April 15, 2010

From the desk of Bob Keefe

Washington, D.C.

April 15, 2010

Political Update

Happy Tax Day!  If you are among the 95% of American taxpayers whose taxes have been reduced by President Barack Obama’s tax cuts, you have something to cheer.  If you are not, you are among the wealthiest of our citizens and you can cheer your own good fortune.

If you missed the tax cuts when they were made last year, join the club.  There was so much going on and so many manipulations of Federal fiscal matters, the tax cuts went largely unnoticed.  There was no general tax cut bill.  The cuts came in many ways in many forms.  Among the positive changes were:

Tax Credit for Homebuyers: Payroll Tax Credit of 6.2 percent; Sales Tax Deduction for New Vehicles; Higher Personal Exemptions; Higher Standard Deductions; Tax Credit for College Tuition; Earned Income Tax Credit (EITC); Higher percent tax brackets kick in at higher levels of income; and, of course, Tax-Free Parking for Employees.

The end result was that the tax rate for American taxpayers for the tax year 2009 was the lowest in years… and it seems that nobody noticed.  In the average income range, the average rate was 4.2%.  And our highest tax rate of 35% on our highest earners is the lowest top rate in the developed world.

The Nuclear Security Summit

It was the largest international conference sponsored by the United States since the conference in San Francisco at which President Franklin Roosevelt presided over the adoption of  the United Nations Charter in June of 1946.  With 43 nations represented – 36 of them by the head of state or head of government -  President Obama began his campaign to clean up the nuclear holdings of the various nations and make them secure.

It was an impressive event.  All of the important players in world politics were in attendance and they followed the script nicely.  There were tabernacle-like declarations of repentance and compliance from previously negligent regimes, and plenty of speeches.  But the strength of the conference was the solidarity of the disparate leaders who were in attendance, from President Hu Jintao of China, Chancellor Angela Merkel of Germany, President Luiz Inácio Lula da Silva of Brazil and the full first team of heads of nations.

It was a good show for the President who demonstrated his ability to provide leadership to the world on important and difficult issues.  Now he has to make sure that the good things that were promised will be delivered.

What is Mother Nature up to?

I called two of my friends in Rio de Janeiro last week and discovered they were home in the middle of the work day.  They were stranded.  Two days of solid rain had flooded the city and made it impossible to get around.  The rain lasted a couple more days and caused serious and deadly mudslides on the mountains of the city.

Donner Pass was closed briefly by more than a foot of April snow.

China was the site of this week’s earthquake.  We have had at least one 6.5+ event every week for a month.

Last night a meteor burned out over Wisconsin providing a marvelous light show, accompanied by sonic booms.

A friend of mine came in from London for a two day trip.  He will be here until after the week-end because of the toxic ash eruption from an under-glacier volcano in Iceland.  He may not get back for a while.  The Queen Mary 2 is booked until June.

A second round of flooding of the Red River in Minnesota and North Dakota proved the locals correct who did not remove their sand bags from last month.

And in Chile, wild fires are roaring through an area that was hit hard by the earthquakes last month.

Now that cap and trade is dead for a while, I guess we will have to put up with this freaky weather and earthshaking problems.

Freaky thinking

It is not just Mother Nature that seems peculiar these days… In the past week, I have been browsing two surveys of important segments of the American political public, Republicans and Tea Party Activists.  I cannot really understand how large segments of the electorate can hold such beliefs.  For example, in a study of self-described Republicans, a pollster found the following beliefs about President Obama:

He wants to turn over the sovereignty of the United States to a one world government (51%);

He has done many things that are unconstitutional (55%).

He resents America’s heritage (47%)

He was not born in the United States and so is not eligible to be president (45%)

He is the “domestic enemy that the U.S. Constitution speaks of” (45%)

He is a racist (42%)

He wants to use an economic collapse or terrorist attack as an excuse to take dictatorial powers (41%)

He is doing many of the things that Hitler did (38%).

While I was recovering from these revelations, the New York Times/CBS News published a poll of people who suggested they were advocates of the Tea Party Movement and that was even more revealing.  Their beliefs are so extremely different from the total population.

Here are some examples:

While the Congressional approval rating is 23+ to 63-; the TP rating is 1+ to 96-.

The economy is good 1, fairly good 22, fairly bad 43, or very bad 34; the TP ratings are 0 good;

6 fairly good; 39 fairly bad and 54 very bad.

Feelings about the way things are going in Washington?  2% of the population are angry;         53% of the TP are  angry.

Fifty-one percent of the TP think global warming will not have a serious impact at all.

Is the country on the right track? 40%; on the wrong track? 51%; but among the TP it is 6%    right and 92% wrong track

And then to top it off, eighty four percent of them believe that the People involved in the Tea Party Movement generally reflect the views of most Americans

So what is going on here?  The thinking exposed in these two big chunks of the American population is scary.  They are what I think of as radical… in some cases, very radical.  Former  President Bill Clinton suggests today that he is nervous about the underlying uneasiness of the nation.  It reminds him of the times in the early 90’s that preceded the Oklahoma City bombing.

Regardless of your overall opinion, do you think the views of the            

I wish I had some good ideas on what we might do to ease the tension.

The Top Republicans’ Think Tank

Now that the controversial Health Care issue is somewhat behind us, I had hoped that we would revert to business-like, fact fed, Congressional consideration of important legislation.  Next up is to be Financial Reform.  God knows that a serious review and renovation of our existing regulation of the banks, the financial industry and their products is in order.

So what is happening?  The House has previously passed a bill to correct the ills it found in our financial system.  The Senate is now ready to consider the legislation that it has been drafting for more than a year.

Listen to the opening salvo of the “debate”.  Senate Minority Leader Mitch McConnell (R-KY) says, “As currently constructed, this bill allows for endless taxpayer bailouts of Wall Street.”  Piping in from his seat in the leadership of the House, Congressman Mike Pence (R-IN) suggested the Senate bill “not only allows for taxpayer-funded bailouts of Wall Street banks. It institutionalizes them.”

Coincident?  No, it is simply the work of one man, Frank Luntz.  Luntz has becoming the one man think tank for Republican leadership in Congress.  He is the premier “maker of talking points” that Republicans are using in their efforts to thwart the Democratic agenda in the run-up to the midterm elections.  “Frank who?”  You say.  Who elected him?

Luntz has never been elected to anything, but he is serving these days as the wordsmith behind the spokespersons on the Republican side of the Congress.  Luntz is a top Republican pollster famous in the industry for his ability to capsulate strong emotional phrases.  He is good at it, and unlike that famous ad agency’s motto, “The truth, well told,” Luntz does not rely on truthful statements… just powerfully emotional statements, well craftedd.

The fact is, the bill that Senate Chairman Chris Dodd and his colleagues have drafted is the antipathy of bail outs.  It is aimed directly at keeping the US government out of the “bank prop up business”   Luntz wrote a memo to his clients in November, before Dodd’s bill had been drafted, that advised  Republicans to tar all efforts to regulate the financial industry as more “bailouts.”   We can thank the Huffington Post for uncovering that memo.

Meanwhile, our Wars Continue

Lest we forget, Americans keep dying and keep being injured in Iraq and Afghanistan. The official count as of April 15, 2010, of the dead since our involvement in Iraq began on March 23, 2003 is 4,390; the dead from the war in Afghanistan from its beginning in September

2001 is 1,044. The count of American service personnel wounded in Iraq is now 31,743; in Afghanistan 5,188 according to the Department of Defense.

I am told that there are now two Afghanistans… the newly vital city of Kabul is twice the size it was when the war started – now about 5 million.  It has the façade of progress that our war spending  produces, new shops and goods peeking out from behind sand bag barriers.  The other is the old Afghanistan of the countryside, virtually unchanged, unimproved, still totally rural – an ancient, reactionary, and deeply conservative society. Women are invisible, hospitals and schools few and far between, paved roads, public facilities and toilets non-existent, the dust is thick and the living is uneasy.

Much of it is, however, covered in the white plumes of poppy plants.  The Taliban is now a narco-terror group not unlike FARC in Colombia.  Like the Sicilian mafia, they presently exist to facilitate participation in the dope business; it is their reason for being, not the other way around. They run the billion dollar business that is larger than the sum total of all foreign aid. It has totally corrupted Afghan society.

Ending the impact of drugs on Afghan society and government seems too much to ask.  But we have to try to disengage the Afghan government from the drug trade.  Maybe our troops and our dollars can get that done.  It is where we have to start.

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Robert J. Keefe

TKC International, Inc.

Telephone: 202 255-8161 – E mail: rkeefe@tkci.com

Past issues of Political Update available at www.bobkeefedc.com

From the desk of Bob Keefe

Washington, D.C.

April 2, 2010

Political Update

Vice President Joe Biden’s statement to President Barack Obama at his big bill signing ceremony last week may have been poorly phrased, but it was certainly not wrong.  It was a big XXXXing deal!  We only pass such significant legislation every forty or fifty years or so.

“After a century of striving, after a year of debate, after a historic vote, health care reform is no longer an unmet promise,” Obama declared in a celebration at the Interior Department auditorium with members of Congress, leaders of advocacy groups and citizens whose personal stories were cited during the debate. “It is the law of the land.”

And, silly me, I thought that the vitriol surrounding the debate on the bill would end… or at least subside.  Wow, was that wrong.  The Republicans have an enormous investment in opposition to the bill and they cannot seem to let go.  But, as for me, I am tired of it.  I look forward to some other issue… the economy, or the environment, or almost anything else.

The Political Aftermath

After a slight upswing in the polls in the days after the vote, and after the celebrations were over, President Obama does not seem to have benefited much from his significant legislative victory.   His standing on four personal qualities has sagged, and 50% of those surveyed say he doesn’t deserve re-election.

In a USA Today/Gallup poll this week, the president gets bad news.  His standing on four key personal qualities, including being a strong and decisive leader and understanding the problems Americans face in their lives, has dipped. For the first time since the 2008 campaign, he fails to win a majority of people saying he shares their values and can manage the government effectively.

Twenty-six percent say he deserves “a great deal” of the blame for the nation’s economic problems, nearly double the number who felt that way last summer. In all, half say he deserves at least a moderate amount of blame.  The blame directed at former president George W. Bush, hasn’t eased, however: 42% now give Bush “a great deal” of blame, basically unchanged from 43% last July.

Obama’s approval rating on handling the economy, foreign affairs and the federal budget deficit hasn’t significantly changed from February. It has risen a bit on health care, though he doesn’t get majority approval on any of the categories.

Even so, the president fares better than other Washington leaders. In the poll, 52% say they have a favorable opinion of Obama. That’s much higher than House Speaker Nancy Pelosi (36%), House Republican Leader John Boehner (29%), Senate Democratic Leader Harry Reid (29%) and Senate Republican Leader Mitch McConnell (31%).

Here is what is in the new Health Care Law:

Here is a snapshot of what is in the big new health care law.  Listed first are the items that will take effect immediately or within the year…

Small Business Tax Credits: Offers tax credits to small businesses to make employee coverage affordable. Tax credits of up to 35 percent of premiums will be immediately available to firms. (Beginning in 2014, the tax credits will cover 50 percent of premiums.)

Medicare Part D Donut Hole: Provides a $250 rebate to Medicare beneficiaries who hit the donut hole in 2010. (Beginning in 2011, institutes a 50% discount on brand-name drugs in the donut hole; completely closes the donut hole by 2020.)

Free Preventive Care under Medicare: Eliminates Medicare co-payments for preventive services and exempts them from deductibles.  Effective January 1, 2011.

Help for Early Retirees: Creates a temporary re-insurance program (until the Exchanges are available) to help offset the costs of expensive health claims for employers that provide health benefits for retirees age 55-64. Effective 90 days after enactment

Rescissions: Bans insurance companies from dropping people from coverage when they get sick. Effective 6 months after enactment.

Discrimination against children with pre-existing conditions: Prohibits insurance companies from denying coverage to children with pre-existing conditions. Effective 6 months after enactment. (Beginning in 2014, this prohibition willapply to all persons.)

Lifetime limits on coverage: Prohibits insurance companies from placing lifetime caps on coverage. Effective 6 months after enactment.

Annual limits on coverage: Restricts use of annual limits to ensure access to needed care. Effective 6 months after enactment. (Beginning in 2014, the use of any annual limits will be prohibited for all plans.)

The full coverage of the legislation will be phased in over the next six years.  It will take that long to process the massive expansion of the programs and prepare for the additional coverage.  When it is all in place, here is what will be included:

Coverage: Will expand coverage to 32 million Americans who are currently uninsured.

Health Insurance Exchanges: The uninsured and self-employed will be able to purchase insurance through state-based exchanges with subsidies available to individuals and families with income between the 133 percent and 400 percent of poverty level.  Separate exchanges will be created for small businesses to purchase coverage – from 2014.  Funding available to states to establish exchanges within one year of enactment.

Subsidies: Individuals and families who make between 100 percent – 400 percent of the Federal Poverty Level (FPL) and want to purchase their own health insurance on an exchange are eligible for subsidies. They cannot be eligible for Medicare, Medicaid and cannot be covered by an employer. Eligible buyers receive premium credits and there is a cap for how much they have to contribute to their premiums on a sliding scale. Poverty Level for family of four is $22,050

Medicare: Closes the Medicare prescription drug “donut hole” by 2020. Seniors who hit the donut hole by 2010 will receive a $250 rebate.  Beginning in 2011, seniors in the gap will receive a 50 percent discount on brand name drugs. The bill also includes $500 billion in Medicare cuts over the next decade.

Medicaid: Expands Medicaid to include 133 percent of federal poverty level which is $29,327 for a family of four.

Requires states to expand Medicaid to include childless adults starting in 2014.

Federal Government pays 100 percent of costs for newly eligible individuals through 2016.

Illegal immigrants are not eligible for Medicaid and will not be allowed to buy health insurance in the exchanges — even if they pay completely with their own money.

Insurance Reforms: Six months after enactment, insurance companies can no longer denying children coverage based on a preexisting condition.   Starting in 2014, insurance companies cannot deny coverage to anyone with preexisting conditions.  Insurance companies must allow children to stay on their parent’s insurance plans until age 26.

Abortion: The bill segregates private insurance premium funds from taxpayer funds. Individuals will have to pay for abortion coverage by making two separate payments; private funds will have to be kept in a separate account from federal and taxpayer funds. No health care plan will be required to offer abortion coverage. States could pass legislation choosing to opt out of offering abortion coverage through the exchange.

Individual Mandate: In 2014, everyone must purchase health insurance or face a $695 annual fine. There are some exceptions for low-income people.

Employer Mandate: Technically, there is no employer mandate. Employers with more than 50 employees must provide health insurance or pay a fine of $2000 per worker each year if any worker receives federal subsidies to purchase health insurance.

Paying for the Plan: Medicare Payroll tax on investment income — Starting in 2012, the Medicare Payroll Tax will be expanded to include unearned income. That will be a 3.8 percent tax on investment income for families making more than $250,000 per year ($200,000 for individuals).

Excise Tax — Beginning in 2018, insurance companies will pay a 40 percent excise tax on high-end insurance plans worth over $27,500 for families ($10,200 for individuals). Dental and vision plans are exempt and will not be counted in the total cost of a family’s plan.

Tanning Tax — 10 percent excise tax on indoor tanning services. Where did this come from??

Meanwhile, our Wars Continue

Lest we forget, Americans keep dying and keep being injured in Iraq and Afghanistan.

The official count as of March 31, 2010, of the dead since our involvement in Iraq began on

March 23, 2003 is 4,387; the dead from the war in Afghanistan from its beginning in September

2001 is 1,032. The count of American service personnel wounded in Iraq is now 31,716; in

Afghanistan 5188 according to the Department of Defense.

Just as the American forces are beginning to pack up in Baghdad to head for home, the Iraqis dropped another surprise into their unsteady political situation.  After the slow count of votes in the national parliamentary election, Ayad Allawi’s predominantly Sunni alliance won.  The former Prime Minister’s group emerged with the most seats in the parliament Friday but fell far short of a majority, Allawi narrowly edged out Prime Minister Nouri al-Maliki’s team to become the largest bloc in the next parliament.  The closeness of the results and the number of significant blocs among the legislators will kick off a battle among political and religious blocs to form a majority government.

The Allawi upset may end the lock on power that Iraq’s majority Shiites have enjoyed since 2003 after decades of oppression under the Sunni-led government of Saddam Hussein.  The results will severely test the country’s fragile institutions. In the two weeks between the March 7 election and the vote tallies Friday, Shiite politicians warned of violence should their parties lose.

Allawi’s coalition won two seats more than that of his close rival, Prime Minister Nouri al-Maliki.   Maliki is refusing to recognize the results.  Even if those challenges fail, it will probably take several months to form a new government.  When the outcome was announced Friday, Prime Minister al-Maliki and his supporters in the State of Law coalition immediately raised accusations of fraud and made vague references to the prime minister’s power as commander in chief. This protracted period of political indecision and potential violence could threaten plans to withdraw American troops.

Let’s hope the Iraqis can get their act together and allow us to proceed with our long overdue departure from their country.

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Robert J. Keefe

TKC International, Inc.

Telephone: 202 255-8161 – E mail: rkeefe@tkci.com

Past issues of Political Update available at www.bobkeefedc.com