What Would You Cut?

I have been meaning to post this for awhile.

We hear constantly that we need to cut government spending, and with that I do not disagree.  But I would like to make it a new rule (if I had that authority) that no politician of any political persuasion can say we should cut spending, or cut wasteful spending, without some specifics.  Personally I don't know if I agree with them unless I know what specific cuts they are in favor of making , and by how much.  I am not infavor of cutting just to be cutting.  I am sure that we can try be smart about this.  There are definitely some things that I do not want to see cut.  I will hold a grudge for a long time about cutting the space program.

Just for fun I would like to ask a question.  If the country came to you for help and put the power to cut spending in your sole discretion, what would be your first cut?  Something that you wouldn't even have to think about.  Something that you're just itching to cut.

This not an easy question for me so I like to ask other people what their ideas are.

Here is a link to the Whitehouse budget proposal's section for "Cuts Consolidations and Savings". 

http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/ccs.pdf

I did some searching for the House passed budget and do not find it online, which is not to say it's not online, but I don't find it.  I see quotes and arguments about it but that's it.  If one of you have a link I would appreciate it.

IRAs and capital gains

There exist investment advisers who believe that the primary advantage of an IRA is the possible difference in tax rates at the beginning and at the end.  I long ago realized that this was not the case and that the main advantage came from the fact that the government lets you keep those taxes and those taxes grow too.  I was talking to a friend, Adam Madison on this blog, who very quickly reduced my lengthy explanation to one simple sentence:  In a IRA you don’t have to pay capital gains taxes.  This is disputed here and there.

Let’s consider three different cases  In each case we will use 10,000 pretax dollars.  Assume your marginal rate for the whole 10,000 is 30% now and in the future .  (We will omit the possibility of an added advantage of being in a lower tax bracket later which is a minor advantage for most of us.)  Let’s say we leave the money in until it doubles.

X         Before IRAs:  You take the $10,000 and pay the tax up front and put the remaining $7,000 into a regular investment account.  In 14 years it grows to $14,000 and you owe capital gains taxes on the $7,000 gain in the account.  You have $14,000 minus that tax.

Y        You take the same $10,000 and pay the tax up front and put the remaining $7,000 into a Roth IRA.  In 14 years it grows to $14,000 and you owe no taxes on that $14,000.

Z        You pay no taxes at the outset and put the $10,000 into a regular IRA.  14 years later you take out $20,000 and pay 30% in taxes leaving you $14,000 after taxes.  Your $7000 doubled without a capital gains tax.

           

(Z is the one where it is harder to see how it is happening.  The 10K in the account can be thought of as $3,000 of taxes that the government lets you keep plus the (after tax) $7,000 that is yours.  Your $7,000 doubles, but the $3,000 of taxes that the government LETS YOU KEEP doubles also, and it is yours!    That second $3,000 is the real benefit of the IRA and it matches the regular taxes that you will owe on the net increase of $10,000.  One might say that the “growth of the taxes pays the taxes on the growth.”)

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Capital Gains and Taxation Thereof

For tax purposes the sale of a capital asset results in a capital gain or loss.  Capital assets are generally those assets outside the daily operations of business.  Personal assets are capital, but you may not recognize a capital loss, or any kind of loss, from the sale of a personal asset...only gains. So, generally when discussing capital gains and losses we are talking about the sales of investment assets. 

Through the history of our tax system long term capital gains (defined now as gains on capital assets with a holding poriod of one year or more) have usually enjoyed preferential treatment.  Since 2001 that preferential treatment is in the form of a lower top tax rate...15%.

In a previous post I was making the point that dividend income, which, for the most part, also enjoys the 15% top rate, and capital gains, are virtually entirely enjoyed by the wealthy.  See the effective tax rates for Romney, Obama, Buffet, etc.  Non-wealthy people may have dividend income, and there are always exceptions to every rule, but I think that, for the most part, we can agree that middle and low and no income folks are generally not able to invest the amount of dollars it would take to earn enough dividends to make an appreciable difference in their income.

A comment to one of my posts made the following observation "It is not just the rich who profit from the capital gains rate. Any one who has a retirement plan that has money in the market does well by it. The effect of an IRA (loved by the middle class) is that the capital gain is not taxed at all."

There appears to be a misconception about taxation of various types of income earned by different types of legal entities  In fact, individuals are the only ones eligible to be taxed at the 15% top rates for dividends and capital gains.  Corporations have a series of special rates for dividend income but pay tax on capital gains at ordinary rates. 

When money is contributed to and income earned inside a retirement account, generally speaking, it loses its identity.  When it is then distributed it is distributed and taxed as ordinary income.  So there is no tax benefit to earning capital gains or dividends inside a retirement account.  I am baffled where the idea came from that the capital gain in an IRA is not taxed at all.  It is not taxed as a capital gain, but it is taxed at ordinary rates when it is distributed to the owner.  Perhaps I am misunderstanding the comment.

VAT vs Corporate Income Tax, Part 2

Between Part 1 and Part 2 I have been considering Wayne's set up and how we can glean anything useful from it in terms of meaningful real life analysis.  It is one of the down sides to stripped down examples.  The devil is always in the details.  I don't believe that things are as disproportionate as they appear at first glance when we add the realities that the countries with VATs actually do levy a corporate income tax in addition.  And the company in the VAT country will not only pay income taxes in their country but in the Unites States as well. 

Whereas the US company would pay income taxes in the foreign country as well as the VAT tax.  But, the foreign income tax paid can be used to offset the US tax so the foreign tax may not be a factor in the total tax cost for the US business. 

So here is what we have:

VAT company...income tax, maybe income tax for both their country and the US, depending on that country's tax laws. 

US company...US income tax + foreign country's VAT

This analysis leaves us with the impression that, due to the VAT the US company gets the worst of it and that IS highly likely, but due to the nature of the United States tax laws it is by no means guaranteed.  To be conservative let's assume that the US company gets the worst of it and therefore is at a competitive disadvantage.  What change or changes could we make to create a more level playing field?

When a VAT country sells goods to a foreign country, they pay the VAT and then get a rebate for it from the government.  Wouldn't it be similar if the US tax law allowed the US companies a VAT credit for VAT paid.  Then, we would be looking at income tax laws vs. income tax laws.  That is the solution that jumps out at me.

Does a VAT Beat a Corporate FIT

Posted by Wayne: Shouldn't our tax policy be constructed to give our corporations whatever advantage it can vis a vis foreign corporations? So here is another corporate tax question. I'll strip it bare to get at the basic idea: Suppose country A gets a lot of their income from a high vat tax ("a glorified sales tax") and has no corporate tax and country B has no vat tax and a high corporate tax. When a corp in A ships stuff to B, then it has no corporate tax at home and no vat tax in B. When a corp in B ships stuff to A, then it has to pay a corporate tax at home and a vat tax in B.

Reply: To Wayne’s first question: yes, we should. In Wayne’s set up, there is a huge disparity in the tax costs between country A and Country B. However, it may not be as clear cut as his stripped down bare example might suggest. In his example the country that charges the VAT levies no income tax and I have never dealt with a country that had a VAT only. There may be some but I'm not aware of them. Countries that have a VAT usually have a corporate income tax also.  Here is a link that lists tax rates, including corporate rates and VAT rates, by country. It seems to be missing Uz beki beki beki stan.

http://en.wikipedia.org/wiki/List_of_countries_by_tax_rates

So, in reality, if a country that has a VAT sells products in the USA, it most likely would be subject to its county’s own income tax + U.S. income tax on income earned in the U.S. (for which it may get a credit against its country’s income tax. Every country's tax system is different, and in The USA the foreign tax credit rules are about as complicated as any other rules, quite often limiting the amount of the foreign tax that can be used as a credit in the year paid).

(Continued in next post)

"Reagan proved deficits don't matter."

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This remark was made by V P Cheney.  (I'll drop the word lunacy - from the previous location of this remark - which is not necessary.)

Even a moment's thought must reveal this to be one of the most silly statements ever uttered by a public official.
If it were true then we could just have the treasury borrow whatever was needed and send us all $10,000 every month.
Literally, the implication of Cheney's statement is that if the treasury did that, then "it would not matter".

Democrats act like they think that deficits don't matter, but, so far as I know, they haven't said it.
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Our Income Tax System

There has been much discussion recently regarding income tax rates and the rate structure. Overhauling the income tax system is a popular promise our politicians are now making due to demand from their constituents. We will no doubt hear dueling overhauling ideas over the next few months until November 6 (which, apropos of nothing, is my 60th  birthday).  Citizens seem to believe that the system needs to be simplified because they are certain, or at least fear, that the current complexities result in their individually paying more tax than they would pay under a simpler system. Or that they are paying an unfair portion of the total taxes collected under the current system.  Or even that the government is hiding in this cloud of complexity, some dark deceptive secret that is sucking their soul out.  The last one is not as popular as the other 2 but it's going around.   There is no question in my mind that our income tax system is extremely complex. 

Probably the radical overhaul that I hear favored by most people who button hole me at various occasions is the Flat Tax.  The description of the flat tax system I hear most is "you just take one single rate for everyone and multiply it times your income".  When I ask about deductions they say that there should be no deductions.  The rates I hear favored are normally a rate less than the person I am talking to is currently paying, all the way down to 10%.

Arguing against the Flat Tax--
1.  This country decided a long long time ago that it favored a progressive tax system; the highest marginal rates are levied on the higher income earners (a marginal rate being what rate you pay on the last dollar of income you make that year, so that if you made $200,000 your marginal rate would be the rate you paid on the 200,000th dollar).  Right now our rate structure generally has six rates, 10, 15, 25, 28, 33 and 35.  If your "TAXABLE INCOME" is $200,000 you are in the 33% tax bracket which means that the first $8,700 is taxed at 10%, the next $26,650 is taxed at 15%.  The next $50,300 is taxed at 25% with the next $90,800 taxed at 28%.  Finally the last $23,550 is taxed at 33% (though I don't intend to discuss this in this piece, note that though the taxpayer is said to be in the 33% bracket, only $23,550, about 10% of their TAXABLE INCOME, is actually taxed at 33%.  This, I believe, is greatly misunderstood by the taxpaying public in general).  In this example the taxpayer is single and has no income from stock ownership.  I think when discussing the progressive tax rate, it is not enough to simply say "that's how we've always done it so we must keep doing it that way".  The question is begged, do we believe that a progressive tax rate structure is desirable over a more regressive income tax, like the sales tax, or, like some countries have, a VAT (a single rate value added tax), or in this case a flat tax, and if so, why?

The desired result of a progressive income tax rate structure is to have the higher income earners pay a higher percentage of their income than lower income earners.  Here is a link to a paper by Cornell's Robert H. Frank, The Progressive Income Tax, which speaks at great length about practical benefits of a progressive income tax rate structure from one economist's point of view.  I found it to be very interesting and persuasive on the whole.  But I don't think that the average citizen will give 2 hoots and a holler about what Robert H. Frank thinks.  Many will be distrustful of him just because of his status in the academic world.  And many will be distrustful because his conclusions are, to many, counter intuitive and therefore not "common sense".

I suspect that the reason we have had a progressive income tax from 1913 on is that it maximizes the revenues a government can collect while minimizing the amount of political protest.  After all wealthy citizens have much more of what is called discretionary income and will feel the pinch of income taxes, if they feel it at all, to a much lesser extent. 

And maybe, from an emotional, moral and ethical standpoint, Americans have had, throughout most of this country's history, a soft spot for the hard working but down trodden poor and "soon to be poor" and even the almost poor, all the way up to "I can see the almost poor from here".  And so perhaps the progressive income tax rate structure appealed on that basis also.  Placing all other matters aside, perhaps we felt that if the government needs to take revenue from its citizens, perhaps they should stay out of the pockets of "the little guy".  The rich won't miss it near as much.  No rich person will do without because they pay a heftier portion of the income tax.

I believe that there are good reasons to keep the progressive rate structure.  Mr. Frank lays out a persuasive technical argument for it. 

However, there are those that would say that the progressive rate structure is now a myth anyway, due to allowing differing rate structures for differing kinds of income.  The 15% top rate on dividends and capital gains is the quintessential example that we have currently.  When our R Presidential candidate is paying a14% effective rate, Warren Buffet, one of the richest people in the world is paying a 15% effective rate and our President is paying a 20% effective rate then one must question whether we have a progressive income tax system at this point.  Many of us, with much less, pay a higher effective rate (an effective rate being the percentage of your taxable income being paid in taxes). If we take that as a sign that the progressive tax rate system is already gone anyway, then it is hard to use it as an argument against the flat tax.  However, there are still a lot of wealthy people that derive their income from sources that are not capped at 15%.  So, they are paying in the top marginal rate, now 35%. While not pure, we still maintain a progressive rate system.  I would still maintain that, in spite of its impurity, there is still plenty of reason that the progressive rate system that we have is still superior to a flat tax system.

2. When people talk to me about the flat tax, as I said earlier, I always ask about the fate of deductions in their flat tax plan.  Most say "no deductions".  I usually counter "even for self employed people...no deductions for the costs and expenses incurred in earning the revenue?  I would not be able to deduct my office expenses, computers and telephones and scanners and wages paid to employees and the cost of taking on extra contract labor when needed, office supplies, etc. etc.?  Some say "well of course you could deduct those".  Others actually say "no, no deductions of any kind."  But either way you go there are huge pitfalls and unintended results.

If a business owner (and for purposes of this discussion I am leaving out businesses that must file a return of their own such as partnerships S Corporations and C Corporation) can't deduct the costs and expenses of doing business then, even if the rate is very low, there will be situations that will arise where a business has very large revenue, but for whatever reason, that particular year they lost money on a cash basis or some other generally accepted accounting method.  That business would be hit with a large tax even though it lost money. 

So let's say that we DO allow businesses to take deductions for their "ordinary and necessary" business expenses.  The door is now open.  We CPAs and the tax lawyers and just plain ol' smart people will be burning the midnight oil, and making lots and lots of money, figuring out schemes (tax planning) whereby a taxpayer can have a new business and deduct expenditures that would otherwise be considered personal expenses under the law.  After all, they are now ordinary and necessary business expenses.  TA DA!  Maybe the schemes won't be allowed, so we'll think of some more and the government will have to expend a bunch of resources in policing and litigating tax law compliance.  Well, there goes one of the strongest arguments in favor of the flat tax, ease of and less costly administration.  To a great extent that kind of thing goes on under the current system.  You can't take a tax deduction for a hobby loss.  So my rich clients that want to play gentleman farmer have to tread very lightly because...NEWS FLASH...gentleman farmers lose a LOT of money.  Over the years there has been developed through court rulings and Tax Regulations some safe harbors that these people can use.  As long as they meet certain measurable criteria they can play gnetleman farmer and deduct the 1 or 2 or three hundred grand it costs per year.  THAT is why I know what would happen even if you allow business deductions.  Suddenly with a shift here and move over there those expenses are business expense.  Again, TA DA!

3.  Lastly, I would argue in favor of our current system, that as flawed as some of the laws are, at least we have flexibility in our ability to change it.  I think we have changed it too much since 2000.  Practically every year there has been major tax legislation.  But sometimes change is very helpful, even necessary.  And I see the inflexibility of  the flat tax as a bad thing, even if there were nothing else wrong with it.  With a flat tax where do you go from there but back to where we are now? 

And I think there is no argument that tax law is a vital and powerful component in fiscal policy.  The flexibility of having that powerful tool in the fiscal policy tool kit could make or break the country in some circumstances.  It's a complex world we live in...even moreso than I can fathom.  It's not 1780 anymore.  We are not an agrarian society.  Our government is not made up of a few slave owning gentleman farmers. We are the most powerful nation on Earth and in many ways that makes the world a lot smaller for us and a lot more complex than for most of the rest of the world (except in Alaska.  That place is like brand new).  Economics is more complex than ever in history.  We are juggling a heck of a lot of balls in the air.

The Bankers and Fiduciary Club of Houston has a lunch every month that I used to go to.  I hate stuff like that but business is business.  They always have a speaker and sometime they even have one that is interesting.  Dick Armey used to come and speak to us every now and then when he was a big shot in Washington in the 90s.  I was a serious Republican back then so I was pretty impressed.  Anyway, he would always harp on the flat tax and how it would solve all of our problems.  There are a LOT of CPAs and tax lawyers in the organization who knew more about taxation then Dick Armey ever even dreamed of.  And it was fun when one of them would take Armey on on this subject.  It would get really tense because he was passionate about it...probably because he had invested so much of his time in speaking about it that he had kind of become synonomous with the subject.  But after the first time he came and spoke about it I spent some time reflecting on the whole concept and what I would do as a tax professional if the country decided to go down that road.  I told Marhsi, my wife, that if the country could ever come up with a better tax system that would do everything we need it to do, whether it was a flat tax or some other kind of tax, if it resulted in me having to change my work focus I would do it and be happy to do it.  I never want to be one of those people that always "kicks against the pricks".

I have included a link below for a website which shows the income tax rate structure since 1913.

http://www.taxfoundation.org/files/fed_individual_rate_history_nominal&adjusted-20110909.pdf .

Is the Affordable Care Act constitutional?

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For those of you who cannot wait until June I thought that I would go ahead and tell you how the Supreme Court will rule on this question. (I am not an attorney, but I once had dinner with one.)

The decision will be yes, the ACA is constitutional.

The rationale will be as follows:

1. Clearly the government has a right to require a citizen to pay for health care via taxation. In fact, with Medicare the government requires a 20 year old citizen to pay taxes for health care that he will not even begin to receive until 45 years later.

2. The ACA mandate is a tax* by another name.

3. The court will not overturn a major piece of legislation on the basis of semantics.

A long shot: The yes vote will be at least 6 and the opinion will be written by the CJ.

However it goes, which ever side loses this argument will have their supporters outraged by the loss and they may find a silver lining in the fall election.

Check back here in June when I will either crow or eat crow.

*Perhaps it was not labeled a tax because its authors had promised not to raise taxes.
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Blue Dog Democrats face extinction in next election

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It appears that the moderate democrats are about to go the way of the moderate republicans.
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A rich guy’s case for higher taxes

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A good case for increasing the top marginal rate can be found in this article by Ezra Klein .

Except for the part where he compared a rich person's income tax to a middle income earner's income + payroll taxes it is a pretty good article.

Here is a sample (he is talking about the Bush tax cuts):
It would be one thing, Levine says, if the economy had performed so much better after taxes on the rich were cut. But it didn’t. Some of the fastest economic growth of the post-war period came in the 1950s, when the top tax rate was above 80 percent. The slowest growth came in the 2000s, when the top tax rate was 35 percent. ...

Not just suggesting, but actually saying ...

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The PBS evening news last night showed a speech by Obama in which he declared that we should enact the Buffett rule (which generates $5 billion a year in taxes on the rich). He then went on to say: "If we do that, then it makes it affordable for us to be able to say for those people who make under $250,000 a year, like 98% of American families do, your taxes won't go up."

The deficit is $1400 billion per year. Getting a mere $5 billion a year from the rich is not going to cover that problem.

We have to accept that we are not going to solve this problem unless the "rest of us", the great middle class, join in and either have our taxes go up or have the government benefits go down or both.
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Supreme Court Justice Scalia

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Scalia also disappointed me in the SCOTUS hearings on the Affordable Care Act.

For starters, I think it is a legitimate point to ask, “If the government can make you buy healthcare insurance, then what can they not make you do?” However, if you are a SC justice speaking during the hearing, then you should find an example to illustrate that point that is different from the one (broccoli) that has been bandied about in political circles. Using broccoli as he did reinforces his opponents’ characterization of him as a shill for conservatives. (PS It is a reasonable position that healthcare insurance is special in that regard.)

Second, suppose they decide that the mandate is unconstitutional. Then there is the business of determining whether each point in the 2,700 page bill can stand alone (independent of the mandate.) I agree with him that that is the job of Congress (because it would be very hard to decide what the congress would have intended without the mandate.) I would even consider it reasonable if they thought the length of the bill alone was sufficient to send it back to congress. I understand that Nancy Pelosi is still waiting to find out what is in the bill. But it sounds childish to say out loud, “You really want us to go through these 2,700 pages?”

Finally, I think that, like Caesar’s wife, members of the court should be beyond reproach, in this case about being political. Talk about the “cornhusker kickback” and needing “60 votes in the Senate” seemed to me to be quite inappropriate.
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Debt

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For those who don't believe the debt matters there is an article in the Post for you.
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The Decider

I remember back when W told reporters that he was the "decider". He caught all kinds of guff for saying that. It was, many said, the ultimate example of just how arrogant he was. And I was taken aback by this. By the time he got that far into his Presidency I had lost all my faith in his ability to make good decisions. But even I could not deny that his job, if he does it, is deciding. If he makes enough good decisions and if he is lucky enough not to have to make too many decisions that have no clear winner, and if he is lucky enough to guess right most of the time then he, or she, might be a good President. I did not take what W said as a brag or even a statement of something that he was particularly happy about. He was merely stating that was his job..deciding. No one else could do it for him. He was the President. While I have never felt the heavy weight of anything like the decisions a President has to make, as a business owner, a Father, and a husband I have certainly had to make my share of decisions that effected people other than myself. And let's just say there is a huge learning curve to decision making...if your fortunate anyway. Even the clearest thinkers among us make bad decisions that effect others. So when I heard W say those words, "I am the decider", I heard a bit of heaviness. He had been President for some time and it was not an easy time to be the leader of the free world. We all can listen to other's opinions and ask experts and professionals. But when it comes to the things we are responsible for, we are the deciders, for better or worse.

The Centrist

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The following was posted by David DuBay on the Rise of the Center under the title of Where Liberals and Conservatives Agree with the American Majority in the Center: Meet Moderate America. I agree with the theme and most of the content.

Recently the New York Times published a series on what the Right gets right, and what the Left gets right. What stands out is that the typical partisan line that the other side is wrong about everything causes us to miss out on some important ideas. It’s in the best of both worlds that we meet moderate America.
The political center isn’t a flabby middle that stands only for compromise without any firm convictions. Instead, moderates support both individual and economic freedom, instead of one but not the other. Like conservatives, moderates support free enterprise and fiscal responsibility. And like liberals, moderates support personal freedom.

Sol's Unscientific Bell Curve of the American Political Spectrum
Moderates are pro-capitalism but also understand that some regulation and environmental protection is necessary. Regulations, though, should be simplified with unnecessary and inefficient regulations eliminated. Balancing the budget is important, but moderates recognize that tax cuts increase the deficit. Tax cuts aren’t really the issue though – we need to simplify the tax code.
Moderates are not knee jerk anti-government because government does play an essential role, but power should be decentralized to the extent possible. This means limiting the role of the federal government and giving states greater flexibility. And it means the US should stop being the world’s police force.
Like liberals, moderates understand that poverty is systemic. And although individual responsibility is primary, society has a responsibility to the vulnerable (children, the elderly, and the disabled). Programs for those in need often create dependency, but instead of ending these programs they should be redesigned and simplified based on behavioral economic research to reduce dependency.
Moderates also support individual liberty, which at times is controversial. Gay marriage isn’t viewed as a moderate position, but the march toward equal rights in American history is undeniable. Your freedom to live your life as you choose is what America is all about, and this includes your constitutional right to own a gun. So personal freedom is not strictly a liberal or conservative issue, but moderates are more consistent on the matter.
Finally, there’s the question of whether moderates should create a new political party. I’d vote no. Third parties have a poor track record. And besides, it’s partisan politics that creates gridlock in Washington, and a third party would only contribute to that. There are moderates among both Republicans and Democrats, and especially among independent voters. Moderates need a bigger voice within the two major parties, and this will require directly confronting the party leadership. And moderates will continue to advocate for issues and run for office without the support of a political party.

constitutional law professor

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I find Obama’s constitutional remarks depressing.

In the 2010 SOTU he claimed that the Citizen’s United decision by the Supreme Court would open the floodgates of contributions to our political campaigns by foreign corporations. Alito shook his head because those who wrote the decision in that case specifically noted that they were not touching the law about foreign corporations – Politifact called Obama’s remarks “mostly false.”

Then on April 2 his remarks about how it would be “unprecedented” if “unelected judges” (U S Supreme Court) were to overturn a federal law and take us back to Lochner in the thirties and I’m going what - what - what ?? The errors and flavor were stunning.
Well just review a few facts –

a) unprecedented – No, they’ve done it hundreds of times from very recently to all the way back to 1803 in Marbury v Madison which established that one of their main functions was to keep the elected branches inside the constitution. This is not subtle constitutional law theory it shows up in in US History 101.

b) unelected judges – It is true that the Supreme Court is unelected and I hope they stay unelected. In this context that expression is an epithet that is used to make an independent judiciary sound like a bad idea. If it sounded familiar to you it may be because it was used in the fifties and sixties by Strom Thurmond, Lester Maddox, et al who wanted to impeach those “unelected judges” because of Brown v Board of Education.

c) The problem with the Lochner reference was that that decision was in 1905, not the thirties, and the full name is Lochner v New York - it was a state law - not a federal one - that was at issue.

Now it seems like that there are two possibilities. Either he did or he did not know at the time that he was wrong about those things,
If he did not know, then they should quit referring to him as a constitutional law professor.
If he did know, then perhaps that is even worse.

Added at 5:45 PM 4/10/2012
A defense of Obama's comments can be found in The New Republic article:
Yes, Obama's Comments on the Court Made Sense
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War and such

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We now have a war on women to go with the war on Christmas.
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constitutional bankruptcy

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No one has answered the March 30 post question: Just on the side: "Does the Federal Government have a right under the Constitution to pass a law that will bankrupt the country?"

Well I suppose that, technically, the government cannot go bankrupt. They can just print the money to pay their bills. It would have the same disastrous effects on the country, but would not technically be bankruptcy.

What ever you call it, do they have the Constitutional power to take us there?

I would say yes. There are no limits on their power to print or borrow money. Either would be sufficient to ruin us.
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On Wayne's April 3 Response To Bruce's April 2 Post

"There is no more new frontier.  We have got to make it here."  Don Henley, The Last Resort

1.  I was thinking that if the opposite of silly is serious then I would have to respectfully disagree with your description.  Without knowing what Nancy Pelosi was thinking at the time she asked that admittedly strange question as an answer to a serious question, I can't say for sure that her question is a comment on her possible belief that Congress isn't required to be concerned about the Constitution.  I am not a fan of Nancy Pelosi or Harry Reid.  I don't really understand why these two ineffective people are the congressional Democrat leaders.  But even they are well aware of the constitution.  And so I offer up a rationale for what she said as merely her belief, at least back in 2009 when this event occurred, that the commerce clause clearly covered the mandate and had been offered .  Many do believe this to be true, while many others believe this line of reasoning to be...well...silly.  Obviously the Supreme Court will do its job and decide this question.
2.  I agree that we humans are not fundamentally objective creatures.
3.  The current rule on the PCIP is that you must have had other health insurance within the past 6 months.  I do not know if that rule continues to be the case when the full law kicks in in 2014.  But, if there is any consistency in this law in its entirety then one would think so since the situation you describe is exactly the one the mandate seeks to avoid. And while I agree that waiting until you have an illness is really a huge burden on the system and just plain inconsiderate, I don't think that the comparison with life insurance is quite on point since life insurance is not likely to save the purchasers life while health insurance would, or at least could.

And, in my defense, I have been paying into one health insurance plan or another since I was 18, which is a long time.  So I have not been engaging in some sort of "gaming" of the system, although that seems to be the exact door that will be opened wide if the Supreme Court strikes down the mandate and leaves the rest of the law intact,or if the law is left intact and people choose to pay the penalty because it is cheaper than the cost of the premiums, or just as a symbolic gesture of the pioneer spirit.
4. I agree that National Health Insurance is by far the best solution and your reasoning is solid, I believe.
5. I did not intend to address my complaints at Republicans only.  But I would say that it is absolutely clear that Republicans are politically scared to death that Obama will hit a home run on health care, virtually guaranteeing his reelection, and are leaving no stone unturned in very organized and widespread attempts to first propagandize about what the bill, now law, is and what the effects of it will be, until the average person doesn't know what to believe and what not to believe, to working the legal end and getting it struck down as unconstituional.  If all else fails there is "repeal and replace".  They have succeeded in muddying the water so much that all citizens know for sure is that they're uncomfortable, from kind of uncomfortable to extremely scared about this thing.  Mission accomplished...almost.

One more thing.  I know that I am perceived as an "L" here, but most of all I see a Democrat Party at least working to solve this very serious health care issue alone and a Republican Party offering little, if any, serious alternatives to the Democrat plan.  Letting people buy insurance across state lines is a red herring that I hear them offering constantly.  Interstate banking has worked so well, why not?  As a result we now have, in effect, about 5 banks with the others dependent on those 5 banks for technology assistance.  Is it a coincidence that this is one of the alternatives they are selling that could very well result in the same kind of concentration in that industry that we now have in banking??? It seems like such a market driven solution.  But is it really?

on Bruce's April 2 Post

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1. Yes I am serious about how silly I think it is.
2. I think we all are to some degree going to have a problem being objective.
3. The PCIP issue is one of the main reasons that I support NHI and one of the main justifications for requiring that everybody participate. (Preferably by taxation by just expanding Medicare. Of course we would need a lot more taxation.)
Obviously the PCIP individual wants health care and my sympathy for them is dependent on how they got there. If they had insurance and lost it because of a life change, then I’m sympathetic. But if they just didn’t want it and didn’t buy it until they got the illness, then it seems unrealistic to me to tell an insurance company (whose business it is to manage risk) that they should have to pay someone’s bills after the fact.
Consider an analogous case of someone who gets a fatal illness and has only 2 months to live. Should an insurance company be required to sell them life insurance?
4. Why does this move me to support NHI? Well, medical technology being what it is, the possibility of predicting what expensive illnesses you will have is growing rapidly and undermining the whole concept of “risk management” insurance. In a few years you will be able to check the dna markers and know what diseases you are likely to get and with what probability. In deference to your rights of privacy the govt will not let anyone require you to tell them what those things are. Now when you set down with the insurance agent you have a lot more information than he does. The ins. Com. will have to assume the worst and charge accordingly. That is not an arrangement that will produce good contracts.
5. I agree that the Rs are not looking very good either, but Ryan’s budget does show the Rs accepting heat (for proposed reduction of services) to further their goal of restraining the growth of government and dealing with the fiscal situation. The Ds on the other hand offer everything to everybody and are not willing to take the heat (increased taxation) to further their goal of increasing government services.
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Are You Serious About the Healthcare Mandate Silliness

I am no fan of "Obamacare" except from the standpoint that without it I, as a 59 year old male self employed person who takes a couple of medications, could not buy traditional health insurance at any price.  I was told time after time that I did not "qualify" for traditional health insurance.  So after Obamacare was passed I called one of my health insurance contacts and asked if there was anything in it that would help me get real health insurance.  Insurance is definitely one of the things that Joni Mitchell  meant when she said "you don't know what you got til it's gone".  OK, maybe not because we were all healthy and immortal back then.  But I'll bet she includes it now.

My insurance guy says "yeah, there is something in there just for you".  It's called the Preexisting Conditions Insurance Plan, or PCIP.  It is a temporary fix until the actual preexisting conditions law kicks in in 2014.  So now I have real health insurance.  I pay a lot in premiums and it is a high deductible policy.  But right now I'm OK with that.

I said all of that to show why I may not be able to be really objective on the subject since it has really helped me out.

And if they mandate that I have to buy health insurance I'm happy to buy it.  If they mandate that I have to buy broccoli?  Well I already buy broccoli.  I don't guess they can make me eat it.  If they mandate that I have to buy a fuel efficient car?  I'm good with that.  I think I should have a fuel efficient automobile for a lot of reasons.  

But, having said that stuff, I do comprehend the overarching issue of government mandates.  I truly am torn because I realize that in a worst case scenario the government could mandate that I buy things that I really don't want to buy.  And not insignificant things like broccoli or things that would in general be a positive step for the common good like fuel efficient automobiles.  I see that.  I get that.

But, here's the rub.  The USA health care system pre Obamacare had been broken and had been broken for decades.  I don't think there are many who would disagree with that.  But I don't believe that Obamacare as it stands is the answer.  As I said, I am no fan, other than from a purely selfish standpoint.

So, here we are.  We've got to do something.  But between fearmongers talking about government takeovers of healthcare and throwing the S word out every ten minutes, and now the word mandate is the symbol of all that is evil.  I honestly have no faith that this country has the will to do what would need to be done to replace what we've got with what we need.

The right says that if they control Washington they will repeal Obamcare "day one". ( I have to chuckle a little everytime I think of all the things they are going to do day one.  We must be electing a King.)  Then they will replace it.  Repeal and replace.  That is the mantra.  But I have no faith that the "Replace" is going to happen.  Should we/could we "fix" Obamacare?  I don't really know the answer.  And is it better than nothing?

American prisoners

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From Fareed Zakaria GPS and Pat Robertson.

America has 5% of the world's population and 25% of the world's prisoners.

California spends less than $9,000 per year per student and more than $50,000 per year per prisoner.

Is this who we have become?

Our politicians are so obsessed with their conflicting economic certainties that they will not deal with our real and pressing problems.

Is it not time to say ALL OUT?
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