Sunday, December 02, 2007

Fiscal Irresponsibility

By Cernig

Sean-Paul Kelly at The Agonist writes that a Florida state-run investment fund is suffering a meltdown of Yeltsin-like proportions and that others will surely follow. He points to the following Bloomberg story:
School districts, counties and cities across Florida sought to raise cash after being denied access to their deposits in a $14 billion state-run investment fund.

The Jefferson County school district was forced to take out a short-term loan to cover payroll for the 220 teachers and other employees in the system after $2.7 million it held in the pool was frozen yesterday. At least five other districts also obtained last-minute loans, said Wayne Blanton, executive director of the Florida School Boards Association.

``The unthinkable and the unimaginable have just happened here in Florida,'' said Hal Wilson, chief financial officer of the Jefferson County school district, located 30 miles (48 kilometers) east of the state capital Tallahassee. ``What we just experienced here is a classic run-on-the bank meltdown.''

Florida's State Board of Administration, manager of the Local Government Investment Pool, halted withdrawals yesterday at an emergency meeting after $13 billion was pulled out this month from participants. Governments from Orange County, home of Disney World, to Pompano Beach asked for their money back following disclosures that the fund held $1.5 billion of downgraded and defaulted debt.
Sean-Paul writes "Is something similar happening in your state? Because if it is, guess who gets to pay for it? You do."

The majority of the bad paper, according to Forbes, was sold to Florida by Lehman Brothers bank. And, it being Florida, Jeb Bush was there:
Bush, as the state's top elected official, served on a three-member board that oversaw the SBA until he retired as governor in January. In August, Bush was hired as a consultant to the bank. Lehman spokesperson Kerrie Cohen, speaking on behalf of Bush, said they had no comment and would not say when the bank had sold Florida the paper. SBA did not return calls.
Meanwhile, the top story on my Yahoo homepage is one about tax refunds being delayed "because Congress has dawdled all year on a tax bill" - a framing right out of the White House stenography book. That article continues by saying that the problem concerns adjustments to the alternative minimum tax:
The alternative minimum tax was passed in 1969 and was aimed at about 155 very wealthy families who used deductions to avoid paying any federal income tax. The AMT disallows certain deductions and credits. It was not adjusted for inflation; as a result, over the years it has hit a growing number of middle-income taxpayers.

More than 4 million were subject to it in the 2006 tax year, and that could soar to 25 million this year without congressional action.

...On Nov. 9, House Democrats pushed through a one-year "patch" to shield 21 million taxpayers from about $50 billion in higher taxes due to the AMT. The bill included an additional $30 billion in tax relief measures such as expanding the child tax credit and extending numerous about-to-expire tax breaks for education costs, small business and military personnel.

But, honoring their pledge not to pass legislation that adds to the federal deficit, Democrats voted to increase taxes by $80 billion in other areas, including for investment fund managers. Tax-adverse Republicans voted unanimously against the bill and Bush said he would veto any bill that included a tax increase.
Now, who is doing the dawdling here? Oh yeah - the don't-tax, still spend Bush Republicans in the White House and their congressional cheer squad.

Sean-Paul has a phrase that the Dems should pick up and repeat long and often.

Democrats may have an affinity for taxes, but at least they pay as they go. Clear?

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