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Archive for the ‘Regulations’ Category

There hasn’t been much good economic news in recent years, but one bright spot for the economy is that the United States is a haven for foreign investors and this has helped attract more than $10 trillion to American capital markets according to Commerce Department data.

These funds are hugely important for the health of the U.S. financial sector and are a critical source of funds for new job creation and other forms of investment.

This is a credit to the competitiveness of American banks and other financial institutions, but we also should give credit to politicians. For more than 90 years, Congress has approved and maintained laws to attract investment from overseas. As a general rule, foreigners are not taxed on interest they earn in America. Moreover, by not requiring it to be reported to the IRS, lawmakers on Capitol Hill have effectively blocked foreign governments from taxing this U.S.-source income.

This is why it is so disappointing and frustrating that the Internal Revenue Service is creating grave risks for the American economy by pushing a regulation that would drive a significant slice of this foreign capital to other nations. More specifically, the IRS wants banks to report how much interest they pay foreign depositors so that this information can be forwarded to overseas tax authorities.

Yes, you read correctly. The IRS is seeking to abuse its regulatory power to overturn existing law.

Not surprisingly, many members of Congress are rather upset by this rogue behavior.

Senator Rubio, for instance, just sent a letter to President Obama, slamming the IRS and urging the withdrawal of the regulation.

At a time when unemployment remains high and economic growth is lagging, forcing banks to report interest paid to nonresident aliens would encourage the flight of capital overseas to jurisdictions without onerous reporting requirements, place unnecessary burdens on the American economy, put our financial system at a fundamental competitive disadvantage, and would restrict access to capital when our economy can least afford it. …I respectfully ask that Regulation 146097-09 be permanently withdrawn from consideration. This regulation would have a highly detrimental effect on our economy at a time when pro-growth measures are sorely needed.

And here’s what the entire Florida House delegation (including all Democrats) had to say in a separate letter organized by Congressman Posey.

America’s financial institutions benefit greatly from deposits of foreigners in U.S. banks. These deposits help finance jobs and generate economic growth… For more than 90 years, the United States has recognized the importance of foreign deposits and has refrained from taxing the interest earned by them or requiring their reporting. Unfortunately, a rule proposed by the Internal Revenue Service would overturn this practice and likely result in the flight of hundreds of billions of dollars from U.S. financial institutions. …According to the Commerce Department, foreigners have $10.6 trillion passively invested in the U.S. economy, including nearly “$3.6 trillion reported by U.S. banks and securities brokers.” In addition, a 2004 study from the Mercatus Center at George Mason University estimated that “a scaled back version of the rule would drive $88 billion from American financial institutions,” and this version of the regulation will be far more damaging.

Both Texas Senators also have registered their opposition. Senators Hutchison and Cornyn wrote to the Obama Administration earlier this month.

We are very concerned that this proposed regulation will bring serious harm to the Texas economy, should it go into effect. …Forgoing the taxation of deposit interest paid to certain global investors is a long-standing tax policy that helps attract capital investment to the United States. For generations, these investors have placed their funds in institutions in Texas and across the United States because of the safety of our banks. Another reason that many of these investors deposit funds in American institutions is the instability in their home countries. …With less capital, community banks will be able to extend less credit to working families and small businesses. Ultimately, working families and small businesses will bear the brunt of this ill-advised rule. Given the ongoing fragility of our nation’s economy, we must not pursue policies that will send away job-creating capital.We ask you to withdraw the IRS’s proposed REG-14609-09. The United States should continue to encourage deposits from global investors, as our nation and our economy are best served by this policy.

Their dismay shouldn’t be too surprising since their state would be especially disadvantaged. Here are key passages from a story in the Houston Chronicle.

Texas bankers fear Mexican nationals will yank their deposits if the institutions are required to report to the Internal Revenue Service the interest income non-U.S. residents earn. …such a requirement would drive billions of dollars in deposits to other countries from banks in Texas and other parts the country, hindering the economic recovery, bankers argue. About a trillion dollars in deposits from foreign nationals are in U.S. bank accounts, according to some estimates. …The issue is of particular concern to some banks in South Texas, where many Mexican nationals have moved deposits because they don’t feel their money is safe in institutions in Mexico. …”This proposal has caused a wave of panic in Mexico,” said Lindsay Martin, an estate-planning lawyer with Oppenheimer Blend Harrison + Tate in San Antonio. He has received in recent weeks more than a dozen calls from Mexican nationals and U.S.-based financial planners with questions on the rule. …Jabier Rodriguez, chief executive of Pharr-based Lone Star National Bank, said not one Mexican national he has spoken to backs the rule. “Several of them have said if it were to happen, then there’s no reason for us to have our money here anymore,” he said. Many Mexican nationals worry that the data could end up in the wrong hands, jeopardizing their safety. If people in Mexico and some South American nations find out they have a million dollars in an FDIC-insured account in the United States, “their families could be kidnapped,” added Alex Sanchez, president of the Florida Bankers Association.

For those who want more information about this critical issue, here’s a video explaining why the IRS’s unlawful regulation is very bad for the American economy.

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I’m an over-protective parent. Even now, with my kids ranging between 18 and 23, I will try to herd them together while skiing so I can follow them down the slopes and watch for potential injuries. And I never got them a jungle gym when they were young, even though I somehow managed to survive childhood with one in my backyard.

But at least I recognize what I’m doing. And I certainly would never consider imposing my mother-hen impulses on the overall population.

I’m not surprised to discover, however, that bureaucrats in New York wanted to go way overboard with regulations to ban just about anything with even tiny risks of injury. This list included things such as archery and rock climbing, which might cause me to fret, but also things such as (I’m not joking) kickball and tag.

With those standards, you may as well require kids to be enclosed in bubble wrap every morning.

The only good news is that people found out about the state’s regulatory overreach and the government was forced to cancel the rules after widespread mockery.

Here are some excerpts from a story by NBC in New York.

Day camp games like tag, wiffle ball, Red Rover and kickball are no longer at risk in New York after state health officials yanked a proposal that threatened the future of those mainstays of child’s play.

Towns, villages and other camp operators had begun revamping upcoming indoor summer programs after the Department of Health sent out a long list of familiar games and activities it said presented a “significant risk of injury” and needed to be regulated more closely.

…On Tuesday, Richie, a Republican whose district includes three mostly rural north-central New York counties, said she was pleased by the reversal.

“At a time when our nation’s No. 1 health concern is childhood obesity, I am very happy to see that someone in state government saw we should not be adding new burdensome regulations by classifying tag, Red Rover and Wiffle Ball as dangerous activities,” she said. “I am glad New York’s children can continue to steal the bacon and play flag football and enjoy other traditional rites of summer.”

The proposal would have revised the definition of a summer day camp to include potentially risky organized indoor group activities like archery and rock climbing — as well as things like kickball, tag and Wiffle Ball.

Ritchie said that would have required camps in many smaller towns and villages to add staff such as nurses and pay $200 for a state permit. Other critics argued the regulation was a hysterical approach that stood to take all the fun out of summer.

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This is beautiful. It’s so refreshing to have a handful of Republicans who actually understand that their job is promoting freedom.

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Regular readers of this blog already know (see here, here, and here) that I’m not a big fan of the new “CFL” light bulbs that we will be forced to use in a couple of years.

In a more entertaining fashion, here’s a video from a few years ago, featuring a Republican Congressman railing against the new bulbs.

Repealing the idiotic mandate for these inferior bulbs should be a gimme for the new Republican majority. Somehow, though, I predict they’ll screw up and leave the requirement in place.

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Since I believe in federalism and decentralization, I tend to be somewhat tolerant of stupid decisions by local governments – particularly when those choices are made thousands of miles away and I don’t have to deal with the consequences.

With this in mind, I find it rather amusing that San Francisco is now plagued by sewer smells as a result of mandates for low-flow toilets. The article doesn’t explain what rules the city imposed, but I assume they are even worse than the federal rules (if you want a good laugh about the federal law, this Dave Barry column is worth reading).

Reading the excerpt below, part of me hopes for a dry summer and that the city’s politicians all live near AT&T Park.

San Francisco’s big push for low-flow toilets has turned into a multimillion-dollar plumbing stink. Skimping on toilet water has resulted in more sludge backing up inside the sewer pipes, said Tyrone Jue, spokesman for the city Public Utilities Commission. That has created a rotten-egg stench near AT&T Park and elsewhere, especially during the dry summer months. The city has already spent $100 million over the past five years to upgrade its sewer system and sewage plants, in part to combat the odor problem. Now officials are stocking up on a $14 million, three-year supply of highly concentrated sodium hypochlorite – better known as bleach – to act as an odor eater and to disinfect the city’s treated water before it’s dumped into the bay. It will also be used to sanitize drinking water.

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The President garnered some attention for his January 18 column in the Wall Street Journal, in which he said we need to control the regulatory burden.

Let’s start with the insincere part. He praised capitalism.

America’s free market has not only been the source of dazzling ideas and path-breaking products, it has also been the greatest force for prosperity the world has ever known. That vibrant entrepreneurialism is the key to our continued global leadership and the success of our people.

I’m not really sure how to analyze this passage. Let’s just say it is akin to George W. Bush talking about the need for small government and fiscal responsibility.

Obama then talks about the need for balance, saying that regulations sometimes are too onerous, but then he gets to the inaccurate part.

…we have failed to meet our basic responsibility to protect the public interest, leading to disastrous consequences. Such was the case in the run-up to the financial crisis from which we are still recovering. There, a lack of proper oversight and transparency nearly led to the collapse of the financial markets and a full-scale Depression.

I don’t know whether to laugh or cry at this statement. A part of the government, the Federal Reserve, creates far too much liquidity with an easy-money policy. Other government-created entities, Fannie Mae and Freddie Mac, then create enormous subsidies for bad housing loans. These combined policies lead to a bubble that bursts, and Obama wants us to believe it was a problem of inadequate regulation?!? For those who are interested, here’s a good article from the American Enterprise Institute explaining how government caused the financial crisis.

Now let’s get to the hypocritical part, where the President issues a new executive order, asserting we need to balance costs and benefits.

As the executive order I am signing makes clear, we are seeking more affordable, less intrusive means to achieve the same ends—giving careful consideration to benefits and costs. This means writing rules with more input from experts, businesses and ordinary citizens. It means using disclosure as a tool to inform consumers of their choices, rather than restricting those choices.

I suppose we should give the President credit for chutzpah. Less than one month ago, his Administration proposes an IRS interest-reporting regulation that, in a best-case scenario, will drive tens of billions of dollars out of the U.S. economy. That regulation does not even pretend there are any offsetting benefits, yet Obama says his Administration will be diligent in applying cost-benefit analysis. This is sort of like a kid murdering his parents and then asking a court for mercy because he’s an orphan.

But that example is just the tip of the iceberg. Diana Furchtgott-Roth has a column for Realclearmarkets, where she dings the President for absurd regulations dealing with everything from gender quotes in the Dodd-Fran bailout bill to offshore drilling regulations that have thrown tens of thousands into unemployment lines.

And David Harsanyi nails the White House for several examples of regulatory excess, including the EPA’s power grab, the FCC’s unilateral attempt to regulate the Internet, and the nightmarish rules that will be required for government-run healthcare.

Right now the EPA is drafting carbon rules to force on states, even though a similarly torturous 2,000 pages on a cap-and-trade scheme intending to make power more expensive was rejected. Maybe there’s something in that pile of paper to mine.

Right now, the FCC is shoving net neutrality in the pipeline — again, bypassing Congress — so government can regulate the Internet for the first time in history, though the commissioners themselves admit that, as of now, any need for rules are based on the what-ifs of their imaginations.

There exists no legislation more burdensome and expensive than the “job-crushing” (not “job-killing,” because, naturally, we can’t stand for that kind of imagery) “Patient Protection and Affordable Health Care Act,” formerly known as Obamacare and presently being symbolically repealed by House Republicans.

Obama’s insincerity, inaccuracy, and hypocrisy are unfortunate. The burden of regulation is now estimated to be about $1.75 trillion. Counterproductive red tape is hidden form of taxation that impedes the economy’s performance, and that means less prosperity for America.

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I’m not a coffee drinker, but I might change my mind if I had the option to patronize a drive-through establishment featuring bikini-clad baristas. And such establishments apparently do exist in the Pacific Northwest.

But some people are not happy about this…um…marketing tactic.

But I’m not sure I understand why these Puritans are so upset. Based on the stories I read, it appears that there’s no actual nudity involved. Nor is there any indication that the gals are on public streets hawking coffee (though I’m not sure why that would be a problem since it’s presumably legal to walk around in a bathing suit).

Not surprisingly, busy-body politicians got involved. Here’s a blurb from the Associated Press.

Snohomish County officials say they’ve had no complaints lodged about scantily clad baristas in the year since tougher rules were adopted. County Auditor Carolyn Weikel tells The Daily Herald that not only have there been no complaints, no one has applied for a license to run an “adult-business” coffee stand. A year ago, the county adopted new rules spelling out what constituted lewd conduct by baristas. The rules also say stand owners are responsible for employee behavior.

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