QUOTE OF THE DAY
Forbes: Two Obamacare Mandates That Dramatically Expand The Internal Revenue Service's Power
Much of the talk in the news this week regards the appalling scandal involving IRS targeting of conservative non-profit groups. So it’s worth noting that Obamacare dramatically expands the authority and the scope of the Internal Revenue Service. Two provisions in particular will require thousands of new IRS agents, and billions in funding, to enforce: the law’s individual mandate, forcing most Americans to buy government-approved health insurance; and its employer mandate, forcing most employers to take money out of workers’ paychecks to purchase costly health insurance on their behalf. Here’s why these two provisions are so intrusive, and why the only solution to the problems they create is to repeal them.
Many people are exempt from the individual mandate
Obamacare requires the IRS to enforce the individual mandate. So let’s first review the precise details of how the individual mandate works. It turns out that many people are exempt from the mandate, and so the IRS has to know a lot about you in order to decide whether you are in compliance with it.
The individual mandate, or what Section 1501 of the Affordable Care Act calls the “shared responsibility for health care,” requires individuals to maintain “minimum essential coverage” or pay a “penalty” (a penalty which Supreme Court Chief Justice John Roberts generously transmogrified into a “tax”).
The mandate is phased in over a three-year period. In 2014, the fine for noncompliance is 1 percent of adjusted gross income, or $95, whichever is greater. In 2015, the fine is 2 percent of AGI, or $325, whichever is greater. In 2016 and thereafter, it’s 2.5 percent of AGI or $695, whichever is greater.
Several groups are exempted from the mandate, including: (1) “a member of a recognized religious sect” that has a moral objection to health insurance; (2) “health care sharing ministries” in which a group of religious believers pool their resources to fund medical expenses, so long as that group has been in continuous existence since 1999; (3) illegal immigrants; (4) incarcerated individuals; and (5) members of Indian tribes.
Individuals who fall below certain income thresholds are exempt from the mandate’s fines. Anyone below 138 percent of the federal poverty level (in 2013, $15,856 for an individual, or $32,499 for a family of four) is exempt from the mandate.
In addition, anyone whose “required contribution for coverage…exceeds 8 percent of such individual’s household income” is exempt. What is a “required contribution? It’s either (1) the portion of an employer-sponsored insurance plan that is paid directly by the individual for self-only coverage; or (2) the premium for the “lowest cost bronze plan available…through the Exchange in the State,” minus the subsidies that the individual would receive from the federal government.
To make that less abstract: the average insurance plan covering a single individual costs around $5,500. If you’re paying for that entire cost yourself, you’re exempt from the mandate if your income is below $68,750. If your employer is paying half the cost on your behalf, then you’re exempt from the mandate if your income is below $34,375.
Reason: Obama’s Scandals Reveal the True Face of Government
The Obama administration has gotten itself into a fix between its contradictory stories about the Benghazi incident, reports of the IRS targeting conservative groups, and the Justice Department’s grabbing of phone records from AP reporters. There are few things more fun to watch than arrogant political leaders -- folks who spend their lives bossing everyone around -- getting a comeuppance.
My favorite take wasn’t from any serious commentator but from comedian Jon Stewart, who noticed that the president routinely claims ignorance about embarrassing events by saying that he learned of them while watching the news: “I wouldn’t be surprised if President Obama learned Osama bin Laden had been killed when he saw himself announcing it on television.”
I take a bipartisan approach to Washington, DC’s political scandals and find myself savoring them all, regardless of the party that is in control of the White House. Any sane person would conclude that all administrations and bureaucracies essentially are corrupt given that they thrive on the exertion of power of other people. We know about the corrupting influence of power, and DC has become like ancient Rome that way. It’s a magnet for those seeking favor, money, or a big title administering some pointless program.
I visited DC last week and was astounded at the booming economy, the endless new construction, the astronomical prices, and garish displays of wealth everywhere -- not to mention the haughty attitudes of every pissant assistant to the whatever. That’s what Other People’s Money buys you. When Ronald Reagan talked about the Shining City on the Hill he was speaking metaphorically about America, but the new shining city is DC -- funded on the backs of all those Americans who blithely vote for people who promise to solve their problems.
That’s the main lesson from this latest mess: the federal government is an untamable beast. These superficial scandals are nothing compared to the things we will never learn -- i.e., the way the CIA conducts its business overseas.
Still, there are so many things to savor as President Obama circles the drain. Obama has always exuded an intellectual arrogance. Yet if he’s so smart, why would his Justice Department target reporters? The national media has fawned over the president, but the quickest way to end that love affair is to go after their personal records.
Unfortunately, many people insist on seeing every scandal in terms of partisanship. Conservatives are aghast, as they should be, at the thought of an IRS auditing groups based on their political views. That is eerily totalitarian. But where would they have been had a Republican administration done the same thing to liberal critics? I doubt the activist groups would be sending out the alarmist direct-mail pieces if the latest Bush were still president.
Muniland: Can Obamacare provide relief to distressed American cities?
A big trip line for states and cities is the host of promises they have made to provide health benefits to retirees (Other Post Employment Benefits (OPEB)). Almost universally, cities and states are shouldering these OPEB costs as they come due. Pay as you go, if you will. From a recent Bloomberg presentation:
These so-called OPEB promises made by the 15 biggest cities alone total $115 billion, with an average burden of $2,300 for every man, woman and child, according to data compiled by Bloomberg. How will local governments manage to make good on their pledges without becoming insolvent? Will we see governments reduce benefits and raise their cost for current workers, as has been the case in several cities and states?
Cities and states cannot unilaterally end these benefits, outside of Chapter 9 bankruptcy, because they are contractual promises. As Stockton, California was entering the bankruptcy process, it eliminated lifetime unlimited health care benefits for former employees and their dependents. Stockton had awarded these OPEBs to former employees who had worked for the city for as little as a month, and the expense helped push the city into bankruptcy. Retirees and former employees took Stockton to court and a judge ruled that, given the city’s fiscal distress, it could cease these benefits.
Now there seems to be another way for cities to get out from under their OPEBs. Chicago’s Mayor Rahm Emanuel is leading the way. Emanuel’s plan is to essentially shift the cost of retiree health benefits from the city budget to the federal budget via President Obama’s Affordable Care Act. From the Chicago Sun Times:
More than 35,000 government retirees have been on pins and needles waiting to find out whether Mayor Rahm Emanuel will continue their city-subsidized health insurance after June 30, when a 10-year settlement agreement that calls for the city to share costs with retirees is due to expire.
They are not likely to be relieved when they find out how Emanuel has decided to resolve the politically volatile issue.
Ahmad disclosed Tuesday that the mayor has decided to extend the 55 percent subsidy for six months — until Jan. 1 — then phase it out for 30,000 retirees over the next three years after giving Obamacare a chance to shake out.
Chicago’s responsibility for this liability ends on June 30. The city will roll over everyone but 5,500 of the most elderly retirees to the Affordable Care Act coverage over a three year period. The city projects savings of $108 million per year, which could help pay its massive pension liabilities. From the Chicago Sun Times again:
“By taking advantage of the Affordable Care Act, which guarantees city retirees access to health care regardless of pre-existing conditions and includes subsidies for lower-income individuals, the city is freeing itself from $540 million in future costs by 2018,” Msall said.
A Wisconsin county is considering the same option. Though, the Sheboygan County case is more about health care cost arbitrage than eliminating a liability. From the Milwaukee Journal Sentinel:
Sheboygan County government retirees may lose their county health insurance benefits and instead be placed under the federal health care program known as Obamacare, the Sheboygan Press reported.
The county is confronting a $2.17 million budget gap for 2014, the Press reports.
County Administrator Adam Payne and Finance Director Terry Hansen estimated the county could save just over $286,000 in the county’s 2014 budget with the assumption that its retirees will be insured under the Affordable Insurance Exchange beginning next year.
The Affordable Care Act may not be fiscally sustainable given large federal deficits and the efforts by Republicans to repeal it. Republicans are unlikely to provide additional funds to support the program that will likely cost much more than is currently budgeted. Even so, cities and states are looking everywhere for cost reductions. Using Obamacare makes sense.
Arthur Brooks: Half the Hispanics eligible to vote don't. They are the ones most likely to call themselves 'political conservatives.'
Before Washington was rocked in recent days by an assortment of brewing scandals, immigration reform was at center stage. And immigration reform will surely return shortly to the heart of Washington debates as Congress considers legislation proposed by Florida Republican Sen. Marco Rubio and his bipartisan "Gang of 8" colleagues.
Their bill would normalize the status of millions of illegal, mostly Hispanic immigrants. This has stimulated a vigorous debate among conservatives over the cost of reform, mostly in the form of public services for those with low skills and high needs.
For many conservatives, however, the economic debate is really a proxy for the political debate. Few things keep conservative strategists awake at night more than the current trends in Hispanic voting patterns.
Mitt Romney lost the Hispanic vote 71%-27% to Barack Obama. As the Pew Research Center declared in a headline the day after the 2012 election, the "Changing Face of America Helps Assure Obama Victory." Pew also predicted that while the non-Hispanic white population will decrease from 63% today to 47% in 2050, the Hispanic population will rise over the same period from 17% to 29%.
In some apocalyptic visions, Republicans become a permanent minority through demographic change and the inability to appeal to a population that is inevitably hostile to conservative ideology. Do the math, the warning goes, and even places like Texas start to turn blue. This will only be accelerated by regularizing the status and citizenship of millions of Hispanics in the coming years. As the old saying goes, when you're in a hole, stop digging. So hit the brakes now on immigration reform.
This political analysis is flawed by two false assumptions. First, it is not true that an increasing Hispanic population means an increasing vote share for Democrats. Second, it is not true that a conservative message will fail to appeal to Hispanics.
According to the National Opinion Research Center's General Social Survey in 2010, Hispanics vote at far lower frequencies than other racial and ethnic groups. For example, 52% of eligible Hispanics (that is, registered adults who are citizens) voted in the 2008 presidential election, versus 78% of non-Hispanic whites and 79% of blacks. This survey is consistent with many others.
What do we know about the Hispanics who don't vote? Among other things, they are the ones most likely to call themselves "political conservatives." Again, according to the 2010 General Social Survey, non-voting Hispanics are 52% more likely than Hispanic voters to label their ideology in this way. In contrast, non-voting whites are 40% less likely than voting whites to call themselves politically conservative. Non-voting Hispanics are also more likely than the voters to express conservative attitudes, such as agreeing that "hard work" is more important than "lucky breaks or help from other people" in getting ahead.
Getting non-voting Hispanics to become voters is more likely to help conservatives than hurt them. But this creates a puzzle: What is suppressing the turnout among all those conservative Hispanics? I believe it is the inability or unwillingness of most conservative politicians to address the issue of primary importance to all groups of Hispanic voters: care for the poor.
Consider the evidence. The 2010 General Social Survey reported that Hispanics are more than a third likelier than non-Hispanics to say that the government should do more to improve standards of living for the needy (39% to 26%). They are 12 percentage points more likely than non-Hispanics to say the government gives "too little assistance to the poor" (74% to 62%).
This is not because Hispanics are poor per se. Controlling for income, as well as age, sex, education, family situation and even political-party affiliation, Hispanics were 16 percentage points more likely than non-Hispanics to say the government should do more to raise the living standards of the poor.
Carpe Diem: In Venezuela, government price controls create economic chaos, so don’t minimum wage laws do the same in the US?
Government price controls continue to create economic chaos and chronic shortages of basic household items in Venezuela. Here’s a news report about the latest price-control-caused shortage:
First milk, butter, coffee and cornmeal ran short. Now Venezuela is running out of the most basic of necessities – toilet paper. Blaming political opponents for the shortfall, as it does for other shortages, the government says it will import 50m rolls to boost supplies. That was little comfort to consumers struggling to find toilet paper on Wednesday.
Commerce minister Alejandro Fleming blamed the shortage of toilet tissue on “excessive demand” built up as a result of “a media campaign that has been generated to disrupt the country.”
MP: As frequently happens, the government imposes mandated price ceilings below the market price, which then lead predictably and inevitably to shortages, which the government then blames on “excessive demand” or “speculators” or ”hoarding” or anything besides the real culprit — the price controls themselves.
Opponents of minimum wage laws correctly anticipate the economic chaos and chronic surpluses of low-skilled workers that inevitably result from artificial, government-mandated wages (prices) above the market-clearing wage. Proponents of minimum wage laws deny any resulting economic chaos or chronic surpluses, or assume the distortions are minimal.
Q: To be logically consistent, shouldn’t advocates of minimum wage laws also support the price controls in Venezuela?
Or stated differently, how is it possible that price controls in Venezuela obviously cause economic chaos and shortages, but minimum wages laws don’t have the same negative effects? What kind of contorted “logic” would it take for somebody to support minimum wage laws in the US but reject price controls in Venezuela? For consistency, it would seem like you would have to either: a) support both the price controls in Venezuela and minimum wage laws in the US, or b) reject the price/wage controls in both countries, no?
Cafe Hayek: Façade Capitalism Means Façade Freedom
An economy is capitalist in façade-only if much of the direction of resources in that economy is governed by something other than the free choices of consumers and the genuine competition of producers – competition both for customers and for resources to be used to produce what producers anticipate customers will demand.
Likewise, a society is free in façade-only if it is capitalist in façade-only.
The modern “liberal” – in America we increasingly say “Progressive” – ethos features two propositions relevant to the subject of this panel. The first is that government intervention is a pernicious threat to liberty when exercised over “personal” or “civil” matters such as religious belief, speech, sexual practices, or participation in politics.
The second is that our liberty is somehow enhanced – or at least not threatened – by strong state or collective intervention into the economy.
I believe that the first of these propositions is absolutely valid. I believe that the second – the one about the economy – is grossly mistaken. And it’s mistaken in a way that is inconsistent with the very reasons for why the first proposition is valid.
Two facts support my belief.
One, economic liberty cannot be compromised without creating government power that threatens to destroy personal or civil liberty.
Two, the very same arguments that justify personal or civil liberty as being essential for civilization apply equally to economic liberty.
The first fact is – or should be – obvious. And it is well-known – at least among us students of scholars such as F.A. Hayek and Milton Friedman.
To the extent that government controls the economy it controls – or has the power to control – those areas of life that are classified as “non-economic.”
Chicago Tribune: Making sense of scandals
The Obama administration's first term was remarkably free of scandals. The second term is making up for lost time. Some of the President Barack Obama's harshest critics have even begun comparing him to President Richard Nixon, a byword for corruption, secrecy and abuse of power.
That's a reach. Before any such damning indictment, we need hard evidence and lots of it, not tendentious political ads by Karl Rove. The current scandals need to be investigated thoroughly, and the White House needs to assist by providing documents and witnesses. Only a thorough investigation can restore public confidence.
The Obama administration is already seriously damaged. It has been caught using the full weight of state power to help the president's friends and punish his enemies, financially as well as politically. It has been caught hiding adverse information from the public and, after the Benghazi killings, mangling the truth or perhaps worse.
The fundamental issues are honesty and abuse of power. Sometimes, that power is the ability to help political friends, at the taxpayer's expense. That was the point of funneling money to Solyndra and all the other green energy "investments." They were run by the administration's friends, pursuing its pet projects.
That was the point of the GM and Chrysler bailouts, which helped the unions, punished the bondholders, trampled basic contractual rights and won crucial votes in Michigan and Ohio. That's the point of all those Obamacare waivers, given to friends through some opaque process. That's the point of Health and Human Services Secretary Kathleen Sebelius leaning on the companies she regulates for "voluntary donations," a practice reminiscent of former Mayor Richard M. Daley's administration securing large donations for his wife Maggie's (worthy) charities from companies reliant on city business. This atmosphere of pervasive political leverage, using every budgetary and regulatory tool, surely seeped through to the IRS, even if White House political operatives did not give explicit instructions.
Sometimes, the government's awesome power is the power to harm opponents, as the IRS did to charities with the temerity to use the words "patriot," "tea party" or "constitution." The IRS kept these nonprofits waiting for years to receive tax-deductible status. Some are still waiting. Their letters and pleas have gone unanswered. When one of them (Z Street, a pro-Israel charity) finally sued, the IRS said the suit itself was reason enough to postpone any tax exemption. That's government by fiat, not government by the people, under the rule of law.
Beyond the scandals now roiling this administration, the uproar over government corruption and coercion illustrate why a gigantic state is inherently dangerous.
Detroit Free Press: Detroit's pension boards pay $22K to send 4 trustees to Hawaii
Four trustees of Detroit’s two public pension funds are heading to a Hawaiian beach resort this weekend with their $22,000 tab paid for by the funds, which are mired in claims of mismanagement and said to be at least $600 million underfunded.
Trustees say the conference provides the education they need to manage complex investments for the funds’ retirees and beneficiaries. But other major public pension systems, including the Los Angeles Fire and Police Pensions, avoided sending their officials to Hawaii because of concerns the exotic locale sends the wrong message at a time when pensions nationwide are contemplating or implementing reduced benefits to cope with rising retirement costs and shaky investment returns.
Records obtained by the Free Press under the Freedom of Information Act show the expenses cover airfare — including a first-class flight for one trustee — lodging at the Hilton Hawaiian Village Waikiki Beach Resort in Honolulu, registration fees, meals and a per diem for miscellaneous expenses.
The city’s two public pension funds — the General Retirement System and the Police and Fire Retirement System — each are sending two trustees to the six-day National Conference on Public Employee Retirement Systems (NCPERS) conference, which starts Saturday. The retirement systems, which are funded by contributions from workers and the city, have combined assets valued at more than $5 billion and provide benefits to about 20,000 retirees and beneficiaries.
Stanford University professor Joe Nation, who specializes in public employee pensions, criticized the trip.
“Trustees don’t need to go to Waikiki to learn about best practices,” he told the Free Press. “Everyone knows they go there and they don’t work very hard. That’s just the nature of it.”
ABC News: IRS Official in Charge During Tea Party Targeting Now Runs ObamaCare Office
The Internal Revenue Service official in charge of the tax-exempt organizations at the time when the unit targeted tea party groups now runs the IRS office responsible for the health care legislation.
Sarah Hall Ingram served as commissioner of the office responsible for tax-exempt organizations between 2009 and 2012. But Ingram has since left that part of the IRS and is now the director of the IRS’ Affordable Care Act office, the IRS confirmed to ABC News today.
Her successor, Joseph Grant, is taking the fall for misdeeds at the scandal-plagued unit between 2010 and 2012. During at least part of that time, Grant served as deputy commissioner of the tax-exempt unit.
Grant announced today that he would retire June 3, despite being appointed as commissioner of the tax-exempt office May 8, a week ago.
As the House voted to fully repeal the Affordable Care Act Thursday evening, House Speaker John Boehner expressed “serious concerns” that the IRS is empowered as the law’s chief enforcer.
“Fully repealing ObamaCare will help us build a stronger, healthier economy, and will clear the way for patient-centered reforms that lower health care costs and protect jobs,” Boehner, R-Ohio, said.
“Obamacare empowers the agency that just violated the public’s trust by secretly targeting conservative groups,” Rep. Marlin Stutzman, R-Ind., added. “Even by Washington’s standards, that’s unacceptable.”
Sen. John Cornyn even introduced a bill, the “Keep the IRS Off Your Health Care Act of 2013,” which would prohibit the Secretary of the Treasury, or any delegate, including the IRS, from enforcing the Affordable Care Act.
“Now more than ever, we need to prevent the IRS from having any role in Americans’ health care,” Cornyn, R-Texas, stated. “I do not support Obamacare, and after the events of last week, I cannot support giving the IRS any more responsibility or taxpayer dollars to implement a broken law.”
Senate Minority Leader Mitch McConnell also reacted to the revelation late Thursday, stating the news was “stunning, just stunning.”
CARTOON OF THE DAY
Policy Outreach Manager
This week in Springfield, the focus shifted from pension reform to policy issues certain members of the Illinois General Assembly deem important, such as the Lion Meat Act.
The Illinois Policy Institute had a big victory this week, as our workforce transparency measure passed the Illinois House and Senate and now heads to Gov. Pat Quinn for consideration.
This measure is meant to provide greater transparency on state government workforce information, and passed the Illinois House on Wednesday by a 114-0 vote. It had previously passed the Senate on a 53-0 vote.
Senate Bill 1670 has its roots in a 2011 study from the Illinois Policy Institute, which focused on pay disparities between government and private sector workers.
SB 1670 requires the Illinois Department of Central Management Services, or CMS, to serve as a data collection point for each state agency to report on their annual workforce characteristics, compensation and employee mobility. This information will then be published annually on the Illinois Transparency and Accountability Portal.
The Institute is excited to see this sensible initiative gain traction after years of persistently encouraging its passage.
Progressive tax opposition gains momentum
State Rep. McSweeney’s resolution opposing the progressive tax continues to gain momentum. To date, the Institute-backed legislation, House Resolution 241, has 45 House sponsors. To put this in perspective, state Rep. Naomi Jakobsson’s measure to amend the Illinois Constitution and impose a progressive income tax, HJRCA 2, has 20 House sponsors.
Approaching the last two weeks of session, it is a top priority of the Institute’s Government Affairs team to continue to educate members of the General Assembly on the perils of a progressive income tax.
General Assembly mulls over Medicaid expansion
There was lots of buzz about Medicaid expansion in the House this week. While no floor debates or votes took place, it is speculated that an amendment will be introduced early next week to push forward the expansion – and thereby, the implementation of President Barack Obama’s Affordable Care Act. In late February, the Senate passed a Medicaid expansion bill, Senate Bill 26, on a 40-19 vote.
The Institute applauds state Rep. Patti Bellock for relentlessly holding the House Republican Caucus together on this front. Lawmakers who stand strong in their opposition to the expansion of a broken Medicaid system understand that Illinois will face future credit downgrades if it expands Medicaid.
The Institute’s Government Affairs team continues to promote solutions that would truly reform health care in Illinois, in a way that does right by both patients and taxpayers.
photo credit: Hemal Mamtora
Director of Labor Policy
Americans for Tax Reform compiled a list of tax increases associated with Obamacare, and union workers in particular are staring at a whopper in a few years – a hefty tax on premium health insurance plans that could easily cost them $1,000 per year. According to ATR:
Obamacare Tax on Union Member and Early Retiree Health Insurance Plans: Obamacare imposes a new 40 percent excise tax on high cost or “Cadillac” health insurance plans, effective in 2018. This tax increase will most directly affect union families and early retirees, who are likely to be covered by such plans. This Obamacare tax will be levied on insurance policies whose premiums exceed $10,200 for an individual and $27,500 for a family. Middle class union members tend to be covered by such plans in states like Ohio, Pennsylvania, Wisconsin, and Michigan.
Lots of Illinois families will be affected by this, too. Premiums on the more generous health insurance programs are expected to be well over the limits employers and employees are allowed to spend under ObamaCare, triggering the 40 percent tax. In the course of collective bargaining, many unions traded higher wages and other perks in order to get these benefits, and now the value of these generous health insurance plans will be dramatically reduced because of the high-tax price tag they will carry.
Workers might wish that they had gotten plain old pay raises instead, or that ObamaCare had never been passed. But if history is any guide union officials’ commitment to big government programs, and to the Democratic Party, will prevent them from strongly challenging this provision, let alone ObamaCare itself. Workers need to keep this in mind: the union establishment has political allegiances that are prone to get in the way of their looking out for workers bests interests.
photo credit: AP Photo/Alex Brandon
From NBC's Ward Room:
Chicago Teachers Union President Karen Lewis on Friday earned a second three year term.
The union said Lewis received an "overwhelming 80 percent of the votes" cast, according to a preliminary tally of the votes.
"[Union members have] spoken ... saying that they appreciate the direction that the union has gone in this last three years, which is fighting for public education for everybody," Lewis said at a late night press conference at the union's headquarters at the Merchandise Mart.
image credit: WTTW Chicago Tonight
Director of Government Reform
Maybe you haven’t heard yet, but city of Chicago leaders have unveiled a plan to fund a new stadium for DePaul University – a private school.
You may also not have heard of Chicago’s Metropolitan Pier and Exposition Authority, or McPier, but chances are if you have ever been to Chicago you’ve probably paid taxes related to this government body.
McPier taxes include:
- 1 percent tax on restaurant sales in downtown Chicago district
- 2.5 percent tax on hotel and motel rooms in Chicago
- 6 percent tax on auto rentals in Cook County
- $4 minimum taxi/livery airport departure tax
- Up to a $54 per bus/van per vehicle airport departure tax
These taxes help pay for entertainment and restaurant facilities located along Chicago’s lakefront, at McCormick Place and Navy Pier.
That may soon expand to include the new, publicly financed sports stadium for DePaul University – the city’s proposal includes paying for the stadium with a combination of McPier hotel taxes and TIF district tax revenues.
According to a report in the Chicago Sun-Times, a new DePaul basketball arena would be largely funded by taxpayers:
The tentative plan is for a “shared burden” of resources: $55 million from the surrounding TIF; $70 million from DePaul, the nation’s largest Catholic university, and $70 million from a McPier Bond fund, which has resources left over from a 2010 restructuring. McCormick Place bonds are backed by local hotel and motel taxes.
The DePaul Blue Demons’ men’s and women’s basketball teams, which would be relocated from the Allstate Arena in Rosemont, have an average of 36 home games per year. For the other 300-plus days a year, the new Chicago arena would be directly competing with many other large venues across the Chicago area for sporting events, concerts and more.
Chicago has a long-running history with subsidizing entertainment facilities:
- The United Center, home to the Bulls and the Blackhawks, was privately financed, but the building has a special property tax break that saves the clubs millions in property taxes.
- The Chicago White Sox’s Cellular Field, which opened in 1991, cost taxpayers $125 million to build and is owned by the ISFA. Enhancements pushed those costs to more than $200 million, plus interest. The White Sox paid no rent until 2008, and rent payments fall way short of paying the bonds off annually. Since the club doesn’t own the facility it pays no property taxes.
It isn’t clear that there’s enough business to go around for everyone. The Chicago area has many stadiums, and most require large public subsidies to stay afloat. Stadiums receiving taxpayer subsidies in the suburbs include the Chicagoland Speedway in Joliet, Toyota Park in Bridgeview and the Sears Centre in Hoffman Estates.
The stadiums in Hoffman Estates and Bridgeview in particular have had serious struggles in attracting enough business to meet financial projections. Additional competition could be harmful to other stadiums and the taxpayers who support them.
Chicago-area taxpayers shouldn’t be viewed as an ATM for professional sports and private universities. Instead of expanding sports and entertainment subsidies, the DePaul stadium deal should be nixed, or at least privately financed by those who stand to profit off it.
Liberty Justice Center
According to reports by the Chicago Tribune, Chicago Mayor Rahm Emanuel will finally do what he and other politicians should have done a long time ago: end costly health insurance benefits paid to city retirees. Starting next year, the mayor will begin a three-year phase out of the coverage, at which time affected retired workers will have to pay for their own health insurance or seek ObamaCare subsidies from the ObamaCare exchange.
But why now? Simple: Because ObamaCare gives Emanuel an easy way to shift the city’s costs to federal taxpayers. While it may be tempting to call him opportunistic, we really can’t blame the mayor if he finally does the right thing, even if he’s only doing it now because he knows federal taxpayers will absorb the cost. This option, which was one of two strongly recommended in a Jan. 11, 2013, report by the city’s Retiree Healthcare Benefits Commission, will save the city more than $61 million in 2014 and result in a bulk of city retirees under age 65 being eligible for federal ObamaCare subsidies with which they can purchase insurance. This will, however, cost federal taxpayers anywhere from $8 million to more than $47 million annually.
We can’t blame the mayor if he does what should have been done a long time ago, with or without ObamaCare; that is, stop the payment of benefits the city cannot afford.
Instead, the blame rests squarely on ObamaCare itself, which will cost our nation more than $1.6 trillion over the next 10 years – more than double its projected cost – while it reduces accessibility to care through a system of price controls that drive out medical providers and make health care harder to come by. Add to that skyrocketing insurance premium costs, disincentives for employers to hire workers and the creation of a board of government bureaucrats that will make life and death decisions affecting America’s seniors, and we are in the midst of a recipe for disaster. The situation unfolding in Chicago – where young retirees may be turning to ObamaCare on the federal taxpayers’ dime – is just another bad consequence of a bad law.
Given that ObamaCare’s authors in Congress are afraid of sending their own employees to an ObamaCare exchange and looking for ways to get out of it, it is understandable that city retirees would be nervous.
As illustrated by the retiree benefit crisis facing the city of Chicago, all ObamaCare does is provide a means to shift costs from one set of taxpayers to another. Until we call out our elected officials for hiding behind the manipulative name of a law that promises protection and affordability, but in fact kills both, we will continue to suffer the consequences.
photo credit: European Pressphoto Agency
QUOTE OF THE DAY
Reuters: Chief executives and the itch to quit
On approaching his 60th birthday this year, long-serving Tullow Oil boss Aidan Heavey told staff he felt "like two 30 year-olds".
A handful of recent shock departures by 50-something chief executives at European blue chip companies - none of them under any obvious pressure to quit - suggest some of his peers either lack that vigor, or want to channel it elsewhere.
Peter Voser is giving up one of the world's most challenging CEO roles at Royal Dutch/Shell next year, before his 55th birthday, in pursuit of a "lifestyle change".
Swiss engineering group ABB's 55-year old boss Joe Hogan is also going, for "private reasons". Pierre-Olivier Beckers, 53, is walking out on Belgian retailer Delhaize, and Paul Walsh, 57, is waving goodbye to drinks multinational Diageo.
All four are about average European CEO age.
Luxury goods group Richemont's chairman and founder Johann Rupert, older, at 62, than the rest of the May retirees, gave up the CEO post in April and on Thursday announced he would take a year off from the chairmanship, too, to catch up on some reading. And perhaps a trip to the Antarctic.
While the rising financial rewards of running a modern multinational have been well publicized, executive recruiters say the pressures of the job have also been ratcheted up in recent years, and not just because of the tough economic times.
"The reality is it's grueling. It's really tough, and there comes a point where you don't want to do it any more," said Ian Butcher, who headhunts board-level and senior executives for MWM Consulting.
"The quarterly reporting, the governance, the regulatory aspects, it just becomes very wearing - the level of scrutiny, the pace at which things are moving, the short-term nature of how people look at any given situation. Even over the past five years these things have made CEO a tougher position to hold, and the travel that people have to undertake in these jobs - it's just something they run out of steam on."
"I just want to be master of my time for some time," said Richemont's Rupert.
Some recent early retirees, while still well short of traditional retirement age, got to the top spot early.
"They're still in their early fifties, with energy and a desire to do something, but they want to do something different, something quite significantly different sometimes," says Butcher.
Voser might not be donning snow shoes for an Antarctic venture, but he has no plans to collect well-paid chairmanships and non-executive directorships, as many ex-CEOs have done in the past. Former Tesco chief Terry Leahy has also resisted that gravy train since he left two years ago.
As for the early starters, executive search industry professionals point at people like Andrew Witty, the CEO of GlaxoSmithKline, who took on the job aged 44 in 2008 and would have to stay in harness for another decade to reach 60 in the role.
Blue-chip bosses as young as Witty are still rare, but over a quarter of Europe's current crop have less than two years in the job, and more than half have less than four, according to data from executive search specialists BoardEx.
Washington Post: Obama: No need for special counsel in IRS probe
President Obama said Thursday that he does not believe a special counsel needs to be appointed to investigate the Internal Revenue Service’s practice of targeting conservative groups, saying congressional hearings and a federal criminal investigation should be enough to determine what happened.
“My main concern is fixing the problem,” Obama said during a news conference with visiting Turkish Prime Minister Recep Tayyip Erdogan.
Obama also called on Congress to fully fund his budget proposal to increase security at U.S. diplomatic missions abroad, following the deadly attack on the U.S. post in Benghazi, Libya, last year.
The issue has for months been the subject of partisan debate in Washington over what Obama said in the days following the attack, which killed four Americans, including U.S. Ambassador J. Christopher Stevens. The Obama administration has sought to put the question to rest in recent days.
The leaders said they also discussed trade, the Syrian civil war and Erdogan’s upcoming trip to the Gaza Strip and the West Bank, occupied by Israel in the 1967 Middle East war.
Erdogan said he hopes the visit the areas next month, which Israel opposes, will help unite the two main Palestinian political movements — the secular Fatah Party and the armed Islamist group Hamas.
Wonk Blog: The coming political battle over Bitcoin
Given that Bitcoin first broke into mainstream attention when Gawker explained how to use it to buy drugs, perhaps the surprise is that it took federal regulators this long to take action against it.
In the wake of the Gawker story two years ago, Sen. Chuck Schumer (D-N.Y.) described Bitcoin as an “online form of money laundering” and called for the authorities to shutter the Bitcoin-based drug market Silk Road. Yet until recently, the feds have taken a relatively hands-off posture. Agencies have issued guidelines and signaled that they are monitoring the situation, but none have taken active steps to force Bitcoin intermediaries to comply with federal regulations.
That hands-off stance may have started to change this week when the feds took action against Mt. Gox, the world’s leading Bitcoin exchange. Many people use Dwolla, a PayPal-like payment network, to send dollars to their Mt. Gox accounts. They then use those dollars to buy Bitcoins. On Tuesday, Dwolla announced that it had frozen Mt. Gox’s account at the request of federal investigators. It’s the first federal action against the currency.
CNet has confirmed that the asset seizure was initiated by Homeland Security Investigations, a division of Immigration and Customs Enforcement. Among other things, that agency has the power to enforce laws against money laundering and drug smuggling.
The government refused to say more about the ongoing investigation, so we don’t know if the feds have targeted Mt. Gox itself or one of its customers. But either way, the move isn’t very surprising.
For years, Bitcoin supporters have touted the currency’s potential to resist government surveillance and censorship. They point to the example of Wikileaks, the whistleblower Web site whose access to funds dried up after the federal government applied informal pressure to intermediaries such as PayPal to cut off payments. The Bitcoin network is fully decentralized, so there is no one with the ability to monitor the network and block illicit transactions. If Wikileaks had funded itself through the Bitcoin network, the government wouldn’t have had such an easy time freezing its funds.
CNBC: Average US Retirement Age Is 61 — And Rising
The average U.S. retirement age has climbed to 61, up from 57 two decades ago, and it's likely to age higher, according to Gallup's Economy and Personal Finance survey.
The average non-retired American now plans to retire at 66, up from 60 in 1995, according to the Gallup survey.
"Because most of the uptick came before the 2008 recession, this shift may reflect more than just a changing economy," Gallup's associate editor Alyssa Brown wrote in her report on the study. "It may also indicate changing norms about the value of work, the composition of the workforce, the decrease in jobs with mandatory retirement ages, and other factors."
The trend to retire older started in the 1990s, said Richard Johnson, the director of Urban Institute's Program on Retirement Policy.
"I think this trend is one of the most important changes we've seen in the labor force in the last quarter of a century," Johnson said. "I think it's a really positive development. A lot of people are working longer because they want to work longer. The incentives to work longer have increased."
Until the 1990s, the retirement age for men had actually been trending younger as pension plans, Social Security benefits and personal savings accrued at a healthy rate, Johnson said.
"That trend stopped and then reversed in the early 1990s," he said. The trend is similar but more complex for women, he said, because they were entering the workforce at greater numbers as well as working later than before.
Data from the U.S. Bureau of Labor Statistics also show that for workers 55 and over, the labor force participation rate, which includes both the employed and those who would like to be employed, changes its direction in the early 1990s. About 30 percent of those 55-and-older were working in the early 1990s. Since 2008, about 40 percent of the 55 have remained in the work force.
In the early 1990s, about 11 percent of those 65 and older remained in the workforce. By contrast, this April, 19 percent remained at work, according to the most recent monthly calculations from the BLS. The pattern continues for those 75 and older. In the 1990s, 4 percent of the population over 75 remained in the workforce. Since December, it has been above 8 percent each month.
Washington Examiner: Obamacare socks union health plans with 40% tax
Deep in the list of taxes that the president's Obamacare plan will hit Americans with is a 40 percent excise tax on health plans typical union members have, especially in Midwest states, according to a new analysis.
The Obamacare tax won't take place until 2018, but when it does it will smack high cost, or so-called "Cadillac" health insurance plans, according to the group Americans for Tax Reform.
"This tax will most directly affect union families and early retirees, who are likely to be covered by such plans," said ATR in a review of upcoming tax cuts in the health reform package set to go into effect in January. It will target plans whose premiums exceed exceed $10,200 for an individual and $27,500 for a family.
"Middle class union members tend to be covered by such plans in states like Ohio, Pennsylvania, Wisconsin, and Michigan," said ATR.
Unsaid: Many more people are likely to be hit if insurance firms raise premiums by up to 400 percent after Obamacare kicks in. A House report provided to Secrets said that 17 major insurers said the average premium increase will be 100 percent and others could top 400 percent.
ATR also warned that Americans participating in flexible spending accounts at work will no longer be able to put away whatever they want, thereby cutting their tax bill. The cap will be $2,500 a year, resulting in a $13 billion tax bill over the next 10 years for those who used to put away more than $2,500.
The American: Could California Make a Comeback?
An unexpected glimmer of hope might cast a new light on the Golden State.
It’s getting depressingly repetitive to keep writing about California’s problems, which are legion and seemingly intractable. But this time, I’m pleased to report on an unexpected glimmer of hope that might, just might, cast a new light on the Golden State.
First, a catalog of our recent woes, which, as ever, revolve around businesses and middle- and upper-income individuals decamping for other states that don’t suffer from California’s high-tax, high-regulation infection.
William Ruger and Jason Sorens of the Mercatus Center at George Mason University observe in their new rankings, “Freedom in the 50 States,” that about 1.5 million Californians departed for other states between 2000 and 2010, amounting to roughly 4 percent of the state’s population.
The Golden State’s not-so-golden regulatory and tax scheme, the authors contend, “costs Californians billions of dollars a year, makes their lives harder, and encourages more and more of them to move somewhere else.” They rank California 49th in terms of overall freedom.
Ruger and Sorens are not alone in attributing this disturbing trend of emigration to unbalanced labor and employment laws, a high minimum wage, stringent zoning regulations, loose worker-compensation requirements, and burdensome licensing requirements across professions and trades. Earlier in the year, Governor Rick Perry of Texas, through a combination of his recruiting visits to California and his radio ads on local stations touting the advantages of the Lone Star State, sought to draw Golden Staters inexorably toward an economically freer alternative.
Fleeing businesses and taxpayers mean lower tax receipts and a more uncertain fiscal future. In March, the state auditor found California’s net worth to be negative $127.2 billion. “Expenses that exceeded revenues and increased long-term obligations resulted in an 81.4 percent decrease in the total net assets for governmental and business-type activities from the 2010-11 fiscal year,” the auditor’s report stated.
Some liberal cheerleaders — most notably Paul Krugman of the New York Times — have erroneously hailed a California “comeback.” While it’s true that Governor Jerry Brown’s budget appears to be in balance, it relies heavily on the usual fiscal gimmicks, and even more heavily on a temporary tax hike that, in the long run, threatens to drive yet more companies and executives to Nevada, Arizona, Colorado, and Texas.
Victor Davis Hanson, a Hoover Institution scholar, historian, and second-generation farmer in California’s once-fertile, now-parched Central Valley, calculates that only 144,000 Golden State households “accounted for about 50 percent of the aggregate state-income-tax revenue — and personal income taxes usually account for about 50 to 60 percent of all state revenues.” Even if only a small fraction of those 144,000 depart for a warmer business climate, California’s already-shaky finances will fall even further out of whack. “We are learning,” Hanson notes, “that it does not take too many businesses or wealthy households moving to Austin, Paradise Valley, or Henderson to make a big difference.”
One such recent example: Bristol-Myers Squibb, the New York City-based pharmaceutical behemoth that absorbed San Diego-based Amylin Pharmaceuticals last summer, decided to close the doors of its San Diego facilities by the end of next year. BMS laid off 100 Amylin employees shortly after the merger and now seeks to relocate some 100-125 workers to its other facilities outside of the Golden State. But the remaining 300 or so California-based research and development, business, manufacturing, and administrative jobs will disappear entirely, while more than 700 former Amylin employees working outside the state — some in facilities in Ohio, others in sales or medical roles around the country — will keep their jobs.
But if dwindling jobs in industries of the future are threatening California’s fortunes, the promise of new jobs in a critical industry of the past may be the key to reviving them.
The Monterey Shale Formation stretches from Modesto, in the northern portion of the Central Valley about 60 miles east of San Francisco, almost 200 miles south to Bakersfield. It spans 1,750 square miles, an area larger than Rhode Island.
As many as 15 billion barrels of oil lie in the Monterey Shale — constituting 64 percent of all shale oil reserves in the United States, and four times as much as in North Dakota’s Bakken formation. The existence of the formation has been known to drillers and state officials for decades, but only with the advent of advanced techniques like horizontal drilling and hydraulic fracturing has a realistic opportunity for extraction arisen.
According to a recent University of Southern California study, these reserves could generate 500,000 jobs and up to $4.5 billion in tax revenue for the state by 2015, plus another 2.3 million jobs and another $20-plus billion by 2020.
Forbes: Don't Cry For Me, America: Comparing Argentina And The United States
Many observers have pondered if the United States is following the same troubled path as Argentina. In the 1940s, Argentina’s Juan Domingo Perón used government agencies for political gain and created a popular form of fascism called Perónism. In the United States, the recent revelation of the Internal Revenue Service targeting political enemies is a bad omen. Are we on an Argentinean course?
The road to decay in my native country, Argentina, began with the implementation of one of the most powerful collectivist doctrines of the 20th century: fascism. The Labour Charter of 1927 – promulgated by Italy’s Grand Council of Fascism under Mussolini – is a guiding document of this doctrine and provides for government-based economic management. This same document recommends government provision of healthcare and unemployment insurance.
Since adopting its own brand of fascism, “Justicialismo,” Argentina began to fall in world economic rankings.
In 1930, Argentina’s gold reserves ranked 6th. After the “experts” took over the central bank, reserves fell to 9th in 1948 (with $700 million), 16th during 1950-54 (with $530 million), and 28th during 1960-1964 (with $290 million).
The Argentine central bank, created in 1935, was at first a private corporation. Its president lasted longer (seven years) than the president of the country, and it had strict limits for government debt purchases and even had foreign bankers on its board. It became a government entity in 1946.
When Perón assumed power shortly thereafter, he hastily expanded the role of government, relaxed central banking rules and used the bank to facilitate his statist policies. In just 10 years, the peso went from 4.05 per U.S. dollar to 18 in 1955 (and later peaked at 36 that same year). After Perón’s rule, Argentina further devalued its currency to 400 pesos per U.S. dollar by 1970.
Bipartisanship in bad policy-making can be especially damaging. Just as some of President Obama’s interventionist monetary policies were preceded by similar Bush administration policies, some of Perón’s policies were similarly foreshadowed: “Already before we reached power, we started to reform, with the approval and collaboration of the previous de facto regime,” said the populist.
Perón was removed from power in 1955 but his policies lived on. The “Liberating Revolution” claimed it was leading an effort to return to the free-market system dictated by the Argentine Constitution of 1853. But Argentines chose an interventionist, Raúl Prebisch, as minister.
Inflationary policies and political use of the monetary regulatory authority, especially after Perón’s first presidency, devastated the economic culture and rule of law of Argentina. In the United States, the Fed does not have all the powers delineated by Perón, and has not caused as much destruction as the Argentine central bank, but the process has been similar and more gradual. The U.S. dollar buys less than 10 percent of what it did in 1913 when the Federal Reserve was created, the debt limit increases regularly—thus stimulating further debt monetization—and monetary authorities have increased their arbitrary interventions.
Forbes: Suit Alleges IRS Improperly Seized 60 Million Personal Medical Records
The Internal Revenue Service is facing a class action lawsuit alleging that more than 60 million personal medical records were improperly seized by agents from the embattled agency.
According to a story by Courthousenews.com, an unnamed healthcare provider in California is suing the IRS and 15 unnamed agents, alleging that they improperly seized some 60 million medical records of 10 million Americans, including medical records of all California state judges on March 11, 2011.
According to the complaint, the IRS agents had a search warrant for financial data pertaining to a former employee of the “John Doe Company,” however, “it did not authorize any seizure of any healthcare or medical record of any persons, least of all third parties completely unrelated to the matter.”
The medical records included information on psychological counseling, gynecological counseling, sexual and drug treatment, and other sensitive medical treatment data, the suit alleges. A copy of the legal complaint can be purchased here for $35.
“This is an action involving the corruption and abuse of power by several Internal Revenue Service agents,” the complaint reads.
“No search warrant authorized the seizure of these records; no subpoena authorized the seizure of these records; none of the 10,000,000 Americans were under any kind of known criminal or civil investigation and their medical records had no relevance whatsoever to the IRS search. IT personnel at the scene, a HIPAA facility warning on the building and the IT portion of the searched premises, and the company executives each warned the IRS agents of these privileged records,” it continued.
The claim asserts that the IRS agents’ seizure of medical records violated the 4th Amendment.
“These medical records contained intimate and private information of more than 10,000,000 Americans, information that by its nature includes information about treatment for any kind of medical concern, including psychological counseling, gynecological counseling, sexual or drug treatment, and a wide range of medical matters covering the most intimate and private of concerns,” the complaint states.
CARTOON OF THE DAY
Public Policy Research Assistant
The Illinois Department of Employment Security, or IDES, announced today that the Illinois unemployment rate declined to 9.3 percent in April from 9.5 percent in March. Illinois’ unemployment rate is still nearly two percentage points above the national average, which declined to 7.5 percent in April.
Source: Illinois Department of Employment Security
The decline in the state’s unemployment rate occurred despite IDES reporting a loss of 2,000 jobs in April.
Director of Labor Policy
The Chicago Teachers Union has announced plans to file a lawsuit to prevent the closure of about 50 Chicago Public Schools buildings.
The union is hoping to keep as many buildings as possible open, and in the process preserve its members’ jobs. Even if the lawsuit fails, the litigation could delay the implementation of the CPS’s consolidation plans for several years.
The one thing that the lawsuit is unlikely to do is to create a consensus as to how a financially struggling school system in a city with a declining population will contend with its challenges and improve its academic performance. The school buildings may stay open, but the problems will remain.
One doesn’t have to approve of the CPS consolidation plan to recognize that the CPS board has to make difficult decisions, and that they should have the authority to decide which programs will run out of which buildings. The CTU is now using its attorneys to interfere in a decision made by the duly appointed school board chosen by the elected mayor of Chicago. And they are using taxpayer-guaranteed funds – in the guise of union membership dues – to pay for for their legal team.
We’ve argued before that government worker unions are bound to get involved in political decisions, and that separating representation from politics is bound to be nearly impossible. This lawsuit is one more illustration of the problem. Even if one sympathizes with teachers who may lose their jobs, in protecting its members, CTU is complicating the running of a school system.
Government worker unions, in particular, should not benefit from guaranteed dues. If teacher union officials want to pursue litigation against the CPS board, they should do it with money they raise on their own.
image source: Chicago Tribune
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