Federales "Lost Revenue"

WHILE THE LAST THREE WEEKS HAVE BEEN a bit more volatile, the major equity indices finished up. By the numbers, for the three weeks ended Friday, February 25, 2011, the Dow Jones Industrial Average closed at 12,130, up 38 points, or 0.3%. The Standard & Poor's 500 closed at 1319, up 9 points, or 0.7%, and the NASDAQ Composite closed at 2781, up 12 points, or 0.4%.

On the political front, Wisconsin governor Scott Walker indicates he's prepared for an OK Corral showdown with the unions. Union leaders are singing the blues over Walker's stance. Most employees who see their employer in financial straits begin exercising options or exploring new opportunities, such as looking for a different job or starting a business.

According to the U.S. Census Bureau, the average household income in the U.S was just over $51,000 in 2008, the latest year for which figures are available. According to the Wisconsin Department of Public Instruction, as published by the USAProductsNow blog, the average wage and benefits for teachers is $86,297 in Milwaukee, $82,956 in Sussex, and $91,065 in Elmbrook. One Germantown assistant principal makes $123,000, a bus manager in Arrowhead makes $169,000, and an elementary principal in Elmbrook makes $142,000. I'm grateful that these folks have been able to serve and educate students, and have been able to make a living doing so. I'm confused as to why they are protesting.

Turmoil continues around the world, in particular the Middle East and North Africa. Hard assets, such as oil, metals, and commodities, continue to do well, whether from inflation, because of domestic and global uncertainty, or perhaps other reasons.

Buffet is back in fine form, with Berkshire reporting a more than 40% increase in profits, though Berkshire unloaded a few positions during the fourth quarter. Borders has finally filed for bankruptcy. Content distributors, especially in the books, music and movie category, face substantial challenges keeping up with, and being profitable in the face of, changing technology. Duetsche Bank plans to pay about $9.5 billion to acquire NYSE Euronext.

In economic news, consumer credit increased by $6.1 billion in December, about three times expectations. Both imports and exports increased in December, yielding a trade deficit of $40.6 billion. Jobless claims fell in December, either due to increased employment, or the unemployed giving up, or some combination of both.

P/E ratios remain constant in the face of rising stock prices, meaning corporate earnings continue to grow. About 70% of the S&P 500 companies reporting so far have beat analysts' estimates.

Bloomberg BusinessWeek shows "revenue lost" to the federales from the following tax breaks in 2009:

Mortgage interest deduction - $77 billion
Earned income credit - $55 billion
Child tax credit - $54 billion
Charitable contributions - $35 billion
Real estate deduction - $21 billion
Medical deduction - $9 billion

The language used in this BusinessWeek article, which apparently reflects the thinking in Washington, is Exhibit One for why we must reduce or effectively eliminate the federal government. Anyone who believes that wages you earn belongs to them is mentally and spiritually ill. Those who suffer in this way need either psychiatric and pastoral care, or a swift kick in the rear, or perhaps both. Yet, the halls of Congress, and legions of paid hangers-on, subscribe to this misguided notion, which flies in the face of freedom and liberty.