Economics from a people first point-of-view

Last week, the Commission on Wartime Contracting released a report to Congress about military contractors. The report, cited by California senator, Dianne Feinstein, in a hearing about it, alleges military contractors cost the taxpayers of this country 30 to 60 billion dollars. As mentioned in the Commission’s four bullet points in its 8-page abstract of the report, “CWC-NR-49,” that money disappeared through waste and fraud:

• Pegs waste, fraud in Iraq, Afghanistan at >$30 billion
• Sees threat of more waste in unsustainable projects
• Faults both government officials and contractors
• Offers 15 recommendations for contracting reform

Contractors were ostensibly hired because the US military was not ready to fight the wars in Iraq and Afghanistan that President George W. Bush led us into. About half of the “military” forces fighting for the Americans  in those wars have been foreign mercenaries. Talk about outsourcing American jobs! With taxpayer funding, no less!

While the  IRS is busy going after domestic employers who evade their tax responsibilities by hiring independent contractors in place of employees, no government agency appeared to be going after our federal and state governments for doing exactly the same thing! In the name of “national security” for a war based on a lie, the federal government was allowed, often without even requiring competitive bidding,  to hire fake “employees”, and turned its head while they defrauded taxpayers out of billions of dollars. And it won’t stop. Senator Feinstein complained that a 2009 agreement with the Defense Department to cut the number of independent contractors used by 5% a year wasn’t being honored.

This is not just a federal government problem. State governments also have been hiring contractors to do the same jobs that state employees do, but with more expensive results for those of us who rely on our local governments to protect American citizens. And there are those in power in some our states who would like to use our taxpayer monies to hire nothing but private contractors! Before going along with that idea, take a look at the abstract of the Commission’s report from August 31, 2011 and the following article I posted about independent contractors in government a little over two years ago on Brucenomics. Continue reading →

Several years ago I cam across a book by a Harvard Medical School psychologist, Martha Stout, called The Sociopath Next Door. This book really opened my eyes.

I’ve been fascinated by psychopaths (now called “sociopaths”) ever since I met one of them when I was in my twenties. He was the kind you read about and see in the movies.

He was a short, balding guy around thirty who owned a tobacco-store near the University of Pennsylvania in Philadelphia. He lured lonely students into his back room, drugged them, and then dumped chests full of their chopped-up bodies into the Schuylkill River. Continue reading →

The mere suggestion of a tax on the wealthy was one of the factors that caused last week’s dire slump in global markets. But this suggestion wasn’t made in the USA and it had nothing to do with earned income. (“EU Tobin tax” Financial Times Lex column 8/18/11 p10.)

Much as I appreciate Warren Buffet’s offer, as one of the wealthiest Americans, to pay a higher rate of  income tax, I can’t help but suspect that the wealthy are not eager to have us look at the other types of taxes they pay or don’t pay; taxes they could be asked to pay, i.e., the capital gains tax or the Tobin tax.

The capital gains tax rewards long-term (over a year) investors for saving and earning money. Money invested for the long-term earns the investor income (called “portfolio income”). This portfolio income is taxed at a rate that is about equal to the second lowest of the six income tax brackets in the US. The capital gains tax favors those who make their money long-term by buying (and selling) capital over those who earn their money by selling their own labor and those who make money by hiring workers in their small businesses.

The Tobin tax is the opposite of a capital gains tax. It is a transaction tax, i.e., a sales tax, on the financial transactions of investors. Money invested, including money invested repeatedly for the short-term is taxed at a minuscule percentage (such as .005 to .05 of a percent) every time a financial transaction (i.e., the buying and selling of investments) takes place. The Tobin tax obviously promotes the spending of money for hiring labor or buying property rather spending that cash solely on financial investments.

According to Representative Peter DeFazio who sponsored a 2009 bill to implement a Tobin tax in the US, the country previously instituted an even larger Tobin-type tax after the Great Depression, and this tax lasted with no ill-effects until the 1960s. The US Tobin tax was levied in order to dampen the type of financial speculation that led to the Wall Street crash in 1929.

However, it was a mere suggestion of a global Tobin tax in talks between France and Germany last week that sent European financial markets into a panic this week. “Deutsche Börse and the London Stock Exchange were down by 5 and 3 percent respectively.” (“EU Tobin tax,” Financial Times Lex column, 8/18/100 p10) Continue reading →