Insider Report
Headlines (Scroll down for complete stories):
1. Record Numbers in Poverty Under Obama
2. Mileage-Based Fuel Taxes Coming Down the Road
3. Pension Funding Practices Called 'Dangerous'
4. North Korea Producing Its Own Nuclear Components
5. Taxes, Regulations Are Small Businesses' Biggest Problem
6. We Heard: Romney Wager, Record Taxes
1. Record Numbers in Poverty Under Obama
The median income of American households dropped by $2,627 during President Barack Obama's first term — and the number of people in poverty rose by about 6,667,000, according to a new report from the Census Bureau.
Some 46,496,000 Americans are now in poverty, the highest number ever and a 16.73 percent increase from 2008 when Obama took office.
Overall, 15 percent of Americans are considered to be living in poverty, up from 13.2 percent in 2008.
But the figures are much higher for blacks and Hispanics — 27 percent of blacks and 25.6 percent of Hispanics are living in poverty. The rate for non-Hispanic whites is 9.7 percent.
More than one-fifth of all Americans under age 18 — 21.8 percent — are in poverty, as are 9.1 percent of those 65 and older.
A single individual earning less than $11,270 last year was considered to be in poverty. For two-person households, the threshold is $14,937; for three-person households, $18,284; for a family of four, $23,492.
Last year, the real median household income in America was $51,017, a 4.89 percent drop from 2008. Median income dropped in every year of Obama's first term.
For black households, median income last year was $33,321, according to the report "Income, Poverty and Health Insurance Coverage in the United States," released on Tuesday.
The income and poverty estimates shown in the report are based solely on money income before taxes and do not include the value of noncash benefits, such as those provided by the Supplemental Nutrition Assistance Program, Medicare, Medicaid, public housing, or employer-provided fringe benefits.
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2. Mileage-Based Fuel Taxes Coming Down the Road
The good news is that Americans are using less gasoline, due to more fuel-efficient vehicles and declining miles driven following the economic downturn — not to mention hybrid and electric vehicles.
The bad news is that gasoline tax revenues are also down and are not providing sufficient funds to maintain or improve the nation's roads.
Last year Americans traveled 2.93 trillion miles on the roads, down from 3.03 trillion in 2007, according to Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute.
Federal taxes on ordinary gasoline, which are now 18.4 cents per gallon, brought in $36.9 billion for the Highway Trust Fund in 2011, the last year for which statistics are available. Expenditures that year totaled $44.5 billion, a deficit of $7.6 billion.
In fact, the Trust Fund has been running deficits since 2008, and Congress has transferred nearly $35 billion over the past few years to keep the Trust Fund positive.
"In the future, roads will need another stream of funding. The most obvious substitute for fuel taxes is to charge road users directly for vehicle miles driven, enabling them to get the roads they are prepared to pay for," Furchtgott-Roth writes in an article for Market Watch.
One innovative approach can be found in Oregon. The state's Department of Transportation will set up a system for 5,000 volunteer motorists who will pay 1.5 cents per mile rather than the current 30 cents per gallon tax on gasoline. The drivers will be refunded for the tax they pay at the pump.
Several other states are resorting to higher gas taxes, increased sales taxes, or bond issues to fund road maintenance and other infrastructure.
"In the 21st century, charging for roads and deciding where they should go should be the responsibility of state or private providers," Furchtgott-Roth concludes. "The interstate highway system is complete, and the technology for pricing roads without stopping vehicles is readily available.
"As the Highway Trust Fund revenues shrink, those states that are raising funds for their own roads — especially Oregon, with its mileage-based user fee — are the wave of the future."
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3. Pension Funding Practices Called 'Dangerous'
Public employee pension plans in the 50 states are now underfunded by $4.1 trillion — with Illinois' retirement fund in the worst shape.
"Current funding practices undervalue the retirement promises made to public employees" and "present a unique threat to state government finances," according to State Budget Solutions, a nonprofit, nonpartisan organization.
"Financial economists and other observers [are] warning that pension funding practices are dangerous for both taxpayers and public employees."
State Budget Solutions calculates a state's funded ratio, which presents a pension plan's assets as a percentage of its liabilities — the amount of money owed in benefits.
By this measure, the most poorly funded state is Illinois, with a funded ratio of just 24 percent, followed by Connecticut (25 percent), Kentucky (27 percent), and Kansas (29 percent). Mississippi, New Hampshire, and Alaska have a ratio of 30 percent.
Even the most well-funded state, Wisconsin, has a ratio of just 57 percent. That's followed by North Carolina (54 percent), South Dakota (52 percent), Tennessee (50 percent), and Washington (49 percent).
Overall, state public pension plans are only 39 percent funded.
Alaska has the largest unfunded liability per person, $32,425, followed by Ohio, $24,893. The smallest liabilities per person are in Tennessee, $5,676, and Indiana, $6,581.
Overall, the $4.1 trillion in unfunded liabilities nationwide amounts to $13,145 per person.
In actual dollars, California has the largest liability, just over $640 billion — its funding ratio is 42 percent — followed by Ohio at $287.3 billion and Illinois at $287 billion.
State Budget Solutions concludes: "While many have tried to turn a blind eye to the pension crisis, the problem is simply too big to ignore."
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4. North Korea Producing Its Own Nuclear Components
North Korean scientists for the first time have learned how to make key uranium-enrichment components that could aid the country's nuclear weapons program, a new report reveals.
The North Koreans' ability to produce parts for gas centrifuges undermines export controls and sanctions designed to halt the communist nation's enrichment of uranium for nuclear weapons.
Along with several signs that North Korea is expanding its nuclear production facilities, the report from American arms control experts Joshua Pollack and Scott Kemp suggests "a new effort by the North to master all the facets of the nuclear production cycle — or perhaps to give the impression of nuclear progress that would drive new offers of talks or economic aid," The New York Times observed.
"If the North Koreans are making parts, they will essentially invalidate much of the international strategy to force them to denuclearize and make it more difficult to monitor their production."
Pollack said the expanded production means that locating all of North Korea's centrifuges will be difficult and will put a verifiable deal to end their nuclear program "out of reach."
Earlier this year, Admiral Samuel Locklear, the head of the U.S. Pacific Command, testified before a Senate committee that North Korea's development of nuclear weapons and long-range missiles poses a "direct threat" to the United States and its allies.
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5. Taxes, Regulations Are Small Businesses' Biggest Problem
Small-business owners are more likely to cite taxes or regulations than poor sales as their greatest single problem.
A survey by the National Federation of Independent Business found that 21 percent of small-business owners believe taxes are their biggest problem, and 21 percent cite "government regulations and red tape," while just 16 percent cite poor sales.
Other problems mentioned include "cost/availability of insurance" (8 percent), quality of labor (7 percent), competition from large businesses (6 percent), and cost of labor (5 percent).
Taxes and regulations are significant contributors to small businesses' reluctance to hire workers, which is keeping unemployment high, according to a report from the Heritage Foundation.
"Unemployment remains high primarily because businesses are creating fewer new jobs — not because of increased layoffs," observed James Sherk, a senior policy analyst in Labor Economics in the Center for Data Analysis at the Heritage Foundation.
"The U.S. government has also contributed to the problem. Excessive taxes and increased regulation discourage risk-taking and investment."
The average top marginal tax rate — including federal and state income taxes and payroll taxes — now stands at 48 percent, and exceeds 50 percent in some states.
The number of final rules published each year is generally in the range of 2,500 to 4,500, according to the Government Accountability Office, and the number of specific regulatory restrictions listed in the Code of Federal Regulations topped one million back in 2010.
Sherk concludes: "Congress does have direct control over the taxes and regulations it imposes on employers. Congress should reform the tax code so job creators do not face tax burdens of almost 50 percent and should streamline or eliminate unnecessary regulations. The weakest labor market in two generations is no time to make it more difficult for businesses to expand and create jobs."
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6. We Heard…
THAT an unidentified trader lost more than $4 million placing bets on a Mitt Romney win in the two weeks leading up to last year's presidential election.
Economists Rajiv Sethi and David Rothschild looked at transaction data on Intrade, a Dublin-based online platform, and found that the trader put in $4 million in 13,000 separate transactions.
"He lost the whole thing because he bet only on Romney," Sethi told Politico.
He added that if Romney had won, the trader could have taken in $12 million.
THAT revenues from a variety of state and local taxes hit all-time highs in the second quarter of this year.
During the quarter from April through June, Americans paid a record $114.032 billion in state and local individual income taxes, up from the previous high of $106 billion, according to an analysis of Census Bureau data by CNS News.
They also paid a record $82.2 billion in state and local general sales and gross receipts taxes in the quarter, $11.2 billion in state and local motor fuels taxes, $7.9 billion in motor vehicle taxes, and $1.8 billion in state and local alcoholic beverage taxes.
Overall, state and local tax revenues hit a second-quarter record of $382.2 billion.
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