented people off of planes. It seems to never end. And next month, it will happen all over again.




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