Loop Holes in Job Creation

The debate surrounding job creation has come to a head with a speech given by President Obama on September 8, 2011. In his speech , President Obama, spoke of a job's bill that he believes will help create jobs. Congress seems to have been waiting for a jobs bill with speaker of the house John Boehner sending a letter to President Obama after the speech stating, "We look forward to receiving legislative text for any of your ideas..." According to the letter, Congress agrees "jobs must be the to priority..." but "we have a different vision in terms of what is needed to boost private-sector job creation in our country..." Businesses seem to agree change is needed. The Business Roundtable (BRT) began a February 11, 2011 statement on regulatory reform by saying, "America’s CEOs applaud President Obama’s initiative to streamline the federal regulatory apparatus..." The BRT had this to say in reaction to President Obama's September 8 speech, "'Special-interest loopholes' are, in fact, most often well-considered expressions of tax policy legislated to achieve an economic goal...Journalists, at least, should refrain from using the loaded term as a description for 'disfavored tax policies.'"

As Americans watch and listen to these three groups debate the best plan of action they read stories like "The Paradox of Corporate Taxes" and wonder if any group will act. "The Paradox of Corporate Taxes" by David Leonhardt tells how the Carnival Corporation benefits from the US government in ways such as: safe passages due to the US Coast Guard, help from customs officers, and infrastructure provided by state and local governments. According to Leonhardt Carnival has benefited from these services while only contributing 1.1% in taxes. According to the Tax Foundation, "The statutory rate of the U.S. corporate income tax is currently 35%, the second highest in the world." It would seem the "special-interest loopholes" that the BRT is found of, Congress has ideas about, and President Obama wants to eliminate is where the focus should be.

A special report by William McBride of the Tax Foundation shows the effective corporate tax rate ranged from 27.5 to 22.8 between 1999 and 2008, respectively. The report goes on to show that domestic businesses, which tend to be small, are paying close to 35% while large multi-national corporations (MNCs) are paying less. McBride makes the case that if foreign taxes are included MNCs are paying between 32.1% and 33%. Are we comfortable allowing MNCs to almost meet the US statutory rate of 35% when the US is not collecting between 12.2% and 7.5%? In 2008 MNCs had income subject to tax of $737 billion and an effective tax rate of 21.2%. This means MNCs did not pay 13.8%, $101.7 billion.

Social Security: The United States' Ponzi Scheme

The evening of September 7, 2011 brought a surprising Republican debate. As usual, candidates used this nationally broadcast event to promote themselves and solidify their position. One member in particular, Texas Governor Rick Perry, solidified his position on Social Security stating, "You cannot keep the status quo in place  and not call it anything other than a ponzi scheme." Naturally, the question becomes: Is Social Security, as we have come to know it in the United States, a Ponzi scheme?


The SEC has defined a ponzi scheme as, "An investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors." One can see how Governor Perry would see Social Security as a Ponzi Scheme. As working Americans, we make payments towards Social Security through payroll taxes, which could be seen as the "contributions" by new investors. Our payroll taxes are collected in various OASDI (Old-Age, Survivor, and Disability Insurance) trust funds where they collect interest until they are paid out as benefits or expensed by the Government. It would seem that Perry is correct, but is he really?


According to the 2010 OASDI Trustees Report, the ratio of contributions to benefits were 390% for OASI and 178% for DI. From 1999-2009 the ratios were over 100% which would seem to refute Governor Perry's Ponzi statements. Looking farther into the report, we see projections for 2010-2019. The projections show ratios based on three different increases in "the number of persons with taxable earnings." OASI ratios steadily decrease throughout the period in two of the three scenarios. DI ratios steadily decrease to the point where the fund will no longer be able to provide 100% of the benefits. Between 2013-2015, the fund will no longer cover 100% of benefits. In other words, by 2015 current payroll taxes will have to be used to pay for current benefits. It would seem Mr. Perry is correct, making Social Security illegal.

Free Time

The worst part about not having a regular job is all the free time. Once the dishes have been washed, by hand of course, and the laundry has been finished there are plenty of hours left for literally anything. Today I took the time to Google what other people do in their free time. In my searching, I came across a post  by Penelope Trunk in which she suggested blogging. I am taking her advice and starting a blog to, at the very least, keep my mind busy and productive. Honestly, I am not sure what to write but I look forward to what the future holds.