G.E. pays no corporate income taxes in 2010 – are you mad?

General Electric had a very good year in 2010. Over $14 billion dollars in global profits with over $5 billion coming from the United States. This story is multi-faceted. Many will demonize them as just another evil, greedy corporation. While the bulk of the country suffers through our current economic malaise, G.E. is surviving nicely, thank you. The company CEO, Jeffery Immelt, is a D.C. beltway insider of the highest order with access to the President as often as he feels the need. Not only does his company benefit from a political landscape tilted his way, he has actively helped in shaping it.

G.E. not only didn’t pay any corporate income taxes in 2010, they will receive a $3.2 billion dollar tax credit. Of course, they employ an army of tax professionals that work 24/7 to ensure that G.E. maximizes all tax loopholes each year to minimize the tax burden. G.E. has been far more successful than virtually any other U.S. corporation at reducing their tax burden.

Should you be upset at General Electric? Mad that they make out like a bandit while the average Joe is getting pummeled? Absolutely not! Let’s remember exactly who pays corporate taxes in America. You do. The consumer. Corporate taxes are simply a portion of the cost structure that goes into pricing a product or service. Corporations do not pay these taxes. They are merely the middleman who collects the tax from the consumer and pays it to the government.

The same goes for wages. Henry Ford was infamous for stating that it was Ford’s customers that paid the companies payroll. They merely served as the middleman. This can be said to be true for any costs that a business incurs. It is factored into the price they charge and those costs are ultimately borne by the end consumer.

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SHUT IT DOWN!

The budget debate is a pathetic, disgusting, carnival freak show. The miniscule amounts of deficit reduction being discussed by either party illustrate that no one got the message in November. Lip service and symbolism simply don’t cut it anymore. I’ve seen enough from the GOP already to justify my serious reservations I’ve had since the mid-terms. Boehner and the GOP leadership don’t have the cajones to step up to the plate and do what they promised.

This is not a blanket indictment of the entire GOP. 54 Republicans, including 22 freshmen, did the right thing and voted against the party line on the stopgap extension. Why was it not 100%? Two reasons. First, you have the old guard establishment led by Boehner who have laid their cards on the table face up and told Reid and Obama that they are not going to allow a government shutdown. This is, of course, precisely why you haven’t seen any counter offer of any substance from the democrats. Why should they? Boehner has already called his own bluff and ignored the election mandate. Our POTUS, a.k.a. Mr. Disengagement, can afford to take his lumps in the press for not getting involved when he already knows the outcome.

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The Japan Syndrome

Are you ready for the big spin? The Keynesian dogs are salivating at the latest crisis too good to waste. The radiation fallout hasn’t even settled yet and already the broken window trained economists are fanning out to spread the word of the tremendous opportunity now in front of Japan. They would never say it, but I’m sure there’s quite a bit of envy that the earthquake wasn’t centered off the U.S. coast instead of Japan. That way, we would be the beneficiaries of a boon of economic stimulus spending that would make the A.R.R.A. look like play money.

Japan has the world’s third largest economy behind the U.S. and China. Yet , they have a debt equal to over 200% of their GDP. Now they are faced with infrastructure repairs of an unknown amount, hundreds of billions to be sure. Before the earthquake, they had 54 nuclear reactors functioning. It remains to be seen how many will be destroyed permanently through the efforts required to prevent the cores from melting down. That’s one huge difference from a normal recovery from a natural disaster. Generally, it’s only a matter of days or weeks before the power is back on. Japan faces no less than years to replace the destroyed power grid in some areas of the country. If the nuclear option is taken off the table for those rebuilding efforts, the costs from alternative sources will certainly be higher.

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Japanese Fukushima Daiichi nuclear plant building explodes ***UPDATED***

First of all, a disclaimer. NOTHING has been confirmed yet. Repeat – nothing confirmed yet. UPDATE***-NISA CONFIRMS REACTOR MELTDOWN ***-link

What is confirmed is an explosion at the Japan Fukushima Daiichi nuclear power plant. According to reports from workers on-site, it was the containment building for the reactor. Again, not confirmed.

UPDATE***Chief Cabinet Secretary confirms that containment building damaged. This is, in fact, the protection should a full reactor meltdown occur and breach the vessel – link 

If this is correct, it could mean the worst case scenario. If the containment building has been compromised and a reactor meltdown does occur, the vessel housing the reactor would likely be compromised due to the molten fuel and we could have another Chernobyl on our hands.

***UPDATE 9:05 PM EST***– It’s become clear at this point that at a minimum, a reactor meltdown has occurred. We don’t know yet if it is a full meltdown. We do know the containment building was compromised due to a hydrogen explosion that completely blew the roof off. The cesium leak confirms the fuel rod melting. Only time will tell just how extensive the leak is and ultimately how many other reactors also fail. The worst case scenario would be a vessel breach below the reactor  leading to water and soil contamination if the floor of the containment building doesn’t hold. Also you could have a fire leading to Chernobyl-like air contamination. No nuclear explosion is possible.

Wisconsin Senate passes “budget repair bill”

The Wisconsin State Senate has spoken and now awaits the mere formality of Gov. Scott Walker’s signature. The result was the only outcome possible. The Governor had to get the concessions on wages and benefit contributions from a fiscal standpoint. He also followed through on his promise to model the Wisconsin system after the Indiana system. Indiana Gov. Mitch Daniels eliminated public-sector union collective bargaining rights as soon as he took office. He also has the track record now in place illustrating the flexibility that was afforded him in reining in and restructuring the state’s cost structure.

It’s a model that will be duplicated across the country. The end result will be a large-scale exodus from public-sector union rolls. As the dues diminish, so will the leverage. The debate and protesting will rage on and progress to who knows what level, but the writing is on the wall. The state budget crunches are only now starting to ramp up with the Obama stimulus money drying up. With no option but to balance their budgets according to law, state’s across the country will require the flexibility afforded by removing the public-sector union roadblock. That’s just a fact. Right or wrong, it will happen.

There is much confusion surrounding the events in Wisconsin, but it really isn’t that complicated. The wage and benefit concessions are to balance the budget this year. The removal of collective bargaining rights are for controlling costs going forward. That’s it a nutshell.

There is more confusion concerning civil service rights. Wisconsin state civil service laws only cover state level employees. Police and firefighters are exempt. Teachers employed by localities are not covered under state civil service protections. They may, however, be covered by county and local civil service protections. In fact, Wisconsin Code Chapter 63 requires a civil service commission for every county with at least 500,000 inhabitants. Madison qualifies for this. Counties with less than 500,000 inhabitants still may employ a civil service commission, it’s just not mandated under this section of the State Code.

In other words, every county in Wisconsin can have a civil service commission if so desired. They are then free to establish civil service protections for all county employees. Same goes for Wisconsin cities. Nothing is preventing teachers or other municipal employees from having basic civil service protections even if they aren’t employed by the state.

This is not what these employees and the unions have in mind. Their desire is strictly for bargaining rights over wages and benefits. Gov. Walker is leaving in place collective bargaining rights for wages so that’s a moot point. So the entire debate boils down to collective bargaining rights over benefits. Teachers can still bargain over wages and civil service protections can be installed at state, county and local levels to cover all levels of employees.

What is busting the budgets of states and local municipalities across the country? Pension and health care obligations. All of the other distractions and smoke and mirrors can’t hide the fact that this single question is the entire issue. Can state and local governments continue to afford their pension and health care liabilities given the state of the economy? The answer is clearly no, so that also makes clear where this debate is going to end up.

Democrat proposed budget cuts equate to less than 20 hours of deficit spending

My previous post pointed out that the deficit spending rang up by Obama in February exceeded $92,000 per second. As amazing as that is to comprehend, I thought I would look at it in yet another way.

Currently, the democrats and republicans are duking it out on Capitol Hill to see who can pass the most inconsequential budget cuts. For starters, this is incorrect nomenclature. There is nothing even approaching a budget cut being bandied about in Washington, rather it is simply reducing the amount of the federal budget deficit.

The GOP has proposed $61 billion in cuts for the remainder of the 2011 fiscal year ending on September 30th. An embarrassing attempt considering the mandate they received in the mid-term elections last November. However, not to be outdone, the democrats decided to make their proposed cuts virtually invisible at $6.5 billion.

To illustrate just how pathetic this number is, consider this. The $6.5 billion proposal doesn’t even equate to 20 hours of deficit spending based on the record February rate Obama just added to our debt. We still have over half the fiscal year remaining in 2011 and the best the left can come up with is pausing the sellout to China ownership for less than one day.

We now have over one-third of our income in this nation paid for by taxpayers. Yes, government handouts.  Yet, virtually no one in Washington is even seriously discussing getting our budget in order. Does this bother you? What are you going to do about it TODAY?

February deficit spending is over $92,000 per second!

Just a quick note as the debate over the debt limit and the 2011 federal budget play out. The U.S. just set an all-time monthly budget DEFICIT for a single month of $223 billion. As the story points out, that’s more in one month than Bush racked up in his final full year in office. Again, that’s just the DEFICIT, not what we spent in total. Amazing!

For a little perspective, that’s over $5.5 million dollars in DEFICIT spending each and every minute last month. Over $92,000 dollars per second! Please tell me there isn’t any sane person left out there that doesn’t recognize that we need to immediately stop this insanity. No more debt limit raises. No paltry $6 or $61 billion cuts out of the budget. We can’t wait any longer and just play politics.