Author Archives: jparquette

Great Horned Owl taken 12-8 on Angela’s garage
The calm of a waiting predator, watching.

 

I am like a desert owl, like an owl among the ruins.

I lie awake; I have become like a bird alone on a roof.

Psalm 102: 6,7

“When you’re 50 you start thinking about things you haven’t thought about before.”  Eugene O’Neill

Still in our early twenties, we withheld some of our Federal income taxes for 1969, the year we lived in Boulder, to express our displeasure at the conduct of the war in Vietnam.  Woefully naïve on several counts, I wrote a note with our tax return clearing up in excruciating detail why we were doing so.  Martin Luther King and Bobby Kennedy were dead, and the world seemed bleak. Returning to Massachusetts with our infant daughter, we were living temporarily with my parents waiting for a cheap winter rental to open up on Mashnee Island off Cape Cod.

How they found us remains a mystery, but as I was coming home from work one evening driving my hand painted 1956, flathead six Chevy pickup truck, two tired looking gray men in rumpled suits pulled into my father’s driveway driving a dirty gray Ford Crown Vic.  Apparently, they had been waiting for me.  The younger of the two had a black band fedora; the older one had a close cropped fringe of salt and pepper hair with nothing on top.  I had a lot of hair and jeans stained from climbing trees.

The older one in charge, whose name has long receded, gave me his card and explained that they had no issue with our political views, which were our prerogative to hold, nor did they care to debate – very clear there would be no debate.  However, they had come to collect the taxes due plus penalties and interest.  It wasn’t a lot of money, but taxes were taxes after all and not an option.  He rattled off his bullet points unapologetically by rote without a smile or a threat or an alternative.  First they would attach and drain, if necessary, our checking and savings accounts.  If we had no such accounts, they would garnish my wages.  If I lacked a job, they would lien our house.  If we had no house, they would take our truck.  He looked over at the Chevy pointedly.  Which would I prefer?

 And so it goes.

Raushenberg’s “Canyon”

A story in this week’s WSJ reminded me of this incident for some reason.  Lifelong art dealer, Ileana Sonnabend, died in 2007 leaving her considerable collection to her heirs, Nina Sundell and Antonio Homem.  The heirs were forced to sell about $600 million dollars worth of their heritage to pay the $471 million in death taxes due on them.  ($600 million was more than was due, but of course, taxes were owed on the proceeds from selling them – capital gains taxes on the death taxes.)  Of course, there was a catch with one of the pieces: Robert Rauschenberg’s “Canyon”, created in 1959 and appraised at $15 million by the IRS.

The collage legally couldn’t be sold because it contained a stuffed bald eagle; selling it would violate the 1940 Bald and Golden Eagle Protection Act and the 1918 Migratory Bird Treaty.  That Rauschenberg before his death filed a notarized letter in 1988, stating that the eagle had been killed and stuffed by one of Teddy Roosevelt’s Rough Riders long before the 1940 law was in effect, made no difference.  The art work could not be sold; the auction house said it was worth nothing as a sale item.  The family filed an affidavit claiming that due to the inability to sell it, there was no value, and therefore no taxes were due on the inheritance for it.  Aha, responded the IRS, since there was a “gross understatement” of its value by the owners, the IRS value had now been upped to $65 million, so the tax bill was $29.2 million plus $11.7 million in penalties for understating its value.   Plus interest.

After five years of expensive legal wrangling, the painting, which had been on permanent loan for display by the owner at the Metropolitan Museum, was donated to the Museum of Modern Art, also in New York.  The painting had been exempt from Wildlife Service penalties as long as it was on loan to the museum, so now it passed with the same waiver to the MOMA.

And so it goes.

The hang up on avoiding the fiscal cliff is the tax rate on the top 3% of earners, not the tax dollars paid, but the tax rate.  While President Obama has proven to be a poor to middling CEO in his role at governance, he is a near genius at politicking, perhaps learned through political infighting during his bureaucratic years as a community organizer.  The tax rate increase he has drawn as a line in the sand has little to do with revenue – the dollars that would be collected are a little spot of yellow in a great snow drift.  The tax rate increase has everything to do with driving a wedge and causing as much consternation as possible amongst his political enemies.

Bear with just a few numbers.  In 1958, the top 3% of earners paid marginal rates as high as 91%, a progressive erotic dream, but almost no one paid those rates because of the pages of loopholes and deductions available.  The total income of the top earners was 14.7% of all income earned, and they paid 29.2% of all federal income taxes.  Many of the loopholes have been closed or capped already, and in 2010 the elite 3% earned 27.2% of all income; their percent of all taxes paid rose to 51%.  Middle and lower income earners (the bottom two thirds) earned 41.3% of all income and paid 29% of all taxes in 1958.  In 2010, their share of earned income had fallen to 22.5%, but their share of taxes paid plummeted to 6.7% of all taxes.

So, indeed, the rich have gotten richer, and their relative tax burden reflects that proportionately, but almost 50% of the rest of us pay no federal income taxes whatsoever.   The compulsion of the progressive liberal is not about “fairness”, it is about redistribution, punitive measures against the successful and ideology.  But even more so, it is about casting chaos into the opposition and twisting the knife.

And so it goes.

“They’re trying to kill me,” Yossarian told him calmly

“No one’s trying to kill you,” Clevinger cried.

“Then why are they shooting at me?” Yossarian asked.

“They’re shooting at everyone,” Clevinger answered.  “They’re trying to kill everyone.”

“And what difference does that make?”

“That’s some catch, that catch-22,” he observed.

“It’s the best there is,” Doc Daneeka agreed.

Catch 22, Joseph Heller

A story is told about Winston Churchill that may or may not be apocryphal, however the significance for us is timeless.  After the war was over and Sir Winston unceremoniously voted out when his indomitable gift of leadership and candor became politically inconvenient, he was invited to speak at a gathering at Cambridge University.  He sat through the formal dinner with his bulldog visage unreadable, silently contemplating the tribute that dominated one wall, memorializing the long list of Cambridge alumni and students who laid down their lives to protect their country from being brutally incorporated into the Third Reich.  The dean finally concluded his endless extravagant introduction lauding Churchill, and how his soaring rhetoric saved the British Isles.  An expectant hush settled on the listeners, awaiting inspirational brilliance.  Sir Winston stood wearily and looked out over hundreds of fresh young faces, survivors whose brethren would never return.  Glancing once again over to the wall, he spoke, “Never give up, never give up, never give up.”  Churchill settled back into his chair.

The usually laconic, if not truly morose, Senate Minority Leader, Mitch McConnell, burst out laughing when Treasury Secretary Timothy Geithner proffered the Obama administration’s “compromise” solution to avoid jumping over the “fiscal cliff” on January first.  Without a scrap of compromise or one inkling to slow down spending, its raison d’etre was taxes, taxes and then, again, more taxes, and even those barely cover a couple of weeks of Federal expenditure. Not a serious proposal, only more political posturing and dialectic of class struggle. To add to the comic relief, the proposal suggested that Congress should abdicate its responsibility to approve debt ceiling increases.  “Leave it to us and avoid the unseemly bickering,” suggested the Executive Branch.  Perhaps that is the rub that incited McConnell’s rarely seen mirth.

The administration kicked off the reign of the 44^th president with an unprecedented level of unstimulating stimulus spending at the staggering level of $800 billion larded on in 2009.  The unprecedented soon became business as usual with spending levels sticking at the newly established benchmark, resulting in undreamed of deficits, over $1,000,000,000,000 (one trillion) a year.  This deficit and the negotiations to raise the debt ceiling resulted in the beggar’s choice deal that dug the chasm looming ahead and deemed by a gleeful media as a “fiscal cliff”.  $16 trillion in debt (and counting), and the compromise solution only addressed asking more from the taxpayers with the rhetoric about fairness and redistribution.  Not a syllable about specific proposals to curtail diarrhea profligacy.

One provision, raising the estate taxes on the “wealthy” from 35% to 55%, would result in the breakup of long held family ranches and farms.  Ranches and farms are by definition illiquid, with their “wealth” consisting of hundreds or even thousands of acres of agricultural land – land owned for generations.  Every nickel of the income derived from these businesses and the income of their owners has already been taxed, every acre taxed each year with property taxes.  Yet when the principle owner lacks the good sense to stay alive, the heirs are subject to the “death tax”.  Their only option is either taking on insupportable debt or selling off some land to pay the taxman.  Estate taxes are deeply rooted in progressive egalitarianism and antipathy to any attempt to pass along the hard earned net worth of the successful to their heirs.  Not just the oft cited Paris Hilton or Kim Kardashian excesses, but privately held farms, ranches and businesses are to be crushed with burdensome taxes at the passing of the owner.

Perhaps the least understood and therefore mostly avoided debt discussion is not the fiscal deficit that shows on the Federal balance sheet.  The debt that is held “off the books” is far worse.  Like Enron, which sealed its own ruin by concocting sophisticated accounting to hide liabilities, the Federal debt that isn’t declared on the balance sheet is shocking to comprehend.  Think icebergs.

The promises made to those who have paid into the system their whole working lives are not stipulated in Federal deficit reports.  The mostly unfunded liabilities of Social Security, Medicare and federal employees’ future retirement benefits already are over $86.8 trillion, 550% of Gross DP.  Much has been made of our stated deficit of $16 trillion crossing the line of 100% of GDP. Quick addition of both the stated and unstated deficits is $102 trillion or about $310,000 for every man, woman, child and transgendered person in the country.  You only thought you had worked all your life to pay off your mortgage and credit cards.  Think again.

Secretary Geithner stated unequivocally that Social Security is not on the table in any debt discussion under any circumstances.  Why?  My cousin, David, is an unrepentant Connecticut/Manhattan progressive, yet somehow remains very intelligent and a good guy.  I have full confidence that he and I could sit down with a halfway competent accountant and come to an agreement to fix Social Security funding for the foreseeable future over a couple of beers.  Eliminate the cap (satisfies taxing the rich), stop the ridiculous pandering of cutting the Social Security contributions of all of us employees, gradually continue to raise the retirement age to reflect the increased longevity of our citizens, and we’re just about done.  How about another beer?  Why can’t our elected officials do the same?

 Nearly 49% of the voting population chose Door “B” to common sense and responsibility.  We lost, but cannot surrender.  Never give up, never give up, and never give up.  For the sustainability of this noble Great Experiment of ours.  To remain true to our ideals and consciences.  For our children and grandchildren.  Sing, but keep going.

“Let us sing alleluia here on earth, while we still live in anxiety….So, then, brothers (and sisters), let us sing now, not in order to enjoy a life of leisure, but in order to lighten our labors.  You should sing as wayfarers do – sing but continue your journey… Sing, but keep going.”  St. Augustine

A chess match ends as a win, a loss or a draw.  A draw can be agreed to by the persons playing the white and black pieces.  Certain situations are deemed a stalemate, which is a draw by definition.  No one wins.  The rules defining a stalemate have application to real life.  If one player on either side is not in checkmate, but has no legal moves, the game is a stalemate and drawn.  If both players have moved fifty times without a pawn moving or a capture being made, that’s a stalemate.  If a position has been repeated three times with every piece on the exact same square for both sides, that’s a stalemate and drawn.  It matters not if the positions are repeated sequentially, so long as they are reproduced exactly.   Only the side in the weaker position poised for a loss would declare the repeated position and draw.

“If a tie is like kissing your sister, losing is like kissing your grandmother with her teeth out.”  George Brett

At the end of drawn out, bitterly contested campaigns, we find ourselves shell-shocked weary with virtually no change in the balance of power in Washington.  Hundreds of thousands of words have been and will be written about changing demographics, debate performances, issues false and true, ground games and early media blitz bets placed in swing states.  The essential question, however, is where do we go from here?  Can the Republicans tweak their base and make inroads into the new demographic coalitions of Latinos, single women, citizens of Asian origin and other minorities?  Have we reached a “tipping point” such that those relying on government and “in the wagon” outnumber those contributing to tax revenues and “pulling the wagon”?

“When the people find they can vote themselves money–that will herald the end of the republic.”  Ben Franklin

Can we avoid repeating our exact position or making fifty moves with no progress to break the potential of stalemate?  Will common sense prevail over ideology and a compromise be crafted to avoid the “fiscal cliff” of large across the board tax increases and devastating cuts to our defense that the Congressional Budget Office tells us will script us directly into over 9% unemployment and a new recession?  Other than a textbook definition, did we ever truly climb out of the last one with the prolonged anemic “recovery”?  Will the now assured full implementation of Obamacare with its assured tax increases and enormous expenditures make cutting our deficit structurally impossible over the next decade and trip us into a recession anyway?  What the hell was David Petraeus thinking?  So many questions to answer, we can be easily overwhelmed.

“A billion here, a billion there, and pretty soon you’re talking about real money.”  Attributed, but not fully documented, to the late former minority leader, Senator Everett Dirksen

There is some certainty in the real numbers, however, and they are worth understanding as we discuss everything else.  Let them speak for themselves.  The deficit that deeply troubles so many of us and will beggar the future of our children can be grasped quite easily with a minimum of sophisticated fiscal knowledge by using this table from a Wall Street Journal article:

U.S. Deficit Growth (from US Treasury Dept and CBO records)
Total federal revenue, outlays and deficits,
fiscal years 2007-2012, in billions of dollars.
Year	2007	2008	2009	2010	2011	2012
Revenue	$        2,568	$    2,524	$    2,105	$    2,163	$    2,302	$    2,449
Spending	$        2,729	$    2,983	$    3,518	$    3,456	$    3,599	$    3,538
Deficit	($161)	($459)	($1,413)	($1,293)	($1,297)	($1,089)
% of GDP	-1.2%	-3.2%	-10.1%	-9.0%	-8.7%	-7.0%

Let these numbers roll around the back of your head for just a little while.  As revenues dropped (and are now just starting to recover), spending exploded and set a new benchmark frozen at an unprecedented level. No serious attempt has been made to curtail the profligacy of Washington as they buy our votes and the campaign contributions of special interests. Our deficit in the Obama years as a percent of Gross Domestic Product (the sum of our total economic activity as a nation) has never been less than double the worst year of the Bush administration, which was fighting the same two wars.  And the actual dollars of deficit have never been less than double the worst of the Bush years.

The Republican caucus insists on paring back the out of control spending; President Obama’s supporters such as those in the public unions and MoveOn.org insist on reducing the deficit by raising taxes.  His proposal in last year’s debt ceiling negotiations was to raise them by about $82 billion a year, which is still only 7% of last year’s deficit.  This week he has upped the ante to double that with no mention of trying to reduce spending.  Stalemate.  Many believe he would be content to let the economy go over the fiscal cliff and blame the Republicans for the new recession while satisfying his left base which demands higher tax rates and very few cuts.  Next year he could negotiate from the now higher rates.  Stalemate, and playing political brinksmanship with our fragile economy.

Unsustainable is a clichéd buzz word, but sometimes clichés are the best we can do.

Just behind sex, food, shelter and clothing in the hierarchy of human drives is the pharisaical impulse – that most ardent desire to write down and impose the minutiae of stultifying rules and regulations upon the spirits of our fellows.  Jesus put it this way: “They tie up heavy loads and put them on men’s shoulders, but they themselves are not willing to lift a finger to move them.” (Matt 23:4) John the Baptist was more succinct: “You brood of vipers!” (Luke 3:7)

We have advanced exponentially in the technological competence to distribute and enforce these regulations, but not a whit, it seems, in controlling the inclination.  In the twentieth and twenty first centuries, the prime movers of regulation are the progressives or liberal political parties (or tyrannies), most especially exemplified currently in the United States by the Obama administration.

Just a couple of examples from the most prolific regulations generators in American history:

• In 2010, the administration headed the charge to fulfill Rahm Emanuel’s admonition (former White House chief of staff, now Mayor of Chicago) to never let a serious crisis go to waste by signing into law the Dodd Frank financial reform bill.  When any bill is passed, it then falls to the bureaucrats to promulgate the regulations defining how it will be enforced.  And propagate the new bureaucrats necessary to enforce it.  Propagating bureaucrats is something at which progressive government is particularly talented.  Consisting of 2,319 pages, Dodd Frank has generated over 8,000 pages of new Federal Register regulations.  And counting.
• The Affordable Care Act (Obamacare) was worse yet, imposing over twenty new taxes, over 2,700 pages in length, it has generated to date almost 12,000 pages of new regulations.   Eighteen pages of these went just to define the term, “full time employee”.  No kidding.  Any reasonable person could have defined the term in a well constructed sentence.  11, 327 pages in July so far.  And counting.

The far from conservative and long esteemed magazine, “The Economist” wrote this about Dodd Frank: “(the bill) will smother financial institutions in so much red tape that innovation is stifled and America’s economy suffers.”  Given the tepid recovery, barely above horizontal since the recession ended in early 2009 – the slowest post war recession recovery –and the record breaking low velocity of money turn over, “The Economist” was prescient, albeit with an obvious prediction.  Banks are sitting on enormous reserves of cash that are not being put to use.

 Financial institutions are struggling to understand and implement the 8,000 pages of Dodd Frank, and are increasingly timid to put their cash back into growing the economy.  Businesses, also concerned with compliance and future tax implications, are reluctant to borrow the money necessary to grow and hire new employees.  Fear and the fearful levels of work necessary to comply are two sea anchors that an economy just beginning to see the wind pick up from the doldrums doesn’t need.  Experts approximate that the 8,000 pages so far are about 30% of what will ultimately be imposed.    The House Committee on Financial Services calculates that the law will take private companies 24 million labor hours a year and require that businesses hire 26,477 employees to comply.  In that sense, it is, I suppose, a jobs bill.  Of course, not one of those 26,477 expensive employees will contribute an iota to growing the business or the profits necessary to hire more people.  Au contraire.

What does this new bureaucracy look like, and how much does it cost the already overburdened taxpayer?  One section (there’s a lot of sections in 2,300 pages) of Dodd Frank was the original brainchild of Elizabeth Warren (Harvard professor and Senate candidate running against Scott Brown in Massachusetts). Dodd Frank established a new Consumer Financial Protection Bureau (bureau being first two syllables of ‘bureaucrat’).  Sounds lofty and helpful, doesn’t it?  The CFPB has a budget of over $447 million for fiscal year 2013, ladles on 958 new federal employees, 60 % of whom make over $100,000 in salary, and has authority to draw up to $550 million directly from the Federal Reserve with no Congressional oversight and just a one page letter to the Fed describing why it needs the money.  Five percent of the employees make over $200,000, which is more than a sitting cabinet member.  The “administrative assistant” (secretary) of the director, Richard Corday, makes $165,139. They spent $40 million (40% of it borrowed in the deficit) on office renovations.

In contrast to those exalted salaries, the median American taxpayer makes $50,054, an amount that has decreased against inflation every year of the Obama administration, including 4% last year.  So far, we have seen the CFPB produce such gems as Consumer Alerts (such as the mandatory small print in things like credit card terms and conditions) published in 187 languages at taxpayer expense, including Somali and Tamil – spoken predominantly in northeast Sri Lanka.  How many of us have read the terms and conditions in the existing credit card statements?  The Tower of Babel had nothing on the Consumer Financial Protection Bureau.

The Labour Party government in post WWII Great Britain left in place many of the wartime restrictions and regulations; this is typical of the progressive Pharisee: once in place, regulations tend to grow brothers and not ride off into the sunset.  A report was commissioned in the fifties to investigate the benefits of closely managing the youth.  Here are some excerpts: Special agencies, called Citizen’s Advice Bureaus, are set up to steer the bewildered through the forest of rules, and to indicate to the persistent the rare clearings where a private person may still make a choice…(the ordinary citizen) spends great stretches of his waking hours going through motions that have been predetermined for him by directives in whose framing he has had no part, whose precise intention he seldom understands, and of whose appropriateness he cannot judge.  (They are) so acclimatized to that state that they seldom plan and carry out under their own steam any new….enterprise.  He thus looks forward to no future period at which a sinewy faculty of responsibility is likely to be of service to himself or others.

Anyone who has had the misfortune to work for a micromanager experienced the slow sapping of creativity, energy, commitment and joy that results.

At his inauguration, President Obama promised “hope and change” and to “fundamentally change” America.  Many did not understand the degree to which he wanted to change us, nor exactly how he would go about it.  This time during the election process, we do.

(Powerful central government) covers the surface of society with a network of small, complicated rules, minute and uniform, through which the most original minds and the most energetic characters cannot penetrate to rise above the crowd.  The will of man is not shattered but softened, bent and guided… Such a power does not destroy, but it prevents existence; it does not tyrannize, but it compresses, enervates, extinguishes, and stupefies a people, till each nation is reduced to be nothing better than a flock of timid and industrial animals, of which government is the shepherd. “Democracy in America” Alexis de Tocqueville.