Free Markets, Free People

Virginia


To My Friends In Maryland

Q: Why doesn’t Delaware fall into the ocean?
A: Because Maryland sucks.
Q: Why doesn’t California fall into the ocean?
A: Because Maryland really sucks.

Dear Marylanders:

I see that your financial picture is looking rather dicey again. Sorry to hear that. Who could have guessed that high taxes, profligate spending and a general hostility to business would lead to such things? No worries, though. I’m sure political leaders will continue to work hard at righting the ship and get Maryland sailing along smoothly again (how is that plan to repeal the laws of economics coming anyway?).

On a related note, I understand that the Maryland legislature, in collaboration with Gov. O’Malley, has passed a new tax on all six-figure income earners in Maryland. Well, bully for you! That’ll teach those nasty capitalists to stop being so productive. And Gaia knows that they really need to pay their fair share (I mean, how is it that the top 20% of earners only pays about 68% of the income taxes? How’s that “fair”?). So, here’s hoping that works out for you (fingers crossed!).

Of course, I seem to recall that the last time you all did something like this (with that “Millionaires Tax” thingy), we here in Virginia experienced a bit of an influx of former Marylanders. Not too many that we couldn’t handle it, mind you, and probably fewer than some thought. But it does raise an issue, especially since the latest tax scheme stands to affect a much larger portion of Maryland’s population. While we’re always happy to welcome you all into the Commonwealth, we’d really appreciate it if you’d leave things here the way you found them.

You see, all too often when Virginia takes in refugees of high tax and high regulation states, they tend to bring a lot of those policies with them. They seem to really like our neighborhoods, schools and business environment, but for some reason they get all worked up about the fact that our government doesn’t spend as much money as they’re used to (in fact, we’ve actually had a budget surplus the past couple of years, and look to do so again this year!). They also tend to push for more state intrusion into our lives. Thing is, we really don’t like that. (In fact, it’s a fairly common complaint in the South.)

You see, before they came, we were doing just fine. Sure, some of us moved to places like New York and California so that we could enjoy that wonderful embrace of the Nanny State, but for the most part it’s been the other way around: people moving from high-tax/high-regulation states to places like Northern Virginia. We completely understand why you would want to leave a place whose policies increase your costs of living, impair your livelihoods, and generally intrude on your lives in unwanted ways. That’s why we try not to do that sort of thing here (albeit, with some annoying exceptions). Problem is, when you all move in, you start enacting all the same policies that made the place you left so bad. We’d all really appreciate it if you wouldn’t do that.

So, like I said, I really hope that whole tax-the-hell-outta-the-rich thing works for you. If it doesn’t, and your looking for change of scenery, you’ll always be welcomed with open arms on this side of the Potomac. Come on over, make yourselves comfortable and set a spell. Just don’t go touching anything.

Yours Truly,

Michael J. Wade


Health care reform – update

Byron York’s count has it at 209 “no”, 204 “yes”, with 18 undecided.   David Dayden at FDL puts the count at 191 “yes”, 206 “no” (205-209 with leaners), with 17 undecided.

As you can imagine, the pressure on the remaining 17 or 18 is going to be enormous. Bart Stupak claims it has been a “living hell”.

Still nothing out of the CBO which means a Saturday vote is unlikely.

Obama’s interview with Brett Baier of Fox is likely to do nothing to change minds about health care, just as his speech in Ohio had little effect. He may as well have gone to Australia as this is shaping up.  But it is clear he and the Democrats want to avoid any talk about “process” and continue to wave it away as something the American people just aren’t concerned with.  Big mistake.

And although he wouldn’t own up to it in the Baier interview, Obama has told others that the fate of his presidency is on the line with this vote.

All it took for Dennis Kucinich to cave was a 45 minute ride on Airforce One.  The liberal Ohio Democrat has found a way to rationalize his change of mind.

If you don’t think this is having an effect throughout the land, just remind yourself of the Scott Brown race, where Brown ran for liberal lion and chief health care reform advocate Teddy Kennedy’s seat as the “41st vote against health care”.  Then cast your eyes west and note that Barbara Boxer, another Senate liberal is vulnerable as well.

Speaking of California Senators, Dianne Feinstein’s “National Insurance Rate Authority” has been dropped from the reconciliation bill.  Since it has nothing to do with budgetary matters, it can’t be included.  If this monstrosity passes, look for her to attempt to add it at another time as an amendment to some other Senate bill.

And Code Red suspects two new “yes” votes for the bill, from California Democratic Reps Dennis Cardoza and Jim Costa have to do with announced water allocations for the water starved Central Valley in the state.  Yesterday the Interior Department moved up the March allocation, something never done in the past.  A “back room deal” for their votes?

One of the things Baier did in his interview is question the health of Medicare.  He got the president to admit that the bill doesn’t fix the structural problems of the program.  More and more medical providers are recognizing that problem and opting out of taking Medicare patients because they claim they can’t afford them.  And if Medicare is in bad shape, Medicaid is in worse shape.  As if to emphasize that point, drug store chain Walgreens has announced that after April 16th, it will no longer take new Medicaid patients.

The point, of course, is this “reform” does nothing to address the structural problems of the two government run systems which are at the core of the health care cost problem in the US.

Last, but not least, the Attorney General of Virginia has announced the state’s intention to sue the federal government if the present health care bill is passed under the “deem and pass” rule.  Virginia has already passed a law declaring it illegal for the federal government to require individuals to purchase health insurance.

~McQ


Virginia State Senate Rejects Health Care Insurance Mandate

In a bit of a surprising move the Virginia Senate has rejected the Obama health care insurance mandate:

Virginia’s Democratic-controlled state Senate passed measures Monday that would make it illegal to require individuals to purchase health insurance, a direct challenge to the party’s efforts in Washington to reform health care.

Let’s just say that “direct challenge” seems to be an understatement here. I was expected that the lower house, the GOP controlled House of Delegates, would pass such a bill, but not the Democratically controlled Senate:

Each of three similar bills that passed the state Senate on Monday would run counter to legislation passed by both chambers of Congress, which would require all individuals to purchase health care.

The bills were also expected to be approved by the GOP-controlled House of Delegates. Gov. Robert F. McDonnell (R) said he will review the bills but supports their intent.

What legal power this would have if such a mandate was passed by Congress is anyone’s guess, but it sure does set up an “interested party” for a law suit doesn’t it?

And, as I implied in the opening, VA isn’t the only state making such moves:

Measures prompted by the Washington debate are pending in at least 29 states, according to the National Conference of State Legislatures.

VA’s argument is a constitutional one – backers of the bill claim that Congress does not have the constitutional authority to require anyone buy insurance. This bill, if signed into law, puts VA in the position to challenge any such law on those grounds should Congress pass one.

And that is the fate, I believe, of any such reform that Congress tries to pass – lawsuit after lawsuit after lawsuit. And frankly I’m glad to see states trying to reassert their rights in this supposedly federal system. That is another great way to begin reigning in the national government.

Of course most of this is driven by politics and the desire of pols to keep their jobs. Any guess as to what is getting the credit?

The bills, a top priority of Virginia’s “tea party” movement, were approved 23 to 17 as five Democrats who represent swing areas of the state joined all 18 Republicans in the chamber in backing the legislation.

Yeah, baby!

For Congressional Democrats, it’s another warning shot right across the bow.  I have to wonder how many it will take to finally get their attention and have them scuttle that health care reform bill monstrosity on their own?

~McQ


Against Obama’s Global Tax Hike

I’m not keen on many taxes to begin with, but as a practical matter, some are more destructive than others. Some are so bad that they’re a train wreck even by their proponents’ stated standards.

President Obama has proposed a package of tax hikes on the overseas operations of American firms. The supposed benefits sound like political winners: over the next decade the feds get $210 billion to shovel into the yawning budget hole, and at the same time discourage those companies from outsourcing jobs. Congressmen who promise more jobs but are wary of mounting deficits might think they’re hitting two birds with one stone.

But there are more appetizing birds than the goose that laid the golden egg.

See, there are just a few things that offer relief from the fact that the US is one of the few countries to tax its companies’ operations all over the globe. One is “deferral” – companies don’t pay taxes on most earnings until the money is returned to the US parent company, so they can delay getting slapped with the double tax by reinvesting their foreign earnings in foreign operations.

Another big relief is being able to claim credits on the taxes they pay to foreign governments.

Obama is proposing, among other things, to place new limits on deferral and clamp down on tax credits. These changes won’t work as advertised: they won’t reduce outsourcing (they may increase it) and won’t raise nearly as much revenue as originally claimed.

First, most American companies that expand overseas do it to get around trade barriers and get close to their customers. When a new KFC opens up in China, that’s not an outsourced American job; that’s an American business getting to expand into a growing market. The vast majority of sales made by foreign affiliates – think 90 to 94 percent – were to foreigners, not exports back to the US.

Second, the roughly 2,200 US-based corporations with overseas operations either employ or support the employment of 22 million Americans, and those companies create half of all American exports. Jobs here rely on providing direction to foreign workers (managers, engineers) and producing goods for affiliates to sell in foreign markets.

The growth of US foreign affiliates is “consistently accompanied(PDF) by the growth of their parent companies, the opposite of what you would expect from a zero-sum perspective on “outsourcing”. More expansion abroad means more jobs, compensation and investment at home.

So making American firms uncompetitive abroad not only threatens jobs at home but even encourages businesses to headquarter themselves outside the US.

And as a result of that, the policy changes won’t raise nearly as much revenue as Obama claimed.

  1. The global downturn has been worse than Obama suspected back when that $210 billion figure was calculated.
  2. We’ve tried cutting back deferral before: in 1986, the government repealed deferral for the shipping industry, and consequently we lost half of our shipping capacity, taking a bunch of jobs and tax revenues with it.
  3. Even still, never underestimate the creativity and industriousness of tax lawyers.

That last part might not be such a problem if Obama’s proposals simplified the tax code, like he claims. But they make things worse on that score, not better.

As a note to my fellow Virginians: these companies with overseas operations are responsible for over half of the private sector jobs in the commonwealth (PDF source), and they tend to be the better-paying jobs (averaging over $70k compensation) like computer systems design and telecommunications. Is that going to sit well with the likes of Sen. Warner?

Bills that hurt this many people are loaded with political liabilities, yet I got word a few days ago that a bill with Obama’s proposals may come up for consideration in the House in September.

Get the word out. The more people know what this is going to cost them, the harder it will be to sell. By all rights, Obama’s Globo-Hike should fail politically before it has a chance to fail as policy.

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