Wednesday, June 29, 2005

Greenhouse Hypocrisy

Greenhouse Hypocrisy

The Washington Post allowed this to be published?!

The End of the Rainbow - New York Times

The End of the Rainbow - New York Times

Friedman is not one of my favorite columnists, but every once in a while he has a really good column. Here is one. Ireland the heart of growth in Europe.

Monday, June 27, 2005

lgf: The Chinese Dragon Awakens

lgf: The Chinese Dragon Awakens

Chicoms are now fascists? This is probably the first honest use of the word fascist that I have seen posted on the web in a non-academic circumstance. Just goes to show that communism and fascism are kissing cousins. In other words, fascism is a leftist ideology, not a far right ideology as the main stream media would have you believe. This is just because the journalistic forefathers bought WWII-era Soviet propoganda about the Nazis . . . and never forgot it.

Friday, June 24, 2005

Finding Troops That Can Tolerate Danger

Finding Troops That Can Tolerate Danger

Interesting. Army draft problems are not for frontline combat positions. The problem is in support troops. The Navy has no such problem. Should we send sailors to serve in support capacities in Iraq? It's not what they signed up to do, but it does handle an immediate problem at lower cost.

Wednesday, June 22, 2005

The Mystery of Fascism by David Ramsay Steele

The Mystery of Fascism by David Ramsay Steele

This is a fantastic analysis of Fascism, Nazism, Marxism, and Communism. It just shows that the myth that Communism is on the left extreme of the political spectrum and Nazism is on the other end is not supportable. They are half-siblings, resentful of one another.

Froggy Ruminations: Why NOT Just Give Them a Trial?

Froggy Ruminations: Why NOT Just Give Them a Trial?

Why not the Geneva Convention and hearings? The Geneva Convention would be weakened. So says a USN Seal.

Death tax diagnosis - Commentary - insider.washingtontimes.com

Confessions of an Estate Planning Attorney

Death tax diagnosis - Commentary - insider.washingtontimes.com

I love the estate tax. I hate the estate tax. The estate is an illogical item to tax. It is a socially beneficial tax. It is a economically inept tax. It is an issue with two faces.

Let me unpack these statements. I loved the estate tax, especially in the late 1990's. It was the easiest sell for non-litigation work that I had: here are your stock market assets; here are your stock market assets on estate taxes. Any questions? I could demonstrate that a couple with $300,000 in the market today would have an estate tax problem in 7 years.

I would ask clients in the late 1990's, "What do you think your stocks' annual growth rate will average out to be?" The answer was invariably over 12%. I would tell the client that historically that was a bit high, maybe we should use more conservative, historical numbers like 8-10% annual growth rate. I had one client almost stomp out of my office when I would only reluctantly use his 15-20% rate. Using the 10% rate, any CPA will tell you will cause your assets' value to double in just 7 years. $300,000 becomes $600,000; presto! estate tax at the widow(er)'s death if just 7 years hence.

Since most of my clients were much too young to expect death that soon, it was easy for them to expand the analysis far further. (I would discourage that because planning for longer to 5-10 years is a waste of effort. Things change too much. A second visit to a lawyer makes more sense, and actually would cost less than overbuilding the plan today. But I digress.)

I hate the estate tax because it caused a huge tax problem for family, who do not fully understand the deceased's affairs, to deal with the deceased rather significant tax headache. It is an ill-conceived point in time to do social reconstruction through the tax code. Emotional family members in confusion: it's just cruel.

The estate is not a good thing to tax. The average Joe resents being taxed for assets that he paid incomes taxes on to acquire or will pay taxes on to liquidate. They see the hints of double taxation (albeit of a different nature then shareholders' being taxed twice for their dividend). The tax does prevent building up long-term family wealth -- if the dead patriarch or matriarch was too stupid to hire professionals. Any half-witted estate planning attorney can make Bill Gate's estate not pay a penny of taxes to the IRS. That includes after his wife's death, too. This means that the estate tax is optional. The cost of opting out is high and immediate, but it is optional. You must pay an attorney, an accountant, and a trust company to build and maintain your plan over the years, but, if you have that much money, you will have to do that anyway. The estate tax just made that sophisticated planning more worthwhile to the middle class.

The estate tax is socially beneficial to the extent that it forces large assets to be divided up if bad planning occurred. It is beneficial to force the less sophisticated family members into the arms of the estate planning professionals. This allowed more control over the loss of family assets by less sophisticated heirs. There is a standard in the estate planning industry: most wealth is gone by third generation. That is to say, grandchildren do not end up as wealthy as their wealthy grandparent. The drive that built the fortune is usually derived from the builder's fear of poverty due to his own bankruptcy or the impoverished circumstances in which, traditionally, he grew up in. (Women's wealth generation from business is only now coming into its own in a way that Estee Lauder or Madame Walker of previous generations only thought was then beginning.) The builder's children go to private schools and grow up playing golf. No poverty. They have less fear of poverty. Their drive is usually a drive to show dad that good accounting practices can improve the profit margins. Their drive is competitive, one-ups-manship. The grandchildren usually take less interest in the business because the passion for building in their parents is too numbers oriented; it lacks human elements. The rags-to-riches story that built the business is too remote. The second generation tries to instill the same lessons it learned from the first generation but lacks the ability to tell the story as well. The third generation may be dragged into the business or may go voluntarily, but the business is now an established, professionalized system. The third generation has little different to offer than more up-to-date accounting or marketing or liberal arts loosening of rules established by the accounting second generation. The third generation runs into new forms of competition and must change the business. Old family habits resist change. And on and on and on . . . .

The estate tax is economically destructive, especially if the deceased did not hire professionals. Why should an heir be forced to break up an economically productive business or asset just because Congress decides it should be so. Congress demands payment of large taxes. The Miami Dolphins or Washington Redskins are perfect examples of assets sold because of tax demands. Are either organization better now in new hands? Society has lost the benefit of the previous ownership, because the cost of the second or third generation receiving the viable business, and society demands the organization be moved to new owners or restructured simply because the owner died.

The new tax system to replace the estate tax will likely generate more tax for Congress to spend. The capital gains tax without adjustment for death will cause more people to owe capital gains tax than the current system demands be paid into the estate tax. The ability to plan around the tax still exists, but with the tax rates of 10-20%, it is less cost effective to do so. The tax payment deadline is under the heir's control: you pay the tax when you choose to sell the asset.

All this means that the heirs will be better off . . . maybe. Remember my analysis of the third generation problem still remains. In fact, in the new system, it may grow worse. There is no tax system driving anti-lawyer, business owners to lawyers to plan for years into the future. The business owners that have attorneys on retainer will have little advantage in taxes saved, but their businesses will withstand the stresses of deaths better. While lawyers don't make or break businesses in estate planning, the owner's willingness to accept that his family's strengths lie in other areas and willingness to hire professionals in and around his business will dictate the business's long-term success.

Fewer owners will learn this since the estate planning world will focus once again primarily on the decamillionaires and not just simple millionaires.

Tuesday, June 21, 2005

TCS: Tech Central Station - Hobbes, Locke and the Bush Doctrine

TCS: Tech Central Station - Hobbes, Locke and the Bush Doctrine

If you, like me, are fascinated with the philosophical roots of American government and coherent philosophical basis for international action, this is a wonderful essay on how Bush's action in Iraq and the Bush Doctrine are coherent and logical with the American pursuit of John Locke's understanding of sovereignty.

Sunday, June 19, 2005

Thoughts on Government for Father's Day

1) Suppose you were an idiot. And suppose you were a member of Congress. But then I repeat myself ............Mark Twain

2) I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle. .............Winston Churchill

3) A government which robs Peter to pay Paul can always depend on the support of Paul. ...........George Bernard Shaw

4) A liberal is someone who feels a great debt to his fellow man, which debt he proposes to pay off with your money. ............G Gordon Liddy

5) Democracy must be something more than two wolves and a sheep voting on what to have for dinner. ..........James Bovard, Civil Libertarian (1994)

6) Foreign aid might be defined as a transfer of money from poor people in rich countries to rich people in poor countries. ............Douglas Casey, Classmate of Bill Clinton at Georgetown Univ

7) Giving money and power to government is like giving whiskey and car keys to teenage boys .............P.J. O'Rourke, Civil Libertarian

8) Government is the great fiction, through which everybody endeavors to live at the expense of everybody else. .........Frederic Bastiat, French Economist (1801-1850)

9) Government's view of the economy could be summed up in a few short phrases: If it moves, tax it; If it keeps moving, regulate it. And if it stops moving, subsidize it. ......Ronald Reagan (1986)

10) I don't make jokes. I just watch the government and report the facts. ...............Will Rogers

11) If you think health care is expensive now, wait until you see what it costs when it's free. .......P.J. O'Rourke

12) In general, the art of government consists of taking as much money as possible from one party of the citizens to give to the other. ...........Voltaire (1764)

13) Just because you do not take an interest in politics doesn't mean politics won't take an interest in you. ..........Pericles (430 B.C.)

14) No man's life, liberty, or property is safe while the legislature is in session. .........Mark Twain (1866)

15) Talk is cheap ... except when Congress does it. .........Unknown

16) The government is like a baby's alimentary canal, with a happy appetite at one end and no responsibility at the other. ...........Ronald Reagan

17) The inherent vice of capitalism is the unequal sharing of the blessings. The inherent blessing of socialism is the equal sharing of misery. .........Winston Churchill

18) The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin. ........Mark Twain

19) The ultimate result of shielding men from the effects of folly is to fill the world with fools. .........Herbert Spencer, English Philosopher (1820-1903)

20) There is no distinctly native American criminal class ... save Congress. ...........Mark Twain

21) What this country needs are more unemployed politicians. ............Edward Langley, Artist (1928 - 1995)

22) A government big enough to give you everything you want, is strong enough to take everything you have. ..........Thomas Jefferson

Thursday, June 16, 2005

Power Line: Reflections on How Things Keep Getting Better

Power Line: Reflections on How Things Keep Getting Better

Wonderful reply e-mail on improving economics that the Democrats don't wish to discuss.

TCS: Tech Central Station - Putin's Real Reforms

TCS: Tech Central Station - Putin's Real Reforms

Putin's Russia the true growth spot in the world? Maybe not, but 7% annual growth? The pent-up intellectual and scientific capital being unleashed? Fascinating!

Wednesday, June 15, 2005

American strategy in Iraq -- success breeds success

It is always easier to describe your team as successful when scoring is rare, if you can see the stripes of the football field. The American media has a fundamentally difficult time describing success in Iraq because there is no clear WWII-style front line that can be seen to advance or retreat.

That was one of the reasons that the American success against the Tet Offensive could be described as disaster by the 1968 press. That is the reason that fundamental success in Iraq can be described as mired by the 2005 press.

This article does something that we rarely see in the American press -- describe the strategy and the battleline. We can now see the stripes on the football field. Any football devotee will tell you that a running offense will not score often, but as long as it keeps the ball moving down the field, the opponent cannot score. Cap that movement with seven points at the end of the drive, and the offense was doubly successful in preventing the opponent's from scoring and making progress toward a win.

(I got my first mention on Powerline here!)

Monday, June 13, 2005