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Bald Eagle in Anchorage, Alaska

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Sunday, December 30, 2012

Tax Reform in the United States

This is the fourth in a series of posts about priorities for Congress and President Obama in his second term.
Priority #1, The Fiscal Cliff:
http://debatablypolitical.blogspot.com/2012/11/priorities-for-obamas-second-term-1.html
Priority #2, Reducing the Federal Deficit 
http://debatablypolitical.blogspot.com/2012/12/priorities-for-obamas-second-term-2.html
Priority #3, Immigration Reform: 
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Priority #4, Tax Reform
The fourth priority for the new Obama administration should be tax reform.  This is an issue that the Republicans got right.  The 2012 Republican platform called for entirely scrapping the Federal Income tax code, and starting over from a clean slate.  Tax reform is necessarily complex, because the tax code is complex.  The political fight will be difficult, because the tax code has penetrated every aspect of American life.  For every provision that might be changed, there will be winners and losers, and it will be difficult to make changes without making enemies.  

The amount of tax collected in the United States is low by comparison to other countries of the OECD.   Overall, the United States collects 24.8 percent of GNP in all taxes, including income, payroll, corporate, excise, and state and local taxes.  The United States ranked 2nd lowest of 34 OECD countries in Federal tax collected as a percentage of GDP (9.4) in 2010, and 3rd lowest  in total tax collected.  However, this blog post is not about the amount of tax collected, but rather about the complexity and economic losses caused by our system of taxes.

A report by the GAO (Government Accountability Office) found that costs to society or our tax system are “large”, but highly uncertain.  According to the report, the U.S. tax system may cost society 2% to 5% of GDP.   This is huge.

The goals of tax reform should be straightforward.   The tax system should be simplified in the interest of fairness and transparency.  The new tax system should reduce economic distortions which presently cause losses of 2% to 5% of GDP.  The new tax system should extend participation to all wage earners, strengthen successful businesses, reduce required record-keeping, and eliminate the motivation for costly tax-avoidance schemes.

Here are the basic areas needing reform. 
1.  Simplify the US income tax.
2.  Gradually eliminate many deductions. 
3.  Extend income tax to all wage-earners, while reducing Social Security and Medicare payroll taxes to keep tax burden on lower-income tax-payers constant. 
4.  Extend Social Security tax to investment income.
5.  Simplify the Corporate Income Tax, and reduce tax rates.
6.  Reduce the Estate Tax rate.
7.  Eliminate Gift Tax, but require payment of Capital Gains upon transfer to another individual.

1.  Simplify the US income tax code
A)  The United States Income Tax Code now amounts to 73,000 pages.  Nobody understands it. 
B)  Employees of the Internal Revenue Service do not understand the tax code.  An audit by the IRS in 2008 showed that its employees provided incorrect tax advice to tax-payers 9% of the time.  The GAO (General Accountability Office) previously found that the IRS error rate was 12% to 25%.  Of course, the tax-payer is liable for any errors made on his return, regardless of the advice he may have received from the IRS.

C)  More than 1.2 million people are employed to assist individuals in preparing tax returns.   Sixty-two percent of tax returns (about 80 million tax returns) are prepared by professionals.  An audit by the GAO found that 12 percent of professionally prepared returns contained reporting errors, and 1 percent contained mathematical errors.  These workers could be doing something of greater value to society, but the potential productivity of these workers is wasted because of the complexity of the tax system.

D)   A 2005 report by the General Accountability Office divided tax costs into compliance (time and effort to complete the tax returns) and efficiency (changes in work, savings, investment and consumption behavior).     The report cited the lowest estimates of the cost to individuals and businesses to prepare tax returns at $107 billion (about 1% of GDP).   Other studies estimate compliance costs to be 50% larger.   Estimates for efficiency losses to the economy range from 2% to 5% of GDP (as of the mid-1990s).

E)  The complexity of the tax code contributes to tax cheating and lost revenue.  The system is so complex that there is a common feeling that other people, particularly the wealthy, are not paying their fair share.  This perception contributes to an attitude that cheating on taxes is justified, in order to pay only as much as others are paying. 

2.  Eliminate many deductions. 
There are seventy-three tax breaks which each reduce tax collections by over a billion dollars.   The largest of these tax breaks is the exclusion of employer-paid health benefits from taxation, which costs about 174 billion dollars each year.  These breaks reduce tax collections by about $1.2 trillion per year; eliminating these tax breaks would balance the Federal budget without any other action. 
These tax breaks are deeply ingrained in American culture, and are a significant part of citizens’ individual tax planning.  Changing or eliminating these breaks will be difficult, but a process of phasing out these deductions should begin, as part of the general simplification of the tax code.
The primary function of the tax code should be to fund the government, not for social engineering.  Congress’ extensive use of taxes for social engineering is impairing the primary function of the tax system.

3.  Extend income tax to all wage-earners.   Reduce Social Security percentage to keep tax burden on lower-income stable.  Every citizen needs to have “skin in the game”, i.e. a vested interest in how US government dollars are spent.

During the 2012 election, much attention was given to Mitt Romney’s complaint (given privately, to roomful of rich donors) that 47% of US wage-earners pay no income tax.  Romney’s statement implied regarding these low wage-earners as parasites on the system.   Interestingly, most of the tax breaks exempting the 47% from income taxes were originally passed as initiatives of Republican presidents.  It should be noted that the 47% are already paying substantial payroll taxes to support Medicare and Social Security. 
Fundamentally, Romney is correct.   It is not right that nearly half of our citizens pay no income tax.  Everyone should pay some Federal tax, to take an “ownership” interest in government.  We should not have a disinterested class of people who have no direct stake in government finances.   Citizens should all feel responsible for some part of financing the government, and to feel some pain about government spending, to motivate interest in voting and spending issues.   It is easy to be disinterested when the government is spending somebody else's money.
Every wage-earner should pay some Federal income tax.  Payroll taxes should be reduced (or incorporated into income tax) in order to extend Federal tax to all workers, without imposing an additional burden.
4.  Extend Social Security tax to investment income.
I see no reason why investment income (interest, dividends and capital gains) should be exempt from Social Security and Medicare taxes.   Social Security and Medicare require additional tax revenue to remain solvent.   It is not fair to make wage-earners carry the entire burden of elder care and the social safety net.   Those who earn money through investments should carry at least an equal burden.

5.  Simplify the Corporate Income Tax, and reduce tax rates.
Federal corporate income tax rates nominally range from 15% to 35% percent.   Additional state taxes are also levied on corporate income.   The United States ranks 17th of 34 countries in the OECD in terms of corporate tax revenue as a percent of GDP. 

Corporate income taxes, like individual income taxes, are unnecessarily complex.  There are fourteen corporate tax breaks costing over one billion dollars are year in lost revenue.   These tax breaks encourage certain economic goals designated by congress, but sometimes produce market distortions and unintended consequences.   An example is the tax break given for the production ethanol fuels.   Since production of corn-based ethanol consumes nearly as much energy as it produces, the tax break encourages misallocation of resources, and makes food scarcer and more expensive.  Simplification of the corporate tax code would reduce economic distortions, and provide a fairer playing field for companies. 

Corporate income tax acts as a drag on the most successful companies, and helps to prop up unsuccessful companies.  Corporate income tax deprives successful companies of the capital needed to expand, and reduces the competitive margin between successful and unsuccessful companies.  Reducing corporate income tax would encourage successful companies to expand, and help them succeed in global markets.

6.  Reduce the Estate Tax rate.
The United States Estate Tax (pejoratively termed “the Death tax” by opponents), is among the most contentious aspects of the tax system.   A substantial reduction in the Estate Tax rate is recommended.   It might be reasonable to peg the estate tax rate to the long-term capital gains rate, and accompany the transfer of title of assets to a step-up in the cost basis of those assets to the market value at the time of transfer.

The amount of money collected by the estate tax is relatively trivial, yet citizens incur substantial costs and undue anxiety worrying over this tax.  It is clear that citizens spend a great deal of money avoiding the tax, but it is difficult to find unbiased data about how much.  Tax avoidance measures through wills and trusts also introduce economic costs.   A 1999 study cited by the GAO showed that the estate tax resulted in efficiency costs to the economy of $38 billion, as a result of distortions in consumer choices.   By comparison, historically the highest amount ever collected by the estate tax was $ 37 billion.

The tax rate above the minimum exclusion is 2nd highest among industrialized countries at 55%.  About half of those countries have no estate tax, and the median of the remainder is 20%.  Only Japan has a higher tax rate, at 70%.  The exclusion amount is currently $5 million, but will revert to $1 million on January 1, 2013, pending any revision.

In my view, the Federal government should take a lesson from Henry Ford.  Ford priced his cars as low as possible, and made higher profits by selling more cars.   At 55%, the estate tax is too high.  People are loath to pay this level of tax, and will expend considerable time and money to avoid it.  But a less confiscatory tax would meet with greater compliance, produce less economic costs and distortions, and might produce greater revenue for the government.

A further step would be to prohibit tax-avoiding trusts and trust provisions.  If Congress has decided, for the good of society, that citizens should pay estate tax, then our laws should prevent avoidance of that tax.  It is absurd to permit legal manipulations which evade the intent of our tax laws.

7.  Eliminate Gift Tax, but require payment of Capital Gains upon transfer to another individual.
The Gift Tax is closely tied to the Estate tax.  Essentially, the Gift Tax is simply intended to prevent avoidance of the Estate Tax by early transfer of assets to heirs.    The Gift Tax is only incurred on large transfers of wealth, but requires life-long record keeping.   A better solution would be to peg the Gift Tax to the Capital Gains tax, and step-up the cost basis for assets, exactly as suggested for the Estate Tax.
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References:
Costs of the US Tax System
In 2005, the GAO reported that costs for tax compliance and tax efficiency are “large”.  Estimates are reported in the range of 1% to 1.5% of GDP for compliance; and economic efficiency costs are reported in the range of 2% to 5% of GDP, (mid-1990s).   No better data was available.
ICB (Treasury Department) estimated that individuals, businesses and exempt organizations spent a total of 6.4 billion man-hours filling out tax forms.  Others do not trust these estimates.
Compliance costs are reported over $100 billion or about 1% of GDP; this is given as the low-end of the uncertainty range. 

Interactive OECD comparative tables about taxes as percentage of GDP.
US 2010 total tax: 24.8 percent of GDP, 3rd lowest of 34 OECD countries
US 2010 federal tax:  9.4 percent of GDP, 2nd lowest of 34 OECD countries
Federal 9.4 percent,  State 5.1 percent,  Local, 4.0 percent, Social Security  6.4 percent  (of GDP)
US 17th of 34 in Corporate Tax collected (as a percentage of GNP) in 2010.

General information.

Over 70,000 pages in the US tax code, 2010

IRS Errors and Tax Preparer Errors
1997 article; IRS advice was incorrect 12% of the time by telephone, 40% of the time in person.
IRS advice wrong 25% of the time.
More about IRS errors.
62 percent of tax returns (80 million) are prepared by paid tax preparers (2005).
42 percent of test returns resulted in material errors (of $1500 per return).
12 percent of returns by professional preparers contain reporting errors; 1 percent contain math errors.
10 percent of self-prepared returns contain reporting errors; 5 percent contain math errors.
In a GAO audit of paid tax preparers, the professions arrived at the correct answer on only 2 out of 19 tax returns.
Accuracy at IRS walk-in assistance centers improved from 85% in 2008 to 91% in 2010.   Assistance centers are staffed by volunteers.    Accuracy at call-in centers is not reported.   Only 76% of callers seeking live help receive service.

Costs of Tax Preparation
About 1.2 million tax preparers in the US.
Cost of tax preparation in the United States is $100 billion to $150 billion.
“Understanding the magnitude of these additional costs is important because every dollar spent on compliance and lost due to inefficiency represents a dollar that society could have spent for other purposes.”

Details of 172 tax breaks for individuals and corporations.  Seventy three tax breaks account for more than one billion dollars each of lost tax revenue. 

Estate Tax
Politically biased piece in favor of estate tax.  Costs of compliance with Estate Tax estimated at 7% of tax collected.  Cost of avoidance is belittled, but not quantified. 
Politically biased piece, in opposition to estate tax.  Large costs are claimed for estate tax.   Maximum ever collected by estate tax is $37 billion, in constant dollars.
Cost of compliance with Income tax is estimated at 14.5% of tax collected; cost of compliance with estate tax is estimated at 7% of tax collected.
At 55%, the United States Estate tax is second only to Japan in a list of 50 industrialized countries.
About half of those countries have no estate tax, and the median of the remainder is 20%.
Without new legislation, estate taxes will revert to 55% of the value of estates greater than $1 million.   It is expected that the exemption amount will be raised by new legislation.  An exemption of $5 million was put in place in 2010.
One study cited estimated efficiency costs of the Estate tax at $38 billion in 1999.
The most tax ever collected by the estate tax was $37 billion, in 2000.  







Wednesday, December 19, 2012


Gun Control in the United States, #2

This is the second post on the topic of Gun Control in the United States.   The first post is found here:  

For twenty years, momentum in the gun control debate has been toward fewer restrictions.  The latest mass-shooting in at Shady Hook Elementary School in Connecticut seems to have abruptly changed the direction of that momentum.  It remains to be seen if the latest tragedy will change the debate and result in more sensible gun laws.

“Stand-Your-Ground” Laws and The Shooting of Trayvon Martin
Republican-controlled state legislatures in thirty-one states have enacted or are considering some version of the “Stand-Your-Ground” law.   The essence of the law is that an individual is permitted to use deadly force in situations where the individual believes an attack is imminent, and that his life is in danger.  The “Stand-Your-Ground” law gives the right of legally justified, preemptive self-defense.  A person who kills another person under these circumstances may be exempted from prosecution.

The shooting of Trayvon Martin challenges the logic and practicality of stand-your-ground laws.  The details of the case are familiar to all who read American news. 

On the night of February 26, 2012, Trevon Martin, a 17 year old black youth, walked to a local convenience story to buy a bag of candy as a gift for a younger black child.  Martin was visiting his father in a Florida suburban community.   George Zimmerman, a Latino resident of the community, was patrolling the community as leader of the neighborhood watch crime-prevention program.   Zimmerman was suspicious of Martin, followed him, both by car and on foot.  Martin ran, and tried to elude Zimmerman.  Zimmerman followed Martin and eventually confronted him.   At the end of the confrontation, the black teenager was dead, killed by a gunshot to the chest.

Many details of the incident are unknown.  According to Zimmerman, Trayvon Martin became angry, punched Zimmerman in the nose, and pushed to the ground, and beat Zimmerman’s head against the sidewalk.  Zimmerman then shot Martin in self-defense.  Zimmerman’s injuries are consistent with his story.

Zimmerman invoked Florida’s “Stand-Your-Ground” law, and local police did not charge Zimmerman with a crime.  After a national outcry, a new investigation was conducted, and Zimmerman was charged with second-degree murder.  Pre-trial work is continuing, and the trial will be held in mid-2013.

Who was standing his ground that night in Florida?   Zimmerman stalked Martin by vehicle for 15 minutes prior to their confrontation.  Martin had every reason to fear for his life.  He had no idea why Zimmerman was following him, and he was dead within minutes.  Martin stood his ground by punching Zimmerman in the nose.  If Trevor Martin held a gun and shot Zimmerman instead, would he have been released under the same law that initially protected Zimmerman from prosecution?

Are More Guns the Answer?
Following shooting tragedies, such as the Gabrielle Giffords shooting in Arizona, or the Aurora Theater shooting in Colorado, gun-rights advocates often claim that the solution is more guns.  They suggest that if more individuals were armed, law-abiding citizens would respond to an assault and shoot the assailant before many lives were lost. 

The immediate problem with that idea is that people intent on committing crimes have a clear advantage.  The criminal knows his intent, his plan, his weapons, his timing.  Any responder must make a correct judgment on a split-second basis, find his weapon, load or unlock the weapon, and shoot.  Responders are likely to be too late, or horrifically, to create “friendly fire” casualties or to shoot inappropriately by misjudging a situation.

In the Aurora shooting, the assailant entered the theater from an exit door, about 30 minutes into the film.  He was dressed in costume, as were many of those attending the film.  Some witnesses believed he was part of a publicity stunt, or playing a prank.  He threw a smoke canister which obscured vision for many, and began firing. 

 Let’s try a thought experiment, and assume for a moment that every person in the Aurora Theater shooting was armed and prepared to respond to an assault.  In the dark and smoke, a few citizens would react quickly, and return fire; many others would not see the original assailant, and would be confused.  Some citizens would see responders rising from the audience and shooting in the darkness.  Some would assume the initial responders were the assailants, and would begin shooting at them.  Soon, the entire theater would be engulfed in gunfire, as the original assailant would be lost in the confusion, the dark, the smoke, and the gunfire.

The idea that ordinary citizens could stop a determined, planned mass shooting is patently false.   School-teachers are prepared to teach school; movie-goers are prepared to watch a movie.  No one is prepared to respond to a mass-murderer.  And an army of armed vigilantes prepared to respond with gunfire are more likely to commit mayhem and murder in response to a back-firing truck than to protect the public.

Saturday, December 15, 2012

Priorities for Obama's Second Term #3 -- Immigration Reform

This is the third post in a series about priorities for Congress and the second Obama Administration.
Priority #1:  The Fiscal Cliff
Priority #2:  Reducing the Federal Deficit
The third priority for President Obama’s second term is immigration reform.   Immigration reform is long overdue in this country.   It has been a major national issue for the past quarter century, but nothing has been accomplished.   We have a great divide between the parties about what should be done.  Democrats favor liberalizing our immigration policies, whereas Republicans literally want to build a wall at our borders.  It is time to resolve our political disputes, and do what is right for the human dignity and safety of the immigrant population within our borders, for the aspirations of their children, and to offer merit-based opportunity to foreign students and others who wish to join us. 

Our immigration policies would better serve the interests of our country by providing better opportunity to immigrants. 

Illegal Immigrants in America
Let’s begin with our most intractable problem, our illegal immigrant population.  There are about 11.5 million illegal immigrants in America.  Of these, about 60 percent are of Mexican origin.   Most illegal immigrants are long-term residents of the United States; 86% of them have lived in the U.S. since before 2005.   Illegal immigrants comprise more than 5% of the U.S. workforce.   Because of their illegal status, these immigrants lack the basic protection of our society; they are fearful to contact police and are subject to exploitation.

Amnesty for illegal immigrants has been provided in the past.  The largest single amnesty was conducted in 1986, during Ronald Reagan’s administration.  At that time 2.9 million illegal immigrants were given legal residency in America.  There have been at least six other amnesty programs since then, targeting particular groups of illegal immigrants for reasons of political or economic asylum.   Critics of amnesty programs say that amnesty only encourages another generation of illegal immigrants to cross our borders.  It is impossible to judge the validity of this argument.  It may be true, partly true, or incorrect.

The Republican response to the illegal immigrant problem was represented well by Mitt Romney.    Romney (and others) propose building a 2000-mile fence along the border with Mexico.  This would be about 20 times the length of the Berlin Wall.  Romney recognizes that it is impossible to “round up” twelve million people, but proposes to make life in America impossible for illegal immigrants, causing them to “self-deport”.   Romney proposes to require employers to verify the citizenship of their employees, forcing illegal immigrants out of work, and expecting them to “return home".

Romney and the Republicans seem oblivious to the fact that this would cause a humanitarian crisis of unimaginable proportions.  There is no other home for illegal immigrants.  These are long-term residents of the United States; their home is here.  They have no house, no apartment, no work and perhaps no relatives in their home country.  Nor does Mexico, or any other country of origin, have the capacity to absorb this population of economic refugees.  It would be equivalent to re-locating the entire populations of Wyoming, Vermont, North Dakota, Alaska, South Dakota, Delaware, Montana, Rhode Island, New Hampshire, Maine, Hawaii, and Idaho, to a place with no infrastructure or jobs to absorb that population.  It does not matter whether the immigrants are forcibly deported or “self-deport”.   They have no place to go.  When Romney proposed this plan through the course of several candidate debates, I do not understand why someone did not call in a loud and strident voice “FOR SHAME!”

President Obama supports two proposals regarding illegal immigrants.   The first is the Dream Act, legislation originally proposed in 2001 to provide a path to citizenship for the children of illegal immigrants who succeed in American schools or participate in our military.   This legislation was blocked by Republicans in the 2010 Congress.  Following Obama’s re-election, some Republicans proposed a watered-down version of the same legislation, hoping to curry favor with Hispanic voters.   A compromise version of the legislation will probably be adopted in 2013.   President Obama also supports a broader path to citizenship for all illegal immigrants.  Obama suggests that illegal immigrants pay a fine and demonstrate fluency in English to be granted legal residency and a long-term path to citizenship.  This proposal will be more contentious.  The Republican Party has spent twenty years building a position opposing illegal immigrants; it will be difficult for the party to reverse course

Legal Immigration to the United States
About one million immigrants are granted legal residency in the United States every year.  The number of total immigrants has been fairly stable since 2001.  Here are the categories of legal immigrants in 2011:
Total
Family-sponsored preferences
Employment-based preferences
Immediate relatives of U.S. citizens
Diversity
Refugees
Other
1,062,040
234,931
139,339
453,158
50,103
168,460
16,049

Family Reunification
Family reunification has long been the centerpiece of American immigration policy.  Until the late 1950s, America’s immigration policy allowed legal immigrants to extend immigration to only spouses and minor children of immigrants.  Since then, however, immigrants have been able to sponsor parents, siblings, and adult children.   This policy has not only come to represent nearly half of all legal immigrants, but has created a backlog of fifteen to twenty years for immigrants of this category.

Employment-Based Preferences
This generally refers to immigration sponsored by an employer.  Many U.S. companies, and foreign companies operating in the United States are multi-nationals.  These companies often find it necessary to transfer employees to locations where their experience and specialized knowledge are needed.  When I worked for a U.S.-based multi-national company, the most difficult country to transfer employees was the United States.  To transfer Americans to another country was simple; to transfer foreign employees to America was a circus.  The process was complex, involving months of legal shenanigans and meaningless procedures to justify a simple transfer of a company employee.

Diversity
For aspiring immigrants without sponsorship by family members, an employer, or refugee status, the only option is the Diversity category of immigration.   Every year a small number of immigrants are selected through a random lottery.  About 25,000 immigrants are selected as winners, out of an applicant pool of about 9 million; the remainder of the allotted 50,000 quota are filled by spouses and children of the winning applicants.  The odds of successful immigration are somewhat less than three-tenths of one percent.  In other words, immigration to the United States without special connections is virtually impossible.

There is no part of the United States immigration process based on merit.

Conclusion
Over the next four years, the Obama administration should set a priority to reform American immigration policy.   Goals should be to provide protection and human dignity to all immigrants; to provide merit-based opportunity to those who wish to become Americans, and to serve our country’s interests in obtaining high-quality workers in our industries.  New policies should provide legal residency to most of our long-term illegal immigrant population, should provide merit-based opportunity for immigration, and should serve American industry by allowing companies to hire the foreign workers needed in our economy.
1)  Establish legal residency for our illegal immigrant population.
2)  Provide a path to citizenship for immigrants brought into the country as children.
3)  Provide opportunity for the best foreign students earning degrees at U.S. universities to legally remain in the U.S.
4)  Provide merit-based opportunity for general immigration, in addition to the current diversity lottery system.
5)  Simplify the process for U.S. companies and multi-nationals to transfer employees to the United States, for temporary or permanent assignments.
6)  Reduce the number of adult relatives of U.S. citizens granted permission to immigrate, in order to accommodate larger numbers of merit-based immigrants.

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References

11.5 Illegal Immigrants in the US in 2011, population unchanged from 2010.
Of the current population, only 14 percent entered since 2005.
Mexicans are 59 percent, but 68 percent of arrivals since 2000.
Achieve Act.
Applies to young people who were brought to the United States before the age of 14, and currently under the age of 32.  Must have earned a college degree or be working on a college degree, or have served in the military.  Does not grant a path to citizenship, only legal residency.   Denies any government benefits.
Might apply to as many as 1.2 million immigrants.
Of the 11.5 million illegal immigrants, 8 million are in the workforce, or 5.2 % of the workforce.
There are 2.1 million Illegal immigrants between the ages of 12 and 35  Obama’s proposed “Dream” act.    However, other provisions of the legislation would restrict benefits to only about 825,000, because many of the immigrant children did not receive enough education, speak English fluently, live in poverty or are already in the workforce.
Seven amnesty laws have been passed since 1965.
Interview with Mitt Romney and Newt Gingrich, following one of the primary debates.
More Romney “self-deportation”.  Romney calls for an undefined “transition period” in which immigrants would be allowed to work here legally, but would later be required to leave.
672,000 foreign students in US colleges and universities in 2008-9.  New international student enrollments rose by double-digits in 06 through 09 (8%, 10%, 16%).
Top sending countries were China, India, S. Korea, Canada, and Japan.
International students contribute $17.8 billion to the US economy.
Foreign (non-immigrant) college enrollment).
2010 :  691,000, increase from 286,000 in 1980.
2010:  20.55 million total.   7.849 million part-time/12.701 million full-time students.
Male:  8.904 total .              3.172 million part-time/5.732 million full-time students    64% full-time.
Female:  11.645 total.         4.678 million part-time/6.967 million full-time students.   60% full-time.
International students increased to 764,000 in 2011/12 school year.  Continuing increases indicated by surveys in 2012.
International students less than 4% of total US higher education.
194,000 students from China; dramatically increased from about 60,000 in 2007.
Women comprise 44 percent of international students; steady increase from 81 to 01, fairly flat since then.
STEM fields 41%; business and management 22%.
International students contributed $22 billion to US economy in 2011.
Women:  64% of US study abroad students.
Every year, over 50,000 illegal immigrant children graduate from US high schools.  These students are unable to receive state aid to attend higher education.
Limited temporary employment permission is available to international students for the purpose of additional training.
Student visas.
The INS exercises close control on international students.   Employment can only be limited to on-campus work.
Self-explanatory.
Many articles and blogs.
House of Representatives voted to eliminate the visa lottery Dec. 4, 2012.
Right-wing view of tech immigration.   The visa lottery issues 55,000 “diversity” green cards annually, under a random process (by country?).
Immigration statistics.
Over 1 million people obtained permanent legal immigrant status in 2011.   Over 1 million per year since 2001, except 2003 & 2004.

Saturday, December 1, 2012

Priorities for Obama's Second Term: #2 Reducing the Federal Deficit

This is the second in a series of posts about priorities for Congress and President Obama in his second term.
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Priority #2, Reducing the Federal Deficit
The second priority for the new administration and Congress is to operate the Federal government within budgetary constraints.

Paradoxically, what is needed in the second priority is exactly what Congress and the President are trying to avoid in the first priority.  The programmed spending cuts and expiration of the Bush tax cuts would eliminate only about half of the budget deficit.  These measures, if allowed to occur, are expected to push the economy into recession. 

It is a question of choosing when we take bitter medicine.   Forecasts by the Congressional Budget Office (CBO) indicate that GDP will be higher by 2022 if the Fiscal Cliff measures are allowed to go into effect than if we continue current policies.  The following is the concluding paragraph from the CBO’s Update to the Budget and Economic Outlook, 2012 - 2022   (http://www.cbo.gov/publication/43539).

What Is the Budget and Economic Outlook for 2014 to 2022 If Many Current Policies Are Continued?
….
“Real GDP would be higher in the first few years of the projection period than in CBO’s baseline economic forecast, and the unemployment rate would be lower. However, the persistence of large budget deficits and rapidly escalating federal debt would hinder national saving and investment, thus reducing GDP and income relative to the levels that would occur with smaller deficits. In the later part of the projection period, the economy would grow more slowly than in CBO’s baseline, and interest rates would be higher. Ultimately, the policies assumed in the alternative fiscal scenario would lead to a level of federal debt that would be unsustainable from both a budgetary and an economic perspective.

The current US federal debt held by the public is about $11.5 trillion.  (The larger figure sometimes cited includes debt between government agencies.)  Our 2012 deficit of $1.3 trillion is increasing the federal debt at a rate of 11 percent per year.

The deficit is expected to equal -7.3 percent of GDP for fiscal year 2012. Federal debt held by the public reached 73 percent of GDP at the end of the fiscal year (http://www.cbo.gov/publication/43539).  The Debt-to-GDP ratio is calculated at 103% by the IMF, using a definition of debt that includes intra-government obligations, such as the Social Security Trust Fund.  The IMF estimates that federal debt will reach 115% percent by 2016, one of the highest ratios in the world, and higher than the troubled economies of Ireland, Italy, and Portugal, four of the five PIIGS (Portugal, Ireland, Italy, Greece, Spain), the countries causing the European debt crisis. 

The European debt crisis offers a clear example of the American future if our deficit spending is not contained.  Social unrest, political disorder, and economic inefficiency and turmoil are our clear destination if we continue on the current path. 

The elements necessary to tame America's debt crisis are clear.  The problem requires a combination of increased tax revenue and decreased spending.

Options include:
1)  Increasing individual or corporate tax rates.  The expiration of the Bush tax cuts would provide about $500 billion of increased annual tax revenue.

2)  Decreasing government spending.  Potential targets with large amounts of annual spending might include military spending ($716 billion), Social Security ($779 billion), Income Security (unemployment, childrens’ programs, and welfare, $780 billion), and Medicare ($484 billion).

3)  Reducing or eliminating tax deductions and exemptions.   These are also known as "Tax Expenditures".  There are 73 tax breaks of over $1 billion each, totaling $1170 billion in reduced tax revenue.   Many of these breaks are well-entrenched into our personal finances and culture, but nevertheless represent a significant loss of tax revenue (http://www.washingtonpost.com/wp-srv/special/politics/tax-code-break-by-break/).  This topic will be discussed in greater depth in a future post regarding tax reform.
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Saturday, November 17, 2012

The Fiscal Cliff

This is the first in a series of posts regarding policy directions for the United States during President Obama's second term.  This post concerns the "Fiscal Cliff" facing the nation in January, 2013.  The other posts are found below.
Priority #4, Tax Reform
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Priority #1, Tax Reform
 President Obama, in his second term, must necessarily focus on different priorities than his first term.  The president must somehow run the American government in a fiscally responsible manner, despite the gridlock between the parties in Congress.  He must simultaneously deal with a failing economy, international crises, other pressing domestic issues, and deliver on the Democratic social agenda. 

 Cooperation from the Republican Party, which was totally lacking in Obama’s first term, is essential to resolution of national problems in his second term.  However there is no reason to believe that the opposition will work with Obama in the second term, any more than in his first term.

I wonder why Barack Obama wanted this job.

I.  Fiscal Cliff:
The “Fiscal Cliff” refers to simultaneous increase of tax collections and reduction in government spending.  The sudden reduction in spending by both consumers and government is believed to threaten the economy, at a time when the national unemployment rate is still about 8%. 

The situation is like a losing chess game.  You can move the knight, or you can move the bishop, but in either case you will be checkmated in three moves.  If Federal spending continues unchecked we will soon face the same debt crisis seen today in Europe.  If taxes are raised or government spending is cut, the frail economy will fall into recession.  There is no winning move.

The “Bush Tax Cuts” were originally enacted in 2001 and 2003, and were extended as an economic stimulus in 2010.  These are now set to expire on December 31, 2012.  A temporary 2% reduction in Social Security tax is also set to expire.

The expiration of the low tax rates would mean an additional 500 billion dollars in tax receipts, or about 20% over current collections.  The mandatory spending cuts are relatively trivial, amounting to 110 billion, or about a 3% savings out of a budget that is running 50% over tax receipts.   A large part of the non-defense spending comes as a cap on Medicare spending.


If all tax and spending changes occur as currently scheduled, 641 billion dollars of deficit spending remain, according the Congressional Budget Office (CBO) baseline projection.

Projections by the CBO indicate that ”going over the cliff” (allowing automatic tax increases and spending cuts to occur) may be best for the long-term health of the nation.  However, the cost of a recession in 2013 is politically unacceptable to either party.  Obama and Congress must work quickly to adopt a solution which will maintain the strength of the economy without sacrificing the country’s long-term financial position.  

Thursday, November 8, 2012

Significance of the 2012 Presidential Election


The significance of the re-election of Barack Obama  in 2012 is primarily that Mitt Romney (or any other Republican) was NOT elected president.  The election of Obama marks the continuation of the status quo, rather than a hard turn to the political right.  But the opportunities and challenges of the next four years will be different than the previous four years, and the ideology of the man in the oval office will have profound and lasting impact upon the country.

The Supreme Court
Four Supreme Court Justices are over the age of 74.  It seems likely that some of these judges will retire or pass away during the next presidential term. 

Supreme Court Justices                 Age                        Philosophy
Ruth Ginsburg                                   79                           Liberal
Antonin Scalia                                   76                           Conservative
Anthony Kennedy                             76                           Conservative
Stephen Bryer                                   74                           Liberal
Clarence Thomas                              64                           Conservative
Samuel Alito                                      62                           Conservative
Sonia Sotomayor                               58                           Liberal
John Roberts                                     57                           Conservative
Elena Kagan                                      52                           Liberal

The Court is currently relatively balanced.   The following graphic shows the voting record of Justices on cases heard in 2011.   Four justices nominated by Democratic presidents form a liberal  voting bloc, particularly on important and contentious cases.  The five justices nominated by Republican presidents form a conservative voting bloc, but with Anthony Kennedy occasionally voting with the liberals.
Modified from data presented here:
http://en.wikipedia.org/wiki/2011_term_opinions_of_the_Supreme_Court_of_the_United_States
Green and blue indicate judges voting with the court majority.  Red and purple indicate dissent.  Bold colors indicate written judicial opinions to be used as precedent by lower courts.

Future court cases are likely to involve abortion rights, health care and elder care, immigration, harassment of minorities, Influence by financial donors over legislators, environmental regulation, death penalty cases, police conduct, copyright law, and partisan actions of local governments.

Judges nominated by Obama will determine the philosophical leaning of the court for years, probably decades.   Given that judges can choose to retire when a president of their party is in power, control of these seats may persist even beyond the tenure of the new judges.  Obama’s power to nominate new judges will likely diminish corporate and big-money influence in politics; his nominees will be favorable with regard to women’s rights, minority and immigrants’ rights, public schools, environmental regulation and religious pluralism in America.

Foreign Policy
Obama has already demonstrated his direction in foreign policy.   Under Obama, foreign disputes are more likely to be handled through negotiation than confrontation.  Obama is willing to conduct covert operations in response to terrorist threats, but has been restrained in the use of military force.   By contrast, Romney would return to the aggressive polices of the G.W. Bush administration, confrontation with China, Russia, and the Islamic world, and unquestioned military support of Israel.    I believe the world will be a more peaceful place with Obama as president instead of Mitt Romney.

Energy Policy and Climate Change
Republicans do not believe in man-made climate change.  Mitt Romney plainly declared “I like coal”.   By contrast, Democrats and Barack Obama believe that climate change is one of the most important issues facing mankind.   Under Obama, policies and taxes will be structured to favor renewable energy, and restrict the use of fossil fuels, particularly coal.

Immigration Reform and Minority Rights
The contrast between Obama and Romney is particularly striking in terms of immigration and minority issues.  Under Republicans, local governments would be given free rein to harass Hispanics and minorities in a variety of ways.  It is racism in the guise of law enforcement.  Under Obama, minority rights will be upheld.   Obama will also seek a resolution to the problem of ten million illegal immigrants living in the America.  Republicans have offered no ideas, no shred of a solution to the problem except to build a fence along our border with Mexico.   

Health Care
President Obama’s signature piece of legislation was the health care reform act extending health care insurance to thirty million Americans who had none.  With Obama’s re-election, Republicans will be unable to repeal the legislation before it is implemented and becomes part of how we live as Americans.

Taxation
Under Obama, the tax cuts for the wealthiest Americans enacted under president Bush will be allowed to expire.   Tax rates for the wealthiest Americans are likely to rise, restoring these rates to levels considered reasonable in previous decades.

Tuesday, November 6, 2012

Barack Obama has been re-elected president of the United States.  The Democratic Party retains a majority in the Senate, and the Republican party retains a majority in the House.

Barack Obama

I am greatly relieved.  I believe that the people of the United States made the right choice about our leadership and direction.   I will write more tomorrow about the meaning of this election, and the challenges for the president and congress over the next four years.

Thursday, November 1, 2012

Gun Control in the United States

This is the first of two posts about Gun Control in the United States.
The second post discusses recent events, and is found here:



My ideas about gun control formed at a young age.  

I was about ten years old.  My brothers were16 and 17.   They had a standard BB gun (hand-pumped air gun), and a more powerful pellet gun that used compressed air cartridges.  But what they really wanted was a real gun – the American boys’ dream, a 22 caliber rifle, and they persistently but unsuccessfully pestered my father for permission to own one.

As the youngest boy I had toy guns.  I was especially proud of a fine imitation of the Winchester rifle, “the gun that won the west”.  In fact, my brothers’ BB gun was also an imitation of the famous Winchester.  The two guns were practically identical.  And at ten, I was allowed to borrow and shoot the BB gun, though I barely had the strength to work the hand pump to compress the air.   I spent afternoon hours shooting at empty tin cans, hoping for a satisfying “ping” with each shot.

One day my mother called while I was shooting the air rifle.  We had to go on some errand; we had to leave NOW.  I left the BB gun on the couch, and went to find shoes or something.   My brother came into the room, saw the BB gun on the couch, and mistook it for my toy Winchester rifle.   He picked it up, jokingly pointed it at my mother, and said “pow”, as he pulled the trigger.  The BB knocked out her front tooth.  Instead of our urgent errand, my brother drove her to the emergency room with a mouthful of blood.
When my father heard the story that evening, sitting in shock, his only words were: “If that were a 22 (caliber rifle), you would have killed her!!” 

That was the last time I played with the BB gun.   We never owned a 22 caliber rifle.
And I learned that guns are not safe in the home.
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Statistics:
There are over 100,000 shootings every year in the United States. 

In 2009, shootings resulted in 31,347 deaths.   

Annual shooting deaths in the United States are approximately double the worst single year of the Vietnam conflict.

About 23,000 shootings annually are accidental.  In 2009, these resulted in 554 fatalities.  There were 3985 accidental shootings of children in 2009, but only 96 of these resulted in death.

Every year there are about 11,000 shootings involving children (< age 18). 
In 2009, 1568 children died as the result of gunshot injuries. 

The great majority of firearm deaths are suicides, which account for 60 percent of all fatalities, and homicides, which account for 36 percent of all fatalities.  These are distributed differently by age, with homicides claiming more victims between the ages of 18 and 30, and suicide peaking in middle age.

Blacks are more two to three times more likely to die from firearms than the general population.  
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In 1990, over 75 percent of the American public favored additional restrictions on gun ownership, and the nation was on the path to greater gun regulation.  However, the NRA (National Rifle Association) fought the regulations, directing millions of dollars into Republican campaigns for both national and local public office.  Control of congress passed from the Democratic party to the Republican party in 1994, in part due to campaign funding regarding gun control.  Public sentiment also gradually changed.  By 2012, the percentage of Americans favoring additional restrictions on guns had fallen from over 75% to under 45%.

Given the political history of gun control in the 1990s, Democrats have given up on this issue.  The Republican party continues to push for reduced gun regulation, including banning local regulation of guns, concealed gun-carry laws, blocking registration of ammunition sales, and blocking regulation of assault weapons.

The political battle over gun control has been fought and won by the Republican side.   
But the body count continues to climb.   

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References:
Vietnam war deaths:
Injuries data:
2009 Firearm fatality statistics:



Preliminary 2011 Firearm Fatality statistics:


Sunday, October 14, 2012

The Republican Platform, the Ten Commandments, and the First Amendment


Abstract:
The Republican Party 2012 platform supports public display of the Ten Commandments, in schools, courthouses, and state capitols.  But the first words of the Ten Commandments are entirely contradictory to the first words of the Bill of Rights.

First Commandment:  “You shall have no other gods before me.”
First Amdendment:   “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.”

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First words are important. 

First words focus our attention, they establish what is most important in what we are about to read.
In any list, you will find the most important thing in the very first words.

Let’s consider two important lists:  the Ten Commandments and the Bill of Rights. 
Here are the first words of each list:
First Commandment:  “You shall have no other gods before me.”

First Amdendment:   “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.”

These statements are entirely incompatible.
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The Ten Commandments establish a Covenant between God and the Jewish people.  The Jewish people promised obedience to the commandments in exchange for support from God and liberation from slavery.

The Bill of Rights consists of the first ten amendments to the Constitution.  These amendments declared certain rights of the people, and forbid the government to infringe on those rights.  Although these rights are not essential to the structure of government, America’s founders considered these rights necessary for a free society.  And so, the Bill of Rights was added to the Constitution immediately upon completion of the Constitution.

In recent years, conservatives have advocated public display of the Ten Commandments.  They wish to put the commandments in schoolrooms, in state capitals, in courtrooms, etc.  Notably, the Republican Party Platform of 2012 includes a commitment to public display of the Ten Commandments:  “We support the public display of the Ten Commandments as a reflection of our history and of our country’s Judeo-Christian heritage.”

When conservatives talk about the Ten Commandments, they always cite commandments 5 through 10, which deal with human relationships.  “You shall honor your father and mother, you shall not kill, you shall not steal”, etc.  The first four commandments are quietly neglected.   These define man’s relationship with God; specifically, the Judeo-Christian God. 
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An Indian woman ran a convenience store in the office building where I worked in Houston.  She had a small shrine in the corner dedicated to Shiva.  She wrote her prayers daily at the counter while waiting for customers.  At other times, in quiet ritual, she worshiped the statuette representing Shiva.   In the late afternoons, her daughter, about 11 years old, helped at the cash register after attending school nearby.  

Does this woman not have the right to raise her daughter according to her own religion?  Should the daughter come to school to face teachers and schoolmates under a placard which says “You shall have no other gods before me”?   If the woman goes into our courts, can she expect justice in halls that say: “You shall not worship any graven image”?
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There can be no question that the purpose for public display of the Ten Commandments is the intimidation and coercion of non-Christians.   An advocate of posting the Ten Commandments in schools wrote a very articulate essay on the topic, found here: http://www.religioustolerance.org/chr_10ca.htm
*  Part of the essay appears below, in Addendum #2.

The Republican effort to post the Ten Commandments in public places is part of a larger effort to discourage religious pluralism in America.  The intent is to make America an exclusively Judeo-Christian nation, and to create a society aligned with the values of the conservative Christian movement.  These values include limiting the reproductive rights of women, eliminating homosexuality, rejecting science in favor of biblical literalism, supporting the expansion of Israel, and global confrontation with Islam.  A Republican victory in 2012 would be a blow against religious freedom in America, and would be deeply troubling with regard to our values as a nation.

If we are going to post a list of ten laws in the schoolrooms, courthouses, and capitals of our nation, I suggest that we begin with The Bill of Rights.


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Addendum #1  2005 Supreme Court Decisions
In 2005, a sharply divide Supreme Court issued two narrow and ambiguous decisions.  One decision allowed display of the Ten Commandments at the Texas State Capital.  The other decision forbade display of the Ten Commandments in two rural Kentucky courthouses.  The reasoning separating the decisions was the history of the display and local community standards.  If the display had been in place for a long time without local complaint, it was allowed.  If a new display aroused local opposition, it was forbidden. 
The decisions provide little guidance for local communities; it as if there had been no decision.  The legality of a display is now determined by whichever side clamors the loudest in a local community.


Addendum #2   Essay on Posting the Ten Commandments in Schools
*  Consider this essay, written by an anonymous advocate of posting the commandments in the schools:
A portion of the essay follows:

“The complete text of Exodus 20:1-17, where the Ten Commandments are delivered to Moses, must be posted and made clearly visible in every classroom of every school.  That way, God's Word will speak for itself to our children, and they will absorb the full meaning.  Take, for instance, the first two commandments:
 Exodus 20:2-6
The meaning here is unmistakable.  You had better believe in and worship the Judeo-Christian God, and only Him.  We must put down everyone who rejects our God, whether atheist or pagan, by having this posted.  The message here is that the one true God is extremely jealous, and will not tolerate any other gods being worshipped, so much so that if you commit the horrible sin of rejecting Him, your children, grandchildren, and great-grandchildren will suffer.  Atheists and pagans must be constantly humiliated and brought to shame by seeing this message. It is their only hope of realizing the truth.

It is so important to God that you worship only Him that he orders the death penalty for those who do otherwise:   Deuteronomy 13:6-10
 Immediately after that, God orders the genocide of cities which do not worship Him.
 Deuteronomy 13:12-16
 Are you getting the picture?  God places exceedingly high importance on worshipping Him and only Him.  Absolutely no ignoring Him or turning to other gods is tolerated.  We must not allow anyone who does not worship our God to forget for one day what grievous sin they are living in.”