Between 2002 and 2011, Boeing reported to its investors that it earned $31.8 billion. But it reported something entirely different to the IRS and didn’t pay income taxes. Instead, it received tax benefits of $2.06 billion. Other companies were similarly agile. So Geithner is ballyhooing President Obama’s latest election-year ploy: putting some fresh lipstick on that ugly tax code though it has a fundamental flaw that turns it into an absurdity.
Congress is the ideal American institution: it spends far more than it takes in and borrows the difference. We love that. To heck with the future. It means free money, services, wars, and other goodies. At least some of us get to profit from it. And then we blow it or invest it, and we lose it or make money on it. It all adds up to that glorious GDP. It’s the American dream. And yet….
The Supercommittee did what it was expected to do. They dug in their heels. Why? They didn’t have to make painful choices. Unlike Greece, the US has a miraculous money machine that takes care of the deficits. The emasculated credit markets watch nervously.
The Postal Service announced a staggering loss for fiscal 2011: $5.1 billion. Plus $5.5 billion for retiree health benefits that it should have paid in 2011 but deferred to fiscal 2012. Now it’s due. But there’s no money. Default? Nope. Congress will find a way to stick it to the taxpayer. But amazingly if run right, the Postal Service could be a decent business.
In his “enough’s-enough” speech in Hawaii, Obama castigated China for its currency peg, a perennial complaint. Congress too regularly hyperventilates about the yuan being “artificially undervalued.” If China just allowed the yuan to trade freely, they say, it would solve the U.S. economic quagmire. Cheap political posturing—and full of bitter ironies.
The government forks over another $13.8 billion to Fannie Mae and Freddie Mac to cover their losses for the last quarter. The regular drumbeat of bailout billions handed to these zombies barely enters the nation’s consciousness anymore, but it adds up: $184.8 billion since 2008. And there is no end in sight. Supercommittee, where art thou?
The members of the congressional panel on deficit reduction are struggling to come up with something that will—I mean, let’s be realistic—get them reelected and fill their campaign funds. Even if they come up with a plan that will reduce the gargantuan budget deficits, Congress won’t follow through. Because it doesn’t have to, thanks to the Fed.
Tuition did it again: up 8.3% for universities and 8.7% for community colleges. For many students, the increases are even steeper. Here in California, they’re outright ridiculous. Student loans will cover much of it, though student loan debt already exceeds $1 trillion. Why? It’s the system.
The ugly numbers speak volumes on how the Fed’s policies hurt the real economy. But those policies enable Congress and the White House to run up ruinous budget deficits that make those of the Eurozone look benign.
That’s inflation—not jobs, wages, or GDP.
“A shame that we can’t see Japan because of the marine layer” is an old joke in San Francisco. The premise that the fog over the Pacific keeps you from seeing Japan is just as false as the premise that running up huge deficits and printing trillions of dollars can create a healthy economy. Yet, that’s the line propagated by the status-quo media and its economists.