Tax Hikes Are Coming, If Obama Gets His Way

Tax Hikes Are Coming, If Obama Gets His Way

May
17th, 2011

Dr. John A. Sparks

President Obama is now openly proposing tax increases on at least two
important fronts as part of his “solution” to the growing debt crisis.

The president’s favorite approach is to talk about the “wealthiest
Americans.” In his speech on April 13, he proclaimed that he will do away with
the “Bush tax cuts” for the rich as soon as he has the opportunity. Just a week
later, April 21, he said that wealthier taxpayers like him should be willing to
pay “a little bit more” to prevent various social programs for the elderly and
the young from being cut. Of course, this is his way of preparing high-earning
Americans for a jump in their federal income tax rates. Apparently, he believes
that they are not currently doing their part or paying their fair share.

Listening to President Obama talk, one would think that the present federal
income tax system is a flat-rate system where everyone, no matter what their
income, pays at the same rate. Of course, the current system is, and has been
for a long time, a steeply graduated tax system where the highest earners pay at
the rate of 35 percent on the topmost portion of their earnings while low
earners pay at the rate of 10 percent. Now, Mr. Obama wants to push the highest
rates even higher, to near 40 percent. President Obama believes, perhaps
rightly, that soaking the rich will not hurt him politically.

But the president is targeting more than the wealthiest. In fact, in his
desperation, he is apparently now prepared to impose heavier tax burdens on
middle-income Americans as well. How? In a recent speech he stated that he wants
to raise the “cap” on Social Security. The cap on Social Security taxes works
this way: If an employee earns more than the cap (currently, $106,800) in a
given tax year, Social Security taxes are not deducted from the amount
of earnings over the cap. So, for example, if an employee earned $126,800 in
2010, he would pay 6.2 percent in Social Security taxes on the first $106,800,
or $6,621.60. The employer would also pay 6.2 percent. On the overage—the
$20,000 of income beyond the cap—neither the employee nor the employer would pay
any Social Security tax.

However, if President Obama has his way and the cap is raised by….

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more
.

State of the Union: Mammoth Government is the New Normal

State of the Union: Mammoth Government is the New
Normal

January 27th, 2011

Ben Johnson, FloydReports.com

In his 2011
State of the Union Address
, Barack Obama gave himself five more years of
trillion-dollar deficit spending, a $678 billion income tax hike, a Social
Security tax increase, and the permanent extension of ObamaCare – and he gave
Republicans medical malpractice reform and a joke about a salmon.
Since his inauguration, the president has gone on a two-year spending orgy
unrivaled since the days of Lyndon Johnson or FDR. Faced with a national
backlash against towering debt, he has come up with a “compromise”: Americans
should accept the big government expansion he has forced down their throats and
move on. This follows the president’s familiar pattern of forcing through costly
and unpopular measures, then promising “discipline” after the fact.
The most reported aspect of the speech was Obama’s pledge to freeze
discretionary, non-military spending at their current levels – exempting such
major programs as Social Security, Medicare, Medicaid, and Homeland
Security.
At the risk of stating the obvious, which perhaps no one has yet stated,
there is no “savings.” As President Obama would say, “Let’s be
clear”: Savings is when you reduce the amount of money you are spending. The
president’s proposal is to spend the same amount of money. The only “savings”
would come from the fact that inflation
unleashed by deficit
spending
and quantitative
easing
will devalue the dollar – but this is hardly a cause for cheer.
History shows that spending freezes rarely freeze anything. The most
ambitious attempt was the 1985 Gramm-Rudman-Hollings Act, which attempted to
control deficit spending by future Congresses, but many of the same politicians
who voted for the bill decided they would not abide by its terms the next year.
Deficits continued to mount. To give a more recent example, last year Congress
approved slightly more
than half
of the whopping $11.5 billion in spending cuts Obama requested
last year.
The amount of the budget actually affected is rather modest, indeed. It would
apply to approximately
12 percent of the budget
. Alec Phillips, an analyst with Goldman Sachs,
estimates that if every Congress for the next five years holds to current
levels, it would “save” $200 billion. The New York Times noted its
higher estimate of “$250 billion in savings over 10 years would be less than 3
percent of the roughly $9 trillion in additional deficits the government is
expected to accumulate
over that time.” Obama’s plan would cost
half-a-trillion dollars more
than returning
to 2008 spending levels
, as proposed by the most moderate Republicans. Sen.
Rand Paul has proposed a half-a-trillion
dollar spending cut
this year, which includes cutting food stamps
and eliminating the Corporation for Public Broadcasting and the National
Endowment for the Arts. Ohio Congressman Jim Jordan and Senator Jim DeMint
introduced a bill to cut
$2.5 trillion
over ten years, eliminating the aforementioned programs as
well as Amtrak and the president’s “high-speed rail” and rolling back spending
to 2006 levels. Obama’s freeze is small beer in its own terms and hypocritical
when paired with his calls for new spending.
The State of the Union made only passing reference to the greatest budgetary
crisis facing us: out of control entitlements (and most of his “solutions” are
bad ideas; see below). “Mandatory” spending alone exceeds projected federal
revenues – the amount of money the government took in all year. If we eliminated
100 percent of discretionary spending – privatized the Post Office, dismantled
the military, and fired every federal prosecutor and judge – we would still run a
deficit
.
Nonetheless, the president instructed us, “The final step to winning the
future is to make sure we aren’t buried under a mountain of debt.” As though we
are not already buried under a mountain of debt. As though this were not a
mountain of his own making. As though it were not one he wished to greatly
enlarge
.
What Obama intends to freeze is big government. His proposal to hold-the-line
comes after he jacked
up federal spending by 84 percent
. After inflating the federal government
beyond the free market’s carrying capacity, he now wishes to maintain the status
quo.
As usual Sen. Jeff Sessions, R-AL, had the best analysis of Obama’s spending
freeze, calling it “a plan for deficit preservation.” The day
after the State of the Union speech, the Congressional Budget Office (CBO)
predicted the deficit for 2011 will be….
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.

“Historic” Rise in Taxation in 6 Mos.

“Historic” Rise in Taxation in 6 Mos.

Posted by Veronica (Profile)

Friday, July 2nd at 12:20PM EDT

53 Comments

We’ve been here before.

Americans For Tax Reform culled a few things from the List of Expiring Federal Tax Provisions 2009-2020 off the government’s website:

In just six months, the largest tax hikes in the history of America will take effect.  They will hit families and small businesses in three great waves on January 1, 2011:

First Wave: Expiration of 2001 and 2003 Tax Relief

In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families.  These will all expire on January 1, 2011:

Personal income tax rates will rise. The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed).  The lowest rate will rise from 10 to 15 percent.  All the rates in between will also rise.  Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates.  The full list of marginal rate hikes is below:

- The 10% bracket rises to an expanded 15%
– The 25% bracket rises to 28%
– The 28% bracket rises to 31%
– The 33% bracket rises to 36%
– The 35% bracket rises to 39.6%

Higher taxes on marriage and family. The “marriage penalty” (narrower tax brackets for married couples) will return from the first dollar of income.  The child tax credit will be cut in half from $1000 to $500 per child.  The standard deduction will no longer be doubled for married couples relative to the single level.  The dependent care and adoption tax credits will be cut.

The return of the Death Tax. This year, there is no death tax.  For those dying on or after January 1 2011, there is a 55 percent top death tax rate on estates over $1 million.  A person leaving behind two homes and a retirement account could easily pass along a death tax bill to their loved ones.

Higher tax rates on savers and investors. The capital gains tax will rise from 15 percent this year to 20 percent in 2011.  The dividends tax will rise from 15 percent this year to 39.6 percent in 2011.  These rates will rise another 3.8 percent in 2013.

Second Wave: Obamacare

There are over twenty new or higher taxes in Obamacare.  Several will first go into effect on January 1, 2011.  They include:

The “Medicine Cabinet Tax” Thanks to Obamacare, Americans will no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).

The “Special Needs Kids Tax” This provision of Obamacare imposes a cap on flexible spending accounts (FSAs) of $2500 (Currently, there is no federal government limit).  There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children.  There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education.  Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year.  Under tax rules, FSA dollars can be used to pay for this type of special needs education.

The HSA Withdrawal Tax Hike. This provision of Obamacare increases the additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

Third Wave: The Alternative Minimum Tax and Employer Tax Hikes

When Americans prepare to file their tax returns in January of 2011, they’ll be in for a nasty surprise—the AMT won’t be held harmless, and many tax relief provisions will have expired.  The major items include:

The AMT will ensnare over 28 million families, up from 4 million last year. According to the left-leaning Tax Policy Center, Congress’ failure to index the AMT will lead to an explosion of AMT taxpaying families—rising from 4 million last year to 28.5 million.  These families will have to calculate their tax burdens twice, and pay taxes at the higher level.  The AMT was created in 1969 to ensnare a handful of taxpayers.

Small business expensing will be slashed and 50% expensing will disappear. Small businesses can normally expense (rather than slowly-deduct, or “depreciate”) equipment purchases up to $250,000.  This will be cut all the way down to $25,000.  Larger businesses can expense half of their purchases of equipment.  In January of 2011, all of it will have to be “depreciated.”

Taxes will be raised on all types of businesses. There are literally scores of tax hikes on business that will take place.  The biggest is the loss of the “research and experimentation tax credit,” but there are many, many others.  Combining high marginal tax rates with the loss of this tax relief will cost jobs.

Tax Benefits for Education and Teaching Reduced. The deduction for tuition and fees will not be available.  Tax credits for education will be limited.  Teachers will no longer be able to deduct classroom expenses.  Coverdell Education Savings Accounts will be cut.  Employer-provided educational assistance is curtailed.  The student loan interest deduction will be disallowed for hundreds of thousands of families.

Charitable Contributions from IRAs no longer allowed. Under current law, a retired person with an IRA can contribute up to $100,000 per year directly to a charity from their IRA.  This contribution also counts toward an annual “required minimum distribution.”  This ability will no longer be there

Government: Destroying Your Wealth a Trillion Dollars at a Time

Government: Destroying Your Wealth a Trillion Dollars at a Time

Posted By Thomas Del Beccaro On May 25, 2010 @ 5:39 am In Congress, Economics, Featured Story, Financial Services, Obama, Politics, Uncategorized | 20 Comments

Recent financial headlines provide a remarkable glimpse into America’s future if we stay on the same track we are now.  From Bloomberg news we learned:  “US Stocks fluctuate amid concerns European debt crisis hasn’t run course.”  Meanwhile, the IMF predicted that the “US national debt will soon reach 100% of GDP.”  Sadly, the World’s, the United States’ and California’s (16% of the US Economy and the 9th largest economy in the world) financial prospects are far worse than those headlines recognize.

The US economy is nearing $15 trillion in gross domestic product (GDP) per year.   The national debt it carries on the books is nearly that high and will certainly reach it, and far surpass it, within 2 years given the trillion dollar deficits that are predicted as far as the eye can see.  Of course, off the books, in accounting that would make Enron blush, the US government has $75 trillion or more in long term unfunded liabilities.  On a more short term basis consider this: the US Government revenues are running below $3 trillion dollars per year – yet its debt is over $13 trillion and growing.  In other words, the existing US debt is 4 to 5 times its current revenue.

Imagine if you will, if your credit card debt was 4 times your current income and the income you are likely to earn in each of the next 4 years.  There is not a bankruptcy attorney in the country that would not tell you that it is time to declare bankruptcy.  For its part, California is projected to have unfunded liabilities as high as $600 billion or 6 ½ times it current revenues.   Sadly for the US and California taxpayers, bankruptcy is simply not an option.

All of which brings us to the European debt crisis – which has anything but run its course.  Indeed, German Chancellor Merkel said this about the recent bailout of Greece: “We didn’t do more than buy time . . .” to get their collective government houses in order.  Meanwhile, USA Today, whose financial reporting is rather blunt at times, featured this headline: US “Investor fears ignite sell-off.”

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The Fall of the Incumbents

The Fall of the Incumbents

Posted By Frontpagemag.com On May 19, 2010 @ 1:03 am In FrontPage | 5 Comments

For months now, speculation has been rife that the Tea Party movement and the grassroots revolt against big-government that it represents poses a real threat to political incumbents of both parties. Yesterday’s primary election results have transformed such speculation into political reality.

In Kentucky, the Tea-Party backed candidate, Rand Paul, the son of libertarian Texas Congressman Ron Paul, won a convincing victory over Kentucky Secretary of State Trey Greyson. Greyson enjoyed the support of the GOP establishment, including Senate Minority Leader Mitch McConell, but Paul had the Tea Party insurgents on his side. Unapologetically embracing the Tea Partiers, Paul ran on a straightforward small-government platform, calling for a balanced federal budget, a reduced national debt, and an end to government bailouts and subsidies for private industries and interests. In the end, he won by a comfortable margin.

Rand Paul’s victory is only the latest example of the Tea Partiers successfully gate-crashing the official Republican camp. In Utah earlier this month, voters in the Republican nomination convention heeded the Tea Party movement’s urging to dump Sen. Bob Bennett. Dooming Bennett was his support for several big-government initiatives, most prominently the Troubled Asset Relief Program bank bailout. Florida Gov. Charlie Crist has also met with the wrath of the Tea Partiers, whose opposition forced him surrender the Republican mantle to Tea Party favorite Marco Rubio in favor of an independent run. Polls suggest he faces an uphill struggle.

While the Tea Parties have had their greatest impact on Republican primary races, Democrats have also born the brunt of the anti-incumbent backlash. In Pennsylvania last night, Republican defector Sen. Arlen Specter lost the state’s Democratic primary to two-term Rep. Joe Sestak, effectively ending his political career. Even in the absence of anti-incumbent sentiment, Specter’s was a tall order: He had to convince voters that his political conversion was a matter of principle rather than, as was apparent to all, pure political expedience. It was an obvious fiction that not even President Obama, who campaigned for Specter and even cut radio and television ads on his behalf, could make credible.

Even here, though, the Tea Party, or at least its brand of anti-Washington angst, made its presence felt. In his victory speech, Sestak sounded like nothing so much as a Tea Party candidate, as he hailed his win as a triumph “over the establishment, over the status quo, even over Washington, D.C.” Of course, it’s a bit rich for a Democrat to style himself as an opponent of Washington, where after all Democrats control both houses of Congress. But such is the national mood that even the party in charge must distance itself from any association with leadership.

Arlen Specter meanwhile is not the only political veteran on the Democratic side, however recent his affiliation, to find himself out of a job for too-close a connection with Washington’s failures. In West Virginia last week, 14-term Democratic Rep. Alan Mollohan became the first House member in 2010 to lose a reelection bid. Although he lost to a fellow Democrat, key in Mollohan’s defeat was his support for the Obama administration’s health care overhaul. It is a sign of perilous times ahead for the party that, even in a Democratic primary, support for the Democratic administration’s signature legislative initiative has become a political death warrant.

Still, that does not yet make the Tea Party and its small-government vision kingmaker in political races. While the influence of the Tea Partiers has obviously been important, the usual primary season caveats apply. Primary elections tend to draw a more ideologically motivated cohort of voters, and it remains to be seen whether the Tea Party will be a significant factor in the fall’s elections races. And yet it is becoming increasingly implausible to claim, as many in the prestige media have, that the Tea Party and the backlash against big government are fringe phenomena. As Rand Paul declared in his victory speech last night: “I have a message from the Tea Party. We’ve come to take our government back.” They will soon have their chance.

A REAL EYE OPENER ! Bush debt vs Obama debt

A REAL EYE OPENER !


 
The Washington Post babbled again today about Obama inheriting a huge deficit from Bush.
Amazingly Enough, a lot of people swallow this nonsense.  So once more,  a short civics lesson.
Budgets do not come from the White House.  They come from Congress, and the party that controlled Congress since January 2007 is the Democratic Party.  They controlled the budget process for FY 2008 and FY 2009, as well as FY 2010 and FY 2011.  In that first year, they had to contend with George Bush, which caused them to compromise on spending, when Bush somewhat belatedly got tough on spending increases.  For FY 2009, though, Nancy Pelosi and Harry Reid bypassed George Bush entirely, passing continuing resolutions to keep government running until Barack Obama could take office.  At that time, they passed a massive omnibus spending bill to complete the FY 2009 budgets.
And where was Barack Obama during this time?  He was a member of that very Congress that passed all of these massive spending bills, and he signed the omnibus bill as President to complete FY 2009.  Let’s remember what the deficits looked like during that period: 

  
If the Democrats inherited any deficit, it was the FY 2007 deficit, the last of the Republican budgets.  That deficit was the lowest in five years, and the fourth straight decline in deficit spending.  After that, Democrats in   Congress took control of spending, and that includes Barack Obama, who voted for the budgets.  If Obama inherited anything, he inherited it from himself.
In a nutshell,  what Obama is saying is I inherited a deficit that I voted for and then I voted to expand that deficit four-fold since January 20th.
WAKE UP,  AMERICA, BEFORE ITS TO LATE
There is no way this will be widely publicized,
unless each of us sends it on!
This is your chance to make a difference.

CBO ups Obamacare cost projections by $115 Billion

CBO ups Obamacare cost projections by $115 Billion

May 12th, 2010

By JENNIFER HABERKORN, Politico

 this brings the cost to over $1Trillion for Obamacare

Congressional Budget Office estimates released Tuesday predict the health care overhaul will likely cost about $115 billion more in discretionary spending over ten years than the original cost projections.

The additional spending — if approved over the years by Congress — would bring the total estimated cost of the overhaul to about $1 trillion.

The Congressional Budget Office expects the federal agencies to spend $10 billion to $20 billion over 10 years on administrative costs to implement the overhaul. The CBO expects Congress to spend an additional $105 billion over 10 years to fund discretionary programs in the overhaul.

The CBO released the estimates in response to a request from California Rep. Jerry Lewis, ranking Republican on the House Appropriations Committee. A spokeswoman for Lewis said the inquiry was filed before the House voted on the bill.

“[L]arge sums of discretionary spending in both the House and Senate versions of the health care reform bills have not yet been included in estimates by the CBO, rendering it impossible to make informed decisions regarding the outcome of this legislation,” Lewis wrote in a February letter to House Speaker Nancy Pelosi, asking her to postpone votes until the discretionary spending analysis was complete.

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Freddie Mac asks for fresh 10.6 billion dollar bailout

Freddie Mac asks for fresh 10.6 billion dollar bailout

AFP – Thursday, May 6
Troubled US government-backed mortgage firm Freddie Mac on Wednesday asked for an additional 10.6 billion dollars from the Treasury Department to cover losses.

WASHINGTON (AFP) – – Troubled US government-backed mortgage firm Freddie Mac on Wednesday asked for an additional 10.6 billion dollars from the Treasury Department to cover losses.

Announcing a 6.7 billion dollar loss in the first quarter, Freddie Mac said it would need the new funding by June 30 this year.

The Washington-area company has already received more than 50 billion dollars in taxpayers cash to cover losses from toxic assets.

It warned that further demands would be on the way: “Freddie Mac expects to request additional draws,” the firm said in a statement.

“The size and timing of such draws will be determined by a variety of factors that could adversely affect the company’s net worth.”

In 2008, the government pledged to ensure that Freddie Mac, and its larger sister organization Fannie Mae, kept a “positive net worth.”

The deal was designed to prop up the vital US housing market from collapsing totally and pushing the economy over the precipice.

But in a sign that the US housing sector is still in difficulty, Freddie said the percentage of its loans not paid on time or in full rose to 4.13 percent in the first three months of the year.

In the final three months of last year the rate stood at 3.98 percent.

The future of Fannie and Freddie has become the latest bone of contention between Democrats who argue they must remain government-backed to aid low-income housing and Republicans who advocate their privatization.

In March, Treasury Secretary Timothy Geithner swatted aside pressure for a swift reform of the mortgage giants as data pointed to a still struggling real estate market.

Geithner told Congress any restructuring of Fannie Mae and Freddie Mac, which received a 100-billion-dollar-plus government bailout at the height of the housing crisis, “must be done as part of a reform of the wider housing finance system.”

Geithner argued reforms would “take several months” to develop and should only be “enacted and executed at a time of greater market stability.”

Failure-in-Chief

Failure-in-Chief

Posted 05/05/2010 ET

 

The controversies over the Arizona immigration plan and the Obama Administration’s response to the oil spill in the Gulf may not seem related, but they have a key common characteristic: both originate in the failure of Washington.

In both cases, President Obama faces a real danger of a political backlash from which he will be unable to recover.

More importantly, they are both part of a rapidly evolving pattern of big government failure that will be a fundamental challenge to our country over the next quarter century.

Federal Failure on Immigration and Border Control

Before anyone criticizes the citizens of Arizona who are worried about their lives and their safety, they should focus on the abject failure of the federal government to control the border and enforce our immigration laws. 

Consider the facts on the ground:

• 15% of Arizona’s state prisoners are illegal immigrants;
• The number of kidnappings in Phoenix, Ariz., has exploded as the Mexican drug cartels have brought their violence North of the border;
• Two Phoenix police officers have been killed in recent years by illegal immigrants;
• A cattle rancher near the Mexican border was recently killed by a drug smuggler;
• Just last week a deputy sheriff was wounded in a gun battle with men suspected of being drug smugglers from Mexico.

In response to the dangers they perceived from Washington’s failure, 64% of Arizonans overwhelmingly support their new immigration law.

Nationally, 51% of Americans who have heard of the law support it, with 39% opposed

This is despite the frequent distortions and flat-out lies about the facts of the bill being reiterated in the mainstream media (Byron York and Andy McCarthy have been especially good at setting the record straight.)

The Obama Administration will alienate the vast majority of Americans if it insists on attacking the Arizona law instead of solving the problems of an uncontrolled border and a failed immigration system.

The right answer for Washington is to meet its responsibilities: 1) Control the border; 2) Pass common sense immigration reform, including a guest worker program and intense enforcement aimed at illegal employers (without whom there would be no magnet to draw in people outside the law); and 3) Ensure that all Americans can live in safety in a law abiding country.

At that point the Arizona law would become moot and unneeded.  Let’s solve the problem, not the symptom.

Federal Failure in Louisiana…Round 2

President Obama faces another challenge in the controversy surrounding the federal government’s response to the oil spill in the Gulf.

Of course, this controversy has echoes of the Hurricane Katrina disaster, which was enabled by government, both in the failure to maintain the levee and pumping system and in taking too long to respond. 

The Bush Administration’s inability to recognize these failures and fix them was a major factor in its loss of public support (which never recovered to pre-Katrina levels).

Today, it is not yet clear what degree of responsibility the federal government has for the oil spill disaster.  But every day we get new pieces of information that suggest this spill could have been contained if the federal government had acted swiftly and competently.

We know that Deputy Interior Secretary David Hayes said the Deepwater Horizon was inspected less than two weeks before the explosion.  However, without knowing the cause of the accident, it is impossible to know if something was missed that would have prevented the explosion or failure of the “blowout preventer” that should have shut off the oil flow.

We also know that it took over eight days for federal government to deem the spill a disaster of “national significance” and fully devote federal resources to the problem.  In fact, on April 23, the Coast Guard was still claiming there was no leak.

Last week, Louisiana lawmakers including Gov. Bobby Jindal pointedly criticized the federal government’s slowness in committing quantifiable resources to containing the spill. 

Furthermore, Ron Gouget, who formerly managed the oil spill recovery department of the National Oceanic and Atmospheric Administration, has made the point that there has been an oil spill clean-up plan on the books since 1994, but federal officials took a full week before attempting to execute that plan.  This is partly because, despite this standing plan, the federal government did not have a single fire boom on hand to execute it.

Even the liberal New York Times has called the timetable of the government’s response “damning”.  

The Obama Administration now faces dual challenges in the Gulf and in Arizona. If it misunderstands and fails to respond effectively to these challenges, it could suffer an equally serious loss of public support.
 
The Future of Offshore Development

This analysis does not in any way exclude British Petroleum (BP) from responsibility.

Even though the rig was owned and operated by a private contractor and the cause of the explosion and equipment failure is not yet known, BP has rightly pledged to pay for the Gulf spill’s cleanup. 

The spill will cause enormous environmental and economic damage to the Gulf region.  Worst case estimates suggest that the spill could reach the East Coast.  Millions of Americans who make their living from the ocean will be affected. 

However, despite this disaster, it is clear that offshore development must continue. 

In fact, it must expand.

The spill, while tragic, does not change any of the underlying facts about America’s current or future energy and national security needs:

• Offshore drilling is still a viable source of new jobs for a struggling economy.  One study shows that expanded offshore drilling could create as much as a million new jobs a year over the next three decades
• Offshore drilling is still a key source of potential revenue for states struggling to balance their budgets.  In 2009, offshore drilling generated more than $2.7 million for Gulf states, as well as nearly $1 million for the Land and Water Conservation Fund;
• Offshore drilling is still an essential component of a strategy to supplant the 11 million barrels of oil per day ($935 million) we import from other countries, including dangerous dictatorships that fund terrorism.

This is why the cynical attempts from the left to use this disaster as an excuse to stop all development in the Gulf and elsewhere are so misguided.

There are over 3,500 oil platforms in the gulf producing 1.2 million barrels a day.  They support tens of thousands of jobs, with about 35,000 workers engaged in Gulf offshore activities at any one time.  At the current price of $85 a barrel, shutting down all offshore drilling in the Gulf would force us to send an additional $102 million every day to foreign countries.  That number will only increase as the summer approaches.

Those analysts who note this was the first American offshore well disaster since 1969 indirectly make the case for continued development. A once in 41-year event is something to be prepared for, not something that should be allowed to increase our dependence on foreign dictatorships for energy.

Similarly, those who point to the Exxon Valdez spill often fail to note that shipping oil is more likely to lead to a spill than drilling.

Investigate. Fix.  Move Forward.

Ultimately, this is a question about the character of America.

Will our response to this disaster be to stop, litigate, and lose our nerve?

Or will it be the historic American response to challenges such as these: investigate, fix, and move forward with a safer system than before? 

When two airliners collided over the Grand Canyon in 1956 with disastrous fatalities, followed by two similar accidents in 1958, the answer was not shutting down the commercial airline industry.  The answer was developing the air traffic control system which has made commercial air travel much, much safer than driving a car.

After the 1979 incident at Three Mile Island nuclear plant, an independent commission was appointed to investigate exhaustively the cause of that event.  The response was not to abandon nuclear power, which produces 20% of electricity in the United States.
After the levees failed in New Orleans during Hurricane Katrina in 2005, an independent investigation determined that new levees should have specific engineering upgrades, more erosion protection, and that there should be better communication between the federal and local governments. The response was not to force residents to abandon New Orleans forever.

Similarly, we should take the BP disaster very seriously.  Yesterday, American Solutions called for an independent commission to investigate the spill, paralleling the commissions that investigated Three Mile Island and the Challenger explosion.

Those who favor offshore development must respond with greater intensity than those who oppose development and have the luxury of unthinking opposition with no thought to the economic and national security consequences.

We should support a vigorous investigation that determines what investments could have avoided it and what the most effective cleanup system would have been.  And then we should support a lean, effective government to implement those findings.

Effective Government, not Big Government

The Founding Fathers were for limited but effective government.

Peter Drucker, the great information age management expert, warned again and again that big government was inevitably bureaucratic and ineffective.

Alvin and Heidi Toffler have repeatedly warned that government is getting slower while the modern world is getting faster.

I have written and spoken before about how government has become the fourth recent bubble (after IT, housing, and the derivatives market — it is overleveraged, underperforming, and fundamentally dishonest about its underlying stability. The collapse of the government bubble will be even more disruptive than the previous three.

More and more, we are seeing that ever growing government is no longer just a threat to our wallet; it is a threat to our personal safety. Both in Arizona and the Gulf, we are being reminded that a massive federal government has been massively ineffective.

A limited federal government can better focus attention and resources on its core responsibilities, which absolutely include controlling the border and large scale disaster recovery.

It is time to reform Washington by returning power and responsibility back to the state and local governments. 

Your friend,

Newt

New U.S. Push to Regulate Internet Access

New U.S. Push to Regulate Internet Access

WASHINGTON—In a move that will stoke a battle over the future of the Internet, the federal government plans to propose regulating broadband lines under decades-old rules designed for traditional phone networks. 

The decision, by Federal Communications Commission Chairman Julius Genachowski, is likely to trigger a vigorous lobbying battle, arraying big phone and cable companies and their allies on Capitol Hill against Silicon Valley giants and consumer advocates. 

Breaking a deadlock within his agency, Mr. Genachowski is expected Thursday to outline his plan for regulating broadband lines. He wants to adopt “net neutrality” rules that require Internet providers like Comcast Corp. and AT&T Inc. to treat all traffic equally, and not to slow or block access to websites. 

The decision has been eagerly awaited since a federal appeals court ruling last month cast doubt on the FCC’s authority over broadband lines, throwing into question Mr. Genachowski’s proposal to set new rules for how Internet traffic is managed. The court ruled the FCC had overstepped when it cited Comcast in 2008 for slowing some customers’ Internet traffic. 

In a nod to such concerns, the FCC said in a statement that Mr. Genachowski wouldn’t apply the full brunt of existing phone regulations to Internet lines and that he would set “meaningful boundaries to guard against regulatory overreach.” 

Some senior Democratic lawmakers provided Mr. Genachowski with political cover for his decision Wednesday, suggesting they wouldn’t be opposed to the FCC taking the re-regulation route towards net neutrality protections. 

Getty ImagesFCC Chairman Julius Genachowski, whose authority over broadband lines has been questioned by a federal court, plans to use regulation on traditional phone networks to establish rules for Internet providers. 

FCC

FCC

“The Commission should consider all viable options,” wrote Sen. Jay Rockefeller (D, W.V.), chairman of the Senate Commerce Committee, and Rep. Henry Waxman (D, Calif.), chairman of the House Energy and Commerce Committee, in a letter. 

At stake is how far the FCC can go to dictate the way Internet providers manage traffic on their multibillion-dollar networks. For the past decade or so, the FCC has maintained a mostly hands-off approach to Internet regulation. 

Internet giants like Google Inc., Amazon.com Inc. and eBay Inc., which want to offer more Web video and other high-bandwidth services, have called for stronger action by the FCC to assure free access to websites. 

Cable and telecommunications executives have warned that using land-line phone rules to govern their management of Internet traffic would lead them to cut billions of capital expenditure for their networks, slash jobs and go to court to fight the rules. 

Consumer groups hailed the decision Wednesday, an abrupt change from recent days, when they’d bombarded the FCC chairman with emails and phone calls imploring him to fight phone and cable companies lobbyists. 

“On the surface it looks like a win for Internet companies,” said Rebecca Arbogast, an analyst with Stifel Nicolaus. “A lot will depend on the details of how this gets implemented.” 

Mr. Genachowski’s proposal will have to go through a modified inquiry and rule-making process that will likely take months of public comment. But Ms. Arbogast said the rule is likely to be passed since it has the support of the two other Democratic commissioners. 

President Barack Obama vowed during his campaign to support regulation to promote so-called net neutrality, and received significant campaign contributions from Silicon Valley. Mr. Genachowski, a Harvard Law School buddy of the president, proposed new net neutrality rules as his first major action as FCC chairman. 

Telecom executives say privately that limits on their ability to change pricing would make it harder to convince shareholders that the returns from spending billions of dollars on improving a network are worth the cost. 

Carriers fear further regulation could handcuff their ability to cope with the growing demand put on their networks by the explosion in Internet and wireless data traffic. In particular, they worry that the FCC will require them to share their networks with rivals at government-regulated rates. 

Mike McCurry, former press secretary for President Bill Clinton and co-chair of the Arts + Labs Coalition, an industry group representing technology companies, telecom companies and content providers, said the FCC needs to assert some authority to back up the general net neutrality principles it outlined in 2005. 

“The question is how heavy a hand will the regulatory touch be,” he said. “We don’t know yet, so the devil is in the details. The network operators have to be able to treat some traffic on the Internet different than other traffic—most people agree that web video is different than an email to grandma. You have to discriminate in some fashion.” 

UBS analyst John Hodulik said the cable companies and carriers were likely to fight this in court “for years” and could accelerate their plans to wind down investment in their broadband networks. 

“You could have regulators involved in every facet of providing Internet over time. How wholesale and prices are set, how networks are interconnected and requirements that they lease out portions of their network,” he said. 

—Niraj Sheth, Spencer E. Ante, Sara Silver and Nat Worden contributed to this article.

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