Watch the video to see Senator Carper in action. I don’t know how much this scheme would cost but I image it would be huge.  Probably enough to sink the post office instead of saving it.

I used to live in Delaware—never voted for Carper, but unfortunately I was in the minority.  Carper beat the incumbent, Senator Roth (of the Roth IRA), in 2000 by a 56% to 44% margin. He defeated Jan Ting by 70% to 29% in 2006.  He is running for a third term in the November 2012.  His opponent will be determined in the September Delaware primary election.

Cbdakota

IER’s analysis provides the following facts about gas prices:

• 76 percent of the price of gasoline is determined by the price of crude oil.
• 12 percent of the price of gasoline is determined by federal, state, and local taxes.
• The federal tax on gasoline accounts for 18.4 cents per gallon, while the volume-weighted average state and local tax is 30.4 cents per gallon.
• Refining costs account for 6 percent of the price of gasoline.
• Retail dealer’s costs and profits account for a combined 6 percent of the price of gasoline.
• Less than 5 percent of gas stations are owned by major oil companies.
• 60 percent of U.S. oil demand is imported from foreign countries.
• The world consumed 87.9 million barrels of crude and liquid fuels every day in 2011, the highest consumption rate in history.
• China is now the world’s second-largest consumer of oil behind the United States.  In 2011, Chinese crude imports were up 8.2 percent over 2010 levels.
• The U.S. produced an average of 5.67 million barrels of crude oil every day in 2011.
• Production in the Gulf of Mexico is expected to fall by 90,000 barrels per day due to production declines in existing fields, permitting delays, and the Obama moratorium.
• Crude oil production in Alaska is projected to fall by 20,000 barrels per day both in 2012 and 2013.
• When President George W. Bush lifted the executive moratorium on offshore drilling, there was an immediate price decrease in the cost of oil.
• About 25 percent of U.S. supply of oil comes from OPEC countries, which have agreed to a production ceiling of 30 million barrels per day including Iraq’s production and some overproduction by member countries.

U.S. monetary policy — particularly increases in the money supply through quantitative easing — have coincided with a surge in oil prices.  Recent signals from the Federal Reserve that interest rates would remain at near-zero through 2014 have created a ripe environment for hedge funds that bet on commodity plays.

OFFSHORE UNDER BUSH

OFFSHORE UNDER OBAMA

Maps and history of the Bush and Obama Administrations regarding offshore oil and gas can be read in more detail here.

Raising Onshore Oil Production Costs

In addition to restrictions, Bureau of Land Management Director Bob Abbey said last week at a Senate Appropriations Committee on Interior hearing that federal regulations applied to oil and gas development simply make it more expensive than producing on state or private land according to a posting on Institute for Energy Research website. Then he remarked that the Administration is currently considering raising onshore production royalty rates from 12.5% to the 18.75% that  is charged for offshore oil; in fact, he said that the Department of Interior’s upcoming budget depends on an assumed 50 percent increase in royalty rates.

More blocking of access and higher rates.  How is this helping the US consumer?

First: Evans examines the Climate Model predictions made by James Hansen (the so-called godfather of AGW) during his testimony to the US Congress in 1988.(click on chart to enlarge)

Evans says:”… the actual temperature rises are about a third of what he predicted. Remember, they have been saying the “science is settled” since the early 80’s, and the models now are essentially the same as they were then.

Furthermore, Hansen’s models predicted the temperature rise if human carbon dioxide emissions were cut back drastically starting in 1988, such that by year 2000 the atmospheric carbon dioxide level was not rising at all. But in reality, the temperature did not even rise that much. Which proves that the climate models don’t have a clue about the effect of carbon dioxide on world temperature.”

Second: Evans looks at ocean warming.  This is a better gauge of global warming than is measuring atmospheric temperature fluctuations.  The Argo Buoys were put into service in 2003.  The measurements of ocean temperatures prior to the Argo program are suspect in my view.  Nothing before 2003 remotely resembles the scope of Argo measurements.(click on chart to enlarge)

Evans says: the climate models predict the oceans should be warming. We’ve only been measuring ocean temperature properly since 2003, using the ARGO system. In ARGO, a buoy duck dives down to 2000m, slowly ascends and reads the temperatures on the way, then radios the result back by satellite to HQ. Three thousand ARGO buoys patrol the oceans constantly. They say that the ocean temperature since 2003 has been basically flat. Again, reality is very different to the climate models.

Thirdly: Evans looks at the “hotspot” which was  a climate computer prediction  which is the  Warmers’ proof of the positive feedback.  Feedback that is able to take a weak CO2 forcing signal and double or triple it.   Unfortunately for the advocates of this hypothesis, the hotspot does not exist.(click on chart to enlarge)

Evans says: “the climate models predict a particular pattern of atmospheric warming during periods of global warming. In particular, the most prominent change they predict is a warming in the tropics about 10 km up, the so-called “hotspot”. But we have been measuring atmospheric temperatures by weather balloons since the 1960s, and millions of weather balloons say there was no such hotspot during the last warming from 1975 to 2001. The hotspot is integral to their theory, because it would be evidence of the extra evaporation and thickening of the water vapor blanket that produces two thirds of the warming in the climate models…”

Fourthly:  Evans hits on one of the most discussed topic in recent times—that of outgoing radiation into space.    Note in the chart below that the top row left is the actual measurements of outgoing radiation by the stat elite ERBE program (Earth Radiation Budget Experiment-click here for more information.)   The other boxes are climate model predictions. (Chart source=Lindzen and Choi 2009)

Evans says: “satellites have measured the outgoing radiation from the earth and found that the earth gives off more heat when the surface is warmer, and less heat in months when the earth’s surface is cooler. Who could have guessed? But the climate models say the opposite, that the Earth gives off less heat when the surface is warmer, because they trap heat too aggressively (positive feedback). Again, the climate models are violently at odds with reality.”

Evans sums up saying:” Those are four independent pieces of evidence that the climate models are fundamentally flawed. Anyone one of them, by itself, disproves the theory of man-made global warming. There are also other, more complex, pieces of evidence. Remember, there is no direct evidence that man causes global warming, so if the climate models are wrong then so is the theory.”

Read all of Evan’s posting here.

cbdakota

OPEN LETTER TO CONGRESS AND THE PRESIDENT OF THE UNITED STATES

The most immediate priority facing our nation is to create jobs for the 25 million Americans who are unemployed, underemployed, or have simply given up looking for work.

To create jobs, we must enact policies that promote and sustain stronger economic growth. We must also address extraordinary fiscal and competitive challenges that are smothering growth and driving away jobs. At the same time, there are specific steps Congress and the administration can take right now to spur faster job growth in America’s private sector without adding to the deficit.

The letter has a number of sections. I have picked out one of them that relates to the Climate Change Sanity blogs theme:

2. PRODUCE MORE AMERICAN ENERGY

Let American energy workers and businesses responsibly develop all sources of domestic energy immediately. This will not only create jobs but will generate new government revenues, protect our energy security, and release us from the grip of some unfriendly governments.

                              Open offshore resources. Almost 190,000 new jobs could be created by 2013 if permitting in the Gulf of Mexico for offshore development returned to pre-moratorium levels. In Alaska, opening up energy production off the coast would create 54,700 jobs.

                              Expand access on federal lands. By expanding oil and gas exploration on federal lands, we could create 530,000 jobs, reduce imports by 44% by 2025, and increase government revenues by $206 billion.

                              Promote development of natural gas. Expanding the development of the nation’s massive shale gas deposits would create hundreds of thousands of jobs and help bring manufacturing back to the United States, especially in the chemicals and steel industries.

By 2020, natural gas production in Western Pennsylvania alone could create 116,000 new jobs, generate more than $2 billion in government revenues, and add $20 billion to the region’s economy.

                        Approve the Keystone XL pipeline. Construction of the Keystone XL oil pipeline connecting Canada to U.S. refineries in Texas would support 250,000 jobs, boost investment in the United States by $20 billion, and generate government revenues totaling $585 million.

Well said, and certainly in line with yesterday’s posting see here.

The other letter sections are as follows and worth reading:

• Expand Trade and Global Commerce
• Speed Up Infrastructure Projects
• Welcome Tourists and Business Visitors to the U.S.
• Speed Up Permits and Provide Regulatory Certainty and Relief
• Pass Tax Incentives That Create Jobs While Increasing Revenues

cbdakota

(Versions in عربي, Français)

All too often we hear the claim that the programs the IMF supports in low-income countries hurt the most vulnerable by forcing cuts in social spending. This is a misconception.

Our study concludes that, contrary to these claims, IMF-supported programs boost education and health spending in low-income countries for as long as countries are engaged with the IMF.

Let the numbers do the talking

We based our analysis on public spending on education and health in 140 countries between 1985 and 2009. The dataset is the most comprehensive ever assembled to assess this issue. The results show the beneficial effects for social spending in program countries in several respects.

First, social spending increased at a faster pace in countries with programs compared to those without, particularly for low-income countries with programs (see chart). This is true for social spending in relation to GDP and as a share of total government spending, as well as increases in per capita social spending after adjusting for inflation.

Second, the benefits for social spending have accelerated over time in low-income countries.

• The median annual increase in education and health spending in low-income program countries since 2000 was more than double the average increase during 1985-1999. The rate of increase since 2000 implies that education and health spending, as a share of GDP, would increase each decade by 0.7 percentage points and 0.6 percentage points, respectively.

• Because GDP is also growing rapidly in these economies, increases in spending relative to GDP imply large increases in spending per capita. The rate of spending growth since 2000 suggests that education and health spending per person, after adjusting for inflation, would rise by about 50 percent and 60 percent, respectively, over a 10-year period.

Of course, IMF-supported programs are not the only determinants of a country’s social spending. Many other factors—age profile of the population, income levels, and macroeconomic conditions—come into play. A fair test of the impact of IMF-supported programs on this spending must take these factors into account.

Using statistical techniques that distill the impact of an IMF-supported program, as distinct from these other factors, we again find that IMF-supported programs have a positive, and even stronger, effect on the rate of increase in social spending in low-income countries. For example, over a five-year period with IMF-supported programs, education spending increases in low-income countries by about ¾ percentage point of GDP; and by about 1 percentage point of GDP for health spending.

Facilitating social spending

The IMF is committed to help protect or increase social spending in the programs it supports in low-income countries. In this regard, there are numerous channels through which programs help spur higher spending in education and health, including:

• Reforms that increase government revenues—on average, program countries increase revenues at a brisker pace than non-program countries—help create “fiscal space.”
• IMF-supported programs help countries mobilize donor financing.
• To the extent that programs lead to higher growth, they can help generate greater fiscal space.
• Finally, the emphasis in these programs on using additional resources—including those generated by debt relief—to support poverty-reducing spending contributes to rising shares of education and health spending.

The results suggest that IMF-supported programs are compatible with the efforts of countries to boost critical social spending to improve social outcomes. But, it will be equally important, as many scholars have emphasized, to improve the targeting and efficiency of public spending to make it a more powerful instrument for bettering the lives of the poor.

“A Conservative is a fellow who is standing athwart history yelling ‘Stop!’”

~William F. Buckley, Jr. 

Understanding The Debt Crisis In The U.S.

Ron Paul: Rein in Government Spending to Reduce the Debt

The CPI chart on the home page reflects our estimate of inflation for today as if it were calculated the same way it was in 1990. The CPI on the Alternate Data Series tab here reflects the CPI as if it were calculated using the methodologies in place in 1980. In general terms, methodological shifts in government reporting have depressed reported inflation, moving the concept of the CPI away from being a measure of the cost of living needed to maintain a constant standard of living. 

http://www.shadowstats.com/alternate_data/inflation-charts 

Ron Paul to Congress: If Debt Is the Problem, Why Do You Want More of It?

Ron Paul: I’ll Vote Against Raising the Debt Limit

Ron Paul Ad – Conviction  

Ron Paul ‘Annoyed’ at President Obama

Ron Paul Talks on The Federal Reserves Manipulation of US Dollar & The Tyranny of the TSA

Peter Schiff Responds to Timothy Geithner on Debt Ceiling He’s just making this stuff up!

A Promise That Cannot Be Kept | THE PLAIN TRUTH by Judge Napolitano

An open letter from Judge Andrew Napolitano to Speaker John Boehner

Underwhelming Spending Cuts from Congress and Obama

Dan Mitchell Exposing DC’s Fake Spending-Cut Scam with Judge Napolitano

“Cut, Cap and Balance,” the Debt Ceiling and Federal Spending

Dan Mitchell Talking about Downgrades and Debt Limit with Kudlow on CNBC

 ”Every Man Cannot Have His Way In All Things” President Obama Address

GOP Response To President Obama’s Debt Ceiling Address – 07/25/11

“A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned – this is the sum of good government.”

~Thomas Jefferson 

The American people want government spending to be cut, the budget balanced and no increase the national debt ceiling starting in Fiscal Year 2012.

The only real cuts in the Federal government spending are cuts to the budget baseline for Fiscal Year 2012 not cuts in the rate of growth of the baseline.

Please downsize the government by closing Departments, Agencies and programs and not voting for an increase the National Debt ceiling.

The time has come to furlough without pay non-essential government employees starting on August 2, 2011.

If you must betray the Tea Party and conservative movements and the American people at least insist that for every dollar increase in the national debt ceiling at least 10 cents be cut from the House of Representatives  Fiscal Year 2012 Budget Resolution:

FY 2012 Budget Resolution

( Nominal Dollars In Billions)

OUTLAYS                                                     3,529

REVENUES                                                  2,533

DEFICIT                                                           995

DEBT HELD BY THE PUBLIC        11,418

As A Share of GDP

OUTLAYS                                                       22.5

REVENUES                                                      16.1

DEFICIT                                                            6.3

DEBT HELD BY THE PUBLIC         72.8

http://budget.house.gov/UploadedFiles/SummaryTables.pdf

If you vote for a $1,000 billion increase in the National Debt ceiling then require the House of Representatives  Fiscal Year 2012 Budget Resolution be cut by $100 billion to $3,429 billion with a $885 billion dollar deficit.

If you vote for a $2,000 billion increase in the National Debt ceiling then require the House of Representatives  Fiscal Year 2012 Budget Resolution be cut by $200 billion to $3,329 billion with a $785 billion dollar deficit.

If you vote for a $3,000 billion increase in the National Debt ceiling then require the House of Representatives  Fiscal Year 2012 Budget Resolution be cut by $300 billion to $3,229 billion with a $685 billion dollar deficit.

If you vote for a $4,000 billion increase in the National Debt ceiling then require the Fiscal Year Budget be cut by $400 billion to $3,129 with a $585 billion dollar deficit.

If you vote for a $10,000 billion increase in the National Debt ceiling then require the Fiscal Year Budget be cut by $1,000 billion to $2, 529 with a $ 4 billion dollar surplus.

Otherwise you will be considered a traitor to the Tea Party movement and be voted out of office in 2012.

Either you are a Constitutionalist Republican or an Establishment Republican, you are either with the tea party or you are against the Tea party.

If you go back to the Fiscal Year 2005 government spending or outlay level, you can balance the budget this year.

I agree with President Obama that we need comprehensive tax reform and Speaker Boehner that we need something dramatic or a breakthrough.

Pass the FairTax to increase economic growth, jobs, savings, investment, productivity and even tax revenues by expanding the tax base.

The FairTax would replace the current Federal income, payroll, gift and estate taxation system which everyone agrees is too complex, costly and unfair.

The FairTax: It’s Time

Lugar Cosponsors the FairTax

Ron Paul on Taxes

Start listening to Ron Paul if you want to get re-elected.

No more commissions or backroom deals. 

Cut spending now!

The choice is yours.

“It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world.”

~Thomas Jefferson

Background Articles and Video

Sen. Toomey Gives a Speech on the Debt Limit at AEI

Smoke and Mirrors on Spending Cuts

Ron Paul on the U.S. Government’s Debt Crisis

The Debt Limit: Made Simple

Ron Paul 2012 Amazing!!!

“…The House on Friday approved a fiscal year 2012 budget resolution from Budget Committee Chairman Paul Ryan (R-Wis.) that seeks to drastically limit government spending next year and in years to follow.

But the vote on the measure — which imposes $5.8 trillion in spending cuts over the next decade — came after a clear sign that at least half of the Republican Caucus supports even tougher spending cuts.

The final tally was 235-193, with four Republicans opposing it. They were Reps. Ron Paul (Texas), Denny Rehberg (Mont.), Walter Jones (N.C.) and David McKinley (W.Va.).

Rehberg, the appropriator in charge of health spending, is running for Montana’s Senate seat.

Majority Whip Kevin McCarthy (R-Calif.) said listening sessions with Republican members made it the strongest vote of the year.

“This is the process we should follow on all votes,” he said.

Every Democrat voted “no.” …”

http://thehill.com/blogs/on-the-money/budget/156379-house-clears-ryans-2012-budget-plan-conservatives-want-more-cuts

House passes cut, cap and balance — and a deal is in sight

By Jennifer Rubin

“…The Republican-controlled House defied a presidential veto threat Tuesday night in approving a bill to amend the Constitution to require a balanced federal budget. But Speaker John A. Boehner acknowledged that a backup plan is needed, and a Senate GOP leader said he expects such an alternative to win his chamber’s approval.

The House voted 234 to 190 in favor of the “Cut, Cap and Balance Act,” which the White House has said will be vetoed in the unlikely event it passes the Senate and reaches President Obama’s desk. Faced with those prospects, Boehner told reporters that it would also be responsible to consider a backup plan for raising the federal debt ceiling and thus averting a potentially disastrous default on U.S. obligations.

http://www.washingtonpost.com/blogs/right-turn/post/house-passes-cut-cap-and-budget–and-a-deal-is-in-sight/2011/03/29/gIQA7JIzOI_blog.html?hpid=z3 

 

Neither the Republican Party nor Democratic Party Fiscal Year 2012 budget proposals are the road to peace and prosperity but a Tea Party budget with balanced budgets most definitely is:

Which Budgets Are Balanced And Living Within The Means of The American People?

4/5/11 Republican Leadership Press Conference

Democratic Party Budget Proposals

http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/tables.pdf

Republican Party Budget Proposals

http://budget.house.gov/UploadedFiles/PathToProsperityFY2012.pdf

Sen. Toomey Unveils his FY 2012 Budget

Senator Pat Toomey Talks with Michael Medved about his Budget

http://www.scribd.com/doc/55116239/Restoring-Balance-Final

SA@TAC – The GOP, War and the Debt

3/09/11: Sen. Rand Paul on balancing the budget

03/17/11: Sen. Rand Paul Introduces Five-Year Balanced Budget Plan

http://campaignforliberty.com/materials/RandBudget.pdf

Tea Party Budget Proposals

Related Posts On Pronk Palisades

The President Obama Exposed As An Empty Suit That Negotiates In Bad Faith With No Democratic Party or Presidential Plan–All Talk and No Walk–Videos

The Pronk Plan for A Peace and Prosperity Economy–Videos

Related Posts On Pronk Pops

Pronk Pops Show 37, July 20, 2011–Segment 0: President Obama Lies and Scares People On Social Security–Stop Spending and Balance The Budget!–Videos

Pronk Pops Show 37, July 20, 2011: Segment 1: The American People’s Solution To Economic Stagnation: Increase National Debt Ceiling By $2,000 Billion To $16,300 Billion In Exchange For Passage of A Balanced Budget Amendment And The FairTax Bills And Repealing The Income Tax 16th Amendment To U.S. Constitution–A Balanced, Fair And Transparent Approach To Creating Jobs and Growing A Peace and Prosperity Economy–Videos

Pronk Pops Show 37, July 20, 2011: Segment 2: It’s Time For A Permanent, Prevasive and Predictable Stimulus Package–The FairTax–Launching A Peace and Prosperity Economy–Videos

Pronk Pops Show 37, July 20, 2011: Segment 3: Senator Tom Coburn’s

(Version in Français)

Drug traffickers, diamond smugglers, and terrorists’ financiers around the world have one thing in common: they abuse the financial system to “clean” the proceeds they have obtained from their illegal work, or to transfer funds to achieve their destructive aims. The former is known as money laundering and the latter as terrorist financing.

In the United States alone, profits from these crimes are estimated around $275 billion, excluding tax evasion.

Our research shows this dark side of the economy has destructive consequences for a country’s financial stability, economy, and governance.   

Large-scale financial fraud impacts people’s lives.  For example, a large bank failure caused by fraud or insider trading may seriously damage the overall integrity of the financial market. The subsequent loss of confidence could cause the currency to lose value, which in turn can result in higher inflation and the erosion of real income and purchasing power for basic goods and services. Corruption undermines the integrity and stability of markets and governance, as well as confidence in the financial sector. Tax evasion on a wide scale literally means money destined for the governments’ coffers to pay for schools, hospitals and roads is diverted elsewhere.

Terrorist attacks and other forms of crime cause destruction and death, spread fear, shake confidence, and undermine the tourism industry. And the whole vicious cycle is powered by money laundering, which helps clean the proceeds from most illegal activity and re-injects it in the legal sectors of the economy.

All of this results in reduced government revenues, resources diverted from more productive activities, and unfair competition, which negatively impact economic activity and growth. And the damage isn’t limited to one country; the destabilizing effects of these activities can spill over onto the economies of neighboring countries and trading partners.

The IMF has worked with countries to combat money laundering and terrorist financing for over 10 years, mostly by assessing then improving the rules and regulations set up by countries, and by helping to shape international policies in these areas.

With the benefit of all this experience, we decided it was time to consider a new, risk-focused approach to add depth to the way we assess money laundering and terrorist financing. In the months ahead, we and our colleagues from the World Bank will be discussing the possibility of moving to this new approach with the Financial Action Task Force (FATF), a group of countries that sets international standards in this area.

Our starting point for this new approach was to recognize that countries do not face the same risks of money laundering and the crimes that generate the money in need of laundering.

Countries need help to combat money laundering and terrorist financing, including

• legislation to combat money laundering and terrorist financing
• criminal justice systems capable of prosecuting money launderers and terrorist financiers, and confiscating their assets
• measures to enable financial and non-financial institutions to identify their customers and verify the information they are providing, known as customer due diligence
• supervision of financial and non-financial institutions
• measures to prevent the misuse of legal persons, such as companies, foundations, and associations, for criminal purposes or criminals from controlling them
• financial intelligence units
• domestic and international cooperation

One size may not fit all, and our response must be tailored to specific circumstances and needs to be more effective.

We think that following a targeted, risk-focused approach would mean our assessments would be more cost-effective and focused on the issues that matter most for countries.

The IMF’s check-ups on the health of a country’s financial system, called the Financial Sector Assessment Program, already include anti-money laundering and terrorist financing, and together with the World Bank we will keep this up and also dig deeper.

When criminal behaviors pose risks to the financial system or impact the countries neighbors, we’ll have a more rational and in-depth coverage of money laundering and predicate crimes in both our financial assessments and in the annual IMF check-ups of a country’s economy, known as the Article IV consultation.

 We’re changing the way we tackle money laundering and terrorist financing so we can keep up with the times.  The effects of Allen Stanford’s fraud on the small Caribbean island of Antigua and Barbuda, and the extent to which tax crimes are having an impact on the economic situation of Greece are reminders of the devastating effects financial abuses can have on a country’s economy.

At the same time, wary corporate decision-makers reported that uncertainty over tax and fiscal policy had discouraged them from creating jobs or making R&D investments essential to prosperity.

As self- imposed constraints limit the agility of these two important sectors, a third—the non-profit sector—worries that the 2010 Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act may have a cascading effect, further impoverishing state and local governments, shifting the burden of providing social services from the public to the non-profit sector. Moreover, its leaders fear that the estate tax provisions may reduce incentives for wealthy individuals to make the no-strings-attached donations and bequests that free the sector from the constraints of politics and markets.

Our tax structure has long reflected the value we place on the nonprofit sector’s ability to take risks and try out new ideas without fear of political or market reprisals. Income and inheritance taxes have encouraged donations and bequests, as well as the creation of tax-exempt foundations. As a result, our nation has a diverse charitable sector comprised of grantees and grantors who are tackling issues at home and across the globe. Free from the need to garner votes or generate profits, they needn’t test the political winds before offering services to the most marginalized Americans. Their reach extends to the developing world, where they have created or supported “social enterprises” with for-profit business models for providing off-grid communities with renewable sources of energy. And, globally they have even entered into public-private partnerships to effect high policy, as Warren Buffett did in making his $50-million gift to the UN’s politically-hampered and resource-strapped International Atomic Energy Agency. That grant will help to create a “nuclear fuels bank” upon which states committed to nonproliferation can draw to meet their energy needs.

Whether the tax deal will limit the freedom of non-profits to achieve such salutary outcomes is a matter of intense debate. But, it is up to us to ask and answer that question before the law’s review in 2012. An election year is a particularly poor time for political risk-taking. Policy-makers will need to be armed with the facts, and buttressed by a clear and unswerving sense of the sector’s purpose.

First the data: The law extends several provisions that can affect charitable giving—and provides time to gather data on their effect. It extends Bush-era tax cuts at all income levels and continues favorable treatment of capital gains and dividends. It delays a requirement that high-income tax-payers reduce their itemized deductions, including for charitable gifts. It exempts older taxpayers from treating up to $100k gifted to charities from their IRAs as taxable income. But, what worries some nonprofits is the 35% cap it places on inheritance taxes, while exempting estates of $5m or less. Many analysts argue that these estate tax provisions will remove incentives for bequests as well as giving-while-living aimed at reducing the size of the taxable estate. Others contend that estate tax considerations play a negligible role in the decision to give, but can influence the size of the gifts made. They draw on the 2004 predictions of the Congressional Budget Office, which anticipated a drop off in the number and size of bequests. Indeed fewer dollars were donated in this way during the phase-out of the estate tax, from 2008-2009. But, that year’s economic contraction is likely to have had far greater effect. More time in an improved economic climate can yield more data on which policymakers can base future choices.

And, the purpose – As we undertake that analysis, it is essential that we come to a shared view of the reasons for charitable organizations, and their tax-exempt status, in the first place. Americans value nonprofits because they can take actions and generate ideas that may be unwelcome, unpopular, and unprofitable in the short run, but produce true societal benefit over time. In the process, they can help identify and tackle truly hard problems when others cannot. Among the hard problems nonprofits can help address is the need to get our country on a financially sustainable course. Nonprofits have already contributed by sounding the alarm, providing analysis and offering policy options.

The deficit dilemma has helped to highlight the hurdles political and business decision-makers face when it comes to calling for sacrifice. Elected officials must respond to caricatures of their views repeated in 24 hour news-cycles. Business leaders are required to produce shareholder value as measured in quarterly returns. The nonprofit sector may be the only one that can afford to ask tough questions, test novel solutions and build consensus from the ground up.

In considering our tax laws in 2012 our goals should be straight-forward: to regain our ability to solve problems as a nation. Preserving the nonprofit sector’s freedom to help tackle society’s next hard problem is an essential first step.

—Jane Wales

China and cigarettes go together

The Gong’an county government in Hubei province has ordered its staff to puff their way through 230,000 packs of Hubei-produced cigarette brands a year, the ‘Global Times’ said.

Departments that fail to meet their targets will be fined, according to the report.

“The regulation will boost the local economy via the cigarette tax,” said Chen Nianzu, a member of the Gong’an cigarette market supervision team, according to the paper. (via China orders officials to smoke or be fined).

The Chinese Central Government commands less than 25% of the total tax revenues - and the 75% goes to provinces. This, possibly is why the Chinese Government cannot reduce cigarette usage in China.

PS: Some readers have commented that this story may not be real. The (local) Government circular is real and this incident is also real. I have embedded some links to give you a better idea – including the original link from Global Times.

With due regard to all CFSR members, I would like to say that the draft report is very comprehensive and it was not so easy to comment over it. The committee has indeed made sincere and focussed attempt to do justice with the assignment given by the planning commission. In the light of the available sources of information, it really made some very genuine proposals.

We run a cooperative credit society which is serving to the unorganized sector for last 25 years and my comments reflects the practical problems of financial institutions in the unorganized sector. I hope the committee will certainly revisit the pointed areas and find it worth while writing the final report.

A.     Macro Economic Framework

1.      Money itself is a medium of exchange, facilitating economic transactions and denotes a price value of real output. Money itself is not a product. Whereas banking and financial services are real services promoting economic transactions and should have prices. There are two ways to recover the cost of financial services; either by fixing a rate of interest as price of finance; or by receiving proportionate share in outcome of financial services (i.e. profit). Interest payable on debt finance is a part of capital cost and increases cost of outputs, resulting increase in prices (inflation). Whereas equity finance is not considered as cost factor, and the aim is to share the profit, without increasing the price level, rather promoting profit sharing and bridging economic disparities. Using ‘interest’ as a tool to control inflation works to control liquidity and financial transactions, but does not provide anti inflationary monetary base, whereas equity based deposits and finances restrict inflation and promote equitable distribution of income and wealth, thus providing stability and inclusive growth.  So, to control inflation and to stabilize financial market we need to promote equity based financial transactions. 

2.      It is required that the proposed Financial Development Council (FDC) and Financial Sector Oversight Agency (FSOA) should have close coordination with the Planning Commission so that it should work according to long term plan and not undertake any politically motivated agenda on priority or approve anything harmful for financial health of the nation.

3.      Considering current recession in USA market, and China’s own requirement of capital inflow, we have to look for Capital Market from Oil Producing Countries for long term sustainable capital inflow for India. But to enable FDI from Oil Producing countries, we may have to open doors for Islamic Banking and Finance in India. Strategic promotion of Islamic Banking by Indian Regulators may open options to have our investments in petroleum resources; reciprocally FDI in our agricultural and unorganized sector.

B.    Developing Banking and Finance for the unorganized Sector

4.      We need to consider the nature of financial holdings required for our unorganized sector where the majority are poor and do not have the capacity to undertake financial risks nor have collaterals to provide. Debt finance through Banks and formal financial institutions do not suit the poor and vulnerable in unorganized sector; thus they should have access to equity finance instead of debt finance so that financial risks do not result in extra pressure on them.

5.      The Business Correspondent model should be enhanced to enable BCs to provide information about equity deposits and finance, along with consultancy to develop small businesses. Business Correspondents without consultancy services may just offer debt finance and increase indebtedness of the poor in the unorganized sector, whereas if consultancy services are provided along with equity finance, it may help the poor and vulnerable to proficiently use the finance.  

6.      We need to develop ‘Market for Unorganized Sector Small Equity Finance and Investments (MUSSEFI)’ where small banks and financial institutions could deal with small mutual funds or venture capital funds focussed on the unorganised sector. This would help equity market to grow out of the present situation in which over 90% Indians do not have any share in equity market. MUSSEFI would work as an OTC market for equity and debt instruments.  There would have to be some market makers which could be found from a number of Islamic Financial Institutions dealing in equity financing.

7.      There should be a specified category of deposits which can be used for equity finance. Such practices will help us grow investment in the unorganised sector. Such deposits could also be counted towards the equity of Cooperative Credit Societies, relieving them of capital constraints while ensuring they remain capital adequate.

8.      In the unorganized sector only 12% retailers have access to formal credit system. Similarly 73% of farmer households have no access to formal credit system. More acutely 40% workers of unorganized sector have no entrepreneurial assets to provide collaterals for credits. We need to ensure that these enterprises should get cheaper and easy credits from formal sources; utilize those credits to compete with organized sector and be part of inclusive growth.

9.      If Government diverts the allotted subsidies for the welfare of farmers, MSME and BPL towards equity finance or risk funds for the unorganized sector, it would help in reducing the deficit of the Government while also benefiting the poor and vulnerable sections through equity finance for the development of enterprises.

10.  There should be a Public Corporation to promote industrial and retail infrastructure for the unorganized sector workers so that they could compete with the organized sector manufacturers and retailers. Industrial estates and retail markets could be developed and provided on lease finance to the unorganized sector workers; it would help them get organized.

C. Ensuring Financial Inclusion for Inclusive Growth

11. To ensure financial inclusion, strongly recommend the following proposal of Dr. C. Rangarajan Committee on Financial Inclusion –

“A National Mission on Financial Inclusion (NaMFI) comprising representatives from all stakeholders may be constituted to aim at achieving universal financial inclusion within a specific time frame. The Mission should be responsible for suggesting the overall policy changes required for achieving the desired level of financial inclusion, and for supporting a range of stakeholders – in the domain of public, private and NGO sectors – in undertaking promotional initiatives.”

12. The Justice Sachar Committee Report hints that there is annual loss over Rs. 22,000 crores to Indian Muslims due to the gap between the credit deposit ratios by them. Around 29% of the savings of Muslims are diverted as credit to others. The credit share to Muslims through SIDBI is reported to have just 0.48%. There should be a regulation to ensure fair and justified credit disbursement by Banks and financial institutions.

13. We should arrange a national level study to identify factors responsible for financial exclusion because till date we have no comprehensive study on financial exclusion so that the real barriers for financial inclusion could be broken down.

D. Islamic Banking – An alternative financial system

14. We have to recognize the fact that ‘Interest’ which is an important ingredient of our financial system, has been strictly prohibited in Islam. This is having a dampening effect on Indian Muslims’ participation in the financial system, which is evident from the Sachar Committee Report. Like ‘Financial Services Authority’ of U.K. regulating Islamic Bank of Britain, Indian regulators should also authorize the establishment and regulation for Islamic Banking and Finance in India

15. To promote public-private-partnership (PPP), we should have a national authority to design equity products and market it in national and international market. If it makes Shariah compliant equities, it could comfortably be marketed in Islamic nations. To make it feasible we need to develop a National Board for Islamic Finance, which should comprise of Government officials, financial consultants, bankers and also Islamic economists so that Shariah compliant certificate could be issued by the board at the national level and products could be sold in the national and international markets. 

16. There is a sense of deprivation among Indian Muslims that many national and international banks have windows of Islamic banking abroad, but Indian Muslims are still deprived to take advantage of Islamic Banking in India. Since, we need to open Islamic Banking in oil producing Islamic nations, it would be better to first allow Islamic banking in India and open its foreign branches in abroad. Islamic Banking should not be seen as a concession to the Muslim community, instead it should be seen as a progressive step in the financial sector, which will have a vast impact on resource mobilization and financial inclusion. 

E. Improvising the Information System for Financial Sector

17. National level unique ID number must be issued to every citizen irrespective of number and nature of accounts in different banks or institutions. All transactions should be traceable through that unique ID number and no significant cash and capital account transaction should be permitted without that unique ID number. That ID should be denoted at national level and not on sector or segment level so that it could be recorded that a particular ID number is involved in how many sectors, segments, enterprises or unit based transactions.

18. We should take land reform as the next most important item on the agenda because without computerization of land records, we cannot assure success of financial sector reforms. It is important to computerize all capital assets including land with specific unique asset ID number. Only then we should go to make efforts for financial sector reform otherwise chaos will always be there and vulnerable group will be excluded in the absence of relevant data and verification system.

19. We need to develop capital accounting system for individuals and firms in banks to record capital assets (lands, equity, tools, vehicles, machineries, equipments, security & certificates etc.) This would help us evaluate assets of all individuals, firms and thereafter at the national level. If managed properly, such capital accounts may also work as collaterals against equity finance.  The provision to maintain cash and capital account system in banks for individuals and firms will help banks maintain required liquidity and utilize maximum financial resources through lending and equity finance.

F. Increasing Circumference of Public financial resources-

20. There should be incentive provision for regular and honest tax payers. The tax payment history of individuals and firms should be available for access by creditors and it should be considered for providing equity finance to individuals and firms. Persons and companies paying regular taxes should have advantage in availing equity finance for their honestly and regular payment of taxes. Whereas the tax savers and cheaters should have disadvantages in equity finance. This would popularize tax payment and increase Government revenues.

21. The tax revenue department should assist National Mission for Financial Inclusion by providing trading and stock keeping software free of charges to unorganized sector enterprises and allowing banks to maintain it with help of Business Consultancies, so that all transactions in unorganized sector could be well recorded and monitored by  special Banks for the unorganized sector. It would help collecting taxes from unorganized sector as well. If tax revenue department successfully help National Mission for Financial Inclusion to attain 100% financial inclusion in unorganized sector, it may result additional 10% GDP growth through tax collection from unorganized sector itself.

22. The Department of Economic Affairs need to frame programmes for economic development of the unorganized sector enterprises. Software related to Sales Taxes and Excise duties may be provide through Business Correspondents, to maintain accounts of the unorganized sector enterprises. This would help the unorganized sector enterprises maintain their accounts; in turn tax revenues may increase and against tax payments, enterprises should have advantages to get tax credits.

G. Liberalizing Regulatory Norms for Financial Sector Growth

23. There should be greater liberalization related to bank licensing, branches, deposits and credit so that the financial sector could grow with comfort and facilitate economic transactions.

24. Priority Sector Lending was introduced at a time when we had limited resources and we needed to ensure that scarcity of resources did not affect the priority sectors. After liberalization, we no longer have such scarcity of financial resources. There is no longer any need for stimulating financial flows into priority areas. Thus we do not find any reason to continue PSA system or to advance it with PSLC scheme because it has no economic rationality in liberalized economy; rather it often creates NPAs. Farmers’ loan waiving over Rs. 71,000 crore is in fact a side effect of PSA scheme.

25. All Banks and NBFCs or other financial institutions should have equal rights and the regulations should ensure level playing grounds. Government should not have any share in Banks because it does not positively affect the efficiency or growth of Banks. All banks should have freedom to choose their own board members or to extend branches or network with other financial institutions without any regulatory restrictions. RBI should allow banks to work according to market forces and decide their rate of interest or percentage share in equity capital. The economic rationality and liquidity should be allowed to govern the financial market. 

26. It is not evident that SLR really helps achieving stability or growth of financial sector; on the contrary, it is evident that it enables deficit finance by government and causes inflation. Thus the condition of SLR should be omitted because it may restrict growth of banks in the unorganized sector. The condition of minimum capital should be liberalized for new banks for the unorganized sector otherwise it may restrict smaller but innovative entries into financial market. Like small community banks in USA, we may need to promote Community Based Multidimensional Local Area Small Banks and Financial Institutions for our unorganized sector to make financial inclusion a success with cost efficiency.     

27. The ‘Hawala Agencies’ and ‘Angaria’ are in fact catering to real financial needs and so it is better that the regulations for registration, licensing, networking and transaction should be liberalized with minimum tax slab so as to induce illegal financial players to undertake only legal financial transactions. It would reduce money laundering business and increase tax revenue of the Government.

I wish the final report of CFSR would contain proposals to develop banking and finance among poor and vulnerable associated to unorganized sector and also open door for Islamic Banking and Finance. Wishing that the proposals would be taken up for implementation at it’s earliest and enable Indian financial sector grow at a much higher rate.

Syed Zahid Ahmad