Thursday, April 11, 2013

My View

Random ruminations from your resident curmudgeon...

There is no secret that the Obama administration favors the so-called "green" energy producers as evidenced by massive subsidies, grants and loans that have come from Washington to private companies in this sector. And those dollars have for the most been squandered as these companies have filed bankruptcy or radically downsized their workforce. It is also no secret that the Obama administration has made life difficult for oil companies by increasing the regulation and hostility to these companies under the aegis of the Environmental Protection Agency. The Obama administration has delayed the Keystone Pipeline beyond reasonable measure; has imposed onerous regulations on our energy sector; and has limited access to potentially oil rich lands in this country by claiming them as federal properties. Yet in spite of these headwinds, our country has passed a milestone that has received little attention. According to the federal Energy Information Administration, the United States became the world's largest oil producer in November 2012, surpassing the daily output of Saudi Arabia. Over the past 5 years, as per the EIA report, U.S. oil production has risen 40%, and last year, domestic production increased by 800,000 barrels per day. The Bakkan Shale in the northern U.S. may be the largest natural gas field in the world. The Eagle Ford oil field in Texas is projected to be the largest oil field in the world. The Cline Shale, a newly discovered field in west Texas, has the potential to be even bigger than Eagle Ford. The benefits for our country in lower energy costs and more importantly, retaining dollars that are currently going to the middle east, are incredibly important. Now, we need the Obama administration to drop the hostility to conventional energy and let our country reap the rewards of our abundance of natural resources.

Doctors say that germs attack the body at its weakest point. I guess that explains all the head colds.

Want more evidence of the overreach of the federal government? According to internal policy documents obtained under a Freedom of Information request by the American Civil Liberties Union, the Internal Revenue Service has taken the position that its agents do not need a warrant from a court of proper jurisdiction to read an individuals private e-mails, texts, and other private electronic communication. In 2009, the IRS drafted a policy and incorporated it into their written policy manual that stated that Internet users "do not have a reasonable expectation of privacy in such communications." The Office of General Counsel for the IRS re-affirmed this position in 2010. In a 2010 Sixth Circuit Court ruling, U.S. v. Warshak, the Court ruled that the IRS had violated the plaintiff's constitutional right to privacy by obtaining those communications without a warrant. The IRS has kept the policy intact, even though they received an adverse ruling from the Court, saying that the ruling applied only to taxpayers in the 6th Circuit and not nationally. Huh? Just recall, friends, where the enforcement powers under Obamacare reside. The IRS. Expect a power hungry and revenue starved federal government to begin to ramp up enforcement actions against more of its citizens. And the IRS will be the hammer used to attempt to bludgeon us into submission.

A friend recently had a colonoscopy. He said afterwards that he now knows how a Muppet feels.

Budget talks are heating up in Washington, and President Obama has proposed a budget that includes a "chained CPI". The Consumer Price Index (CPI) is a proxy for increases (or decreases) in the annual cost of living.. There are several methods to calculate the CPI, and you should be aware of them. CPI-W is the cost of living index for households where there is at least one wage earner. This is the broadest measure of changes in the annual cost of living. CPI-U expands the CPI-W and reflects the spending habits of retirees, professionals, self employed, and the unemployed. The broad CPI-U and the CPI-W accounts in a limited fashion for what economists call "substitution". For instance, if beef prices move significantly higher, consumers might switch to chicken. A "chained CPI" factors in an even greater amount of substitution than either the CPI-W or the CPI-U. And here is how that affects all of us. For those that are living on social security or have pension benefits that are indexed to inflation, a chained CPI means that the effects of substitution result in a much lower rate of inflation and consequently much smaller increases in these retirement benefits. But the effects of a chained CPI do not just hit retirees. Tax brackets are adjusted to reflect changes in the cost of living, and a chained CPI would result in much lower increases in the calculated cost of living and therefore adjustments to the tax brackets. According to Congress' Joint Committee on Taxation, a chained CPI would result in bracket creep as incomes moved up faster than the calculated cost of living, so that by 2021, those earning $100,000 or less would be paying 69% of all the increases in taxes collected. Ouch. While following something as arcane a chained CPI may be sleep inducing, the impact of its implementation could certainly be jolting.

Did you ever notice that when you put the two words "the" and "IRS" together, it spells "theirs"?

And that, my friends, is my view.

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