Menckens Ghost

More About: Economy - Economics USA

Why we're way past the tipping point

The conventional wisdom is that the USA is approaching a tipping point because about 48% of voters pay no federal income taxes or pay less in income taxes than what they receive in government benefits.  A few years ago I debunked this wisdom by calculating that the nation already was well past the tipping point because there are more voters who are dependent on big government and the regulatory state than just those who pay zero or little in income taxes.  I added to the 48% the people (and their voting-age dependents) who receive entitlements and subsidies, as well as those who work for the government or who work in private-sector jobs that exist because of the regulatory state, such as tax accountants.  Many in these additional categories are Republicans who rail against big government.  After eliminating any doublecounting, these additions bring the total number of voters dependent in some way on the government to over 60%. Below is an editorial that shows the pernicious effects that this dependency has on the political system. Readers often ask what is the solution if a majority of voters won’t vote to eliminate their government rice bowl.  The solution is that things will have to run their course until the dire circumstance is reached where the national government runs out of money, including the ability to print Monopoly money without triggering massive inflation.  I’ll leave it to the big-name partisan pundits to debate whether Democrats or Republicans will get us there sooner. Mencken’s Ghost    
The Wall Street Journal December 2, 2011 Republicans for the Accounting Cartel GOP Members block Sarbox reform for small public companies.

How is it that a Republican House that claims to be pro-jobs can't pass a regulatory reform so modest that even President Obama's jobs council endorses it? Part of the answer is that the accounting cartel fighting reform has one of its own in the Republican ranks. A GOP presidential candidate also can't be bothered to show up for a critical vote.

In September we told you about Tennessee Representative Stephen Fincher's plan to relieve small public companies from Sarbanes-Oxley's most burdensome and duplicative accounting rules. "Useless" might be a better description for these rules, after MF Global became the latest company in the Sarbox era to hide catastrophic transactions outside its balance sheet—exactly what the law was supposed to prevent.

On Tuesday night, the House Financial Services Committee had to yank the Fincher reforms from a scheduled Wednesday vote. With all committee Democrats expected to vote against reducing paperwork, the Republicans would need almost all hands to send the measure to the House floor.

But House sources say Michele Bachmann wouldn't return from the campaign trail to vote. Meanwhile, California Republican John Campbell has been leading an effort to water down or kill the Fincher reforms. Mr. Campbell is an accountant carrying water for his former industry colleagues. New Mexico Republican Steve Pearce, who styles himself an opponent of federal regulation, is also blocking reform.

Sarbox was supposed to punish accountants, but like much regulation in practice it guarantees a lucrative business to a cartel dominated by four big firms. The mandate for an external audit on top of the traditional financial audits has helped accounting fees rise as fast as the bureaucratic burden.

Sarbox compliance runs into the billions of dollars annually, and the market for initial public offerings of young companies has never recovered since the law's 2002 enactment. In a report lauded by Mr. Obama, his independent jobs panel recently recommended allowing shareholders in companies below $1 billion in market capitalization to opt out of Sarbox's infamous section 404. Alternatively, the council suggested exempting all new companies from Sarbox compliance for five years after going public.

Click here for full article in the Wall Street Journal

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