I just paid my estimated quarterly tax payments. Am I the only one who feels really pissed off when I sign those checks? I feel like tax payers are getting totally ripped off!
Here are a few examples of what I mean:
In 2001 Short Sellers (not the SEC) discovered the fraud at Enron, and in 2002 internal auditors (again, not the SEC) discovered accounting fraud at WorldCom. In response, the government said that they likely would have caught the fraud earlier if only the SEC had more resources to do greater enforcement. In 2003 the SEC’s budget was $437 million – and through revenue generated from enforcement actions they were anticipated to bring in substantially more revenue than their expenses – in other words they were expected to produce a significant profit from their enforcement activities. From 2003 to 2008 the SEC’s budget grew by 107%, to $905 million. From 2000 to 2006 Harry Markopolos repeatedly contacted the SEC with information about why he felt that Bernard Madoff was operating a huge Ponzi scheme. The SEC never followed up with any of the information Markopolos provided to detect or take enforcement actions against Bernard Madoff in his $50 billion Ponzi scheme. So, let me get this straight, we’ve more than doubled the SEC’s budget in a period of five years, and a credible person persistently contacted the SEC with significant information indicating the Madoff was committing fraud, and the SEC was totally ineffective. The fraud was exposed when Madoff confessed it to his sons who turned him in, not because the SEC prosecuted him. In the mean time, the US Government itself is running an even bigger Ponzi scheme in the form of the Social Security program. The ability to pay out benefits is dependent on new entrants to the program paying in, because none of the money taxed for Social Security has been set aside to pay benefits.
Another example: the bailout of Chrysler & GM. The US government already bailed out Chrysler once before in 1980. Unfortunately, US automakers have been significantly mis-managed for decades. Many people complain about the outrageous union wage packages that the big three are stuck paying – and they are, in fact, OUTRAGEOUS, with the average big 3 union employee costing over $73 per hour for wages and benefits. Based on a 40 hour work week that equates to more than $150k in total compensation for these employees – about $50k more per year then the average foreign-owned auto maker plant’s US factory workers. However, the thing that seems to get overlooked in the discussion about this is that agreeing to such outrageous wages and benefits is, itself, a huge management failure. Furthermore, with the exception of trucks and SUVs, the big three have failed to deliver quality cars that have designs that are competitive with their foreign competitors. The big three were on the verge of collapse before the US economy began to tank. By giving these automakers bailout money we are, in essence, rewarding bad management and bad business models. After bailout money was awarded to GM & Chrysler, they proceeded to buy thank-you ads to the US public in publications such as USA Today and The Wall Street Journal to the tune of about a half a million dollars. Businesses who use bail-out money for such advertising are clearly not responsible enough to deserve to be bailed out.
Another example: so far $350 billion has been spent in bailout money with much of it going to banks and financial institutions. The politicians and pundits claimed that by providing this capital to financial institutions it would “unfreeze the credit market” and make banks more interested in resuming lending. Incompetently, the government didn’t put appropriate restrictions or requirements on its use. Consequently, here we are months later and the credit markets are still very tight, and little of the TARP money seems to be being freed up for lending purposes. Instead, banks and financial institutions are holding on to the money to boost their balance sheets or are making acquisitions of other banks.
There is talk of the government spending $1 trillion in the coming year or two to stimulate the economy. We hear a number like $1 trillion and it is sometimes difficult to understand just how large that is. Let me help put it in perspective. A trillion seconds equals 31,709 years. Currently the US population is about 304 million people, and since there are, on average, 2.59 people were average household, that means there are 117,374,517 US households. If you divided $1 trillion by the number of households in the US, it would amount to $8,520 per household. I’m certainly not advocating writing a check to each US household, but this certainly puts things in perspective. This is by far the largest crisis spending of any type in US History, even in inflation-adjusted dollars. Yet, more money isn’t necessarily the best answer to many problems. In fact, speaking of inflation, this massive government spending runs the risk of creating hyper-inflation in the future.
As a tax payer, I would like to see the government use money wisely before giving more of it out and creating a larger deficit and an astronomical debt. Technically, the US is already insolvent or bankrupt. It’s time to starting having government act responsibly.
Why not let things run their course? If incentives are going to be provided, why not do it in such a way that those who have acted responsibly and/or create jobs are rewarded, not those businesses and individuals who have failed? Furthermore, in a capitalist free market economy things have a way of working themselves out even if it means that there are retractions that result in significant pain for periods of time. Point in case: Eight months ago politicians and pundits were confident that we would never see gasoline prices drop lower than $4 per gallon, and many estimated that by the end of the year prices could reach $6 per gallon. It was a rallying cry for alternate energy, a repeal of the gas tax, and for a special profit tax on petroleum companies despite the fact that most large petroleum companies have net margins that are lower than many other industries. The only problem is that the politicians and pundits were wrong. Dead wrong. I can fill up my car for less than $1.80 a gallon right now. So, how can we expect these non-business person, non-economists to make accurate predictions about how to handle the current economic crisis. My vote is that they quit indiscriminately throwing money at the problem. Anyway, as I wrote out my quarterly estimated tax payment today, I just needed to vent. Let’s see now, what happened to that copy of Atlas Shrugged . . .
Codiligent Business Brokers - Portland, Oregon based business brokers representing sellers of businesses with $500k – $20 million in annual revenue. To schedule a free consultation to discuss the possible sale of your business you may contact Eric Williams at 503-535-8817 or E@codiligent.com
