The United States should learn a lesson from Greece’s economic downturn. Their ballooning deficits are not too different from our very own. U.S. federal debt as a percentage of GDP came out to an astounding 94%, not too far behind Greece with a debt that has reached over 112% of GDP. Greece has been engaging in massive spending cuts and enormous tax hikes for sales, tobacco, luxury autos, fuel, a VAT, and any other feasible manner they can pinch money out of their citizens' pockets to pay for their irresponsible policies. These taxes will halt investment and prolong the stunted growth of the nation.

The United States will likely face these same consequences if spending isn’t curbed by the federal government. Passing healthcare would be one step in the wrong direction toward a Greek fiasco in the U.S. Paying for massive bailouts doesn’t assist in diminishing public debt. Spending billions on stimulus bills that have no proven record to pull the economy out of a recession only serves to increase the deficit and to push us closer toward the collapse of our economy. We must curtail spending increases soon, before we end up selling our states to Canada to pay off the debt (Greece thinks it’s a viable option).

(Image by Chip Bok at reason.com)

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Governor Paterson of New York City has proposed a tax on sugary soda drinks in order to simultaneously raise money for the government and fight off the rising rates of obesity.

At a rate of one cent per ounce, a 12 ounce soda can would see an increase in price of 12 cents. My question for proponents of this tax is whether 12 cents is truly going to hinder a mass amount of people from drinking more soda. Furthermore, even if it did decrease consumption of soda, would it really have a profound effect on reducing obesity, or for that matter, any effect at all on obesity rates?

According to a study at the University of Illinois in Chicago, the effect of this tax on diets will be miniscule. The press release of the study stated, “Previous economic studies suggest that food prices do change consumption. However, the researchers want to determine if, for example, consumers will seek out another high-sugar drink such as Kool-Aid if, say, soda is too expensive. If they do, then a tax on soda may reduce soda consumption but will not necessarily reduce weight, improve diet quality, or reduce overall sugar intake.” People will find substitutes to replace the sugary drinks so that even if consumption decreases, obesity rates will likely remain unchanged.

A tax on soft drinks is as regressive as it gets considering the highest proportion of soda drinkers are in the lower income brackets. Similar to the federal tax hike on cigarettes, this tax puts a greater portion of the burden on the poorer consumers in America.

Pigovian taxes such as the soda tax are self-contradictory. If the intent is to change unhealthy habits and the tax succeeds in doing so, the projected revenue from the tax will not be received since no one will be drinking soda. If the government’s goal to raise revenue is attained, then no behavioral change will occur and the healthy benefits promised from proponents will not be seen.

A tax on soda would likely not accomplish the intended results of decreasing obesity and would harm the lower income sectors due to the regressive characteristics of the tax.

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Governor Chris Christie announced his proposed list of spending cuts across the board on Thursday, February 11^th. In his speech , Christie asserted, "Today, we come to terms with the fact that we cannot spend money on everything we want. Today, the days of Alice in Wonderland budgeting in Trenton end,”…and he’s right about this. His plan includes cutting spending in 375 different government programs to close the $2 billion dollar budget gap brought about by the previous governor’s irresponsible fiscal policies. Governor Corzine spent over $7 billion dollars and pushed New Jersey to lead all states in tax increases during his time as governor. Christie is looking for the long term solution to Corzine’s spending spree. Here is a glimpse of where some of the cuts are being made:

• Cutting the "InvestNJ" program, which has failed to actually create new jobs, will save taxpayers $50 million.
• Subsidies for the New Jersey Transit need to be cut. The transit system must improve its efficiency through rethinking their union contracts and patronage hiring, or even through service reductions or fare increases.
• Making cuts within the pension system is a must; the state cannot afford to spare $100 million for a system in need of reform.
• School aid will also see dramatic cuts—the amount of aid to be withheld is $475 million.

While some of these cuts may be tough to deal with initially, Governor Christie is taking a major step in the right direction. His business-minded approach to improving the government’s efficiency will lead to less wasted money. Putting a stop to automatic annual renewals for spending will weed out the ineffective state programs. Christie’s proposal to make programs accountable for the results they produce will eliminate several of the unnecessary usages of taxpayer money. If the deficit is reduced through spending cuts, the government can keep taxes down, while simultaneously being able to achieve a more efficient economy.

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Several critics of President Obama’s “Buy American” provisions warned of the looming trade war between the U.S. and China. Just today, China has made the next move in pushing U.S-China trade relations one step closer toward a full-blown trade war between the two countries. They have imposed anti-dumping duties on U.S. chicken products that reach as high as 105.4%.

The U.S. chicken industry relies on selling chicken products to China and will likely take a huge hit from these tariffs. While some jobs may have been “saved” from the tire tariffs or from the anti-dumping duties in the steel industry, jobs lost from tariffs placed on U.S. exports will likely negate the number of “saved” jobs.

While it may sound appealing to “save” jobs through limiting competition from imports, the eventual consequences of tariff policies far outweigh any immediate benefits. For example, it adversely affects workers in other industries as the American poultry industry is now witnessing. Furthermore, the total impact of tariffs seems to offer consumers a raw deal. It drives up prices and prohibits variety and competition.

Tariffs come with an enormous price tag that must be accounted for.

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On Thursday January 14^th, President Obama announced his proposal for a tax on banks in order to recuperate the money spent on bailouts and the stimulus package. The following Monday, the stock market began a week filled with losses and down arrows. Let’s examine the closing prices of the Vanguard 500 Index Fund (the largest mutual fund that mirrors the performance of the S&P 500 index) to see how the bank tax announcement fared on the stock market.

The chart below lists the date, the adjusted closing price, and the amount of money one would have if they invested $10,000, $50,000, or $100,000 in this mutual fund.

From the beginning of the week to the end, someone who invested $10,000 would have lost $568.08. Someone who had $100,000 of their 401(k) invested would have lost over $5,680. I would say this is a pretty significant loss. If this is the loss from the week following simply just an announcement of a possible bank tax, what will happen to the stock market if a bank tax actually makes its way through Congress?

On January 16^th, Obama asserted, "Like clockwork, the banks and politicians who curry their favor are already trying to stop this fee from going into effect.” Well, it seems that the stock market is the one currently doing the convincing.

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Remember when the Department of Justice thought Microsoft violated antitrust laws so they tried to coerce the company into integrating their competitor’s browser in their software? Well it’s a good thing for all of us that they failed. Regulating Microsoft would have inhibited the fast-paced innovation in this industry, which probably would have stunted the growth of what is currently one of the most high-tech, creative companies in the world, Apple. And where would we all be without our beloved iphones or Apple’s newest gadget, the iPad tablet? The mass fear of a monopoly by Microsoft never played out and instead more fierce competition bloomed with the rise of Apple.

Now, Americans are facing a parallel situation. Should the government heighten regulation of the banks? Should the government step in and place more controls on the banks? The answer is no—it will deter competition, innovation, and growth. The government currently is in need of a scapegoat and the big banks are the perfect target, just as Microsoft was in the late 90s. We should use history as a guide and avoid making the mistake of intervening with market forces. Competition will ensure prosperity and growth in the long run as it did in the tech industry, while augmented regulation will only inhibit it.

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We are bombarded with news about the Obama administration’s recent addition of tariffs on Chinese tires or on steel and the possibility of a trade war looming ahead. However, the public is utterly unaware of the taxes imposed on the insignificant items more commonly known in Congress as the “miscellaneous tariff bills.

These bills include a laundry list of a narrow and seemingly arbitrary set of goods ranging from the duty on bells designed for use on bicycles to the duty on ice shavers and even as specific as the duty on combination single slot toaster and toaster ovens. Every so often, a compilation of the suspension of many of these tariffs is passed through Congress on a temporary basis. To apply for a temporary suspension on these tariffs, three conditions must be met:

• There is no domestic production of the good or no objections from current domestic producers
• U.S. Customs and Border Patrol must be able to administer the duty suspension
• The CBO gives it a score of under $500,000 per year

The temporary suspension of the import taxes is one step in the right direction, but I must ask why we need to have these tariffs in the first place. If the reasoning behind the placement of a tariff on a good is that it deters competition from international producers, then why do we have tariffs on goods that don’t even have any domestic producers? This seems to me to be a money-making scheme for the government that only gets noticed when producers who use these goods in their final product point out the fruitlessness of these taxes. And even so, they only receive temporary suspension. I propose we eradicate these tariffs on a permanent basis. This will provide domestic producers with lower costs, providing a boost to their industry and the economy as a whole. Wasn’t that the original intention of tariffs anyway?

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If there is any good news from the financial collapse, it is that 20 to 30-year-olds have decided that spending less and saving for retirement are important.  Now if the federal government will only catch on.

Fidelity Investments recently released a report that indicates that “saving more and spending less was the overwhelming mantra for most Americans (18 yrs or older) when listing the top three financial resolutions they are considering. More than half (51%) said that saving more money was their primary focus, followed by spending less money (30%) and making or sticking to a budget (14%).”

In addition, the report said “nearly half (47%) of Gen Y employees (22-33 yrs old) with an employer-sponsored retirement savings plan report that managing everyday finances, such as paying the mortgage or credit card debt, is a more crucial obligation than saving for retirement. The majority (57%) believe that these types of savings plans are the best way to save for retirement. More (18%) now consider saving for retirement to be their "most crucial goal" versus just 13 percent in 2008."

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When the latest ACORN scandal broke, many conservatives started jumping all over each other to claim that ACORN was guilty of high levels of corruption.  They are missing the point. 

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When a Congressman owns stock, he is less likely to do things that will frustrate the market, such as increasing the corporate income tax.  Furthermore, becoming a part of the investor class is an important part of becoming independent from the government, and planning one’s own life.  It also gives them some skin in the game, meaning they won’t do idiotic things to tank the equities market like double the capital gains tax. In other words, making bad law will affect both their reelection and their pocketbook.  

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With the health care debate raging in the Senate, another fight has been lost in the background: the death tax.  It can be confusing to discuss the topic, mainly due to the complexity of tax law.  Here is a refresher on the death tax.

• At present, the death tax (another name for the estate tax) sits at 45%.
• It is slotted to expire at 12:00 AM, January 1^st, 2010.  That is, the death tax drops to 0%.
• The death tax will jump from 0% to 55% overnight, at 12:00 AM, January 1^st, 2011—as every tax that was cut under President Bush is hiked again.

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