Current Economic News

July 2013

The Obama administration decided to delay for one year a requirement that employers provide health insurance to employees.

Businesses said the complex reporting requirements that come with the law would eat away at valuable staff time. In addition, many businesses were concerned that the federal reporting systems used by employers to report on their employees’ health benefits were untested. Also, they said the law’s regulations have yet to be fleshed out.

“This is simply the latest evidence that implementation of this terrible law is going to be difficult if not impossible, and the burden is going to fall on the people who create American jobs,” said Amanda Austin, director of federal public policy for the business group. “Temporary relief is small consolation. We need a permanent fix to this provision to provide long term relief for small employers.”

(source: Arkansas Democrat-Gazette)

Portugal joins list of countries on the verge of bankruptcy.

The Portuguese government is split on discussions regarding austerity measures needed to get the country’s fiscal house in order. The split could jeopardize Portugal’s ability to access needed bailout loans, which are needed to avoid bankruptcy.

Unions are fighting the government’s plans to increase the working time of state employees to 40 hours a week from 35, while lowering pension entitlements, and lay off some 50,000 government workers out of about 583,000.

(source: Arkansas Democrat-Gazette)

If this all sound familiar it is because Greece is going through the same fiscal problems and is also seeking bail out money from the International Monetary Fund, and the European Central Bank.

Egypt is once again in political turmoil. The economy is poor and suffering from 8% inflation. Although the United States is broke, it gives Egypt about $1.5 billion annually for various military and other aid.

It’s almost like the United States is blessed to be able to observe what is happening in Portugal, Greece, and other Southern European countries in order to understand the devastating effects from out-of-control spending and promises of entitlements that can never be kept.

DO YOU THINK THAT WASHINGTON IS IN FACT LEARNING FROM THESE ECONOMIC EPISODES AROUND THE WORLD?

Arkansas ends fiscal year with $300 million surplus!

For its fiscal year 2012-2013, the state of Arkansas ended up with $5.02 billion of collected taxes and a surplus of $300 million. Governor Mike Beebe was quoted as saying; “It’s much easier to have some money put back for a rainy day than it is to be a liberal budget person and just want to project liberal projections and then wake up and find out, ‘Oh my gosh, I either spent too much money or I cut too much in the way of taxes and now we’re in the hole like all these other states’”.

Arkansas legislature had previously approved a package of tax cuts totaling about $10 million in fiscal year 2014, $85 million in fiscal 2015, and $140 million in fiscal 2016.
(source: Log Cabin Democrat, Conway AR)

The $300 million surplus last year would indicate that the package of tax cuts is well supported. How about Mike Beebe for President?

Finally some really smart proposed legislation out of congress to help avoid another housing collapse like the one in 2008.

Two of the “good guys”, Senators Bob Corker (R-Tenn.) and Mark Warner (D-Virginal) have introduced a bill to wind down the risk associated with housing finance under Fannie Mae and Freddie Mac. Basically, the bill requires a 10% private money cushion in front of any government sponsored financing. This makes a lot of sense and should help stabilize the mortgage financing market.

The bill is much fairer to taxpayers who were footing the bill for government sponsored losses, while private enterprises were profiting from the government’s insuring the loans.

Mr. Obama visits Africa.

We all know that Nelson Mandela is a true icon of freedom. Mr. Obama wanted to see him and his family before he passed on. A nice gesture.

Tanzania is the final stop of Mr. Obama’s weeklong African visit. While he is there, the president is expected to announce new efforts to increase trade and investment in the eastern region of Africa, as well as a plan to help double access to reliable electricity in the continent.

Mr. Obama will also announce a new push to prevent wildlife trafficking, in which sophisticated poaching syndicates kill elephants and rhinoceroses and sell their tusks and horns in contravention of international conventions. Mr. Obama will commit $10 million to help combat the problem and will detail a member of his Fish and Wildlife Service to the continent. “It’s decimating the populations of some of Africa’s iconic animals, including rhinoceros and elephants as well,”

In my opinion, the timing of such a trip is completely wrong. I’m sorry that Mr. Mandela is on the verge of death at the age of 94. I am also sorry that rhinos and elephants are being decimated. But why is Mr. Obama spending time and over $10 million in taxpayer money in Africa while America burns? Answer: Mr. Obama is unable to do anything constructive in Washington. It appears that he will be a lame duck president for the next three and half years.

Petroleum Imports from January through April fell to 36.2%, lowest level in 26 years.

The US produced more crude oil domestically during the January to April period than any comparable period in more than two decades going back to 1992. Let’s hope this trend continues so that the US can start a mega-trend of becoming energy independent, and perhaps become a net exporter of energy, greatly helping our balance of trade.

Hezbollah vows to back Syria’s Assad regime to the bloody end of that nation’s civil war.

While President Obama has not committed US troops to this conflict, he has committed over $300 million in humanitarian aid to go to the war torn country and its neighbors. The Middle East is like Obama’s tar baby where we, the United States, keep getting sucked into helping with funds we don’t have. It is a shame to watch what happens in despotic nations of the world. However, the US simply does not have the money to save all those unfortunate people. Digging ourselves deeper into our deficit/debt hole only makes us weaker and less able to handle our own domestic problems.

US Senate slams Apple Computer’s CEO Tim Cook for using purely legal techniques to avoid paying taxes to the US Government.

Congress keeps looking in all the wrong places to raise tax money. The real answer: simplify the tax code and make sure that our American corporations are not uncompetitive because of an overreaching, complicated taxing system.

Cisco has $46 billion in cash, but CEO John Chambers says he is no longer willing to use it to acquire U.S. companies. That’s because 80 percent of that cash is stored in overseas accounts and if Cisco spends it in the U.S., the company will have to fork over 35 percent in taxes. For years, he has been trying to get the U.S. to change that tax rule. He’s said before that this prevents him from hiring more U.S. workers. But now he’s said he’s also stopped shopping for acquisition targets in the U.S., too. That’s a blow, as Cisco has historically been a company that acquires like crazy.

US companies have about $1.7 trillion offshore. For instance, Microsoft keeps about 87 percent of its $66.6 billion stored outside the US; Oracle, 80 percent of its $31.6 billion; and Apple about 68 percent of its $121.3 billion, reports CNBC’s Jon Fortt. A lot of the money sitting overseas was earned overseas, but some of it is stashed there through accounting methods, a situation that Congress has recently been investigating.

Chambers wants low tax rates when that money is used here (called repatriation), or preferably no taxes at all (called a repatriation holiday). He explained on an interview on CNBC:

“Tax policy will determine where our growth and head count will be. I’ m a very loyal American citizen and company, but in terms of future growth, unless tax policy changes, you will see that occur outside the US … wherever we acquire is where our head count growth is going to be. If the majority of our money remains outside the US, and this depends on tax policies, that’s where you’ll see us acquire going forward.”

Tax

Tax

The senate’s hearings on corporate taxation are nothing less than silly and embarrassing. Rather than giving our CEOs a bad time for not being more magnanimous with their shareholders’ money, shouldn’t they do what they all know needs to be done? TAX REFORM.

Oklahoma Senator Tom Coburn is grateful for US aid to tornado victims in his state, but suggests that Washington cut other budgeted expenses to pay for it.

Tom Coburn is one of the good guys in Congress. He knows that the US Government is in big-time financial trouble. Aid for natural disasters such as Hurricane Sandy and the tornadoes in Oklahoma are unplanned and unbudgeted.

When time comes for the Federal Government to help with such disasters (one of the legitimate things we need from the US Government) it seems like some other expenses should be cancelled or deferred to accommodate these unplanned costs. Unfortunately, the Congress does not see it that way; one of the many things holding us back from a balanced US budget.