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Tuesday, November 22, 2011

Beldar on the failure of the "supercommittee"

Regarding the unsurprising failure of the congressional "supercommittee," consider this:

Democrats simultaneously insist that (a) they want to raise taxes on America's rich, while (b) rejecting GOP proposals to reform and save Social Security and Medicare by making them be "means-tested." Means-testing would only affect those who are not currently on, or about to qualify for, those programs. For those later beneficiaries, however, the wealthiest subsets would receive lesser benefits than the poorest ones, with the very poorest continuing to be subsidized at current levels (adjusted over time with inflation). 

The Dems insist that the federal government continue giving rich people money for their retirement and medical care, in other words, even if those people can quite comfortably afford to pay for those things themselves. But those same Dems also insist on taking a higher percentage of rich people's current income to pay for the costs of ever-expanding government programs, most notably those same entitlement programs which are already operating in the red, with alarming increases on the near horizon that are demographic and actuarial certainties.

Got that?

The explanation is as old as Tammany Hall: the Democratic Party depends on handing out government largess, including outright graft, to keep its disparate power bases in line. This is why General Electric pays no federal income taxes. This is why Hollywood studios show paper losses on films that generate multi-hundreds of millions at the box office. This is why unions give hundreds of millions in political donations, but more than 85% of that always goes to Democrats. This is why the federal government hands out millions based on allegedly frustrated "intent to be a farmer," or pays tax dollars to prop up commercially nonviable car companies or solar panel manufacturers, while rejecting a badly needed pipeline construction project that would create thousands of jobs at no government expense whatsoever.

If your source of political power is based on hand-outs to favorites, preferences for government-picked "winners," and government-effectuated or government-mandated income redistribution, then you protect that power quite literally at all costs — even costs that will positively bankrupt the government in fairly short order.

If any of this surprises you, then congratulations: You're the guy at the poker table wondering which one of his fellows is "the mark."

This is what the 2012 election should be fought over.

Posted by Beldar at 12:15 AM in 2012 Election, Budget/economics, Congress, Obama, Politics (2011) | Permalink

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Comments

(1) Mike Myers made the following comment | Nov 22, 2011 3:16:52 PM | Permalink

It was set up to fail. Staff it with some of the most liberal Democrats in the Senate--Patty Murray I'm looking at you--and there was no chance of meaningful compromise.

Setting up the committee was an exercise in kicking the can down the road--and now the committee has punted and sent it yet further down the road.

(2) Michael made the following comment | Nov 23, 2011 12:30:06 AM | Permalink

To paraphrase Rumsfeld, 'You manage the government with the political participants you have' or you don't see it managed. I'd prefer to see it managed. This isn't to say that that management can't later be changed; of course it will. But to leave the deficit adrift and be cutting out the F-35 and the military programs you say you need is not to have it managed. It is not for serious political participants, and it invites someone or a faction which is serious to take over for those who are not.

(3) Gregory Koster made the following comment | Nov 23, 2011 1:51:53 AM | Permalink

Dear Mr. Dyer: I think you've answered your own question about means testing. The Dems oppose means testing, because once started, it will inevitably spread downward. This will reveal SS for what it is: welfare. That will do more to destroy its popularity among the citizenry than any number of Dan Mitchell (who's perfectly right) videos about how SS is a Ponzi scheme. Means testing can be done by stealth via jiggering income tax exemption cutoffs i.e. those earning more than x have to start adding SS to taxable income.

Mr. Myers is quite right about the committee being set up to fail. But I wonder if the GOP conferees will now introduce their package in the House and Senate. Put some pressure on Harry. I doubt if the Dems will try a corresponding move. The tax increases they warble for stick out too obviously, and the citizenry might feel like the proverbial hog on the conveyor belt...In any case, yes the can has been kicked down the road. But every time the dam fools do this, they add a few more drops of nitroglycerin to the can. The country's foot will be blown up when the rest of the world stops panicking about the future of Europe, realizing the US is not far behind. Then for the whirlwind!

Sincerely yours,
Gregory Koster

(4) Jm Hu made the following comment | Nov 24, 2011 11:15:32 AM | Permalink

write in Beldar!

(5) ech made the following comment | Nov 29, 2011 11:39:11 AM | Permalink

This is why Hollywood studios show paper losses on films that generate multi-hundreds of millions at the box office.

Yes and no. An individual film shows losses due to the way they are structured. (I have family in the industry and am familiar with the way they work.) When a film is made, it is usually made by a separate corporation, wholly owned by the studio. You'll see this sometimes at the end of the film in tiny type. So Warner Brothers will form "Harry Potter and the Order of the Phoenix, Inc." to make the film. All the "above the line" costs (writer, director, actors, producers) and "below the line" costs - crew, food service, set construction, camera rental, transportation, etc. are charged to the corporation. This allows better accounting, liability limits are established, etc. The studio can know exactly how much the film cost to make. It also means that for tax purposes, it doesn't make a profit, owns nothing, and doesn't pay local taxes. Essentially, the only revenue that the film would have comes from sale of items they bought for the film - some furniture and other stuff used on the sets - and that stuff is sold used and at a loss. (About half my brother's furniture came from films he worked on.)

After the film is finished, the studio distributes and markets it, keeping the bulk of the money from ticket sales, cable sales, DVDs, etc.

Now the accounting gets complicated. The "above the line" people (directors, actors, writers, producers) are entitled to residuals based on the gross receipts from the different revenue streams. Also, there can be others that were given "points" of the gross. (My guess is that J.K. Rowling gets part of the gross from Harry Potter films). Certain "below the line" unions get direct payments to their medical plans from the film's gross. the producers get a cut. If the film was financed by a partnership, they get payments.

Each union contract spells this out in great detail for those above the line, and was the major sticking point that led to the recent writer's strike. The unions had made concessions to the studios on residuals for videocassetes when it was a new technology and revenues were uncertain. Now that it is a huge source of money, they wanted a bigger share. Also, there was the issue of revenue from streaming over the internet to hammer out.

BTW, one of Ronald Reagan's great triumphs as head of the Screen Actors Guild was to get the residual payment system in place. Prior to the early 60s, everyone, not just crew like my brothers, was work for hire.

Only a fool or someone with bad legal representation takes points of the profit. I read a news story on a woman that sold the rights to a modestly successful series of young adult novels to a major kid's entertainment studio. Her attorney, who was not experienced in entertainment law, negotiated a percentage of the profits for the author. Needless to say, the TV movies, short series, albums, and merchandise never turned a profit for the entity that bought the rights.

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