Creative Class Accounting

McCain and the U.S. Census Bureau have come up with clever ideas to make the United States of America a better place. The Census Bureau would like for more people to fill out the forms it sends out ever four years and John McCain would like for someone to invent a really good car battery

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Toys and Almonds

The trouble with the almonds, as far as the Commission is concerned, is the aflatoxin levels in their production and processing and the fact that there are inadequate controls in the United States to insure that the almonds that reach Europe meet its standards.

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Pharmaceutical Politics

Drug companies are, of course, deeply indebted to the Republicans. In crafting the Medicare prescription drug benefit that went into effect in 2006, the Republicans left drug pricing to the free market place.

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The Minor Fall, The Major Lift

The minimum wage provides that those who work for a living should be paid no less than a certain amount. The amount since 1997 has been $5.15 an hour or $10,712 a year if the worker foregoes any vacation.

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Dirty Tricks

We have no greater fear than a terrorist who is inside the United States with a nuclear weapon. The consequences of such an attack would be catastrophic for our people, for our economy, for our liberties. – Thomas Kean, Chairman of the Sept. 11 commission quoted 11/14/2005

It is probably nothing more than an unfortunate coincidence that while the consequences of Hurricane Katrina were still in the national consciousness, the Department of Homeland Security released its report on what to do in the event a terrorist explodes a dirty bomb on our shores. Had the report appeared in The Onion the reader would have thought it a marvelous bit of satire. But repeated reading of accounts in the New York and Los Angeles Times are clear evidence that, as usual, the administration does not disappoint. It is as dumb as it appears to be.

Two important lessons are to be learned from the report. Response to a dirty bomb will be based upon the cost of remediation and cost will determine what levels of radiation are considered acceptable for the citizenry. As Nuclear Regulatory Commissioner Edward McGaffigan explained, “We don’t have access to al-Qaida’s pockets to finance a half billion dollars cleanup. We have to do something and do it as best we can.” California can force the operator of a nuclear power plant to set aside funds to pay for remediation in the event of a disaster but the government cannot, for obvious reasons, force a terrorist to do the same thing. As a result, Mr. McGaffigan and the report conclude, certain compromises in public health must be made. One of those compromises is determining acceptable levels of exposure to radioactivity.

The federal and state governments have specific guidelines in place for acceptable levels of radiation for workers in industrial settings or for people living near nuclear plants or hazardous waste sites but the Homeland Security people don’t believe such rigorous standards should apply to a dirty bomb attack. According to the report, the government must “balance protection with other important factors.” For that reason the guidelines permit “continued shipment, sale and consumption of contaminated food and drinking water for an ‘intermediate’ phase that could last a year or more.” It says that if only a small area is affected “it might reasonably be expected that a complete return to normal conditions can be achieved within a short period of time. However, if the impacted area is very large, then achieving even very low criteria for remediation of the entire area and/or maintaining existing land uses may not be practicable.”

The report sensibly suggests that government should balance “the public health risk against the value of a highway or crucial transportation structure or of a high-profile place.” If local government had budgeted for a major highway improvement at the same time as a dirty bomb was exploded, for example, local officials might decide that a higher level of exposure to radiation would be OK for its citizens if the result was the highway project could continue as planned. A side benefit of that decision would be that with its population exposed to a high level of radiation, fewer people would be around to use the highway and it could, therefore, be a more modest project than before the citizenry had been exposed to what had been considered lethal doses of radiation when health rather than cost effectiveness was the applicable criterion.

Those impressed with the post-Hurricane Katrina relief efforts may be pleased to learn that its recommendations are not the last word. According to the New York Times: “Officials say that in the days or weeks after an attack with a dirty bomb . . . officials at all levels of government and members of the public will discuss what standards to use.”

Readers may be less than sanguine at the thought of Homeland Security conducting post instead of pre-dirty bomb discussions. So will those who read the New York Times report about a simulated dirty bomb attack in Seattle in 2003. After the exercise was completed, officials concluded that one of the problems was “a lack of planning for long-term cleanup.” Had the Homeland Security people been aware of the Seattle experiment they might not have said standards should only be set after the event. They might have thought prophylactic planning more appropriate. Then again, maybe they wouldn’t.

Planning ahead, though saving lives, would tarnish Homeland Security’s reputation as being marginally competent. And all would agree its reputation is far more important than the few thousand lives its incompetence may some day cost us.

Editor’s note:This post was written by Christopher Brauchli but published, for technical reasons, by Spot-on editor Chris Nolan.

Painless, Profitable Giving

It is not a tax bill but a tax relief bill providing relief not for the needy but for the greedy. – Franklin Delano Roosevelt, Tax Bill Veto Message.

Who’d have thought it? The first proposal that Congress came up with to help the victims of Hurricane Katrina was a proposal to permit people who died in the hurricane avoid estate tax. Of course, anyone looking at pictures of the city and those fleeing the rising waters in New Orleans could tell at a glance that the survivors were worrying that if they drowned their survivors might have to pay significant estate taxes.
Aware of this concern, Republicans in Congress proposed that tax on the estates of all who died leaving behind more than $1.5 million be waived. Sadly, that particular provision did not become law. As a result, families of those who died leaving behind more than $1.5 million in assets may face high estate taxes that could have better been spent by the survivors on rebuilding the substandard housing in which many of them had lived before the hurricane arrived.
The Katrina Emergency Tax Relief Act of 2005, however, did become law. It has many wonderful provisions one of which is worthy of mention here. It pertains to charitable contributions made before the end of the year and will prove an enormous boon to hurricane survivors.
Prior to the enactment of this law, people who wanted to make large gifts to charities were limited in how much they could give and still benefit from reduced income tax liability. That is because deductions for charitable gifts are normally limited to 50% of the taxpayer’s adjusted gross income. So, a taxpayer who has adjusted gross income of $100,000 can only deduct charitable gifts of $50,000. Gifts in excess of that amount may be deducted in limited amounts over the following five years.
As a result, many us who wanted to make large charitable gifts found our charitable instincts and tax saving instincts in hopeless conflict. Although we may have wanted to give away all of our adjusted gross income to charities, the fact that we received no income tax benefit (and would have no money on which to live) dissuaded us. In addition, we knew that when our adjusted gross income reached $145,950 (unless we were married filing separately) a phase-out would cause us to lose a percentage of our deductions. If we had the misfortune to have really high adjusted gross income, we would lose up to 80% of the value of our deductions. But thanks to the Hurricane Katrina, relief from these provisions has been given for the rest of this year.
The Act says, among other things, that in order to help out the victims of Katrina, charitable contributions of up to 100% of a donor’s gross income can be deducted. The phase-out for deductions is eliminated. The only restrictions are that the gift must be made in cash before January 1, 2006 and must go to a public charity. Thanks to the Act, if any of my readers with an adjusted gross income of $10 million has been wanting to make a gift of $10 million to the Museum of Modern Art in New York City, but has not done so because of the phase out and the 50% limit, the gift can now be made and the entire amount deducted, eliminating the donor’s tax liability. If that isn’t an incentive to make large gifts, it’s hard to know what is.
Some readers may wonder why permitting people to make extraordinary gifts to museums, symphony orchestras, opera companies, universities and the like benefits hurricane victims. Others may wonder what sorts of people are dissuaded from giving away all their adjusted gross income solely because they don’t get any income tax benefits from doing so. I can answer both questions.
Making a large gift to a museum does not benefit a hurricane victim who has lost a house. It benefits the museum. The answer to the second question is the same sort of people who the Bush Administration has always worked to benefit: The Very Rich.
The reason most of my readers do not give away all their income to charities is because they like to eat and food costs money. So does housing. Many of my readers use most, if not all, of their adjusted gross income, to survive. The only people for whom adjusted gross income is nothing more than a trifle are the very rich. Thus, it turns out that one of the most significant benefits of the Katrina Emergency Tax Relief Act of 2005, goes to President Bush’s very wealthy friends and their pet charities. It is amazing how Congress and the president can make things appear to be what they are not.
Editor’s note:This post was written by Christopher Brauchli but published, for technical reasons, by Spot-on editor Chris Nolan.

Meals Ready to Eat

I hate ingratitude more in a man than…babbling drunkenness… Shakespeare, Twelfth Night

Once again we are reminded that when a president decides he would like to be a war president, we – to paraphrase Donald Rumsfeld – go to war, not with the accounting system you would like to have but with the accounting system you have.
September 30 and October 14 were the reminders of this not particularly reassuring sentiment. September 30 was the date veterans were scheduled to be told there’s no free lunch. October 14 was the date a report in the Washington Post confirmed it. The September 30 date acquired significance because of a report made public in April 2004.
In April of last year, there was a report that wounded military personnel in hospitals were being required to pay for their meals. It was disclosed that beginning in 1958 hospitalized military officers had to pay for their hospital food at a daily cost of $8.10. In 1981 it was decided enlisted personnel should be treated the same as officers and they, too, were charged $8.10 a day. That happened because service personnel are entitled to a monetary allowance for food known as Basic Allowance For Subsistence (BAS) if not living on a military base.
After the first Gulf War, Congress decreed that service personnel who were receiving BAS at their home bases should continue to receive it when deployed, even though they were taking all their meals at the bases to which they were assigned. Being in hospital after being wounded, however, was not considered deployment and hospitalized patients had to pay for their food. When that came to Congress’s attention in 2003 it decided war wounded should eat for free while being treated for war wounds. And eat for free they did – until January of 2005.
On January 3, 2005 it was decreed that free hospital food would be given only to inpatients confined to hospital beds and to certain outpatients. When that came to Congress‚s attention there was outrage. In a speech on the Senate floor, on April 14, 2005, Barack Obama of Illinois gave a speech in which he said: “[B]ecause the Department of Defense doesn’t consider getting physical therapy or rehabilitation services in a medical hospital as ‘being hospitalized’ there are wounded veterans who still do not qualify for the free meals other veterans receive. . . . This is wrong and we have a moral obligation to fix it.”
Congress fixed it. Section 1023(a) H.R. 1268 that became Public Law 109-13 prohibits charging anyone injured in Iraq or Afghanistan for their meals so long as they are “undergoing medical recuperation or therapy. . . at a military treatment facility. . . ”
Unfortunately, subsection (b) said subsection (a) would expire September 30, 2005 even if the war had not. The war has not. As far as this writer can determine, (a) has. That’s the bad news.
Donna St. George of the Washington Post imparted the October 14 bad news about “Financial Friendly Fire.” In her report Ms. St. George reports that 331 wounded soldiers have been hounded by the military following their release from the service for what are described as unpaid military debts. The debts can be incurred in a variety of ways. Here is one.
A military person serving in Iraq receives additional pay for combat. If the soldier loses a leg and is sent home for treatment, the soldier‚s pay is reduced because the soldier is no longer in harm’s way, the harm having been done. However, some soldiers continue to be paid as if they were still in harm’s way. When the error is discovered, the Army begins collection efforts using, if necessary, the services of collection agencies that are not always debtor-friendly. This happens for a reason.
According to Gregory D. Kutz, the General Accounting Office’s managing director for forensic audits and special investigations, the computer system used by the Department of Defense is out of date. He told Ms. St. George that the Defense Department had been trying – unsuccessfully – to modernize it since the mid 1990s. According to Mr. Kutz, in some Army National Guard and Reserve units, more than 90 percent of the unit members have fallen victim to computer errors and been asked to repay thousands of dollars inadvertently paid them by errant computers. That’s the bad news. Here‚s a tiny bit of good news:There may still be a free lunch.
Although September 30 has come and gone, it seems possible that the computer will not notice that the law providing for free meals has changed. That possibility notwithstanding, those in hospital should set aside $8.10 a day in case the administration discovers its inadvertent munificence and demands repayment. After all, President George Bush is unlikely to tolerate spending money on the wounded who he certainly believes will be better men and women when they learn to take care of themselves – and their debts – the way the rich do.
Editor’s note:This post was written by Christopher Brauchli but published, for technical reasons by Spot-on editor Chris Nolan.

Setting Priorities

The Olympian is a difficult foe to oppose.
–Homer, The Iliad

It was the juxtaposition that caught the eye. It was the fact that the G8 gathering began on the same day as the site of the next Olympic games was announced. Each occasion was important. Each demonstrated civilization’s priorities.
As The New York Times observed in an editorial before the G8 began its meeting: “The choices President Bush and his fellow leaders make this week in Scotland will help determine whether more than two million children under five will keep dying every year of diseases that can be easily and cheaply treated, whether 40 million young people will still be unable to go to school and whether 300 million Africans will continue to lack access to clean water.”
To provide a bit of context: If 300 million people in the United States lacked access to clean water no one in this country would have clean water. Not even President Bush. That’s because there are only approximately 295,734,134 of us living here. So the results of the meeting of the G8 look good on paper – especially Mr. Bush’s commitment – but reality is a bit harsher.
The leaders at the meeting (including Mr. Bush) promised to double aid to Africa from $25 billion to $50 billion by 2010. That’s only 5 years from now, not all that long for Africa to wait in the overall scheme of things, even though a lot of people will get sick and die while waiting for potable water. It was a generous gesture and what makes it even better is that it didn’t cost Mr. Bush a penny.
As Faryar Shirzad, a deputy national security adviser explained to the press at the end of the conference, the U.S. aid commitment involves no new money. It is money that had already been promised. And it is not, relatively speaking, a great deal of money. The U.S. currently contributes $.16 for every $100 of national income compared with the major European nations that now give $.36 for each $100 of national income and have pledged to raise that to $.51 by 2010. By committing no new money Mr. Bush did not jeopardize the United States’ standing as the leader of the country that contributes the smallest share of its national income to foreign aid.
By contrast, the choice the International Olympic Committee made was whether to break with tradition and let cost play a role in determining what country would host the 2012 games. Paris already has the infrastructure and sporting venues to accommodate many of the Olympic sports. According to CBC news, the IOC gave Paris “glowing reviews” because its plan would enable the games to take place at reduced cost. When the chips were down, however, London won out. The idea of putting on the games at a reduced cost did not have sufficient appeal to give Paris the prize. If the IOC cared about money it might have given Paris the games.
The IOC might have been influenced by looking at what the Olympics have done for some of the earlier lucky winners. The most recent was Greece. The Greeks budgeted $5.5 billion to put on the games. As of July 7, 2005 the bills were still being added up but had come to $13 billion. The Olympics did, however, help Greece attain one new height. Its deficit reached 6.1 per cent of its gross domestic product. To compensate for that shortfall the government has decreased spending on public works and increased its value added tax. According to Matthew Lynn of, the Greek government is auctioning off some of its Olympic facilities including the kayak slalom course that cost 26 million Euro to build. That should sell really fast.
Greece isn’t the only country that was surprised when all the costs of hosting the games were calculated. According to a PricewaterhouseCoopers study completed in 2004, the Montreal Olympics ended up with a $1.2 billion deficit. Annual maintenance on publicly owned facilities in Montreal is approximately $22 million according to CNN/Money. Barcelona, Atlanta and Sydney broke even although Sydney is reportedly spending $32 million a year to support some of the underused venues left over from the 2000 games.
Given the financial history of the games and the contrasting needs of nations throughout African who – lacking food and water will not be attending the games – it’s worth asking why the games are not always held in the same place? That would reduce the need to spend money on infrastructure and new venues each time the Olympics are presented. The money saved could be spent on the many other causes that need the help of the countries that can afford to put on the Olympics.
But the Olympics, it is argued – sometimes despite the financial or other evidence – give a boost to the local economies and have a unifying effect on the host countries. We have Greece and Montreal to demonstrate the effect on the local economies. And let’s not forget Sarajevo as a demonstrating of the unifying effect the games have on the host country. It hosted the games in 1984.