bbalaw.com

Ruling could mean tax on Amazon sales

Jeffrey Hiatt — Wed, 05 Oct 2011 15:23:21 +0000

Tennessee’s attorney general is saying that online retailers do have to collect sales taxes if they open warehouses in the state, in a ruling that could impact the debate over the tax treatment of Amazon.

Attorney General Robert Cooper said in a ruling released Tuesday that current state law requires retailers that have distributing houses or warehouses in the state to collect sales taxes, provided they are not owned by a subsidiary and serve customers elsewhere.

Cooper also said that state officials do not have the power to waive the sales tax requirement for certain retailers, but they do have right to interpret the law as they see fit.

“Nonetheless the Commissioner of Revenue possesses substantial discretion in determining the best measures to take to enforce Tennessee’s tax laws,” Cooper’s opinion says. “The exercise of such discretion is particularly appropriate where the enforcement of a tax may be debatable.”

The ruling appears to give support to arguments made by opponents of Amazon. The online retailer had been assured by officials in the administration of Gov. Phil Bredesen that it would not have to collect sales taxes on Tennessee customers if it opened distribution centers near Chattanooga and Nashville.

Big-box retailers and some state lawmakers have challenged that promise, saying it gives Amazon an unfair advantage and could erode Tennessee’s tax base.

“As more facts and information are made public, it is becoming increasingly clear that Amazon.com’s argument against sales tax collection is evaporating,” Mike Cohen, a spokesperson for the Alliance for Main Street Fairness said in a statement.

“A recent opinion by Tennessee’s attorney general proves that under the law as written Amazon has a physical presence in the state and should be collecting sales taxes when its distribution centers open.”

Written by
Chas Sisk | The Tennessean

Right to blood test in DUI cases

Jeffrey Hiatt — Tue, 20 Sep 2011 18:43:08 +0000

On September 8, 2011, a Judge in the Jefferson District Court granted a motion prepared by associate attorney, Jonathan Hodge, for a client his motion to suppress the Commonwealth’s evidence obtained from a breath alcohol analysis (breath test). The Court found that the Defendant submitted to breath analysis upon his arrest for charges of driving under the influence and was subsequently refused his statutory right to receive an independent blood test from a physician of his choosing.
Under KRS 189A.103(7), “after the person has submitted to all alcohol concentration tests… requested by the officer, the person tested shall be permitted to have a person… administer a test or tests in addition to any test administered at the direction of the peace officer.” Under Commonwealth v. Cook and Commonwealth v. Philbin, the courts have identified that due to the nature of the proceedings, a defendant in police custody does not have the liberty of arranging for the test himself, so KRS 189A.103(7) requires an arresting officer to make “reasonable efforts” to inform the arrestee of a known nearby alternative testing site and to provide transportation to said site. It is important to note that the individual will be financially responsible for the cost of the independent test.

In this particular case, our client did request an independent test however the court found that no reasonable efforts were made to facilitate his taking the test. Accordingly, the Commonwealth’s breath analysis evidence, i.e. the breathalyzer results, are suppressed from evidence in the client’s trial for charges of driving under the influence.

The Commonwealth’s breath analysis evidence is the single-most important piece of proof used to show the driver was intoxicated. While the prosecution will often present the officer’s testimony, the field sobriety tests, and video of the arrest in support of its contention that the driver was operating under the influence, they will generally have no scientific evidence conclusively proving that the driver was intoxicated.

New Jersey changes rules on police lineups

Jeffrey Hiatt — Tue, 20 Sep 2011 18:16:56 +0000

Police Lineups Start to Face Fact: Eyes Can Lie
By ERICA GOODE and JOHN SCHWARTZ
Published: August 28, 2011

The decision by New Jersey’s Supreme Court last week to overhaul the state’s rules for how judges and jurors treat evidence from police lineups could help transform the way officers conduct a central technique of police work, criminal justice experts say.

Rex C. Curry for The New York Times

Senior Cpl. Chris Daniels, left, and Lt. David Pughes of the Dallas police homicide unit simulating a sequential photo lineup.

In its ruling, the court strongly endorsed decades of research demonstrating that traditional eyewitness identification procedures are flawed and can send innocent people to prison. By making it easier for defendants to challenge witness evidence in criminal cases, the court for the first time attached consequences for investigators who fail to take steps to reduce the subtle pressures and influences on witnesses that can result in mistaken identifications.

“No court has ever taken this topic this seriously or put in this kind of effort,” said Gary L. Wells, a professor of psychology at Iowa State University who is an expert on witness identification and has written extensively on the topic.

Other courts are likely to follow suit, and in November the United States Supreme Court will take up the question of identification for the first time since 1977.

But changing how the nation’s more than 16,000 independent law enforcement agencies handle the presentation of suspects to witnesses will be no easy task, many experts say.

Around the country, the notion of change has met with resistance from police officers who remain skeptical about the research and bridle at the idea that they could affect the responses of witnesses, even unintentionally, which studies find is how most influence occurs.

In many communities, lineups are conducted in the same way they have been for decades, although typically these days they involve photos, not actual people. According to some estimates, only about 25 percent to 30 percent of jurisdictions have police departments that have revised their policies to protect the integrity of lineup procedures.

Although some states are studying revisions or require single changes in procedure, only two — New Jersey and North Carolina — mandate the two practices that researchers regard as most important: lineups that are blinded, that is, administered by someone who is not familiar with the suspect and who is not one of the primary investigators on the case; and photo arrays that are presented sequentially rather than as a group. Both practices, studies find, decrease the pressure on witnesses to pick someone and guard against influence.

The idea that human memory is frail and suggestible has gradually gained acceptance among leaders in law enforcement, buttressed by more than 2,000 scientific studies demonstrating problems with witness accounts and the DNA exonerations of at least 190 people whose wrongful convictions involved mistaken identifications. About 75,000 witness identifications take place each year, and studies suggest that about a third are incorrect.

Model policies for changing lineup procedures have been created by professional organizations like the International Association of Chiefs of Police, and in 1999, the National Institute of Justice released guidelines that were sent to every police department in the United States.

But the process of reform, Dr. Wells said, is “all over the place, it’s very spotty.” He added that he suspected many police departments simply deposited the federal guidelines, which he helped develop, “into their round files.”

Some large departments, like those in Dallas and Denver, have already made changes, often under the leadership of an administrator eager to keep up to the national standard or after DNA exonerations revealed mistaken identifications.

In Dallas, for example, detectives take elaborate precautions to make sure that identifications remain untainted and that they will stand up in court.

Witnesses are sent to a special unit of the Police Department devoted entirely to lineups, where they are read instructions and shown photographs by trained lineup officers who have no relationship to the cases.

Photos are presented one at a time instead of all together, and the witnesses then indicate how confident they are in their judgments. The whole process is videotaped, so that it can be viewed by defense lawyers and by the court, if necessary.

Lt. David Pughes, commander of the department’s homicide unit, said 5,000 lineups had been conducted in this manner since April 2009, when the policy was instituted, a major departure from the days when the investigating officers in criminal cases conducted lineups and no consistent procedures were followed.

Initially, Lieutenant Pughes said, the new practices were resisted by detectives, who felt that their integrity was being challenged.

A version of this article appeared in print on August 29, 2011, on page A1 of the New York edition with the headline: Police Lineups Start to Face Fact: Eyes Can Lie.

Eyewitness Mistakes

Jeffrey Hiatt — Tue, 20 Sep 2011 18:11:28 +0000

In New Jersey, Rules Are Changed on Witness IDs
By BENJAMIN WEISER
Published: August 24, 2011

The New Jersey Supreme Court, acknowledging a “troubling lack of reliability in eyewitness identifications,” issued sweeping new rules on Wednesday making it easier for defendants to challenge such evidence in criminal cases.

The court said that whenever a defendant presents evidence that a witness’s identification of a suspect was influenced, by the police, for instance, a judge must hold a hearing to consider a broad range of issues. These could include police behavior, but also factors like lighting, the time that had elapsed since the crime or whether the victim felt stress at the time of the identification.

When such disputed evidence is admitted, the court said, the judge must give detailed explanations to jurors, even in the middle of a trial, on influences that could heighten the risk of misidentification. In the past, judges held hearings on such matters, but they were far more limited.

The decision applies only in New Jersey, but is likely to have considerable impact nationally. The state’s highest court has long been considered a trailblazer in criminal law, and New Jersey has already been a leader in establishing guidelines on how judges should handle such testimony.

Stuart J. Rabner, the court’s chief justice, wrote in a unanimous 134-page decision that the test for reliability of eyewitness testimony, as set out by the United States Supreme Court 34 years ago, should be revised.

The new rules come at a time of increased scrutiny of the eyewitness identification issue among lawyers, law enforcement officers and the scientific community. The opinion noted that task forces have been formed to recommend or put into effect new procedures to improve reliability.

The State Supreme Court’s ruling was seen as significant because it was based in part on an exhaustive study of the scientific research on eyewitness identification, led by a special master, a retired judge, who held hearings and led a review of the literature on the issue. The special master, Geoffrey Gaulkin, estimated that more than 2,000 studies related to the subject had been published since the Supreme Court’s original 1977 decision, the court noted.

“Study after study revealed a troubling lack of reliability in eyewitness identifications,” Chief Justice Rabner wrote. “From social science research to the review of actual police lineups, from laboratory experiments to DNA exonerations, the record proves that the possibility of mistaken identification is real.

“Indeed, it is now widely known that eyewitness misidentification is the leading cause of wrongful convictions across the country.”

The decision listed more than a dozen factors that judges should consider in evaluating the reliability of a witness’s identification, including whether a weapon was visible during a crime of short duration, the amount of time the witness had to observe the event, how close the witness was to the suspect, whether the witness was under the influence of alcohol or drugs, whether the witness was identifying someone of a different race and the length of time that had elapsed between the crime and the identification.

Chief Justice Rabner said the court had avoided “bright-line rules that would lead to suppression of reliable evidence any time a law enforcement officer makes a mistake.”

The ruling instead allowed for a much more complete exploration of the factors involved in an identification “to preclude sufficiently unreliable identifications from being presented and to aid juries in weighing identification evidence.”

Chief Justice Rabner noted that in the vast majority of cases, identification evidence would still be presented to a jury.

“The threshold for suppression remains high,” he wrote. And because, in most cases, juries will continue to determine the reliability of eyewitness testimony, Chief Justice Rabner added, “it is essential to educate jurors about factors that can lead to misidentifications.”

The ruling was praised by lawyers and legal groups that have pressed for reforms. “It’s a landmark decision,” said Barry C. Scheck, a director of the Innocence Project at the Benjamin N. Cardozo School of Law, which filed a friend-of-the-court brief in the case.

Mr. Scheck, citing the New Jersey court’s national prominence and the large scientific record developed in the case, added, “It’s going to affect the way every state and federal court in the United States assesses eyewitness identification evidence, and what those courts tell juries about the factors that can increase the risk of misidentification.”

In its ruling, the court cited findings by Brandon L. Garrett, a law professor at the University of Virginia, who documented in a recent book, “Convicting the Innocent,” eyewitness misidentifications in 190 of the first 250 cases of DNA exoneration in the country.

Professor Garrett said the decision would provide a model for legislatures and courts around the country that “have been at a loss for what to do” and needed “a structure for how judges should handle identifications in the courtroom.”

The United States Supreme Court is scheduled to hear arguments, in November, in its first significant eyewitness identification case in 34 years. The case, Perry v. New Hampshire, is concerned with whether judges must take a hard look at all identifications arising from suggestive circumstances or only those involving official misconduct.

Joseph E. Krakora, the public defender who argued the case before the New Jersey Supreme Court, said the decision would “go a long way toward eliminating wrongful convictions based on mistaken identifications.”

The New Jersey attorney general’s office, which the state court on Wednesday credited for developing early guidelines to address identification issues, said, “The court’s ruling embodies the promulgation of additional safeguards as opposed to an overhaul of the present system.” It called the ruling “careful and balanced.”

Adam Liptak contributed reporting.
A version of this article appeared in print on August 25, 2011, on page A1 of the New York edition with the headline: In New Jersey, Sweeping Shift On Witness IDs.

Changes in Police Lineups

Jeffrey Hiatt — Tue, 20 Sep 2011 18:04:50 +0000

In New Jersey, Rules Are Changed on Witness IDs
By BENJAMIN WEISER
Published: August 24, 2011

“Indeed, it is now widely known that eyewitness misidentification is the leading cause of wrongful convictions across the country.”

Chief Justice Rabner said the court had avoided “bright-line rules that would lead to suppression of reliable evidence any time a law enforcement officer makes a mistake.”

Chief Justice Rabner noted that in the vast majority of cases, identification evidence would still be presented to a jury.

Adam Liptak contributed reporting.
A version of this article appeared in print on August 25, 2011, on page A1 of the New York edition with the headline: In New Jersey, Sweeping Shift On Witness IDs.

The Changing Face of America: Diversity and Longevity

Jeffrey Hiatt — Wed, 31 Aug 2011 19:04:36 +0000

In the 30 minute “Connections” interview, airing today, Friday, on KET-2 at 5:00 PM, and Sunday, on KET at 1:30 PM, It discusses demographic trends, diversity, income inequality, worldwide, in the United States and in Kentucky, etc.

Also attached is a draft of a brief article on The Changing Face of America- Diversity and Longevity including 2009 ACS population pyramids and a chart by age and race/Hispanic origin for the United States. It is scheduled for publication in Views and Visions – Summer 2011 (a publication of Bowles Rice McDavid Graff & Love LLP) which should be released any day now. I’ll update the population pyramids and chart to the 2010 Census but data by age by race and Hispanic origin is just being released for 2010 state by state.

The Changing Face of America: Diversity and Longevity

Introduction
The United States of America is going through two significant demographic trends which wThe Changing Face of America: Diversity and Longevityill
dramatically impact our society and our economy. We are experiencing two revolutions, as diversity
growth is changing the future face of America and longevity is driving our population growth. The
opportunities and challenges of these two revolutions are not well understood by many of our decision
makers and our citizens.
The World around Us
These two revolutions go beyond the United States. In 1800, World population reached 1 Billion
persons. It took another 130 years to reach its 2nd billion in 1930 and 30 years to reach its 3rd Billion by
1960. Since then the World has added another Billion persons every 12 to 14 years and is projected to
reach 7 billion persons in 2011. However, the United Nation’s projects World population growth is
slowing and flattening out, peaking at 10 billion persons in 2100.
The Population Reference Bureau states “the World population has reached a transition point”. “The
population size of the world’s developed countries has essentially peaked. What little growth remains
will mostly come from immigration from less developed countries.” These less developed countries
accounted for virtually the entire World population growth in the 20th Century and are made up of
persons of color. However, the major factor in the World’s population explosion during the last Century
was not due to fertility but longevity, a direct result of the rapid decline in mortality rates in the less
developed countries.
The United States Demographic Revolutions
Only three developed countries are experiencing population growth, the United States along with
Canada and Australia. All three countries have been “Settler Nations” allowing immigration from other
countries. Ben Wattenberg, of the American Enterprise Institute has stated, “America is becoming a
universal nation, with significant representation of all human hues, creeds, ethnicities, and national
ancestries. Continued moderate immigration will make us an even more universal nation as time goes
on.”
Along with immigration, the United States is experiencing changing fertility patterns with our minority
population growing significantly while our Non‐Hispanic White population experiencing little growth and
is significantly smaller in the younger age cohorts. The 2010 Census found the United States population
grew by 27 million persons or 9.7% between 2000 and 2010. However, when broken down by race and
Hispanic origin it found our Black population had grown by 12.3%, our Asian population by 43.3% and
our population of Hispanic origin, which can be of any race, grew by 43.0% compared to a Non‐Hispanic
White growth rate of only 1.2%. The 2009 Census American Community Survey found over 80% of our
population, ages 70+ were Non‐Hispanic White while only 51.7% of children under age 5 were Non‐
Hispanic White and new Census data indicates for children age 2 and under our children are now
majority minority, above 50%.
However, we do not have much growth in our child or younger workforce age population. Our younger
population is becoming more diverse but not growing as the Non‐Hispanic White population of children
and younger workforce age declines significantly. (See attached population pyramids by race and
Hispanic origin and the table showing age cohorts.) The 2010 Census found between 2000 and 2010
our population growth was almost entirely due to longevity with our population ages 45 to 64 growing
by 31.5%, and our population 65+ growing by 15.1%, compared to the younger workforce age
population, ages 18 to 44, growing by only 0.6% and our children under age 18 by 2.6%. The Bureau of
Labor Statistics estimates between 2008 and 2018, 95% of workforce growth will be among older
workers, ages 55+.
New Realities in Preparing for Our Future
States like Kentucky and West Virginia are aging faster than the United States and are significantly less
diverse with declining populations of children and a younger workforce. What happens when your
young workforce age population declines? We need to insure our returning veterans are invested in and
provided employment after their service to our country. We need to educate and train, and retool and
retrain our workforce for tomorrow. We will need to attract a more diverse population and invest in
their well being. We will need to support immigration when our real problem is not too much
undocumented immigration but not enough documented immigration. We need to bring immigrants
out of the shadows. Maybe we need to hire Minutemen not to build walls but to open up lemonade
stands and hand out lemonade and cookies to attract immigrants. The economies of a number of South
and Central American countries are doing well and we want to close off our borders?
We also need to make sure all of our population regardless of skin color, age or gender is educated,
skilled and prepared for a new 21ft Century. We need to develop and make investments in a system
that offers a lifetime of education and training. We need to make investments in our infrastructure to
promote our well‐being and our economy. Cutting those investments is disinvesting in our futures!
United States 2009 Population Pyramids
Total
55 60-64
65-69
70-74
75-79
80-84
85+
Under 5
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
Black Alone, Not Hispanic or Latino
15,000,000 10,000,000 5,000,000 0 5,000,000 10,000,000 15,000,000
Male Female
6 69
70-74
75-79
80-84
85+
5-10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-Asian Alone, Not Hispanic or Latino
2,000,000 1,500,000 1,000,000 500,000 0 500,000 1,000,000 1,500,000 2,000,000
Under 5
5 9
Male Female
80-84
85+
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
Source: Census Bureau: 2009 Population Estimates
800,000 600,000 400,000 200,000 0 200,000 400,000 600,000 800,000
Under 5
5-9
10-14
15 Male Female
United States 2009 Population Pyramids
Hispanic or Latino
55 60-64
65-69
70-74
75-79
80-84
85+
Under 5
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
White Alone, Not Hispanic or Latino
3,000,000 2,000,000 1,000,000 0 1,000,000 2,000,000 3,000,000
Male Female
6 69
70-74
75-79
80-84
85+
5-10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-Two or More Races, Not Hispanic or Latino
10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000
Under 5
5 9
Male Female
80-84
85+
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
Source: Census Bureau: 2009 Population Estimates
400,000 300,000 200,000 100,000 0 100,000 200,000 300,000 400,000
Under 5
5-9
10-14
15 Male Female
Population by Age, Race and Hispanic Origin; United States: 2009
Total
Population
Black; Not
Hispanic
% of
Total
AIAN; Not
Hispanic
% of
Total
Asian; Not
Hispanic
% of
Total
NHOPI; Not
Hispanic
% of
Total Hispanic % of
Total
Two+ Races;
Not Hispanic
% of
Total
White; Not
Hispanic
% of
Total
Total Population 307,006,550 37,681,544 12.3% 2,360,807 0.8% 13,686,083 4.5% 448,510 0.1% 48,419,324 15.8% 4,559,042 1.5% 199,851,240 65.1%
Under 5 years 21,299,656 2,909,385 13.7% 194,902 0.9% 959,911 4.5% 37,097 0.2% 5,484,770 25.8% 697,649 3.3% 11,015,942 51.7%
5 to 9 years 20,609,634 2,796,496 13.6% 178,446 0.9% 913,806 4.4% 35,093 0.2% 4,792,409 23.3% 618,169 3.0% 11,275,215 54.7%
10 to 14 years 19,973,564 2,857,269 14.3% 173,808 0.9% 813,996 4.1% 32,159 0.2% 4,059,590 20.3% 520,680 2.6% 11,516,062 57.7%
15 to 19 years 21,537,837 3,285,249 15.3% 202,702 0.9% 824,871 3.8% 35,572 0.2% 4,031,986 18.7% 450,049 2.1% 12,707,408 59.0%
20 to 24 years 21,539,559 3,102,041 14.4% 204,379 0.9% 888,781 4.1% 36,109 0.2% 3,883,925 18.0% 378,212 1.8% 13,046,112 60.6%
25 to 29 years 21,677,719 2,948,080 13.6% 190,121 0.9% 1,098,369 5.1% 38,488 0.2% 4,149,692 19.1% 325,583 1.5% 12,927,386 59.6%
30 to 34 years 19,888,603 2,568,707 12.9% 156,845 0.8% 1,203,073 6.0% 36,899 0.2% 4,029,775 20.3% 247,035 1.2% 11,646,269 58.6%
35 to 39 years 20,538,351 2,586,667 12.6% 152,688 0.7% 1,253,296 6.1% 34,052 0.2% 3,757,576 18.3% 219,006 1.1% 12,535,066 61.0%
40 years 20 991 605 2 592 865 12 4% 153 232 0 7% 1 097 417 to 44 20,991,605 2,592,865 12.4% 153,232 0.7% 1,097,417 5.2% 31,534 0.2% 3,306,453 15.8% 194,159 0.9% 13,615,945 64.9%
45 to 49 years 22,831,092 2,727,142 11.9% 168,192 0.7% 1,014,129 4.4% 31,848 0.1% 2,893,985 12.7% 201,421 0.9% 15,794,375 69.2%
50 to 54 years 21,761,391 2,486,851 11.4% 154,901 0.7% 906,047 4.2% 27,130 0.1% 2,273,831 10.4% 185,464 0.9% 15,727,167 72.3%
55 to 59 years 18,975,026 2,028,329 10.7% 129,829 0.7% 778,157 4.1% 22,195 0.1% 1,720,174 9.1% 151,372 0.8% 14,144,970 74.5%
60 to 64 years 15,811,923 1,494,948 9.5% 100,946 0.6% 607,784 3.8% 16,694 0.1% 1,274,195 8.1% 119,608 0.8% 12,197,748 77.1%
65 to 69 years 11,784,320 1,060,591 9.0% 70,261 0.6% 432,194 3.7% 11,789 0.1% 890,817 7.6% 83,346 0.7% 9,235,322 78.4%
70 to 74 years 9,007,747 819,627 9.1% 50,353 0.6% 328,030 3.6% 8,622 0.1% 675,704 7.5% 59,454 0.7% 7,065,957 78.4%
75 to 79 years 7,325,528 627,478 8.6% 35,223 0.5% 243,396 3.3% 5,981 0.1% 508,733 6.9% 44,456 0.6% 5,860,261 80.0%
80 to 84 years 5,822,334 439,402 7.5% 23,312 0.4% 170,054 2.9% 3,873 0.1% 361,632 6.2% 32,348 0.6% 4,791,713 82.3%
85 years and over 5,630,661 350,417 6.2% 20,667 0.4% 152,772 2.7% 3,375 0.1% 324,077 5.8% 31,031 0.6% 4,748,322 84.3%
Median Age 36.8 31.3 29.5 35.3 29.9 27.4 19.7 41.2

Trends in population & socioeconomic impacts on the country

Jeffrey Hiatt — Wed, 31 Aug 2011 18:59:32 +0000

Ron crouch is the former director of The Ky. Data Ctr at U of L.
He one of the foremost “futurists” in the USA. He uses demographic data to project trends in population & socioeconomic impacts on the country.

See below articles:

Taxes: Regressive or Progressive, Income Tax or Fair or Flat or VAT?
(1) Coming to a reasoned judgment about tax policy requires clarifying your own values about
fairness, sifting through some subtle conceptual issues, and, perhaps hardest of all,
evaluating the conflicting claims about the economic impact of tax alternatives. (page 305)
Tax Cuts as a Trojan Horse
(2) For many advocates of tax cuts, the real objective is not the tax system but rather the size of
government, and tax cuts are really a tactical weapon in the battle to downsize government.
The idea is to lower taxes and hope that politicians’ (and voters’) fear of deficits and dislike of
tax increases will force expenditures below what they would other be. Because the ultimate
objective is to limit spending initiatives, this is a good idea only if the benefits of the spending
that is cut or forestalled fall short of their cost. So the real issue is not the tax system but the
proper size and scope of government. (page 306)
Source: Taxing Ourselves: A Citizen’s Guide to the Debate over Taxes, Fourth Edition; Joel Slemrod and
Jon Bakija, The MIT Press, 2008
(3) Make no mistake. Estate tax repeal, along with the “fair tax” movement and its cousin the
“flat tax” campaign –both of which would replace the income tax—are key pieces of a three
decade effort to fundamentally restructure our nation’s tax system by eliminating all taxes on
wealth and income from wealth. At the inception of the twenty‐first century, the great battle
over distributive tax justice that culminated early in the twentieth century has been renewed.
(4) And if progressive taxes and progressive tax rates are purged from the tax system, the
amount of taxes the government can raise becomes limited. Low and moderate income
people simply cannot afford to pay enough in taxes to finance the government’s current
expenditures, whether the dollars go to homeland security, national defense, social Security,
Medicare, Medicaid or elsewhere. Of course, advocates of proposals like the “fair tax”
understand that eliminating the progressive elements of our nation’s tax system would be a
highly effective way to “starve the beast” of the federal government. For antitax activists
such as Grover Norquist, that is indeed the goal. Remember how fond he is of saying, “I
don’t want to kill the government, I just want to get it down to a size where I can drown it in
a bathtub”. (pages 277‐278)
(5) Make no mistake, the antitax forces are working tirelessly to dismantle America’s system of
progressive taxation. They are patient. They are serious. They are determined. They know
that what they want cannot be accomplished at a fell swoop. Hence their strategy: death by
a thousand cuts. What strategy is there on the other side? (page 282)
Source: Death by a Thousand Cuts: The Fight over Taxing Inherited Wealth; Michael J. Graetz and Ian
Shapiro, Princeton University Press, 2005.
1
(6) At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal, Joseph
Heller, that their host, a hedge fund manager, had made more money in a single day than
Heller had earned from his wildly popular novel Catch‐22 over its whole history. Heller
responds, “Yes, but I have something he will never have…enough.” (Page 1)
(7) But the rampant greed that threatens to overwhelm our financial system and corporate
world runs deeper than money. Not knowing what enough is subverts our professional
values. It makes salespersons of those who should be fiduciaries of the investments
entrusted to them. (page 2)
Enough: True Measures of Money, Business, and Life; John C. Bogle, John Wiley & Sons, 2009.
(8) The crash has laid bare many unpleasant truths about the United States. One of the most
alarming, says a former chief economist of the International Monetary fund, is that the
finance industry has effectively captured our government…Recovery will fail unless we break
the financial oligarchy that is blocking essential reform. (page 1)
(9) But these various policies‐lightweight regulation, cheap money, the unwritten Chinese‐
American economic alliance, the promotion of homeownership‐had something in common.
Even though some are traditionally associated with Democrats and some with Republicans,
they all benefited the financial sector. (page 4)
(10) But the first age of banking oligarchs came to an end with the passage of significant banking
regulation in response to the Great Depression; the reemergence of an American financial
oligarchy is quite recent. (page 5)
The Quiet Coup; Simon Johnson, The Atlantic, May, 2009.
2
Line Total
Percent of
Total
Total
Percent of
Total
Total
Percent of
Total
Total
Percent of
Total
10 Personal current transfer receipts ($000) 4,454,362 100.00% 8,967,126 100.00% 16,848,970 100.00% 28,962,136 100.00%
20 Current transfer receipts of individuals from governments 4,219,484 94.73% 8,535,472 95.19% 16,058,069 95.31% 28,243,102 97.52%
30 Retirement and disability insurance benefits 2,165,211 48.61% 4,121,897 45.97% 6,690,289 39.71% 10,201,671 35.22%
40 Old-age, survivors, and disability insurance (OASDI) benefits 1,804,501 40.51% 3,657,844 40.79% 6,207,781 36.84% 9,694,985 33.47%
50 Railroad retirement and disability benefits 110,096 2.47% 169,512 1.89% 211,504 1.26% 277,388 0.96%
90 Workers’ compensation 50,412 1.13% 127,777 1.42% 147,018 0.87% 139,209 0.48%
100 Other government retirement and disability insurance benefits 1/ 200,202 4.49% 166,764 1.86% 123,986 0.74% 90,089 0.31%
110 Medical benefits 767,132 17.22% 2,674,791 29.83% 6,538,057 38.80% 11,985,239 41.38%
111 Medicare benefits 443,340 9.95% 1,542,741 17.20% 3,164,133 18.78% 7,005,440 24.19%
113 Public assistance medical care benefits 2/ 314,076 7.05% 1,076,484 12.00% 3,308,846 19.64% 4,876,613 16.84%
114 Military medical insurance benefits 3/ 9,716 0.22% 55,566 0.62% 65,078 0.39% 103,186 0.36%
120 Income maintenance benefits 594,345 13.34% 1,022,089 11.40% 1,757,147 10.43% 3,072,813 10.61%
130 Supplemental security income (SSI) benefits 163,159 3.66% 349,721 3.90% 758,445 4.50% 1,020,388 3.52%
140 Family assistance 4/ 139,494 3.13% 183,559 2.05% 136,816 0.81% 156,177 0.54%
150 Supplemental Nutrition Assistance Program (SNAP) 222,316 4.99% 345,399 3.85% 329,227 1.95% 764,693 2.64%
160 Other income maintenance benefits 5/ 69,376 1.56% 143,410 1.60% 532,659 3.16% 1,131,555 3.91%
170 Unemployment insurance compensation 340,514 7.64% 212,900 2.37% 293,733 1.74% 716,440 2.47%
180 State unemployment insurance compensation 292,242 6.56% 200,008 2.23% 276,396 1.64% 668,604 2.31%
190 Unemployment compensation for Fed. civilian employees (UCFE) 5,009 0.11% 4,805 0.05% 4,458 0.03% 5,736 0.02%
200 Unemployment compensation for railroad employees 6,250 0.14% 3,415 0.04% 1,678 0.01% 2,085 0.01%
210 Unemployment compensation for veterans (UCX) 7,497 0.17% 3,269 0.04% 4,715 0.03% 13,125 0.05%
220 Other unemployment compensation 6/ 29,516 0.66% 1,403 0.02% 6,486 0.04% 26,890 0.09%
230 Veterans benefits 267,695 6.01% 319,206 3.56% 425,710 2.53% 802,378 2.77%
240 Veterans pension and disability benefits 218,726 4.91% 293,524 3.27% 388,831 2.31% 750,281 2.59%
250 Veterans readjustment benefits 7/ 32,633 0.73% 4,576 0.05% 20,214 0.12% 37,465 0.13%
260 Veterans life insurance benefits 16,251 0.36% 20,983 0.23% 16,665 0.10% 14,632 0.05%
270 Other assistance to veterans 8/ 85 0.00% 123 0.00% 0 0.00% 0 0.00%
280 Education and training assistance 9/ 83,929 1.88% 182,816 2.04% 346,434 2.06% 991,075 3.42%
290 Other transfer receipts of individuals from governments 10/ 658 0.01% 1,773 0.02% 6,699 0.04% 473,486 1.63%
300 Current transfer receipts of nonprofit institutions 133,882 3.01% 173,573 1.94% 335,317 1.99% 441,529 1.52%
310 Receipts from the Federal government 52,181 1.17% 58,731 0.65% 104,650 0.62% 160,358 0.55%
320 Receipts from state and local governments 43,709 0.98% 44,525 0.50% 77,764 0.46% 100,289 0.35%
330 Receipts from businesses 37,992 0.85% 70,317 0.78% 152,903 0.91% 180,882 0.62%
340 Current transfer receipts of individuals from businesses 11/ 100,996 2.27% 258,081 2.88% 455,584 2.70% 277,505 0.96%
Source: Bureau of Economic Analysis
Personal Current Transfer Receipts: Kentucky
1980 1990 2000 2008
(thousands of dollars)
3
Source: Bureau of Economic Analysis
Personal Current Transfer Receipts in Constant (2009) Dollars:
Kentucky
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
1980 1990 2000 2008
Retirement and disability Medical benefits
Family assistance 4/ Supplemental Nutrition Assistance Program
Unemployment insurance compensation
4
Average U.S. After-Tax Household Income by Quintile and Percentile (2006 Dollars)
1979 – 2006
1,400,000
1,200,000
1,000,000
800,000
Top1%
Top25%
Top210%
600,000
Top220%
HighestQuintile
FourthQuintile
MiddleQuintile
400,000
SecondQuintile
LowestQuintile
200,000
0
Source: Historical Effective Federal Tax Rates: 1979 to 2006, Congressional Budget Office (http://www.cbo.gov/publications/collections/taxdistribution.cfm)
5
1980 -$600 -4.0% -$1,100 -3.7% -$1,500 -3.5% -$1,800 -3.2% -$2,900 -2.9% -$2,668 -3.1% -$1,500 -3.1% -$3,200 -2.6% -$2,744 -2.7% -$5,400 -3.3% -$4,925 -4.0% -$7,300 -2.2%
Top 2-20% Top 2-10%
1979 – 2006
Annual Dollar and Percentage Change in Average U.S. After-Tax Household Income by Quintile and Percentile (2006 Dollars)
Lowest Quintile Second Quintile Middle Quintile Fourth Quintile Highest Quintile All Quintiles Top 10% Top 5% Top 2-5% Top 1%
1981 -$400 -2.8% -$600 -2.1% -$800 -1.9% -$200 -0.4% -$300 -0.3% -$926 -1.1% -$300 -0.6% -$200 -0.2% -$1,511 -1.5% $300 0.2% -$2,525 -2.2% $11,600 3.5%
1982 -$400 -2.9% -$400 -1.4% -$200 -0.5% $300 0.6% $3,300 3.4% $1,553 1.9% $800 1.7% $6,100 5.0% $2,722 2.8% $11,400 7.1% $5,125 4.5% $36,500 10.7%
1983 -$600 -4.4% -$1,000 -3.6% -$500 -1.2% $0 0.0% $4,100 4.1% $2,463 2.9% $500 1.1% $7,000 5.5% $3,867 3.9% $10,100 5.9% $3,825 3.2% $35,200 9.3%
1984 $300 2.3% $1,300 4.8% $1,400 3.5% $2,100 3.9% $6,600 6.4% $4,916 5.7% $1,800 3.8% $10,300 7.6% $7,156 6.9% $16,200 8.9% $10,600 8.6% $38,600 9.3%
1985 $100 0.8% $0 0.0% $700 1.7% $500 0.9% $3,300 3.0% $1,279 1.4% $1,300 2.6% $5,800 4.0% $1,811 1.6% $9,900 5.0% $1,950 1.5% $41,700 9.2%
1986 $100 0.8% $800 2.8% $1,000 2.4% $2,100 3.7% $14,900 13.2% $7,153 7.7% $3,700 7.3% $24,800 16.4% $9,544 8.4% $44,900 21.6% $15,600 11.5% $162,100 32.9%
1987 -$100 -0.7% -$900 -3.1% -$100 -0.2% $300 0.5% -$10,700 -8.4% -$2,516 -2.5% -$2,400 -4.4% -$20,100 -11.4% -$3,867 -3.2% -$40,100 -15.9% -$8,575 -5.7% -$166,200 -25.4%
1988 $300 2.3% $500 1.8% $500 1.2% $400 0.7% $9,300 7.9% $2,395 2.5% $2,200 4.2% $16,500 10.6% $2,722 2.3% $31,300 14.8% $4,000 2.8% $140,500 28.7%
1989 $500 3.7% $600 2.1% $500 1.2% $800 1.3% -$100 -0.1% $1,837 1.8% $700 1.3% -$800 -0.5% $3,211 2.6% -$4,000 -1.6% $4,225 2.9% -$36,900 -5.9%
1990 $300 2.1% $500 1.7% -$100 -0.2% -$900 -1.5% -$3,500 -2.8% -$2,468 -2.4% -$700 -1.3% -$5,800 -3.4% -$3,878 -3.1% -$9,200 -3.8% -$5,725 -3.8% -$23,100 -3.9%
1991 $0 0.0% -$300 -1.0% -$600 -1.4% -$500 -0.8% -$4,700 -3.8% -$1,574 -1.6% -$1,300 -2.4% -$8,400 -5.1% -$2,211 -1.8% -$15,900 -6.9% -$3,850 -2.6% -$64,100 -11.2%
1992 -$200 -1.4% $0 0.0% $400 0.9% $800 1.4% $4,900 4.1% $1,900 1.9% $1,400 2.7% $8,500 5.4% $2,567 2.2% $16,600 7.7% $5,275 3.7% $61,900 12.2%
1993 $300 2.1% $300 1.0% $300 0.7% $400 0.7% -$1,900 -1.5% $779 0.8% -$200 -0.4% -$5,100 -3.1% $200 0.2% -$12,100 -5.2% -$1,925 -1.3% -$52,800 -9.3%
1994 $200 1.4% $300 1.0% $300 0.7% $1,000 1.7% $1,400 1.2% $1,184 1.2% $500 0.9% $2,600 1.6% $2,278 1.9% $4,300 2.0% $4,000 2.8% $5,500 1.1%
1995 $800 5.4% $1,400 4.7% $1,300 2.9% $800 1.3% $5,000 4.1% $2,637 2.6% $1,900 3.5% $7,200 4.4% $2,456 2.0% $14,600 6.5% $5,775 3.9% $49,900 9.6%
1996 -$200 -1.3% -$100 -0.3% $500 1.1% $1,200 1.9% $6,000 4.7% $3,158 3.0% $1,700 3.0% $11,100 6.5% $5,667 4.5% $16,300 6.9% $5,375 3.5% $60,000 10.5%
1997 $400 2.6% $500 1.6% $700 1.5% $1,100 1.7% $8,100 6.1% $3,021 2.8% $2,200 3.8% $14,500 8.0% $4,489 3.4% $27,600 10.9% $8,350 5.2% $104,600 16.6%
1998 $700 4.5% $1,700 5.3% $1,500 3.2% $2,600 4.0% $9,400 6.6% $4,132 3.7% $3,200 5.3% $16,100 8.2% $5,722 4.2% $29,100 10.3% $9,000 5.3% $109,500 14.9%
1999 $500 3.0% $700 2.1% $1,000 2.1% $1,600 2.4% $8,100 5.4% $4,658 4.1% $2,400 3.8% $12,400 5.8% $5,611 4.0% $18,800 6.0% $5,125 2.9% $73,500 8.7%
2000 -$900 -5.3% -$400 -1.2% -$200 -0.4% $600 0.9% $6,400 4.0% $1,879 1.6% $1,000 1.5% $11,400 5.1% $2,411 1.6% $21,100 6.4% $3,300 1.8% $92,300 10.1%
2001 $100 0.6% $800 2.4% $1,500 3.1% $400 0.6% -$13,100 -7.9% -$2,821 -2.3% -$2,400 -3.6% -$25,100 -10.6% -$4,733 -3.2% -$48,100 -13.7% -$8,025 -4.3% -$208,400 -20.6%
2002 -$400 -2.5% -$800 -2.3% -$900 -1.8% -$1,000 -1.4% -$6,200 -4.1% -$1,716 -1.4% -$2,200 -3.4% -$11,900 -5.6% -$3,067 -2.1% -$23,800 -7.9% -$6,900 -3.9% -$91,400 -11.4%
2003 -$200 -1.3% $100 0.3% $300 0.6% $1,300 1.9% $7,000 4.8% $4,168 3.6% $1,600 2.6% $11,600 5.8% $6,133 4.3% $20,300 7.3% $10,175 6.0% $60,800 8.6%
2004 $100 0.6% $600 1.8% $1,600 3.2% $2,200 3.1% $12,300 8.0% $5,068 4.2% $3,300 5.2% $21,300 10.1% $7,033 4.7% $37,700 12.6% $9,700 5.4% $149,700 19.4%
2005 $300 1.9% $400 1.2% $300 0.6% $600 0.8% $12,500 7.5% $3,484 2.8% $2,800 4.2% $23,000 9.9% $5,133 3.3% $45,600 13.5% $11,050 5.8% $183,800 20.0%
2006 $600 3.8% $400 1.1% $300 0.6% $1,000 1.4% $6,300 3.5% $1,595 1.2% $2,000 2.9% $10,700 4.2% $1,256 0.8% $18,000 4.7% -$1,425 -0.7% $95,700 8.7%
1979-2006 $1,600 10.7% $5,300 17.6% $9,200 21.4% $17,700 31.6% $85,500 86.5% $44,568 51.6% $24,000 50.1% $140,300 112.1% $59,978 59.0% $235,500 142.8% $78,575 64.5% $863,200 256.1%
1980-1989 -$200 -1.4% $300 1.0% $2,500 6.0% $6,300 11.6% $30,400 31.7% $18,153 21.7% $8,300 17.9% $49,400 40.5% $25,656 25.9% $80,000 50.2% $34,225 29.3% $263,100 79.8%
1990-1999 $2,500 17.4% $4,500 15.1% $5,400 12.3% $9,000 15.1% $36,300 29.5% $19,895 20.0% $11,800 21.9% $58,900 35.6% $26,778 22.2% $99,300 43.1% $37,125 25.5% $348,000 61.1%
2000-2006 $500 3.1% $1,500 4.4% $3,100 6.3% $4,500 6.5% $18,800 11.4% $9,779 8.1% $5,100 7.6% $29,600 12.5% $11,756 7.8% $49,700 14.2% $14,575 7.8% $190,200 18.8%
1980-1983 -$1,400 -9.8% -$2,000 -6.9% -$1,500 -3.6% $100 0.2% $7,100 7.4% $3,089 3.7% $1,000 2.2% $12,900 10.6% $5,078 5.1% $21,800 13.7% $6,425 5.5% $83,300 25.3%
1984-1987 $100 0.8% -$100 -0.4% $1,600 3.9% $2,900 5.1% $7,500 6.8% $5,916 6.5% $2,600 5.3% $10,500 7.2% $7,489 6.7% $14,700 7.4% $8,975 6.7% $37,600 8.3%
1988-1991 $800 5.9% $800 2.8% -$200 -0.5% -$600 -1.0% -$8,300 -6.6% -$2,205 -2.2% -$1,300 -2.4% -$15,000 -8.7% -$2,878 -2.4% -$29,100 -12.0% -$5,350 -3.6% -$124,100 -19.7%
1992-1995 $1,300 9.2% $2,000 6.8% $1,900 4.4% $2,200 3.7% $4,500 3.7% $4,600 4.6% $2,200 4.1% $4,700 2.8% $4,933 4.1% $6,800 2.9% $7,850 5.3% $2,600 0.5%
1996-1999 $1,600 10.5% $2,900 9.2% $3,200 7.0% $5,300 8.4% $25,600 19.2% $11,811 11.0% $7,800 13.4% $43,000 23.7% $15,822 12.0% $75,500 29.7% $22,475 14.0% $287,600 45.6%
2000-2003 -$500 -3.1% $100 0.3% $900 1.8% $700 1.0% -$12,300 -7.4% -$368 -0.3% -$3,000 -4.5% -$25,400 -10.8% -$1,667 -1.1% -$51,600 -14.7% -$4,750 -2.6% -$239,000 -23.7%
2004-2006 $900 5.8% $800 2.3% $600 1.2% $1,600 2.2% $18,800 11.4% $5,079 4.0% $4,800 7.2% $33,700 14.5% $6,389 4.1% $63,600 18.9% $9,625 5.0% $279,500 30.4%
6
3-May-10
Receipts by Source as Percentages of Gross Domestic Product: 1934-2015
Social Insurance and Retirement Receipts Total Receipts
Total (On-Budget) (Off-Budget) Total (On-Budget) (Off-Budget)
1934 0.7 0.6 * * — 2.2 1.3 4.8 4.8 –
1935 0.8 0.8 * * — 2.1 1.6 5.2 5.2 –
1936 0.9 0.9 0.1 0.1 — 2.1 1.1 5.0 5.0 –
1937 1.2 1.2 0.7 0.4 0.3 2.1 0.9 6.1 5.8 0.3
1938 1.4 1.4 1.7 1.3 0.4 2.1 0.9 7.6 7.2 0.4
1939 1.2 1.3 1.8 1.2 0.6 2.1 0.8 7.1 6.5 0.6
1940 0.9 1.2 1.8 1.3 0.6 2.0 0.7 6.8 6.2 0.6
1941 1.2 1.9 1.7 1.1 0.6 2.2 0.7 7.6 7.0 0.6
1942 2.3 3.3 1.7 1.1 0.6 2.4 0.6 10.1 9.5 0.6
1943 3.6 5.3 1.7 1.1 0.6 2.3 0.4 13.3 12.7 0.6
1944 9.4 7.1 1.7 1.0 0.6 2.3 0.5 20.9 20.3 0.6
1945 8.3 7.2 1.6 1.0 0.6 2.8 0.5 20.4 19.8 0.6
1946 7.2 5.3 1.4 0.8 0.6 3.1 0.5 17.7 17.1 0.6
1947 7.7 3.7 1.5 0.8 0.6 3.1 0.6 16.5 15.9 0.6
1948 7.5 3.8 1.5 0.8 0.6 2.9 0.6 16.2 15.6 0.6
1949 5.7 4.1 1.4 0.8 0.6 2.8 0.5 14.5 13.9 0.6
1950 5.8 3.8 1.6 0.8 0.8 2.8 0.5 14.4 13.7 0.8
1951 6.8 4.4 1.8 0.8 1.0 2.7 0.5 16.1 15.1 1.0
1952 8.0 6.1 1.8 0.8 1.0 2.5 0.5 19.0 17.9 1.0
1953 8.0 5.7 1.8 0.7 1.1 2.7 0.5 18.7 17.6 1.1
1954 7.8 5.6 1.9 0.7 1.2 2.6 0.5 18.5 17.3 1.2
1955 7.3 4.5 2.0 0.7 1.3 2.3 0.5 16.5 15.2 1.3
1956 7.5 4.9 2.2 0.7 1.5 2.3 0.5 17.5 16.0 1.5
1957 7.9 4.7 2.2 0.7 1.5 2.3 0.6 17.7 16.2 1.5
1958 7.5 4.4 2.4 0.7 1.7 2.3 0.6 17.3 15.6 1.7
1959 7.5 3.5 2.4 0.7 1.7 2.2 0.6 16.2 14.5 1.7
1960 7.8 4.1 2.8 0.8 2.1 2.3 0.8 17.8 15.8 2.1
1961 7.8 4.0 3.1 0.8 2.3 2.2 0.7 17.8 15.5 2.3
1962 8.0 3.6 3.0 0.8 2.2 2.2 0.7 17.6 15.4 2.2
1963 7.9 3.6 3.3 0.9 2.4 2.2 0.7 17.8 15.4 2.4
1964 7.6 3.7 3.4 0.9 2.6 2.1 0.7 17.6 15.0 2.6
1965 7.1 3.7 3.2 0.8 2.4 2.1 0.8 17.0 14.6 2.4
1966 7.3 4.0 3.4 0.9 2.5 1.7 0.9 17.3 14.8 2.5
1967 7.6 4.2 4.0 1.0 3.0 1.7 0.9 18.4 15.4 3.0
1968 7.9 3.3 3.9 1.0 2.9 1.6 0.9 17.6 14.7 2.9
1969 9.2 3.9 4.1 1.1 3.1 1.6 0.9 19.7 16.7 3.1
1970 8.9 3.2 4.4 1.1 3.3 1.6 0.9 19.0 15.7 3.3
1971 8.0 2.5 4.4 1.1 3.3 1.5 0.9 17.3 14.0 3.3
1972 8.1 2.7 4.5 1.1 3.4 1.3 1.1 17.6 14.2 3.4
1973 7.9 2.8 4.8 1.3 3.5 1.2 0.9 17.6 14.1 3.5
1974 8.3 2.7 5.2 1.5 3.7 1.2 1.0 18.3 14.5 3.7
1975 7.8 2.6 5.4 1.4 4.0 1.1 1.0 17.9 13.9 4.0
1976 7.6 2.4 5.2 1.4 3.8 1.0 1.0 17.1 13.3 3.8
TQ 8.4 1.8 5.5 1.6 3.9 1.0 0.9 17.7 13.8 3.9
1977 8.0 2.8 5.4 1.5 3.9 0.9 1.0 18.0 14.1 3.9
1978 8.2 2.7 5.5 1.6 3.9 0.8 0.9 18.0 14.2 3.9
1979 8.7 2.6 5.6 1.6 3.9 0.7 0.9 18.5 14.6 3.9
1980 9.0 2.4 5.8 1.6 4.2 0.9 1.0 19.0 14.8 4.2
1981 9.4 2.0 6.0 1.7 4.3 1.3 0.9 19.6 15.3 4.3
1982 9.2 1.5 6.3 1.8 4.5 1.1 1.0 19.2 14.7 4.5
1983 8.4 1.1 6.1 1.8 4.3 1.0 0.9 17.5 13.2 4.3
1984 7.8 1.5 6.2 1.9 4.3 1.0 0.9 17.3 13.0 4.3
1985 8.1 1.5 6.4 1.9 4.5 0.9 0.9 17.7 13.2 4.5
1986 7.9 1.4 6.4 1.9 4.5 0.7 0.9 17.5 12.9 4.5
1987 8.4 1.8 6.5 1.9 4.6 0.7 0.9 18.4 13.8 4.6
1988 8.0 1.9 6.7 1.9 4.8 0.7 0.9 18.2 13.3 4.8
1989 8.3 1.9 6.7 1.8 4.9 0.6 0.9 18.4 13.5 4.9
Footnotes at end of table. Page 1 of 2
Fiscal Year Individual
Income Taxes
Corporation
Income Taxes Excise Taxes Other
7
Receipts by Source as Percentages of Gross Domestic Product: 1934-2015–continued
Social Insurance and Retirement Receipts Total Receipts
Total (On-Budget) (Off-Budget) Total (On-Budget) (Off-Budget)
1990 8.1 1.6 6.6 1.7 4.9 0.6 1.0 18.0 13.1 4.9
1991 7.9 1.7 6.7 1.7 5.0 0.7 0.9 17.8 12.8 5.0
1992 7.6 1.6 6.6 1.8 4.8 0.7 0.9 17.5 12.6 4.8
1993 7.7 1.8 6.5 1.8 4.7 0.7 0.8 17.5 12.8 4.7
1994 7.8 2.0 6.6 1.8 4.8 0.8 0.8 18.0 13.2 4.8
1995 8.0 2.1 6.6 1.8 4.8 0.8 0.9 18.4 13.6 4.8
1996 8.5 2.2 6.6 1.8 4.8 0.7 0.8 18.8 14.1 4.8
1997 9.0 2.2 6.6 1.8 4.8 0.7 0.8 19.2 14.5 4.8
1998 9.6 2.2 6.6 1.8 4.8 0.7 0.9 19.9 15.1 4.8
1999 9.6 2.0 6.6 1.8 4.8 0.8 0.9 19.8 15.0 4.8
2000 10.2 2.1 6.6 1.8 4.9 0.7 0.9 20.6 15.7 4.9
2001 9.7 1.5 6.8 1.8 5.0 0.6 0.8 19.5 14.5 5.0
2002 8.1 1.4 6.6 1.8 4.9 0.6 0.7 17.6 12.7 4.9
2003 7.2 1.2 6.5 1.7 4.8 0.6 0.7 16.2 11.5 4.8
2004 6.9 1.6 6.3 1.7 4.6 0.6 0.7 16.1 11.5 4.6
2005 7.5 2.2 6.4 1.7 4.6 0.6 0.7 17.3 12.7 4.6
2006 7.9 2.7 6.3 1.7 4.6 0.6 0.7 18.2 13.6 4.6
2007 8.4 2.7 6.3 1.7 4.6 0.5 0.7 18.5 13.9 4.6
2008 7.9 2.1 6.2 1.7 4.6 0.5 0.7 17.5 12.9 4.6
2009 6.4 1.0 6.3 1.7 4.6 0.4 0.7 14.8 10.2 4.6
ESTIMATES
2010 6.4 1.1 6.0 1.6 4.3 0.5 0.8 14.8 10.5 4.3
2011 7.3 1.9 6.1 1.7 4.4 0.5 0.9 16.8 12.4 4.4
2012 8.2 2.3 6.2 1.8 4.4 0.5 0.9 18.1 13.6 4.4
2013 8.5 2.3 6.2 1.8 4.5 0.5 1.0 18.6 14.1 4.5
2014 8.8 2.4 6.2 1.8 4.4 0.5 1.0 19.0 14.5 4.4
2015 9.0 2.1 6.2 1.8 4.5 0.5 1.1 18.9 14.5 4.5
* 0.05 percent
Source: Office of Management and Budget, Budget of the US Government FY 2011, Historical Tables, Table 2.3
Available at http://www.gpoaccess.gov/usbudget/fy11/sheets/hist02z3.xls (last accessed May 3, 2010).
Fiscal Year Individual Other
Income Taxes
Corporation
Income Taxes Excise Taxes
8
THE BUDGET FOR FISCAL YEAR 2011, HISTORICAL TABLES 21
Table 1.1—SUMMARY OF RECEIPTS, OUTLAYS, AND SURPLUSES OR DEFICITS (–): 1789–2015
(in millions of dollars)
Year
Total On-Budget Off-Budget
Receipts Outlays Surplus or
Deficit (–) Receipts Outlays Surplus or
Deficit (–) Receipts Outlays Surplus or
Deficit (–)
1789–1849 …………………………………………………………… 1,160 1,090 70 1,160 1,090 70 ……………… ……………… ………………
1850–1900 …………………………………………………………… 14,462 15,453 –991 14,462 15,453 –991 ……………… ……………… ………………
1901 ……………………………………………………………………. 588 525 63 588 525 63 ……………… ……………… ………………
1902 ……………………………………………………………………. 562 485 77 562 485 77 ……………… ……………… ………………
1903 ……………………………………………………………………. 562 517 45 562 517 45 ……………… ……………… ………………
1904 ……………………………………………………………………. 541 584 –43 541 584 –43 ……………… ……………… ………………
1905 ……………………………………………………………………. 544 567 –23 544 567 –23 ……………… ……………… ………………
1906 ……………………………………………………………………. 595 570 25 595 570 25 ……………… ……………… ………………
1907 ……………………………………………………………………. 666 579 87 666 579 87 ……………… ……………… ………………
1908 ……………………………………………………………………. 602 659 –57 602 659 –57 ……………… ……………… ………………
1909 ……………………………………………………………………. 604 694 –89 604 694 –89 ……………… ……………… ………………
1910 ……………………………………………………………………. 676 694 –18 676 694 –18 ……………… ……………… ………………
1911 ……………………………………………………………………. 702 691 11 702 691 11 ……………… ……………… ………………
1912 ……………………………………………………………………. 693 690 3 693 690 3 ……………… ……………… ………………
1913 ……………………………………………………………………. 714 715 –* 714 715 –* ……………… ……………… ………………
1914 ……………………………………………………………………. 725 726 –* 725 726 –* ……………… ……………… ………………
1915 ……………………………………………………………………. 683 746 –63 683 746 –63 ……………… ……………… ………………
1916 ……………………………………………………………………. 761 713 48 761 713 48 ……………… ……………… ………………
1917 ……………………………………………………………………. 1,101 1,954 –853 1,101 1,954 –853 ……………… ……………… ………………
1918 ……………………………………………………………………. 3,645 12,677 –9,032 3,645 12,677 –9,032 ……………… ……………… ………………
1919 ……………………………………………………………………. 5,130 18,493 –13,363 5,130 18,493 –13,363 ……………… ……………… ………………
1920 ……………………………………………………………………. 6,649 6,358 291 6,649 6,358 291 ……………… ……………… ………………
1921 ……………………………………………………………………. 5,571 5,062 509 5,571 5,062 509 ……………… ……………… ………………
1922 ……………………………………………………………………. 4,026 3,289 736 4,026 3,289 736 ……………… ……………… ………………
1923 ……………………………………………………………………. 3,853 3,140 713 3,853 3,140 713 ……………… ……………… ………………
1924 ……………………………………………………………………. 3,871 2,908 963 3,871 2,908 963 ……………… ……………… ………………
1925 ……………………………………………………………………. 3,641 2,924 717 3,641 2,924 717 ……………… ……………… ………………
1926 ……………………………………………………………………. 3,795 2,930 865 3,795 2,930 865 ……………… ……………… ………………
1927 ……………………………………………………………………. 4,013 2,857 1,155 4,013 2,857 1,155 ……………… ……………… ………………
1928 ……………………………………………………………………. 3,900 2,961 939 3,900 2,961 939 ……………… ……………… ………………
1929 ……………………………………………………………………. 3,862 3,127 734 3,862 3,127 734 ……………… ……………… ………………
1930 ……………………………………………………………………. 4,058 3,320 738 4,058 3,320 738 ……………… ……………… ………………
1931 ……………………………………………………………………. 3,116 3,577 –462 3,116 3,577 –462 ……………… ……………… ………………
1932 ……………………………………………………………………. 1,924 4,659 –2,735 1,924 4,659 –2,735 ……………… ……………… ………………
1933 ……………………………………………………………………. 1,997 4,598 –2,602 1,997 4,598 –2,602 ……………… ……………… ………………
1934 ……………………………………………………………………. 2,955 6,541 –3,586 2,955 6,541 –3,586 ……………… ……………… ………………
1935 ……………………………………………………………………. 3,609 6,412 –2,803 3,609 6,412 –2,803 ……………… ……………… ………………
1936 ……………………………………………………………………. 3,923 8,228 –4,304 3,923 8,228 –4,304 ……………… ……………… ………………
1937 ……………………………………………………………………. 5,387 7,580 –2,193 5,122 7,582 –2,460 265 –2 267
1938 ……………………………………………………………………. 6,751 6,840 –89 6,364 6,850 –486 387 –10 397
1939 ……………………………………………………………………. 6,295 9,141 –2,846 5,792 9,154 –3,362 503 –13 516
1940 ……………………………………………………………………. 6,548 9,468 –2,920 5,998 9,482 –3,484 550 –14 564
1941 ……………………………………………………………………. 8,712 13,653 –4,941 8,024 13,618 –5,594 688 35 653
1942 ……………………………………………………………………. 14,634 35,137 –20,503 13,738 35,071 –21,333 896 66 830
1943 ……………………………………………………………………. 24,001 78,555 –54,554 22,871 78,466 –55,595 1,130 89 1,041
1944 ……………………………………………………………………. 43,747 91,304 –47,557 42,455 91,190 –48,735 1,292 114 1,178
1945 ……………………………………………………………………. 45,159 92,712 –47,553 43,849 92,569 –48,720 1,310 143 1,167
1946 ……………………………………………………………………. 39,296 55,232 –15,936 38,057 55,022 –16,964 1,238 210 1,028
1947 ……………………………………………………………………. 38,514 34,496 4,018 37,055 34,193 2,861 1,459 303 1,157
1948 ……………………………………………………………………. 41,560 29,764 11,796 39,944 29,396 10,548 1,616 368 1,248
1949 ……………………………………………………………………. 39,415 38,835 580 37,724 38,408 –684 1,690 427 1,263
1950 ……………………………………………………………………. 39,443 42,562 –3,119 37,336 42,038 –4,702 2,106 524 1,583
1951 ……………………………………………………………………. 51,616 45,514 6,102 48,496 44,237 4,259 3,120 1,277 1,843
1952 ……………………………………………………………………. 66,167 67,686 –1,519 62,573 65,956 –3,383 3,594 1,730 1,864
1953 ……………………………………………………………………. 69,608 76,101 –6,493 65,511 73,771 –8,259 4,097 2,330 1,766
1954 ……………………………………………………………………. 69,701 70,855 –1,154 65,112 67,943 –2,831 4,589 2,912 1,677
See footnote at end of table.
9
22 THE BUDGET FOR FISCAL YEAR 2011, HISTORICAL TABLES
Table 1.1—SUMMARY OF RECEIPTS, OUTLAYS, AND SURPLUSES OR DEFICITS (–): 1789–2015—Continued
(in millions of dollars)
Year
Total On-Budget Off-Budget
Receipts Outlays Surplus or
Deficit (–) Receipts Outlays Surplus or
Deficit (–) Receipts Outlays Surplus or
Deficit (–)
1955 ……………………………………………………………………. 65,451 68,444 –2,993 60,370 64,461 –4,091 5,081 3,983 1,098
1956 ……………………………………………………………………. 74,587 70,640 3,947 68,162 65,668 2,494 6,425 4,972 1,452
1957 ……………………………………………………………………. 79,990 76,578 3,412 73,201 70,562 2,639 6,789 6,016 773
1958 ……………………………………………………………………. 79,636 82,405 –2,769 71,587 74,902 –3,315 8,049 7,503 546
1959 ……………………………………………………………………. 79,249 92,098 –12,849 70,953 83,102 –12,149 8,296 8,996 –700
1960 ……………………………………………………………………. 92,492 92,191 301 81,851 81,341 510 10,641 10,850 –209
1961 ……………………………………………………………………. 94,388 97,723 –3,335 82,279 86,046 –3,766 12,109 11,677 431
1962 ……………………………………………………………………. 99,676 106,821 –7,146 87,405 93,286 –5,881 12,271 13,535 –1,265
1963 ……………………………………………………………………. 106,560 111,316 –4,756 92,385 96,352 –3,966 14,175 14,964 –789
1964 ……………………………………………………………………. 112,613 118,528 –5,915 96,248 102,794 –6,546 16,366 15,734 632
1965 ……………………………………………………………………. 116,817 118,228 –1,411 100,094 101,699 –1,605 16,723 16,529 194
1966 ……………………………………………………………………. 130,835 134,532 –3,698 111,749 114,817 –3,068 19,085 19,715 –630
1967 ……………………………………………………………………. 148,822 157,464 –8,643 124,420 137,040 –12,620 24,401 20,424 3,978
1968 ……………………………………………………………………. 152,973 178,134 –25,161 128,056 155,798 –27,742 24,917 22,336 2,581
1969 ……………………………………………………………………. 186,882 183,640 3,242 157,928 158,436 –507 28,953 25,204 3,749
1970 ……………………………………………………………………. 192,807 195,649 –2,842 159,348 168,042 –8,694 33,459 27,607 5,852
1971 ……………………………………………………………………. 187,139 210,172 –23,033 151,294 177,346 –26,052 35,845 32,826 3,019
1972 ……………………………………………………………………. 207,309 230,681 –23,373 167,402 193,470 –26,068 39,907 37,212 2,695
1973 ……………………………………………………………………. 230,799 245,707 –14,908 184,715 199,961 –15,246 46,084 45,746 338
1974 ……………………………………………………………………. 263,224 269,359 –6,135 209,299 216,496 –7,198 53,925 52,862 1,063
1975 ……………………………………………………………………. 279,090 332,332 –53,242 216,633 270,780 –54,148 62,458 61,552 906
1976 ……………………………………………………………………. 298,060 371,792 –73,732 231,671 301,098 –69,427 66,389 70,695 –4,306
TQ ………………………………………………………………………. 81,232 95,975 –14,744 63,216 77,281 –14,065 18,016 18,695 –679
1977 ……………………………………………………………………. 355,559 409,218 –53,659 278,741 328,675 –49,933 76,817 80,543 –3,726
1978 ……………………………………………………………………. 399,561 458,746 –59,185 314,169 369,585 –55,416 85,391 89,161 –3,770
1979 ……………………………………………………………………. 463,302 504,028 –40,726 365,309 404,941 –39,633 97,994 99,087 –1,093
1980 ……………………………………………………………………. 517,112 590,941 –73,830 403,903 477,044 –73,141 113,209 113,898 –689
1981 ……………………………………………………………………. 599,272 678,241 –78,968 469,097 542,956 –73,859 130,176 135,285 –5,109
1982 ……………………………………………………………………. 617,766 745,743 –127,977 474,299 594,892 –120,593 143,467 150,851 –7,384
1983 ……………………………………………………………………. 600,562 808,364 –207,802 453,242 660,934 –207,692 147,320 147,430 –110
1984 ……………………………………………………………………. 666,438 851,805 –185,367 500,363 685,632 –185,269 166,075 166,174 –98
1985 ……………………………………………………………………. 734,037 946,344 –212,308 547,866 769,396 –221,529 186,171 176,949 9,222
1986 ……………………………………………………………………. 769,155 990,382 –221,227 568,927 806,842 –237,915 200,228 183,540 16,688
1987 ……………………………………………………………………. 854,288 1,004,017 –149,730 640,886 809,243 –168,357 213,402 194,775 18,627
1988 ……………………………………………………………………. 909,238 1,064,416 –155,178 667,747 860,012 –192,265 241,491 204,404 37,087
1989 ……………………………………………………………………. 991,105 1,143,744 –152,639 727,439 932,832 –205,393 263,666 210,911 52,754
1990 ……………………………………………………………………. 1,031,972 1,253,007 –221,036 750,316 1,027,942 –277,626 281,656 225,065 56,590
1991 ……………………………………………………………………. 1,054,996 1,324,234 –269,238 761,111 1,082,547 –321,435 293,885 241,687 52,198
1992 ……………………………………………………………………. 1,091,223 1,381,543 –290,321 788,797 1,129,205 –340,408 302,426 252,339 50,087
1993 ……………………………………………………………………. 1,154,341 1,409,392 –255,051 842,406 1,142,805 –300,398 311,934 266,587 45,347
1994 ……………………………………………………………………. 1,258,579 1,461,766 –203,186 923,554 1,182,394 –258,840 335,026 279,372 55,654
1995 ……………………………………………………………………. 1,351,801 1,515,753 –163,952 1,000,722 1,227,089 –226,367 351,079 288,664 62,415
1996 ……………………………………………………………………. 1,453,055 1,560,486 –107,431 1,085,563 1,259,582 –174,019 367,492 300,904 66,588
1997 ……………………………………………………………………. 1,579,240 1,601,124 –21,884 1,187,250 1,290,498 –103,248 391,990 310,626 81,364
1998 ……………………………………………………………………. 1,721,733 1,652,463 69,270 1,305,934 1,335,859 –29,925 415,799 316,604 99,195
1999 ……………………………………………………………………. 1,827,459 1,701,849 125,610 1,382,991 1,381,071 1,920 444,468 320,778 123,690
2000 ……………………………………………………………………. 2,025,198 1,788,957 236,241 1,544,614 1,458,192 86,422 480,584 330,765 149,819
2001 ……………………………………………………………………. 1,991,142 1,862,906 128,236 1,483,623 1,516,068 –32,445 507,519 346,838 160,681
2002 ……………………………………………………………………. 1,853,149 2,010,907 –157,758 1,337,828 1,655,245 –317,417 515,321 355,662 159,659
2003 ……………………………………………………………………. 1,782,321 2,159,906 –377,585 1,258,479 1,796,897 –538,418 523,842 363,009 160,833
2004 ……………………………………………………………………. 1,880,126 2,292,853 –412,727 1,345,381 1,913,342 –567,961 534,745 379,511 155,234
2005 ……………………………………………………………………. 2,153,625 2,471,971 –318,346 1,576,149 2,069,760 –493,611 577,476 402,211 175,265
2006 ……………………………………………………………………. 2,406,876 2,655,057 –248,181 1,798,494 2,232,988 –434,494 608,382 422,069 186,313
2007 ……………………………………………………………………. 2,568,001 2,728,702 –160,701 1,932,912 2,275,065 –342,153 635,089 453,637 181,452
2008 ……………………………………………………………………. 2,523,999 2,982,554 –458,555 1,865,953 2,507,803 –641,850 658,046 474,751 183,295
2009 ……………………………………………………………………. 2,104,995 3,517,681 –1,412,686 1,450,986 3,000,665 –1,549,679 654,009 517,016 136,993
See footnote at end of table.
10
Receipts, Outlays, and Surpluses or Deficits by Fund Group
1975-2008
(in millions of dollars – chained 2000 dollars)
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008 estimate
Receipts Federal Funds Receipts Trust Funds Outlays Federal Funds Outlays Trust Funds
11
31-Jan-11
Historical Highest Marginal Income Tax Rates
Year
Top Marginal
Rate Year
Top Marginal
Rate Year
Top Marginal
Rate
1913 7.0% 1946 86.45% 1979 70.00%
1914 7.0% 1947 86.45% 1980 70.00%
1915 7.0% 1948 82.13% 1981 69.13%
1916 15.0% 1949 82.13% 1982 50.00%
1917 67.0% 1950 91.00% 1983 50.00%
1918 77.0% 1951 91.00% 1984 50.00%
1919 73.0% 1952 92.00% 1985 50.00%
1920 73.0% 1953 92.00% 1986 50.00%
1921 73.0% 1954 91.00% 1987 38.50%
1922 56.0% 1955 91.00% 1988 28.00%
1923 56.0% 1956 91.00% 1989 28.00%
1924 46.0% 1957 91.00% 1990 31.00%
1925 25.0% 1958 91.00% 1991 31.00%
1926 25.0% 1959 91.00% 1992 31.00%
1927 25.0% 1960 91.00% 1993 39.60%
1928 25.0% 1961 91.00% 1994 39.60%
1929 24.0% 1962 91.00% 1995 39.60%
1930 25.0% 1963 91.00% 1996 39.60%
1931 25.0% 1964 77.00% 1997 39.60%
1932 63.0% 1965 70.00% 1998 39.60%
1933 63.0% 1966 70.00% 1999 39.60%
1934 63.0% 1967 70.00% 2000 39.60%
1935 63.0% 1968 75.25% 2001 38.60%
1936 79.0% 1969 77.00% 2002 38.60%
1937 79.0% 1970 71.75% 2003 35.00%
1938 79.0% 1971 70.00% 2004 35.00%
1939 79.0% 1972 70.00% 2005 35.00%
1940 81.10% 1973 70.00% 2006 35.00%
1941 81.00% 1974 70.00% 2007 35.00%
1942 88.00% 1975 70.00% 2008 35.00%
1943 88.00% 1976 70.00% 2009 35.00%
1944 94.00% 1977 70.00% 2010 35.00%
1945 94.00% 1978 70.00% 2011 35.00%
Note: This table contains a number of simplifications and ignores a number of
factors, such as a maximum tax on earned income of 50 percent when the top rate
was 70 percent and the current increase in rates due to income-related reductions in
value of itemized deductions. Perhaps most importantly, it ignores the large increase
in percentage of returns that were subject to this top rate.
Sources: Eugene Steuerle, The Urban Institute; Joseph Pechman, Federal Tax
Policy; Joint Committee on Taxation, Summary of Conference Agreement on the
Jobs and Growth Tax Relief Reconciliation Act of 2003, JCX-54-03, May 22, 2003;
IRS Revised Tax Rate Schedules
12
Percentage of GDP Source: Congressional Budget Office. Chart 29 of 39
13
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Social Security Online Trust Fund Data
Office of the Chief
Actuary Social Security & Medicare Tax Rates
Tax rates for each Social
Security trust fund
Maximum taxable
earnings
Social Security’s Old-Age, Survivors, and Disability Insurance
(OASDI) program and Medicare’s Hospital Insurance (HI) program
are financed primarily by employment taxes. Tax rates are set by law
(see sections 1401, 3101, and 3111 of the Internal Revenue Code)
and apply to earnings up to a maximum amount for OASDI.
The rates shown reflect the amounts received by the trust funds. In
certain years, the effective rate paid by employees, employers, and/or
self-employed workers was less than the rate received by the trust
funds, with the difference covered by general revenue. See the
footnotes for details.
Calendar
year
Tax rates as a percent of taxable earnings
Rate for employees and employers,
each Rate for self-employed workers
OASDI HI Total OASDI HI Total
1937-49 1.000 — 1.000 — – –
1950 1.500 — 1.500 — – –
1951-53 1.500 — 1.500 2.250 — 2.250
1954-56 2.000 — 2.000 3.000 — 3.000
1957-58 2.250 — 2.250 3.375 — 3.375
1959 2.500 — 2.500 3.750 — 3.750
1960-61 3.000 — 3.000 4.500 — 4.500
1962 3.125 — 3.125 4.700 — 4.700
1963-65 3.625 — 3.625 5.400 — 5.400
1966 3.850 0.350 4.200 5.800 0.350 6.150
1967 3.900 0.500 4.400 5.900 0.500 6.400
1968 3.800 0.600 4.400 5.800 0.600 6.400
1969-70 4.200 0.600 4.800 6.300 0.600 6.900
1971-72 4.600 0.600 5.200 6.900 0.600 7.500
1973 4.850 1.000 5.850 7.000 1.000 8.000
1974-77 4.950 0.900 5.850 7.000 0.900 7.900
1978 5.050 1.000 6.050 7.100 1.000 8.100
1979-80 5.080 1.050 6.130 7.050 1.050 8.100
1981 5.350 1.300 6.650 8.000 1.300 9.300
1982-83 5.400 1.300 6.700 8.050 1.300 9.350
1984 a 5.700 1.300 7.000 11.400 2.600 14.000
1985 a 5.700 1.350 7.050 11.400 2.700 14.100
14
Calendar
year
Tax rates as a percent of taxable earnings
Rate for employees and employers,
each Rate for self-employed workers
OASDI HI Total OASDI HI Total
1986-87 a 5.700 1.450 7.150 11.400 2.900 14.300
1988-89 a 6.060 1.450 7.510 12.120 2.900 15.020
1990 and later
b, c
6.200 1.450 7.650 12.400 2.900 15.300
a In 1984 only, an immediate credit of 0.3 percent of taxable wages was allowed against the OASDI taxes paid by
employees, resulting in an effective employee tax rate of 5.4 percent. The OASI and DI trust funds, however,
received general revenue equivalent to 0.3 percent of taxable wages for 1984. Similar credits of 2.7 percent, 2.3
percent, and 2.0 percent were allowed against the combined OASDI and HI taxes on net earnings from selfemployment
in 1984, 1985, and 1986-89, respectively.
b Beginning in 1990, self-employed workers are allowed a deduction, for purposes of computing their net
earnings, equal to half of the combined OASDI and HI contributions that would be payable without regard to the
contribution and benefit base. The OASDI contribution rate is then applied to net earnings after this deduction,
but subject to the OASDI base.
c For 2010, most employers were exempt from paying the employer share of OASDI tax on wages paid to certain
qualified individuals hired after February 3. For 2011, the OASDI tax rate is reduced by 2 percentage points for
employees and for self-employed workers, resulting in a 4.2 percent effective tax rate for employees and a 10.4
percent effective tax rate for self-employed workers. The reductions in 2010 and 2011 tax revenue due to lower
tax rates will be made up by transfers from the general fund of the Treasury to the OASI and DI trust funds.
Beginning in 2013, an additional HI tax of 0.9 percent is assessed on earned income exceeding $200,000 for
individuals and $250,000 for married couples filing jointly. This additional HI tax rate is not reflected in the tax
rates shown in the table.
15
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Social Security Online Automatic Increases
Office of the Chief
Actuary Contribution and Benefit Base
Automatic Increases
Cost-of-Living
Adjustment
Tax data
Wage-indexed amounts
Social Security’s Old-Age, Survivors, and Disability Insurance
(OASDI) program limits the amount of earnings subject to taxation for
a given year. The same annual limit also applies when those earnings
are used in a benefit computation. This limit generally increases with
increases in the national average wage index. We call this annual
limit the contribution and benefit base, or taxable maximum. For
earnings in 2011, this base is $106,800.
For Medicare’s Hospital Insurance (HI) program, the taxable
maximum was the same as that for the OASDI program for 1966-
1990. Separate HI taxable maximums of $125,000, $130,200, and
$135,000 were applicable in 1991-93, respectively. After 1993, there
has been no limitation on HI-taxable earnings.
An employee who pays contributions on earnings in excess of the
contribution and benefit base (because of employment with two or
more employers) is eligible for a refund of the excess employee
contributions.
For wages paid in 2011, employees pay 4.2 percent and employers
pay 6.2 percent in OASDI taxes. Thus, an individual with wages equal
to or larger than $106,800 would contribute $4,485.60 to the OASDI
program in 2011, and his or her employer would contribute $6,621.60.
Self-employed workers pay 10.4 percent in OASDI taxes on income
in 2011. By law, the OASI and DI trust funds will receive taxes as if
the tax rates were 6.2 percent for employees and employers, each,
and 12.4 percent for self-employed workers. The reduction in 2011
tax revenue due to lower tax rates will be made up by transfers from
the general fund of the Treasury to the trust funds. See tax rates for a
table of the OASDI and HI tax rates on wages and self-employment
income.
Year Amount
1937-50 $3,000
1951-54 3,600
1955-58 4,200
1959-65 4,800
1966-67 6,600
1968-71 7,800
1972 9,000
1973 10,800
Year Amount
1986 $42,000
1987 43,800
1988 45,000
1989 48,000
1990 51,300
1991 53,400
1992 55,500
1993 57,600
Year Amount
2006 $94,200
2007 97,500
2008 102,000
2009 106,800
2010 106,800
2011 106,800
Contribution and benefit bases, 1937-2011
16
1974 13,200
1975 14,100
1976 15,300
1977 16,500
1978 17,700
1979 22,900
1980 25,900
1981 29,700
1982 32,400
1983 35,700
1984 37,800
1985 39,600
1994 60,600
1995 61,200
1996 62,700
1997 65,400
1998 68,400
1999 72,600
2000 76,200
2001 80,400
2002 84,900
2003 87,000
2004 87,900
2005 90,000
Note: Amounts for 1937-74 and for 1979-81 were set by statute; all other amounts were determined under
automatic adjustment provisions of the Social Security Act.

The Quiet Coup
THE CRASH HAS LAID BARE MANY UNPLEASANT TRUTHS ABOUT THE UNITED STATES. ONE OF THE MOST
ALARMING, SAYS A FORMER CHIEF ECONOMIST OF THE INTERNATIONAL MONETARY FUND, IS THAT THE
FINANCE INDUSTRY HAS EFFECTIVELY CAPTURED OUR GOVERNMENT—A STATE OF AFFAIRS THAT MORE
TYPICALLY DESCRIBES EMERGING MARKETS, AND IS AT THE CENTER OF MANY EMERGING-MARKET CRISES.
IF THE IMF’S STAFF COULD SPEAK FREELY ABOUT THE U.S., IT WOULD TELL US WHAT IT TELLS ALL
COUNTRIES IN THIS SITUATION: RECOVERY WILL FAIL UNLESS WE BREAK THE FINANCIAL OLIGARCHY THAT
IS BLOCKING ESSENTIAL REFORM. AND IF WE ARE TO PREVENT A TRUE DEPRESSION, WE’RE RUNNING OUT
OF TIME.
By Simon Johnson
IMAGE CREDIT: JIM BOURG/REUTERS/CORBIS
ONE THING YOU learn rather quickly when working at the International Monetary Fund is that no
one is ever very happy to see you. Typically, your “clients” come in only after private capital has
abandoned them, after regional trading-bloc partners have been unable to throw a strong enough
lifeline, after last-ditch attempts to borrow from powerful friends like China or the European Union
have fallen through. You’re never at the top of anyone’s dance card.
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The reason, of course, is that the IMF specializes in telling its clients what they don’t want to hear. I
should know; I pressed painful changes on many foreign officials during my time there as chief
economist in 2007 and 2008. And I felt the effects of IMF pressure, at least indirectly, when I worked
with governments in Eastern Europe as they struggled after 1989, and with the private sector in Asia
and Latin America during the crises of the late 1990s and early 2000s. Over that time, from every
vantage point, I saw firsthand the steady flow of officials—from Ukraine, Russia, Thailand, Indonesia,
South Korea, and elsewhere—trudging to the fund when circumstances were dire and all else had
failed.
Every crisis is different, of course. Ukraine faced hyperinflation in 1994; Russia desperately needed
help when its short-term-debt rollover scheme exploded in the summer of 1998; the Indonesian rupiah
plunged in 1997, nearly leveling the corporate economy; that same year, South Korea’s 30-year
economic miracle ground to a halt when foreign banks suddenly refused to extend new credit.
But I must tell you, to IMF officials, all of these crises looked depressingly similar. Each country, of
course, needed a loan, but more than that, each needed to make big changes so that the loan could
really work. Almost always, countries in crisis need to learn to live within their means after a period of
excess—exports must be increased, and imports cut—and the goal is to do this without the most
horrible of recessions. Naturally, the fund’s economists spend time figuring out the policies—budget,
money supply, and the like—that make sense in this context. Yet the economic solution is seldom very
hard to work out.
No, the real concern of the fund’s senior staff, and the biggest obstacle to recovery, is almost invariably
the politics of countries in crisis.
Typically, these countries are in a desperate economic situation for one simple reason—the powerful
elites within them overreached in good times and took too many risks. Emerging-market governments
and their private-sector allies commonly form a tight-knit—and, most of the time, genteel—oligarchy,
running the country rather like a profit-seeking company in which they are the controlling
shareholders. When a country like Indonesia or South Korea or Russia grows, so do the ambitions of its
captains of industry. As masters of their mini-universe, these people make some investments that
clearly benefit the broader economy, but they also start making bigger and riskier bets. They reckon—
correctly, in most cases—that their political connections will allow them to push onto the government
any substantial problems that arise.
In Russia, for instance, the private sector is now in serious trouble because, over the past five years or
so, it borrowed at least $490 billion from global banks and investors on the assumption that the
country’s energy sector could support a permanent increase in consumption throughout the economy.
As Russia’s oligarchs spent this capital, acquiring other companies and embarking on ambitious
investment plans that generated jobs, their importance to the political elite increased. Growing
political support meant better access to lucrative contracts, tax breaks, and subsidies. And foreign
investors could not have been more pleased; all other things being equal, they prefer to lend money to
people who have the implicit backing of their national governments, even if that backing gives off the
faint whiff of corruption.
But inevitably, emerging-market oligarchs get carried away; they waste money and build massive
business empires on a mountain of debt. Local banks, sometimes pressured by the government,
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become too willing to extend credit to the elite and to those who depend on them. Overborrowing
always ends badly, whether for an individual, a company, or a country. Sooner or later, credit
conditions become tighter and no one will lend you money on anything close to affordable terms.
The downward spiral that follows is remarkably steep. Enormous companies teeter on the brink of
default, and the local banks that have lent to them collapse. Yesterday’s “public-private partnerships”
are relabeled “crony capitalism.” With credit unavailable, economic paralysis ensues, and conditions
just get worse and worse. The government is forced to draw down its foreign-currency reserves to pay
for imports, service debt, and cover private losses. But these reserves will eventually run out. If the
country cannot right itself before that happens, it will default on its sovereign debt and become an
economic pariah. The government, in its race to stop the bleeding, will typically need to wipe out some
of the national champions—now hemorrhaging cash—and usually restructure a banking system that’s
gone badly out of balance. It will, in other words, need to squeeze at least some of its oligarchs.
Squeezing the oligarchs, though, is seldom the strategy of choice among emerging-market
governments. Quite the contrary: at the outset of the crisis, the oligarchs are usually among the first to
get extra help from the government, such as preferential access to foreign currency, or maybe a nice tax
break, or—here’s a classic Kremlin bailout technique—the assumption of private debt obligations by the
government. Under duress, generosity toward old friends takes many innovative forms. Meanwhile,
needing to squeeze someone, most emerging-market governments look first to ordinary working folk—
at least until the riots grow too large.
Eventually, as the oligarchs in Putin’s Russia now realize, some within the elite have to lose out before
recovery can begin. It’s a game of musical chairs: there just aren’t enough currency reserves to take
care of everyone, and the government cannot afford to take over private-sector debt completely.
So the IMF staff looks into the eyes of the minister of finance and decides whether the government is
serious yet. The fund will give even a country like Russia a loan eventually, but first it wants to make
sure Prime Minister Putin is ready, willing, and able to be tough on some of his friends. If he is not
ready to throw former pals to the wolves, the fund can wait. And when he is ready, the fund is happy to
make helpful suggestions—particularly with regard to wresting control of the banking system from the
hands of the most incompetent and avaricious “entrepreneurs.”
Of course, Putin’s ex-friends will fight back. They’ll mobilize allies, work the system, and put pressure
on other parts of the government to get additional subsidies. In extreme cases, they’ll even try
subversion—including calling up their contacts in the American foreign-policy establishment, as the
Ukrainians did with some success in the late 1990s.
Many IMF programs “go off track” (a euphemism) precisely because the government can’t stay tough
on erstwhile cronies, and the consequences are massive inflation or other disasters. A program “goes
back on track” once the government prevails or powerful oligarchs sort out among themselves who will
govern—and thus win or lose—under the IMF-supported plan. The real fight in Thailand and Indonesia
in 1997 was about which powerful families would lose their banks. In Thailand, it was handled
relatively smoothly. In Indonesia, it led to the fall of President Suharto and economic chaos.
From long years of experience, the IMF staff knows its program will succeed—stabilizing the economy
and enabling growth—only if at least some of the powerful oligarchs who did so much to create the
underlying problems take a hit. This is the problem of all emerging markets.
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Becoming a Banana Republic
In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of
moments we have recently seen in emerging markets (and only in emerging markets): South Korea
(1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global
investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt,
suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll
over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into
bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up
overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled
out into the rest of the economy, causing a severe economic contraction and hardship for millions of
people.
But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of
the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit
backing of the government, until the inevitable collapse. More alarming, they are now using their
influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of
its nosedive. The government seems helpless, or unwilling, to act against them.
Top investment bankers and government officials like to lay the blame for the current crisis on the
lowering of U.S. interest rates after the dotcom bust or, even better—in a “buck stops somewhere else”
sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie Mae
or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And, of
course, it is axiomatic to everyone that the regulators responsible for “safety and soundness” were fast
asleep at the wheel.
But these various policies—lightweight regulation, cheap money, the unwritten Chinese-American
economic alliance, the promotion of homeownership—had something in common. Even though some
are traditionally associated with Democrats and some with Republicans, they all benefited the financial
sector. Policy changes that might have forestalled the crisis but would have limited the financial
sector’s profits—such as Brooksley Born’s now-famous attempts to regulate credit-default swaps at the
Commodity Futures Trading Commission, in 1998—were ignored or swept aside.
The financial industry has not always enjoyed such favored treatment. But for the past 25 years or so,
finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and it only
gained strength with the deregulatory policies of the Clinton and George W. Bush administrations.
Several other factors helped fuel the financial industry’s ascent. Paul Volcker’s monetary policy in the
1980s, and the increased volatility in interest rates that accompanied it, made bond trading much more
lucrative. The invention of securitization, interest-rate swaps, and credit-default swaps greatly
increased the volume of transactions that bankers could make money on. And an aging and
increasingly wealthy population invested more and more money in securities, helped by the invention
of the IRA and the 401(k) plan. Together, these developments vastly increased the profit opportunities
in financial services.
Not surprisingly, Wall Street ran with these opportunities. From 1973 to 1985, the financial sector
never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19
percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in
4
Click the chart above for a larger view
the postwar period. This decade, it reached 41 percent. Pay rose
just as dramatically. From 1948 to 1982, average compensation
in the financial sector ranged between 99 percent and 108
percent of the average for all domestic private industries. From
1983, it shot upward, reaching 181 percent in 2007.
The great wealth that the financial sector created and
concentrated gave bankers enormous political weight—a weight
not seen in the U.S. since the era of J.P. Morgan (the man). In
that period, the banking panic of 1907 could be stopped only by
coordination among private-sector bankers: no government
entity was able to offer an effective response. But that first age of
banking oligarchs came to an end with the passage of significant
banking regulation in response to the Great Depression; the
reemergence of an American financial oligarchy is quite recent.
The Wall Street–Washington Corridor
Of course, the U.S. is unique. And just as we have the world’s
most advanced economy, military, and technology, we also have its most advanced oligarchy.
In a primitive political system, power is transmitted through violence, or the threat of violence:
military coups, private militias, and so on. In a less primitive system more typical of emerging markets,
power is transmitted via money: bribes, kickbacks, and offshore bank accounts. Although lobbying and
campaign contributions certainly play major roles in the American political system, old-fashioned
corruption—envelopes stuffed with $100 bills—is probably a sideshow today, Jack Abramoff
notwithstanding.
Instead, the American financial industry gained political power by amassing a kind of cultural capital—
a belief system. Once, perhaps, what was good for General Motors was good for the country. Over the
past decade, the attitude took hold that what was good for Wall Street was good for the country. The
banking-and-securities industry has become one of the top contributors to political campaigns, but at
the peak of its influence, it did not have to buy favors the way, for example, the tobacco companies or
military contractors might have to. Instead, it benefited from the fact that Washington insiders already
believed that large financial institutions and free-flowing capital markets were crucial to America’s
position in the world.
One channel of influence was, of course, the flow of individuals between Wall Street and Washington.
Robert Rubin, once the co-chairman of Goldman Sachs, served in Washington as Treasury secretary
under Clinton, and later became chairman of Citigroup’s executive committee. Henry Paulson, CEO of
Goldman Sachs during the long boom, became Treasury secretary under George W.Bush. John Snow,
Paulson’s predecessor, left to become chairman of Cerberus Capital Management, a large privateequity
firm that also counts Dan Quayle among its executives. Alan Greenspan, after leaving the
Federal Reserve, became a consultant to Pimco, perhaps the biggest player in international bond
markets.
These personal connections were multiplied many times over at the lower levels of the past three
presidential administrations, strengthening the ties between Washington and Wall Street. It has
5
become something of a tradition for Goldman Sachs employees to go into public service after they leave
the firm. The flow of Goldman alumni—including Jon Corzine, now the governor of New Jersey, along
with Rubin and Paulson—not only placed people with Wall Street’s worldview in the halls of power; it
also helped create an image of Goldman (inside the Beltway, at least) as an institution that was itself
almost a form of public service.
Wall Street is a very seductive place, imbued with an air of power. Its executives truly believe that they
control the levers that make the world go round. A civil servant from Washington invited into their
conference rooms, even if just for a meeting, could be forgiven for falling under their sway. Throughout
my time at the IMF, I was struck by the easy access of leading financiers to the highest U.S.
government officials, and the interweaving of the two career tracks. I vividly remember a meeting in
early 2008—attended by top policy makers from a handful of rich countries—at which the chair
casually proclaimed, to the room’s general approval, that the best preparation for becoming a centralbank
governor was to work first as an investment banker.
A whole generation of policy makers has been mesmerized by Wall Street, always and utterly convinced
that whatever the banks said was true. Alan Greenspan’s pronouncements in favor of unregulated
financial markets are well known. Yet Greenspan was hardly alone. This is what Ben Bernanke, the
man who succeeded him, said in 2006: “The management of market risk and credit risk has become
increasingly sophisticated. … Banking organizations of all sizes have made substantial strides over the
past two decades in their ability to measure and manage risks.”
Of course, this was mostly an illusion. Regulators, legislators, and academics almost all assumed that
the managers of these banks knew what they were doing. In retrospect, they didn’t. AIG’s Financial
Products division, for instance, made $2.5 billion in pretax profits in 2005, largely by selling
underpriced insurance on complex, poorly understood securities. Often described as “picking up
nickels in front of a steamroller,” this strategy is profitable in ordinary years, and catastrophic in bad
ones. As of last fall, AIG had outstanding insurance on more than $400 billion in securities. To date,
the U.S. government, in an effort to rescue the company, has committed about $180 billion in
investments and loans to cover losses that AIG’s sophisticated risk modeling had said were virtually
impossible.
Wall Street’s seductive power extended even (or especially) to finance and economics professors,
historically confined to the cramped offices of universities and the pursuit of Nobel Prizes. As
mathematical finance became more and more essential to practical finance, professors increasingly
took positions as consultants or partners at financial institutions. Myron Scholes and Robert Merton,
Nobel laureates both, were perhaps the most famous; they took board seats at the hedge fund Long-
Term Capital Management in 1994, before the fund famously flamed out at the end of the decade. But
many others beat similar paths. This migration gave the stamp of academic legitimacy (and the
intimidating aura of intellectual rigor) to the burgeoning world of high finance.
As more and more of the rich made their money in finance, the cult of finance seeped into the culture
at large. Works like Barbarians at the Gate, Wall Street, and Bonfire of the Vanities—all intended as
cautionary tales—served only to increase Wall Street’s mystique. Michael Lewis noted in Portfolio last
year that when he wrote Liar’s Poker, an insider’s account of the financial industry, in 1989, he had
hoped the book might provoke outrage at Wall Street’s hubris and excess. Instead, he found himself
“knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to
6
share. … They’d read my book as a how-to manual.” Even Wall Street’s criminals, like Michael Milken
and Ivan Boesky, became larger than life. In a society that celebrates the idea of making money, it was
easy to infer that the interests of the financial sector were the same as the interests of the country—and
that the winners in the financial sector knew better what was good for America than did the career civil
servants in Washington. Faith in free financial markets grew into conventional wisdom—trumpeted on
the editorial pages of The Wall Street Journal and on the floor of Congress.
From this confluence of campaign finance, personal connections, and ideology there flowed, in just the
past decade, a river of deregulatory policies that is, in hindsight, astonishing:
• insistence on free movement of capital across borders;
• the repeal of Depression-era regulations separating commercial and investment banking;
• a congressional ban on the regulation of credit-default swaps;
• major increases in the amount of leverage allowed to investment banks;
• a light (dare I say invisible?) hand at the Securities and Exchange Commission in its regulatory
enforcement;
• an international agreement to allow banks to measure their own riskiness;
• and an intentional failure to update regulations so as to keep up with the tremendous pace of
financial innovation.
The mood that accompanied these measures in Washington seemed to swing between nonchalance and
outright celebration: finance unleashed, it was thought, would continue to propel the economy to
greater heights.
America’s Oligarchs and the Financial Crisis
The oligarchy and the government policies that aided it did not alone cause the financial crisis that
exploded last year. Many other factors contributed, including excessive borrowing by households and
lax lending standards out on the fringes of the financial world. But major commercial and investment
banks—and the hedge funds that ran alongside them—were the big beneficiaries of the twin housing
and equity-market bubbles of this decade, their profits fed by an ever-increasing volume of
transactions founded on a relatively small base of actual physical assets. Each time a loan was sold,
packaged, securitized, and resold, banks took their transaction fees, and the hedge funds buying those
securities reaped ever-larger fees as their holdings grew.
Because everyone was getting richer, and the health of the national economy depended so heavily on
growth in real estate and finance, no one in Washington had any incentive to question what was going
on. Instead, Fed Chairman Greenspan and President Bush insisted metronomically that the economy
was fundamentally sound and that the tremendous growth in complex securities and credit-default
swaps was evidence of a healthy economy where risk was distributed safely.
In the summer of 2007, signs of strain started appearing. The boom had produced so much debt that
even a small economic stumble could cause major problems, and rising delinquencies in subprime
mortgages proved the stumbling block. Ever since, the financial sector and the federal government
have been behaving exactly the way one would expect them to, in light of past emerging-market crises.
7
By now, the princes of the financial world have of course been stripped naked as leaders and
strategists—at least in the eyes of most Americans. But as the months have rolled by, financial elites
have continued to assume that their position as the economy’s favored children is safe, despite the
wreckage they have caused.
Stanley O’Neal, the CEO of Merrill Lynch, pushed his firm heavily into the mortgage-backed-securities
market at its peak in 2005 and 2006; in October 2007, he acknowledged, “The bottom line is, we—I—
got it wrong by being overexposed to subprime, and we suffered as a result of impaired liquidity in that
market. No one is more disappointed than I am in that result.” O’Neal took home a $14 million bonus
in 2006; in 2007, he walked away from Merrill with a severance package worth $162 million, although
it is presumably worth much less today.
In October, John Thain, Merrill Lynch’s final CEO, reportedly lobbied his board of directors for a
bonus of $30 million or more, eventually reducing his demand to $10 million in December; he
withdrew the request, under a firestorm of protest, only after it was leaked to The Wall Street Journal.
Merrill Lynch as a whole was no better: it moved its bonus payments, $4 billion in total, forward to
December, presumably to avoid the possibility that they would be reduced by Bank of America, which
would own Merrill beginning on January 1. Wall Street paid out $18 billion in year-end bonuses last
year to its New York City employees, after the government disbursed $243 billion in emergency
assistance to the financial sector.
In a financial panic, the government must respond with both speed and overwhelming force. The root
problem is uncertainty—in our case, uncertainty about whether the major banks have sufficient assets
to cover their liabilities. Half measures combined with wishful thinking and a wait-and-see attitude
cannot overcome this uncertainty. And the longer the response takes, the longer the uncertainty will
stymie the flow of credit, sap consumer confidence, and cripple the economy—ultimately making the
problem much harder to solve. Yet the principal characteristics of the government’s response to the
financial crisis have been delay, lack of transparency, and an unwillingness to upset the financial
sector.
The response so far is perhaps best described as “policy by deal”: when a major financial institution
gets into trouble, the Treasury Department and the Federal Reserve engineer a bailout over the
weekend and announce on Monday that everything is fine. In March 2008, Bear Stearns was sold to JP
Morgan Chase in what looked to many like a gift to JP Morgan. (Jamie Dimon, JP Morgan’s CEO, sits
on the board of directors of the Federal Reserve Bank of New York, which, along with the Treasury
Department, brokered the deal.) In September, we saw the sale of Merrill Lynch to Bank of America,
the first bailout of AIG, and the takeover and immediate sale of Washington Mutual to JP Morgan—all
of which were brokered by the government. In October, nine large banks were recapitalized on the
same day behind closed doors in Washington. This, in turn, was followed by additional bailouts for
Citigroup, AIG, Bank of America, Citigroup (again), and AIG (again).
Some of these deals may have been reasonable responses to the immediate situation. But it was never
clear (and still isn’t) what combination of interests was being served, and how. Treasury and the Fed
did not act according to any publicly articulated principles, but just worked out a transaction and
claimed it was the best that could be done under the circumstances. This was late-night, backroom
dealing, pure and simple.
8
Throughout the crisis, the government has taken extreme care not to upset the interests of the financial
institutions, or to question the basic outlines of the system that got us here. In September 2008, Henry
Paulson asked Congress for $700 billion to buy toxic assets from banks, with no strings attached and
no judicial review of his purchase decisions. Many observers suspected that the purpose was to overpay
for those assets and thereby take the problem off the banks’ hands—indeed, that is the only way that
buying toxic assets would have helped anything. Perhaps because there was no way to make such a
blatant subsidy politically acceptable, that plan was shelved.
Instead, the money was used to recapitalize banks, buying shares in them on terms that were grossly
favorable to the banks themselves. As the crisis has deepened and financial institutions have needed
more help, the government has gotten more and more creative in figuring out ways to provide banks
with subsidies that are too complex for the general public to understand. The first AIG bailout, which
was on relatively good terms for the taxpayer, was supplemented by three further bailouts whose terms
were more AIG-friendly. The second Citigroup bailout and the Bank of America bailout included
complex asset guarantees that provided the banks with insurance at below-market rates. The third
Citigroup bailout, in late February, converted government-owned preferred stock to common stock at a
price significantly higher than the market price—a subsidy that probably even most Wall Street
Journal readers would miss on first reading. And the convertible preferred shares that the Treasury
will buy under the new Financial Stability Plan give the conversion option (and thus the upside) to the
banks, not the government.
This latest plan—which is likely to provide cheap loans to hedge funds and others so that they can buy
distressed bank assets at relatively high prices—has been heavily influenced by the financial sector, and
Treasury has made no secret of that. As Neel Kashkari, a senior Treasury official under both Henry
Paulson and Tim Geithner (and a Goldman alum) told Congress in March, “We had received inbound
unsolicited proposals from people in the private sector saying, ‘We have capital on the sidelines; we
want to go after [distressed bank] assets.’” And the plan lets them do just that: “By marrying
government capital—taxpayer capital—with private-sector capital and providing financing, you can
enable those investors to then go after those assets at a price that makes sense for the investors and at a
price that makes sense for the banks.” Kashkari didn’t mention anything about what makes sense for
the third group involved: the taxpayers.
Even leaving aside fairness to taxpayers, the government’s velvet-glove approach with the banks is
deeply troubling, for one simple reason: it is inadequate to change the behavior of a financial sector
accustomed to doing business on its own terms, at a time when that behavior must change. As an
unnamed senior bank official said to The New York Times last fall, “It doesn’t matter how much Hank
Paulson gives us, no one is going to lend a nickel until the economy turns.” But there’s the rub: the
economy can’t recover until the banks are healthy and willing to lend.
The Way Out
Looking just at the financial crisis (and leaving aside some problems of the larger economy), we face at
least two major, interrelated problems. The first is a desperately ill banking sector that threatens to
choke off any incipient recovery that the fiscal stimulus might generate. The second is a political
balance of power that gives the financial sector a veto over public policy, even as that sector loses
popular support.
9
Big banks, it seems, have only gained political strength since the crisis began. And this is not
surprising. With the financial system so fragile, the damage that a major bank failure could cause—
Lehman was small relative to Citigroup or Bank of America—is much greater than it would be during
ordinary times. The banks have been exploiting this fear as they wring favorable deals out of
Washington. Bank of America obtained its second bailout package (in January) after warning the
government that it might not be able to go through with the acquisition of Merrill Lynch, a prospect
that Treasury did not want to consider.
The challenges the United States faces are familiar territory to the people at the IMF. If you hid the
name of the country and just showed them the numbers, there is no doubt what old IMF hands would
say: nationalize troubled banks and break them up as necessary.
In some ways, of course, the government has already taken control of the banking system. It has
essentially guaranteed the liabilities of the biggest banks, and it is their only plausible source of capital
today. Meanwhile, the Federal Reserve has taken on a major role in providing credit to the economy—
the function that the private banking sector is supposed to be performing, but isn’t. Yet there are limits
to what the Fed can do on its own; consumers and businesses are still dependent on banks that lack the
balance sheets and the incentives to make the loans the economy needs, and the government has no
real control over who runs the banks, or over what they do.
At the root of the banks’ problems are the large losses they have undoubtedly taken on their securities
and loan portfolios. But they don’t want to recognize the full extent of their losses, because that would
likely expose them as insolvent. So they talk down the problem, and ask for handouts that aren’t
enough to make them healthy (again, they can’t reveal the size of the handouts that would be necessary
for that), but are enough to keep them upright a little longer. This behavior is corrosive: unhealthy
banks either don’t lend (hoarding money to shore up reserves) or they make desperate gambles on high
-risk loans and investments that could pay off big, but probably won’t pay off at all. In either case, the
economy suffers further, and as it does, bank assets themselves continue to deteriorate—creating a
highly destructive vicious cycle.
To break this cycle, the government must force the banks to acknowledge the scale of their problems.
As the IMF understands (and as the U.S. government itself has insisted to multiple emerging-market
countries in the past), the most direct way to do this is nationalization. Instead, Treasury is trying to
negotiate bailouts bank by bank, and behaving as if the banks hold all the cards—contorting the terms
of each deal to minimize government ownership while forswearing government influence over bank
strategy or operations. Under these conditions, cleaning up bank balance sheets is impossible.
Nationalization would not imply permanent state ownership. The IMF’s advice would be, essentially:
scale up the standard Federal Deposit Insurance Corporation process. An FDIC “intervention” is
basically a government-managed bankruptcy procedure for banks. It would allow the government to
wipe out bank shareholders, replace failed management, clean up the balance sheets, and then sell the
banks back to the private sector. The main advantage is immediate recognition of the problem so that it
can be solved before it grows worse.
The government needs to inspect the balance sheets and identify the banks that cannot survive a severe
recession. These banks should face a choice: write down your assets to their true value and raise private
capital within 30 days, or be taken over by the government. The government would write down the
10
toxic assets of banks taken into receivership—recognizing reality—and transfer those assets to a
separate government entity, which would attempt to salvage whatever value is possible for the taxpayer
(as the Resolution Trust Corporation did after the savings-and-loan debacle of the 1980s). The rump
banks—cleansed and able to lend safely, and hence trusted again by other lenders and investors—could
then be sold off.
Cleaning up the megabanks will be complex. And it will be expensive for the taxpayer; according to the
latest IMF numbers, the cleanup of the banking system would probably cost close to $1.5 trillion (or 10
percent of our GDP) in the long term. But only decisive government action—exposing the full extent of
the financial rot and restoring some set of banks to publicly verifiable health—can cure the financial
sector as a whole.
This may seem like strong medicine. But in fact, while necessary, it is insufficient. The second problem
the U.S. faces—the power of the oligarchy—is just as important as the immediate crisis of lending. And
the advice from the IMF on this front would again be simple: break the oligarchy.
Oversize institutions disproportionately influence public policy; the major banks we have today draw
much of their power from being too big to fail. Nationalization and re-privatization would not change
that; while the replacement of the bank executives who got us into this crisis would be just and
sensible, ultimately, the swapping-out of one set of powerful managers for another would change only
the names of the oligarchs.
Ideally, big banks should be sold in medium-size pieces, divided regionally or by type of business.
Where this proves impractical—since we’ll want to sell the banks quickly—they could be sold whole, but
with the requirement of being broken up within a short time. Banks that remain in private hands
should also be subject to size limitations.
This may seem like a crude and arbitrary step, but it is the best way to limit the power of individual
institutions in a sector that is essential to the economy as a whole. Of course, some people will
complain about the “efficiency costs” of a more fragmented banking system, and these costs are real.
But so are the costs when a bank that is too big to fail—a financial weapon of mass self-destruction—
explodes. Anything that is too big to fail is too big to exist.
To ensure systematic bank breakup, and to prevent the eventual reemergence of dangerous behemoths,
we also need to overhaul our antitrust legislation. Laws put in place more than 100 years ago to combat
industrial monopolies were not designed to address the problem we now face. The problem in the
financial sector today is not that a given firm might have enough market share to influence prices; it is
that one firm or a small set of interconnected firms, by failing, can bring down the economy. The
Obama administration’s fiscal stimulus evokes FDR, but what we need to imitate here is Teddy
Roosevelt’s trust-busting.
Caps on executive compensation, while redolent of populism, might help restore the political balance
of power and deter the emergence of a new oligarchy. Wall Street’s main attraction—to the people who
work there and to the government officials who were only too happy to bask in its reflected glory—has
been the astounding amount of money that could be made. Limiting that money would reduce the
allure of the financial sector and make it more like any other industry.
11
Still, outright pay caps are clumsy, especially in the long run. And most money is now made in largely
unregulated private hedge funds and private-equity firms, so lowering pay would be complicated.
Regulation and taxation should be part of the solution. Over time, though, the largest part may involve
more transparency and competition, which would bring financial-industry fees down. To those who say
this would drive financial activities to other countries, we can now safely say: fine.
Two Paths
To paraphrase Joseph Schumpeter, the early-20th-century economist, everyone has elites; the
important thing is to change them from time to time. If the U.S. were just another country, coming to
the IMF with hat in hand, I might be fairly optimistic about its future. Most of the emerging-market
crises that I’ve mentioned ended relatively quickly, and gave way, for the most part, to relatively strong
recoveries. But this, alas, brings us to the limit of the analogy between the U.S. and emerging markets.
Emerging-market countries have only a precarious hold on wealth, and are weaklings globally. When
they get into trouble, they quite literally run out of money—or at least out of foreign currency, without
which they cannot survive. They must make difficult decisions; ultimately, aggressive action is baked
into the cake. But the U.S., of course, is the world’s most powerful nation, rich beyond measure, and
blessed with the exorbitant privilege of paying its foreign debts in its own currency, which it can print.
As a result, it could very well stumble along for years—as Japan did during its lost decade—never
summoning the courage to do what it needs to do, and never really recovering. A clean break with the
past—involving the takeover and cleanup of major banks—hardly looks like a sure thing right now.
Certainly no one at the IMF can force it.
In my view, the U.S. faces two plausible scenarios. The first involves complicated bank-by-bank deals
and a continual drumbeat of (repeated) bailouts, like the ones we saw in February with Citigroup and
AIG. The administration will try to muddle through, and confusion will reign.
Boris Fyodorov, the late finance minister of Russia, struggled for much of the past 20 years against
oligarchs, corruption, and abuse of authority in all its forms. He liked to say that confusion and chaos
were very much in the interests of the powerful—letting them take things, legally and illegally, with
impunity. When inflation is high, who can say what a piece of property is really worth? When the credit
system is supported by byzantine government arrangements and backroom deals, how do you know
that you aren’t being fleeced?
Our future could be one in which continued tumult feeds the looting of the financial system, and we
talk more and more about exactly how our oligarchs became bandits and how the economy just can’t
seem to get into gear.
The second scenario begins more bleakly, and might end that way too. But it does provide at least some
hope that we’ll be shaken out of our torpor. It goes like this: the global economy continues to
deteriorate, the banking system in east-central Europe collapses, and—because eastern Europe’s banks
are mostly owned by western European banks—justifiable fears of government insolvency spread
throughout the Continent. Creditors take further hits and confidence falls further. The Asian
economies that export manufactured goods are devastated, and the commodity producers in Latin
America and Africa are not much better off. A dramatic worsening of the global environment forces the
U.S. economy, already staggering, down onto both knees. The baseline growth rates used in the
administration’s current budget are increasingly seen as unrealistic, and the rosy “stress scenario” that
12
the U.S. Treasury is currently using to evaluate banks’ balance sheets becomes a source of great
embarrassment.
Under this kind of pressure, and faced with the prospect of a national and global collapse, minds may
become more concentrated.
The conventional wisdom among the elite is still that the current slump “cannot be as bad as the Great
Depression.” This view is wrong. What we face now could, in fact, be worse than the Great
Depression—because the world is now so much more interconnected and because the banking sector is
now so big. We face a synchronized downturn in almost all countries, a weakening of confidence
among individuals and firms, and major problems for government finances. If our leadership wakes up
to the potential consequences, we may yet see dramatic action on the banking system and a breaking of
the old elite. Let us hope it is not then too late.
This article available online at:
http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/7364/
Copyright © 2011 by The Atlantic Monthly Group. All Rights Reserved

Introduction: Why We Need to Stand Up for
Government
“It is not an
exaggeration to
say that the rightwing
in this
country has
declared war on
government.”
We need to better understand the indispensable roles that
government plays in our society, and we need to come to the
defense of this unfairly maligned institution.
Why do we need to stand up for government? Because for decades,
this valuable institution has been unfairly attacked and maligned
by right-wing forces in this country. To make matters worse, parts
of the mainstream media have eagerly joined in this government
bashing. Hardly a day goes by on Fox News without one their
conservative commentators gleefully lambasting “wasteful” social
programs, “ridiculous” regulations, and the “socialist” politicians
who support those “stupid” things.
Until now, those who have been attacking government have been doing a much better job than the
few who have been trying to defend it. For example, Republicans have been waging their antigovernment
campaign on two fronts. First has been the attack on specific government programs,
from welfare and Medicaid to environmental protection and business regulation. Second, and
perhaps more important, has been the effort to delegitimize government itself – to convince
Americans that government is a bad thing that should be limited whenever possible.
Unfortunately, many centrist and liberal politicians have been fighting back on only one front. They
tried, during the Bush administration, to defend particular public sector programs from attack,
including Social Security and environmental protection. But until recently, they have not been
aggressively defending the idea that government itself is valuable and beneficial. They have not
been making the positive case for a healthier and more active public sector.
Actually, it was worse than that. Beginning in the 1980s, some Democrats beat a retreat away from
the notion that government is good. They routinely reinforced anti-government stereotypes by
focusing on its negative aspects, such as complaining about government waste. Many also supported
damaging tax cuts and ill-considered deregulation efforts. And some Democratic candidates even
joined Republicans in running against Washington and “big government” in their election
An Unapologetic Defense of a Vital Institution
A web project of Douglas J. Amy, Professor of Politics at Mount Holyoke College
1
campaigns. Consider the words uttered by Bill Clinton in his 1996 State of The Union Address: “We
know big government does not have all the answers. We know there’s not a program for every
problem. … The era of big government is over.” These kinds of statements inadvertently added
legitimacy to the right-wing crusade against government. One conservative journal, the Weekly
Standard, was so excited about Clinton’s statement that they declared on their front cover “We’ve
Won!”
Clearly many centrist and liberal lawmakers understood the valuable and indispensable role that
government plays in our society, but many seemed to believe that if they too jumped on the antigovernment
band-wagon, this would take the issue away from the conservatives. But this strategy
utterly failed. It only added fuel to the anti-government fire that Republicans had been stoking for
years. Far from abandoning this issue, the right only pressed harder in their efforts to delegitimize
government and reduce liberal programs.
It is important to see that this Democratic retreat represented an enormous change from the more
positive attitude toward government – even big government – that was common in the earlier parts
of the twentieth century. Then, many politicians and members of the public embraced big
government as the only thing that could counter-balance the power of big business, prevail over the
big foreign threats of fascism and communism, and solve big societal problems like economic
depressions, racism, and environmental pollution.
Fortunately, the election of Barack Obama seemed to signal an end to the liberal retreat from
government. He has portrayed himself as a champion of government and has pledged to
reinvigorate the public sector. He understands that we still face big problems as a society –
problems that only big government can solve. These include our financial crisis, global warming,
persistent poverty, an ongoing healthcare crisis, an unsafe food supply system, vastly unequal
educational opportunities, a deteriorating infrastructure, and a looming pension crisis. And the
American public seems to increasingly appreciate the vital role that government programs can play
in confronting these difficulties.
But despite these hopeful signs, it is clear that the battle over government is not over. While the
Republicans are presently in retreat on the national level, they still control many state and local
governments and continue to pursue an agenda of cutting taxes and slashing government services.
And even in Congress, many conservatives continue to espouse the gospel of small government and
they have opposed the President’s effort to revive the economy, improve education, promote
renewable energy, etc.
So there is still a need to make vigorous and reasoned case for government. It is crucial to continue
to make the argument, as this website does, that government has a vital and indispensable role to
2
play in improving the lives of all Americans – that government is good.
Government is Good?
But what exactly does it mean to say that government is good? It means that, on balance,
government programs have a very positive impact on the lives of all Americans – that government
has been a powerful force for good in our society.
It is not an exaggeration to say that a good portion of the improvement in the quality of Americans’
lives during the last 100 years has been due to the efforts of our federal, state, and local
governments. Consider, for instance, the wide variety of vital roles and functions that big
government plays in our society. Things like providing roads and sewers and other essential
infrastructure facilities, preventing economic depressions, eliminating horrible diseases like polio
and smallpox, ensuring drinkable water and breathable air, dispensing justice, providing retirement
security, preventing business abuses, sponsoring stunning scientific breakthroughs, feeding the
hungry, recalling unsafe products, educating our children, reducing workplace injuries and deaths,
responding to disasters and emergencies, preventing crime, protecting civil liberties, rescuing
endangered species, ensuring the safety of drugs, guarding our national security, caring for the
elderly, and so on.
Seen this way, it is clear that the supportive role that government plays in all our lives is
indispensable. We are usually told that the high quality of life enjoyed by so many people in the
United States is due to the abundance created in the private sector, but in fact it is also due to the
many activities of the public sector. The good life as we know it in the United States literally could
not exist without the constant assistance and protection we all get from an extensive network of
government laws and programs. Efforts by anti-government politicians to drastically cut taxes and
reduce government programs have put this good life in jeopardy.
Defending Government, Not Particular Administrations
Let me clear about what I am not arguing here. I am saying that government is good, but not that
every particular government is good. People often say they dislike the government when what they
really mean is that they dislike the policies of the current Democratic or Republican administration –
such as the Bush regime’s war in Iraq or its failures in responding to Hurricane Katrina. But just
because the policies of a particular administration are bad doesn’t mean that government as an
institution is bad. That would be like condemning film as a medium just because you are
disappointed with the current crop of movies. This website is about the value of government as an
institution, because that is what is under attack by conservatives. They are trying to undermine the
basic enterprise of modern democratic government itself– with its substantial commitment to social
programs and regulation – and that is what I am defending. I am arguing that the large democratic
3
state and the basic functions it fulfills have been good – very good – for Americans.
“Flawed” Does not Mean “Bad”
Also, while this website offers a vigorous and unapologetic defense of government, it is not denying
that this institution is flawed in some ways. Of course it is. Some waste is inevitable, some politicians
are corrupt, and some regulations are boneheaded. In addition, our government is not as responsive
and democratic as it could be and special interests play much too dominant a role in policymaking –
problems to which I devote an entire article (see What is Really Wrong with Government). Much can
and should be done to deal with these kinds of problems.
Clearly government is far from perfect; no human institution is. But that doesn’t mean it is bad.
Consider ourselves: none of us are perfect either. Virtually all of us have lied many times, cheated at
least a few times, done some dumb things as a teenager, repeatedly broken traffic regulations and
perhaps other laws, neglected some of our responsibilities, abused alcohol or drugs on at least a few
occasions, made some terrible mistakes on the job, said things we deeply regretted, fudged on our
taxes, betrayed a confidence, and treated at least one of our relatives very badly. But that doesn’t
make us bad people. And we would resent it if someone leapt to that conclusion by blowing our
faults out of proportional and cavalierly ignoring all the good things we’ve done in our lives.
But this is exactly what conservatives do to government. They not only ignore what is good about
government, they also take the problems and mistakes of government and inflate them into a
wholesale condemnation of that institution. The articles on this website take a careful look at what
conservatives contend are the “evils” of government, look at the research concerning these problems,
and find that most of them are exaggerated, misleading, or sometimes simply wrong. Take, for
example, one of their frequent criticisms of government: that government bureaucracies are
constantly growing and continually wasting enormous amounts of tax payers’ dollars. This is a
common stereotype about government and it has now become the number one citizen complaint
about this institution. Many Americans believe, for instance, that the government wastes forty-eight
cents of every tax dollar. In reality, studies show that the amount of waste is more like two cents for
every dollar – hardly an alarming figure.1 And what about the charge that the federal bureaucracy is
growing at an uncontrollable rate? Not true either. In 1970, 2,997,000 civilians worked for the
federal government; by 2007, that figure had grown to – or rather been reduced to – 2,695,000.2 So
much for the ever-growing federal bureaucracy.
The articles on this site will show that most of the other right-wing criticisms of government are off
the mark as well. It is constantly being alleged, for instance, that Americans are hugely overtaxed,
that big government inevitably impinges on individual freedoms, and that government is the natural
enemy of business. But under examination, none of these things turn out to be true. In the end,
4
much of what we think we know about what is wrong with government – and what conservatives
keep telling us – is simply mistaken.
Anti-government conservatives can only maintain the illusion that government is bad by promoting
these distorted stereotypes and by turning a blind eye to all the contributions that public sector laws
and programs are making to our lives. But if we can begin to look at how government actually works
and see clearly the various roles it is playing in our lives, then we can begin to develop a much more
accurate, complete, and complex view of this institution – and one that turns out to be much more
positive.
What is at Stake in the Battle over Government
Why is it so crucial to set the record straight about government? Why is it important for Americans
to realize that their local, state, and federal governments are in fact acting as powerful forces for
good in our society? Because the negative images of government that are being constantly promoted
by conservatives have had widespread and damaging political repercussions. These distorted views
of government have been used to fuel and justify the conservative campaign to drastically reduce
government – to slash important social programs and rollback regulations that are protecting
investors, consumers, workers, and the environment.
In recent years, Americans have become all too aware of what is at stake in this battle over
government. They have lost trillions of dollars in investments due the mortgage loan crisis and the
resulting meltdown of the financial system. And it is clear that lack of effective regulation of
financial institutions was a major contributor to this economic disaster. And thousands of
Americans have gotten sick because of lax and under-funded food inspection programs – thanks
again to Republican hostility to the regulation of business.
And these well-known examples of the disastrous results of the attack on government are merely the
tip of the iceberg. There are literally thousands of other cases of how cutbacks on government
programs have led to increasing problems and suffering for the public. Consider just one example –
the deregulation of rat poison. In 1998, the Environmental Protection Agency mandated childproofing
of rat poisons that were manufactured in candy-like pastel pellets. It required that the
pellets have a bitter taste and a bright dye. But some manufacturers protested, and in the spirit of
limiting government and getting it off the back of business, the Bush EPA rescinded those
requirements in 2001. By 2004, poisons centers were reporting that 50,000 children a year were
requiring treatment for ingesting rat poisons – three times as many as when the childproofing
requirements were in effect.3
We must also consider the long list of problems caused by cutbacks in state and local programs.
Across the United States we have seen teachers laid off, firefighters and police officers fired, bridges
5
© 2007 Douglas J. Amy – All rights reserved. You may print, reproduce, and use the articles on
governmentisgood.com for personal, educational or non-commercial purposes. Copying, redistribution, or use of
any material on this site for commercial purposes is prohibited without the express written permission of the
in disrepair, state colleges made less affordable, libraries closed, reductions in health care, and so on.
Many Americans have seen the quality of life in their communities suffer because of these efforts to
reduce government.
But the problem with the conservative anti-government campaign is not simply what we have lost,
but also what we have not gained. Because of this long-standing effort to limit government in the
United States, we have been unable to expand our public sector efforts to deal with new or growing
problems.4 This means that our citizens have had to forgo many of the beneficial public programs
adopted by most other Western countries. Studies now show that because of our more anemic public
sector, Americans are more likely than European citizens to lack health care coverage, to be poor, to
drive on dangerous roads, to breathe dirty air, to drink less safe water, to have less access to good
public transportation, and to be less economically secure. Less government here has also meant that
we have less affordable daycare, a higher infant mortality rate, more job-related injuries, less
affordable housing, and a lower life expectancy.5
We have a lot of ground to make up. But this is only possible if we as a nation recognize that
government can and should be a powerful force for good in society. That is why we need to come to
the defense of government.
1. Joseph Nye, et al, Why People Don’t Trust Government (Cambridge MA: Harvard University
Press, 1997) p. 62.
2. U.S. Government, Statistical Abstract of the United States (Washington D.C.: U.S. Government
Printing Office, 2009) Table 478.
3. “Childproof/EPA Eases up on Rat Poison,” Minneapolis Star Tribune, Nov. 22, 2004, editorial
page.
4. For more on this point, see Jacob S. Hacker, “Privatizing Risk without Privatizing the Welfare
State: The Hidden Politics of Social Policy Retrenchment in the United States,” American Political
Science Review, Vol. 98, No.2, May 2004, pp. 243-60. Hacker also has a book on this topic, The
Great Risk Shift..
5. See Derek Bok, The State of the Nation (Cambridge, MA: Harvard University Press, 1996) pp.

Women’s Soccer – local star

Jeffrey Hiatt — Tue, 19 Jul 2011 20:24:13 +0000

Senior Partner, Oliver Barber, Jr. spends significant time refereeing local soccer and has come across some noticeable talent and the related article below by Aidan Kelly with The News and Tribune.

July 19, 2011
KICK IT: Brandy’s ‘Rocketing’ upwards!

BY AIDAN KELLY aidokaydo@gmail.com The News and Tribune Tue Jul 19, 2011, 12:29 AM EDT

> SOUTHERN INDIANA — While our women’s national team was doing us proud in Germany over the past few weeks, some of our finest talent aspiring to such levels were at the Olympic Development Program regional camp in DeKalb, Ill.

One of them was New Albany’s Brandy Orth Becker, who was one of 18 girls selected to represent Kentucky at the U16 level.

The speedy Orth Becker, who plays forward and left wing, scored a decisive goal in the game against Kansas, while also featuring in a tie against Wisconsin and a loss to Michigan.

This is her second year on the ODP team, which she described as “a great experience” but also “a real challenge.”

“It’s fun to play other state teams from all over the country,” said Orth Becker. “It’s pretty humbling to be a part of a team that represents a state.”

It’s also pretty tough trying to make the cut.

“It’s hard to start with a pool of 75 or so girls and see that pool get smaller and smaller as months of tryouts go by and as cuts are continuously made,” she said. “It’s hard to make friends with players from another part of the state and watch them get cut.”

The team is finally narrowed to 18, who compete together at tournaments and college showcases before going on to regional camp.

“The ODP coaches don’t baby you,” she revealed. “They expect your best and more. This year’s coach, Mike Weisman, has a Class ‘A’ coaching license and knows the game down to a science, while last year’s coach, Jay Hoffman, is the head coach at Centre College.”

She added that as much fun as it is playing teams from other states, it’s even more fun making friends from those states.

“I always like trading jerseys with friends I’ve made at the end of the camp,” she said. “This year I came home wearing an ODP Wisconsin jersey.”

The junior plays varsity soccer at Assumption High School and is co-captain of the track team, participating in the 4×100 and 4×200 at this year’s state finals. She has “great hopes” for the Lady Rockets this fall.

“We are mostly all returning juniors and seniors,” she said. “We’ve played together for at least two years and know and trust each other mentally and physically. When we played together as freshman, we were undefeated, so I think we’ll continue to play well together.

“Our coaches Kenyon Meyer, Ollie Barber and Holly Hayden pull us together and inspire and elevate our level of play even more.”

Clubwise, Orth Becker started out with southern Indiana’s Net-Surfers and spent the last two seasons playing in Louisville.

However, encouragingly, once she got the call that her old coach Walter Iglesias would be mentoring at her age level at Net-Surfers, she knew she was coming back.

“I have trained under Walter for years and have tremendous respect for his talent and knowledge of the game,” she said. “I was really excited when he decided to finally coach a girls’ team.”

Others from the area to be chosen for ODP squads this year — some were unable to attend camp — included Borden’s Grant Hollkamp (Kentucky ‘97 boys), a promising talent who once again made the Region II holdover pool; Brodey Zink (Georgetown), Benjamin Rhoads, Sean Brown (both of Jeffersonville), who were all chosen for Indiana ‘98 older boys; Parker Bussabarger-Davidenkoff, Tyler McGeorge (both Floyds Knobs) and Andrew Kennedy (Lanesville), all Indiana ‘96 boys; Matthew Jerrell (Scottsburg), Logan Rauck (Memphis), Zachary Adamec, Alex Duckworth, Roman Arvizu (Jeffersonville), all Indiana ‘97 older boys; Zach Yagle (Floyds Knobs), Indiana ‘97 younger boys; Jordan Reger (Sellersburg), Indiana ‘97 older girls; Skyler Davis and Brian Fischer, (both Jeffersonville), Kentucky ‘95 boys; and Hayley Anderson (Sellersburg), Kentucky’97 girls.

Highlanders kick off in showcase

Floyd Central will be taking part in the 10th annual Sporting Indiana FC High School Summer Showcase, at Davis Park, Anderson this weekend.

There are 56 boys’ teams taking part in the event from Indiana, Ohio and Illinois.

The Highlanders will play in Group E Friday against Goshen (10 a.m.) and 2009 state champion Zionsville (4.30 p.m.), before finishing out Saturday against Chesterton (10 a.m.).

Floyd Central will be using the Hoosierfutbol.com sponsored event as good preparation for the season ahead, in which it hopes to retain the Hoosier Hills Conference title and perform well in a sectional that will this year include both New Albany and Jeffersonville.

A right Nelly!

Paul the oracle octopus became headline news around the globe when he predicted correctly the results of all of Germany’s 2010 World Cup games, and threw in the correct outcome of the final to boot.

Alas, the iconic salty soothsayer passed away last October at the age of three, leaving the door wide open for other German creatures to try make a name for themselves during the recent Women’s World Cup.

First up was Paula, another octopus, but she didn’t get very far. She chose Canada to beat Germany on the tournament’s first day by taking a treat from a box marked with the maple leafed flag.

The tentacled tipster, whose gender is actually unknown, claims on her Facebook page to be psychic but her sole day of posts has me fearing for her current health.

Not to worry. Enter Nelly the 18 month old elephant. She predicts games by “trunking” the ball into the loser’s net. She did quite a good job too, getting all the German games right, including their loss against Japan.

In fact, she quite likes Japan, it seems, as the predicting pachyderm correctly went for them over the U.S.A. to win Sunday’s final, which they duly did on penalty kicks following an exciting 2-2 tie.

Contact Aidan Kelly at aidokaydo@gmail.com.

Auditor of Public Accounts Recommendations for Public and Nonprofit Boards

Jeffrey Hiatt — Mon, 18 Jul 2011 18:21:47 +0000

The Kentucky Auditor of Public Accounts, Crit Luallen,
has posted the following recommendations that should be reviewed closely by all public and nonprofit Boards.

Article at www.auditor.ky.gov/

Revised 3/4/10
The Auditor of Public Accounts, as a result of recent investigations, makes the following recommendations to assist public and nonprofit Boards in designing and implementing internal controls. These recommendations should assist Board members in providing appropriate financial oversight. The following is a brief summary of various financial policy areas that Board members should consider. After each control area is considered, a policy should be developed to address the specific business model of the organization.
1. The Board should have a well defined, clear mission statement to serve as a platform for policies, operational plans, and resource allocations that further the interest of its organization’s members.
2. The Board should facilitate the development of an annual orientation program and manual for new and returning Board members to ensure an understanding of the Board’s structure, operations, and their legal and fiduciary responsibilities. An explanation of the budget and accounting structure, as well as revenue and investment information should also be included. If possible, the orientation should be facilitated by a knowledgeable, independent party, such as a Board attorney or consultant.
3. The Board should ensure that its organizational structure maintains a flexibility that allows for multiple sources of information. The Board should request reports from individuals having responsibility for various program areas rather than from just the chief executive.
4. The Board meeting minutes should document the exact nature of the financial reviews conducted by the Board. Any issues that result from these reviews and action taken to resolve the issues should also be documented.
5. For Boards who fall under the open meetings law, sessions closed to the public should be entered into in accordance with KRS 61.810. Any conclusions or decisions reached during a session closed to the public must be documented in the Board meeting minutes as stated in KRS 61.815, clarified in OAG 81-387.
Page 2
6. The Board should establish an independent process to receive, analyze, investigate, and resolve concerns related to the organization including anonymous concerns. Employees, business associates, customers, or the general public may have significant, beneficial information that they are uncomfortable reporting directly to the Board. A toll-free complaint number or an advertised email and postal address for feedback would allow the transmission of this information. In addition, where applicable, the Board’s policy should include a reference to Kentucky law (KRS 61.102) notifying employees, as defined in KRS 61.101, of their rights to protection against retaliation for reporting violations to certain authorities. A whistleblower policy should be adopted and distributed to employees. The policy should include reporting procedures and management’s responsibility to address issues reported.
7. An internal audit function could be used to ensure that Board concerns are independently investigated. The individual designated to perform internal audits should be given the authority to investigate and examine any area designated by the Board and the responsibility to report the audits findings directly to the Board.
8. A Board audit committee should appoint and compensate the audit firm and ensure the rotation of the lead audit partner and the audit partner reviewing the audit, as required by the Sarbanes Oxley Act (SOX) for companies with publicly traded stock. The Board should also consider whether rotating audit firms would be beneficial given the facts and circumstance of the organization. Further, if possible, the Board audit committee should be comprised of at least one member who has an understanding of generally accepted accounting principles and financial statements, experience with internal controls and in preparing or auditing financial statements, and an understanding of audit committee functions, as suggested in Section 407 of SOX. In addition, reviews of internal controls should be conducted to ensure that controls are functioning as designed or needed. The review of internal controls could be conducted by an internal auditor, Board designee, or included in the engagement of an auditing firm. Any concerns noted by the Board should be disclosed to the auditor and included in the audit scope for review.
9. The Board should adopt a code of ethics that includes standards of conduct for its Board members, officers, and employees related to business conduct, integrity, and ethics. The policy should include the requirement to sign a form stating that the individuals have received and understand the code of ethics. The code should include statements regarding moral and ethical standards, confidentiality, conflicts of interest, nepotism, gifts, honoraria, and assistance with applicable audits and investigations. Violations of the code of ethics should be reported to the Board or designated committee of the Board.
10. The Board should adopt a financial disclosure policy for Board members and executive management. A policy should also be developed requiring Board members and executive management to disclose any conflicts of interests. The disclosure form should be completed by a specified date and returned to the appropriate committee of the Board.
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11. The Board should establish and approve a detailed, equitable personnel and compensation policy. The policy should include that the Board or a designated Board committee annually review the salary increases and bonus payments made to all staff. This review should be documented in the Board meeting minutes.
12. The Board should define and document all employee benefits in a fair and equitable manner. Benefits received that result in taxable income should be properly accounted for and accrued to each applicable employee. Employee benefits should also be reviewed to ensure they provide a reasonable business purpose. Also, membership fees to organizations or associations should provide a reasonable business benefit.
13. The Board should approve the compensation package of the organization’s primary executive and be aware of the compensation provided to other Executive Staff. In determining the compensation for the primary executive, the Board should consider the organizations financial resources, current economic conditions, employee performance, and salary data for similar positions at relevant organizations within the region.
14. The Board should ensure a well-defined employee evaluation system is implemented within the organization to consistently assess employee performance. The results of the employee’s evaluation should be used for employee advancement or salary adjustments.
15. The Board should adopt policies to ensure all forms of employee leave are properly approved and accurately recorded.
16. The Board should have sick and vacation leave policies that address the accrual, use, and the payment to employees for any unused sick, vacation, or compensatory time.
17. The Board policy should include a transparent, competitive selection process for the procurement of goods and services. The policy should outline the circumstances under which quotes or competitive bids are required and the process to be followed. The Board should have policies that require a formal contract for purchases over a specified amount and that all contracts over a specified dollar amount require Board approval.
18. A review of budget to actual expenditures should be performed regularly by the Board or a designated Board Committee to monitor costs in each account. The name and number of budget categories or line items should provide transparency and sufficient detail to allow Board members to accurately identify the types of expenses being attributed to each category. If expenditures occur at an unexpected rate, additional detail should be requested to ensure that incurred expenditures are reasonable and necessary.
19. At least quarterly, the Board or a designated Board committee should receive and review a listing of payments that includes, at a minimum, the payee, dollar amount, and date of each expenditure. This review would assist in identifying inappropriate, unusual, or excessive expenditures.
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20. Executive management traveling out of state should present their plans and estimated costs to the Board for prior approval. The approval of these activities and associated costs should be addressed at the Board meetings to ensure proper documentation in the minutes. Subsequent to attending approved conferences or activities, the amount expended should be reported to the Board.
21. To minimize and control the cost of travel, a travel expense policy should be developed that specifically defines the allowable costs related to lodging, meals, entertainment, personal mileage reimbursement, rental cars, and airfare. The travel expense policy should state the invoice requirements for the reimbursement of certain expenditures such as taxi fees, tips, parking, or tolls. The policy should provide examples of expenditures that are to be paid for by the employee, such as costs incurred by family members or the attendance at events not approved by the Board. This policy should explicitly state that expenses not in compliance with the travel expense policy would not be reimbursed or paid by the Board.
22. In lieu of credit cards, the Board should consider the following: The use of purchasing cards that would allow the Board to restrict the types of purchases that can be made on the card based on industry codes. Casinos, specialty retail outlets, and food and beverage establishments are examples of these restrictions. The amount spent on a single purchase can also be restricted through the use of a purchasing card. Reimburse employees personal credit card charges when the use is necessary. Procedures and supporting documentation requirements should be developed to facilitate this type of reimbursement.
23. If the use of credit cards is needed, the Board should implement the following oversight controls: A Board member or committee of the Board should be assigned to review, at a minimum, credit card statements of Executive Staff prior to payment. Credit card charges should be supported by detailed receipts, documented business purpose, and supervisory approval. The employee should be responsible for the timely payment of any unsupported credit card charges or disallowed expenses. Policies established by the Board should ensure that all review procedures are performed in a timely manner to avoid late fee and finance charges.
24. Expenses classified as gifts or entertainment should be documented to include the name and title of the person(s) involved and a description of why the expense was needed and how it relates to business operations.
25. A policy related to reimbursements made by employees to the organization should be developed to ensure that any expenses that should be paid by an employee are monitored. This policy should include the timeframe allowed for making the reimbursement and the alternative actions that will be taken if reimbursement is not made.
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26. Business expense reimbursements requested by executive management should be reviewed by the Board or a designated Board committee to ensure supporting documentation is provided. This documentation should be retained to ensure that duplicate payments are not made to the employee.
27. Specific marketing goals should be developed to monitor the success of any business promotions approved by the Board. Marketing expenditures incurred should be coded to that goal so that Board members will know the expenses involved in a specific marketing promotion. Further, documentation should be maintained detailing the recipients of promotional prizes including tickets, trips, or merchandise.
28. A Board policy should be developed to address the authorization process to purchase vehicles and the method used to dispose of vehicles. The use and assignment of vehicles owned by the organization should be addressed within this policy. In addition, the practice of providing a vehicle should be reviewed and monthly vehicle allowances considered. The policy should include following the IRS guidelines for personal use of a vehicle.
29. The personal use of business equipment should be addressed within Board policy to determine when appropriate. The policy should require that equipment being used inappropriately or that is missing should be reported directly to the Board.
30. The Board should establish a policy detailing the process to report lost or missing financial information or records. To avoid lost or stolen financial information, electronic images of financial records should be created and retained, if possible.
31. A formal policy should be developed that identifies what equipment is a fixed asset and should be included as inventory. Once this designation has been made, the existing inventory listing should include the following identifying information related to each piece of equipment: The name of the individual in receipt of equipment; Description of equipment; Vendor name; Model number; Serial number; Acquisition date; and, Acquisition cost.
Once the inventory listing has been validated, any acquisitions and dispositions of computer equipment that fall within the fixed asset policy should cause an appropriate update to the inventory listing.
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32. An information system policy should be developed that explicitly defines a user’s responsibilities as they relate to information system resources and applications. These policies should cover, at a minimum: Securing of user id and password; Protection against computer virus or mal-ware infection; Legal notice at logon indicating system is to be used for authorized purposes only; Securing unattended workstations; and, Securing portable devices, such as laptops, Blackberries, cell phones, etc.

Middletown Chamber of Commerce

Jeffrey Hiatt — Thu, 23 Jun 2011 17:35:12 +0000

We would like to announce that we have moved to eastern Jefferson County and are now members of the Middletown Chamber of Commerce. We look forward to be active members of our new neighborhood. Our new address is 802 Lily Creek Rd., Suite 101, Louisville, Kentucky 40243. our offices are located at 802 Lily Creek Road, Suite 101 which is off of Blankenbaker Parkway in the Blankenbaker Centre Office Park. This is across the street from Southeast Christian Church and behind Zaxby’s Restaurant and Commonwealth Bank & Trust Company. Enter into the office park by turning onto Martin House Lane (Watterson Trail when turning towards the Church)at the light between Commonwealth Bank & Trust Company and Garden Gate Apartments.