Nearly 40 years ago, as a recent college graduate, I made a painful discovery: I couldn’t figure out how to do my own federal income-tax return.
That was embarrassing, and it made me wonder what other Americans do. So I wrote my first major tax story: I asked five different tax-preparation services in the Atlanta area to prepare returns for a family of four with fairly typical finances. The results: At one extreme, a tax expert said the family was entitled to a federal income-tax refund of $652.04. But another said the family owed $141 — a difference of $793.04.
That experience made me feel somewhat less dumb, but the article didn’t have much impact: Since then, our tax system has evolved from a mess to a nightmare. The pace of change has accelerated in recent decades as lawmakers increasingly have tried to use tax laws to reward or punish conduct. The number of pages in the CCH Standard Federal Tax Reporter, which records tax law, regulations and related material, has soared to 70,320 from 26,300 in 1984.
More than 60% of all individual returns are signed by professional preparers, up from 46% in the mid-1980s. Joel Slemrod, an economics professor at the University of Michigan, estimates that the time and money individuals spend on tax compliance now comes to about $90 billion a year.
McCain in Hong Kong & Vietnam
His performance in Vietnam was particularly intriguing. He knows the country well and is treated almost as a celebrity – a reflection of both the quirks of history, and his moral and political courage, qualities that helped propel his White House run.
Senator McCain spent five years as a prisoner of war in Hanoi at the height of the Vietnam conflict, having been shot down and crashing his jet fighter into a lake on the edge of the capital. His vivid descriptions of being tortured – he refused offers of early release as the son of a leading admiral – did not stop his efforts years later. He not only returned to enemy territory but, as a prominent and hawkish Republican, played a key role through the late 1980s and 1990s in America’s long delayed reconciliation and normalisation with its victorious opponent.
In his political twilight, Senator McCain could be forgiven for resting easy during his first return to the Vietnamese capital in five years. Despite political and social differences, the two countries are open to trade and investment, and have taken the first steps to a military relationship – a pipe dream just a decade ago.
He remains restless, however. In a speech to the country’s diplomatic academy, he passionately urged both nations to get even closer. “Today, the hardest work of normalisation is behind us. The time has come, I believe, for us to move from the normalisation of our ties commensurate with Vietnam’s rising status in the region and the world. We should not simply rest on our laurels and allow the relationship to plateau. It is time to take the next step.”
Some Great Photos
Good Friday Links
Pirates and the CIA: What would Thomas Jefferson have done?
“It was the sixth such attack this week and one of 66 this year by Somali pirates, a collection of shrewd businessmen and daring opportunists who have pulled off a series of spectacular seizures using high- and low-tech gear, from satellite phones and rocket-propelled grenades to battered wooden skiffs and rickety ladders,” the Washington Post reported today about the attack on a U.S.-operated container ship. “In the past year, their booty has included the MV Faina, a Ukrainian ship loaded with tanks and antiaircraft guns, and the MV Sirius Star, a 300,000-ton, 1,000-foot-long Saudi oil tanker that is the largest ship to be seized in history.”
For months, a former senior CIA officer has been telling me that pirate activity off Somalia was a problem that needed to be aggressively dealt with. By chance, I had a meeting with him yesterday as the Maersk Alabama hijacking was unfolding. Here’s what he had to say (he updated his remarks today):
The American response to date has been incredibly naïve and woefully ineffective. Now, predictably, you have an American taken hostage. All of which should have been prevented. You’ve got a failed state in Somalia and pirates operating in an area of ocean that is larger than the state of Texas but we’ve been trying to deal with this from the ocean side, by sending the navy and with a limited application of technology, such as satellites and drones. We can’t afford to patrol that big a piece of the ocean; it’s too expensive to leave a naval task force out there.
36 Hours in Hanoi
NEAR Hoan Kiem Lake in the heart of Hanoi, a digital clock counts down the seconds to this atmospheric city’s 1,000th birthday in 2010. There certainly will be a lot to celebrate: the city, Vietnam’s capital, has experienced extraordinary growth over the last two decades, evolving from a grim, famine-ravaged place into a sophisticated metropolis with high-rises, sensational cuisine and world-class art. Those shaking their heads at the disappearance of local culture, though, should think twice. For every glitzy mall, there’s an incense-filled temple nearby, and cultural influences of the past are still part of the modern-day fabric, from revered Confucian monuments to trendy French restaurants. In fact, it’s this zeal for barreling toward the future while always looking back that defines this city.
April Fools Jokes – a few days later…..
This stunning accommodation offers deluxe living in the heart of England’s capital city. A gated property with secure parking and armed guards, this is the perfect property to relax in complete luxury. Exquisitely furnished with many priceless antiques, royal collections and rare artefacts. 400 people work at the Palace to cater to your every need, including domestic servants, chefs, footmen, cleaners, plumbers, gardeners, chauffeurs, electricians, and two people who look after the 300 clocks.
The palace consists of 19 state rooms, 600 bedrooms and 78 bathrooms. There is an adequate sized banquet hall to entertain your guests in the evening and a throne room which is an unusual but popular additional feature.
The owners do reside in the property but are discreet and are available should you require any assistance. They also own other properties throughout the United Kingdom. Please contact them for further details.
More: The 10 Best April Fools’ Jokes and Econoland.
How Bailouts Can Butcher Capitlism
One unhappy hallmark of the Great Recession is a dramatic spike in financial distress. Moody’s predicts that the default rate on corporate debt–which helps foretell bankruptcies–will be three times higher this year than in 2008. Home foreclosures are already at record highs, and going higher. Defaults on credit cards and other consumer debt will crest right behind mortgages.
The Obama administration is on the case, bailing out banks and homeowners and aiding dozens of industries either directly, through a financial-rescue scheme that could top $2 trillion, or indirectly, through the $787 billion stimulus bill. Automakers, furniture companies, real estate developers, and even porn magnates have their hands out.
[See a tally of the bailout efforts so far.]
Those efforts ought to help soften a sharp recession. But the unprecedented aid to the private sector may also unleash new problems, the way antibiotics have generated stronger strains of bacteria. “There’s something fundamental about the need for failure,” says Syd Finkelstein, a professor at Dartmouth’s Tuck School of Business and author of Think Again: Why Good Leaders Make Bad Decisions and How to Keep It From Happening to You. “We’re tinkering with the genetic DNA of a capitalist society.”
The Quiet Coup
The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.
Fed & Treasury: Putting off Hard Choices with Easy Money (and Probable Chaos)
Brief remark – from early reports regarding the toxic assets plan, it appears that the Treasury envisions allowing private investors to bid for toxic mortgage securities, but only to put up about 7% of the purchase price, with the TARP matching that amount – the remainder being “non-recourse” financing from the Fed and FDIC. This essentially implies that the government would grant bidders a put option against 86% of whatever price is bid. This is not only an invitation for rampant moral hazard, as it would allow the financing of largely speculative and inefficently priced bids with the public bearing the cost of losses, but of much greater concern, it is a likely recipe for the insolvency of the Federal Deposit Insurance Corporation, and represents a major end-run around Congress by unelected bureaucrats.
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Last week, the Federal Reserve announced its intention to purchase a trillion dollars worth of Treasury debt by creating the little pieces of paper in your pocket that have “Federal Reserve Note” inscribed at the top. In effect, the Fed intends to monetize the Treasury debt in an amount that exceeds the entire pre-2008 monetary base of the United States.
Apparently, the Fed believes that absorbing part of the massively expanding government debt and maybe lowering long-term rates by a fraction of a percentage point will increase the capacity and incentive of the markets to purchase risky and toxic debt. Bernanke evidently believes that the choice between a default-free investment and one that is entirely open to principal loss comes down to a few basis points in interest. Even now, the expansion of federal spending as a fraction of GDP has clear inflationary implications looking a few years out, so any expectation that long-term Treasury yields will fall in response to the Fed’s buying must be coupled with the belief that investors will ignore those inflation risks.