Tag Archives: The Wall Street Journal

New Taxes For Thee–But NOT For Me

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The Wall Street Journal posted an editorial today about one of the President’s new tax proposals. The proposal would take away the tax breaks for families saving for their children’s college education. The 529 plans have been a way for families to save for college, and if the money was spent on educational expenses, it was not taxed when it was withdrawn from the plan. The money in these plans has already been taxed, and the President intends to tax it again when it is withdrawn (before it can be used to fund higher education).

There is  however, a very interesting aspect of this proposal–money that has already been put in these plans would be exempt from the new tax. Sounds reasonable, right?

The editorial reports:

According to a 2009 report in the Journal, in 2007 “the Obamas took advantage of a unique feature of 529 plans that allows account owners to front-load five years’ worth of contributions, $240,000 in total for the two girls.” No doubt these investments took a hit during the financial crisis. But given the stock market recovery since the spring of 2009, we imagine the Obama family has built educational resources that most middle-class families can only dream of.

We would compliment the President on his financial planning and thoughtful parenting in building up these assets tax-free. But his latest policy proposal makes us wonder why he won’t let the next generation of savers do the same.

Taxes for thee–but not for me.

I Don’t Think The Negotiations Are Working

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On Wednesday, The New York Times reported that Jason Rezaian, an American citizen of Iranian descent from California, The Washington Post’s correspondent in Iran, who has been in prison in Iran since July, will be charged and tried in a Revolutionary Court.

On the same day, The Wall Street Journal posted the following:

Nice timing, brothers. Secretary of State John Kerry met Wednesday with Iranian Foreign Minister Mohammed Javad Zarif to negotiate how much of Iran’s nuclear program it will be able to keep. Meanwhile, according to the Associated Press, Iran’s state news agency reported that a court in Tehran had indicted Washington Post reporter Jason Rezaian, who will stand trial on unspecified charges.

The New York Times reports:

Earlier in the day, Mr. Zarif, who knows Mr. Rezaian personally and has described him as “a fair reporter,” gave no hint of any movement in the case. “This is a judicial matter, so we will have to wait for the judiciary to move forward,” Mr. Zarif said. He repeated Iran’s contention that it regards Mr. Rezaian, as well as another imprisoned American citizen of Iranian descent, Amir Hekmati, as Iranian citizens who are subject to Iranian laws. Neither has been granted the diplomatic access afforded to foreign prisoners, and in Mr. Rezaian’s case, he has not been given access to a lawyer since his arrest.

I think it is time to place severe economic sanctions on Iran. They obviously have no respect for the American government and do not care how they treat American citizens. I think it is time to play hard ball. It is becoming very obvious that the trouble makers in today’s world have decided that they have nothing to fear from America’s current leadership. Franky, I would rather countries like Iran and Russia fear us than like us. Unfortunately, President Obama has caused them to do neither.

The Next Government-Caused Financial Disaster

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The Wall Street Journal has two stories in its opinion section about what is happening to student loans–the first is entitled, “Your Taxpayer Tuition Bill,” and the second is entitled, “The Hidden Student-Debt Bomb.” As you know, the federal government took over the student-loan market in 2010. The Department of Education now stands behind over $1 trillion in outstanding debt.

The first article explains:

Less well known is how the same federal government that has promoted and subsidized this debt is also scheming to make sure it doesn’t have to be repaid.

Jason Delisle of the New America Foundation has the story in a nearby op-ed. Even as the debt-level rises and the economy improves, the feds are promoting loan forbearance and forgiveness programs.

The first article explains that graduates who choose nonprofit or government jobs an have their loans forgiven entirely after 10 years.

The first article points out:

Two years ago the Administration’s estimate of the average amount to be forgiven in income-based repayment plans was already $41,000 per borrower. The total amount of forbearance loans is $125 billion, and rising. And even with all of these ways to avoid on-time repayment, borrowers are still defaulting at a rate of nearly 20%. The clear danger is that hundreds of billions of dollars will never be repaid, which means that future taxpayers will have to pick up the tab.

Now on to the second article. The problem with the government taking over student loans is that a large percentage of them will not be repaid–leaving the taxpayers to pay the bill. Conveniently, the bill will be due after President Obama leaves office.

The second article illustrates the trend:

Despite more borrowers taking advantage of benefits to suspend and lower their payments, the share of borrowers in default is still trending upward. It now stands at 19.8% of borrowers whose loans have come due—some 7.1 million borrowers with $103 billion in outstanding balances. That’s the highest share since the Education Department began making the statistic available in 2013, and given other trends, it probably is a record high.

These trends are troubling because the U.S. economy has been improving for some time. Yet fewer and fewer borrowers are repaying their federal student loans. For those who do make payments, more of them are paying too little to retire the debt they took on.

This all makes sense, however, when you realize that the student-loan program has been designed to achieve two political goals: Loans should be available to any student, at any school, pursuing any credential; and student debt is bad and burdensome, so it should be easy for borrowers not to repay.

Based on these goals, the program is performing quite well for students and the institutions whose coffers swell under such loose lending standards. Loan issuance has grown rapidly in recent years while repayment rates have declined steadily. From the perspective of the taxpayers who must ultimately finance these liabilities, however, the federal student-loan program is performing badly and steadily getting worse.

There are some things we need to remember. Any time the government takes over something, it makes it less efficient. Banks had motivation for collecting on these loans and thus used wisdom in granting them–the government has neither. The amount of a college loan should be connected to the marketability of the skill required–borrowing more than $100,000 to get a degree in Women’s Studies does not necessarily make sense. As an aside, I once knew a person who had a Ph. D. in lute, but he was working for a living and being responsible financially. I also once worked doing data entry in a call center where one of the telemarketers had a degree in Ancient Egyptian Archeology. I asked him why he was working as a telemarketer, and he replied, “I like to eat.” An education is a wonderful thing, but at some point employment has to be a goal. Not everyone needs to go to college, and the American taxpayer does not have to pay the bill for everyone to attend.

 

The Unintended Consequences Of American Oil Production

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The Wall Street Journal today included an article by Daniel Yergin about the falling oil prices. The Organization of the Petroleum Exporting Countries (OPEC) met Thursday and decided not to cut oil production. That is a major policy change and will have worldwide impact. The demand for oil is no longer the basis for OPEC’s decisions–now the deciding factors are the surge in U.S. oil production and the new oil supply from Canada.

The article reports:

Since 2008—when fear of “peak oil,” after which global output would supposedly decline, was the dominant motif—U.S. oil production has risen 80%, to nine million barrels daily. The U.S. increase alone is greater than the output of every OPEC country except Saudi Arabia.

The world has experienced sudden supply gushers before. In the early 1930s, a flood of oil from East Texas drove prices down to 10 cents a barrel—and desperate gas station owners offered chickens as premiums to bring in customers. In the late 1950s, the rapidly swelling flow of Mideast oil led to price cuts that triggered the formation of OPEC.

Oil is currently selling at about $69 per barrel after hovering around $100 per barrel for the past three years. The shale oil being drilled in America is still economical to produce with prices between $50 and $69 per barrel, so the lower prices will not drive America from the world market.

So what are the international implications of cheap oil? The Russian budget is funded over 40% by oil, but Putin has built up a reserve of a few hundred billion dollars that will help Russia cope with the falling oil prices. Venezuela and Iran are also negatively impacted by falling oil prices. Just for the record, the building of the Keystone XL Pipeline would have a severe negative impact on the Venezuelan economy–the Gulf Coast refineries would replace the heavy oil from Venezuela with the Canadian oil.

There is, of course, the possibility that OPEC could change its mind in the Spring and cut output, but even if they were to do that, they would only be hurting themselves, as Canada and the United States would simply increase their production to make up the difference.

An Interesting Perspective On The Coming Amnesty

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On November 16, The Wall Street Journal posted an editorial entitled, “The Missing Immigration Memo.” The editorial asked if President Obama has sought or received written legal justification from the Attorney General or the Justice Department‘s Office of Legal Counsel (OLC) for his coming Executive Order on amnesty.

The editorial points out that on previous actions such as drone strikes or targeting U.S. citizens abroad, the President asked the OLC for advice on the boundaries of Presidential authority.

The editorial states:

It’s possible Messrs. Obama and Holder haven’t sought an immigration opinion because they suspect there’s little chance that even a pliant Office of Legal Counsel could find a legal justification. Prosecutorial discretion is a vital legal concept, but it is supposed to be exercised in individual cases, not to justify a refusal to follow the law against entire classes of people.

White House leakers are also whispering as a legal excuse that Congress has provided money to deport only 400,000 illegal migrants a year. But a President cannot use lack of funds to justify a wholesale refusal to enforce a statute. There is never enough money to enforce every federal law at any given time, and lack of funds could by used in the future by any President to refuse to enforce any statute. Imagine a Republican President who decided not to enforce the Clean Air Act.

The President and the Democrat party need to realize that the President’s actions have resulted in the decline of the Democrat party. Do they really want a Republican President who operates under the precedent of this sort of power grab?

Our Government Is Supposed To Represent Us–Not Rule Over Us

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From The Wall Street Journal:

The above chart is included in a Wall Street Journal article about the fight over the testing contracts for Common Core.

This is the beginning of the article:

As states race to implement the Common Core academic standards, companies are fighting for a slice of the accompanying testing market, expected to be worth billions of dollars in coming years.

That jockeying has brought allegations of bid-rigging in one large pricing agreement involving 11 states—the latest hiccup as the math and reading standards are rolled out—while in roughly three dozen others, education companies are battling for contracts state by state.

Mississippi’s education board in September approved an emergency $8 million contract to Pearson PLC for tests aligned with Common Core, sidestepping the state’s contract-review board, which had found the transaction illegal because it failed to meet state rules regarding a single-source bid.

When Maryland officials were considering a roughly $60 million proposal to develop computerized testing for Common Core that month, state Comptroller Peter Franchot also objected that Pearson was the only bidder. “How are we ever going to know if taxpayers are getting a good deal if there is no competition?” the elected Democrat asked, before being outvoted by a state board in approving the contract.

Common Core is sacrificing our children’s education while a few well-placed companies make millions. It is simply not worth it.

Will Keystone Make A Difference?

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The Wall Street Journal (not linked–the article is subscribers only) posted an editorial in its weekend edition about President Obama’s recent remarks about the Keystone XL Pipeline.

When asked about the pipeline, President Obama responded, “Understand what this project is: It is providing the ability of Canada to pump their oil, send it through our land, down to the Gulf, where it will be sold everywhere else. It doesn’t have an impact on U.S. gas prices.”

Either the President is economically ignorant or he is attempting to take advantage of the lack of economic knowledge of the average American (the tactic used to sell ObamaCare).

The editorial at the Wall Street Journal points out:

Someone should tell the President that oil markets are global and adding to global supply might well reduce U.S. gas prices, other things being equal. A tutor could add that Keystone XL will also carry U.S. light oil from North Dakota‘s Bakken Shale. So even if he thinks that bilateral trade only helps Canada, he’s still wrong about Keystone.

…Mr. Obama routinely entreats Congress to spend taxpayer money on “infrastructure” to create jobs, yet he implies that the 1,179-mile Keystone infrastructure project won’t create jobs.

Chances are that President Obama will veto the bill that passed the House and Senate regarding the Keystone Pipeline. The only reason the Senate allowed the bill to be brought up was to help Senator Landrieu win re-election. I am not sure the bill would have been brought up if the Democrats were not sure the President would veto it. I doubt enough Democrats will actually support the bill to override that veto. It would be nice if they did. Keystone would be a wonderful way to boost the American economy without charging Americans more taxes.