Alternate engine earmark?

[Roosveltrepub]

If the speaker inserts an expenditure the defense dept doesnt want that will cost half a billion this year and 2-3 billion in total isn't that an earmark? How can he propose cuts in WIC while proposing welfare for GE and Rolls Royce?

[ZekeJones]

Because poor people don't buy aircraft.

[Roosveltrepub]

Because poor people don't buy aircraft.

Are you aware it's money to develop a jet engine for an aircraft that already has one? A broke country as the Speaker says we are doesn't pay for things that aren't requested or needed

[highsea]

So if it's for GE it's corporate welfare, but if it's for Pratt it's money well spent??

[Roosveltrepub]

So if it's for GE it's corporate welfare, but if it's for Pratt it's money well spent??

It wouldnt be corporate welfare if they had actually won the contract or had an engine but they did neither. Why bid on contracts? It's welfare because DoD says they don't want it. What happens at Pratt has little or no effect on me this is about the No earmark Speaker inserting a MASSIVE earmark to develop a second engine when we already have one. Do you pay to research and purchase tooling you don't need?

[highsea]

...Do you pay to research and purchase tooling you don't need?

Sometimes I do, yes.

Having an alternate engine is good for the program. It will put price pressure on Pratt, and some users will prefer the GE engine. Good for sales.

Considering all the US eggs are going to be in the JSF basket, it makes sense to split the fleet between two engines.

It's not uncommon to have problems crop up down the road, and if virtually all the USAF, USN, and USMC fast jets are using one engine, a problem with F135 could ground the entire fleet.

[ZekeJones]

Certainly.
My comment means that if poor people had more economic muscle, there wouldn't be any cuts in social services. A large contractor can afford to lobby and get what they want where people who can't afford to pay bribes..er...make political contributions, get left out in the cold.

[gunnut]

If the speaker inserts an expenditure the defense dept doesnt want that will cost half a billion this year and 2-3 billion in total isn't that an earmark? How can he propose cuts in WIC while proposing welfare for GE and Rolls Royce?

I'm entirely for the cancelation of the F136 engine to cut down spending. At the mean time, we should cut TARP and Porkulus out of the budget. Let's see, that's $700 billion and $820 billion, plus the massive earmark of $3 billion for the engine, we just might be able to balance the budget this year.

Meanwhile GM is paying its 45000 UNIONED employees $4000 bonus each. How about paying back the tax dollars we shelled out to save them? How about the former shareholders who got screwed in the deal?

By the way, I called it almost a year ago when I said Obama's plan is to jack up the spending and then propose to either cut or freeze it to make it look like he's a "fiscal conservative."

[Roosveltrepub]

I'm entirely for the cancelation of the F136 engine to cut down spending. At the mean time, we should cut TARP and Porkulus out of the budget. Let's see, that's $700 billion and $820 billion, plus the massive earmark of $3 billion for the engine, we just might be able to balance the budget this year.

Meanwhile GM is paying its 45000 UNIONED employees $4000 bonus each. How about paying back the tax dollars we shelled out to save them? How about the former shareholders who got screwed in the deal?

By the way, I called it almost a year ago when I said Obama's plan is to jack up the spending and then propose to either cut or freeze it to make it look like he's a "fiscal conservative."

If I look up the threads I am sure you were outraged by the million dollar plus AIG bonuses that were contractual obligations?

[gunnut]

Justifying one wrong with another wrong?

By the way, those people agreed to work for AIG after the bailout. Those contracts were written after the bailout, not before.

The union was bailed out by the government but the stock holders, who should have had at least equal right to the money, was left with nothing. The pre-bailout union contract was upheld but the pre-bailout stock contract was not. Double standards here, again.

I'm sure you are all for the union bonuses just like all the AIG bonuses, right? Or do you have a double standard here?

[Roosveltrepub]

Justifying one wrong with another wrong?

By the way, those people agreed to work for AIG after the bailout. Those contracts were written after the bailout, not before.

The union was bailed out by the government but the stock holders, who should have had at least equal right to the money, was left with nothing. The pre-bailout union contract was upheld but the pre-bailout stock contract was not. Double standards here, again.

I'm sure you are all for the union bonuses just like all the AIG bonuses, right? Or do you have a double standard here?

No, not at all. I nderstand those AIG bonuses were from un-abrogated contracts and the GM bonuses were as a result of a restructured contract that involved massive givebacks. Why didn't you call for wall st and AIG contracts to recieve haircuts like the UAW contracts recieved? You understand that those UAW bonuses don't equal what they lost in renegotiating which was something not required of all those wall street/aig contracts? You understand that unlike a hedge fund manager making millions a year and paying a flat 15 percent on his income those UAW bonuses of 4500 were taxed at 40 percent?

[JAD_333]

RR:

Is this thread about the extra engine for the F-35 or about earmarks? Make up your mind, otherwise I'm going to merge it with a thread in aviation forum about today's congressional thumbs down on a 2nd engine.

http://www.worldaffairsboard.com/mil...35-engine.html

[gunnut]

No, not at all. I nderstand those AIG bonuses were from un-abrogated contracts and the GM bonuses were as a result of a restructured contract that involved massive givebacks. Why didn't you call for wall st and AIG contracts to recieve haircuts like the UAW contracts recieved?

Wall St. (now Wall St. is in) and AIG (when did this come in? and why is this relevant?) don't get pensions, nor lifetime employment. They do not strike either.

You know, I am not even sure what you're talking about. You're a parrot for the democrat daily talking points. You recite keywords and attack people who disagree with you. I cited a very specific event (GM bonus for hourly workers in 2011) while you just throw out the words "AIG/Wall St. bonus....hedge fund manager"...blah blah blah.

Humor me. Give me the specific incident with AIG bonus that you do not agree with and apparently believe that I agree with, and we'll go from there.

You understand that those UAW bonuses don't equal what they lost in renegotiating which was something not required of all those wall street/aig contracts?

So you're still justifying one wrong with another wrong. What did UAW lose during GM's "restructure" that robbed the previous shareholders of everything?

You understand that unlike a hedge fund manager making millions a year and paying a flat 15 percent on his income those UAW bonuses of 4500 were taxed at 40 percent?

Are you sure? Can you find me some proof that the so-called hedge fund managers pay a flat 15% income tax?

Can you also provide some proof that UAW bonuses are taxed at 40%? Is that federal tax plus state tax plus sales tax? If that's so, then I'm in the 40% range.

[Roosveltrepub]

Justifying one wrong with another wrong?

By the way, those people agreed to work for AIG after the bailout. Those contracts were written after the bailout, not before.

The union was bailed out by the government but the stock holders, who should have had at least equal right to the money, was left with nothing. The pre-bailout union contract was upheld but the pre-bailout stock contract was not. Double standards here, again.

I'm sure you are all for the union bonuses just like all the AIG bonuses, right? Or do you have a double standard here?

Justifying one wrong with another wrong?

By the way, those people agreed to work for AIG after the bailout. Those contracts were written after the bailout, not before.

The union was bailed out by the government but the stock holders, who should have had at least equal right to the money, was left with nothing. The pre-bailout union contract was upheld but the pre-bailout stock contract was not. Double standards here, again.

I'm sure you are all for the union bonuses just like all the AIG bonuses, right? Or do you have a double standard here?

Please give me documentation showing those wall st. firms and AIG and I might add the MACs where they renegotiated every contract and everyone agreed to steep pay cuts. The reason the bonuses are taxed so heavy when not stock bonuses of the types executives and higher level salaried employees receive is that 4500 check is added to that weeks pay making the average employees gross pay at least 5700.00 that week meaning 6 percent ss tax on the first 2k, medicare tax to max level and a calculation that puts them in the highest tax bracket that week. I wasn't including state taxes just fica, Medicare and SS. Now, when I sat back I realized they probably get 5 percent of that FICA back at tax time making it only an interest free loan to the government . Hedge fund managers on the other hand make millions and have a nominal rate of 15 percent before they take advantage of all the rights offs unlimited political donations errr free speech buy them from congress.

Hedge Funds Make Hay Riding high on the bank bailout, hedMedicaremanagers posted record paydays in 2009, according to an annual survey by AR: Absolute Return +Alpha magazine.

Leading the pack, David Tepper of Appaloosa Management made $4 billion, in part by betting successfully that the government would bail out the big banks. John Paulson, of Paulson & Company, made $2.3 billion by buying back bank stocks he shorted in 2008. And a year after his fund received $200 million in the bailout of the American International Group, Kenneth Griffin of the Citadel Investment Group made $900 million.

In all, the top 25 managers earned $25.3 billion in 2009, including fees and capital gains.

Debate is endless about the role of hedge funds, largely unregulated investment pools for institutional and wealthy investors. What is not disputable is that the funds’ profits are bound up with a defective financial system that has fostered booms, busts and bailouts.

The day after the hedge fund results were released, the government reported that unemployment was stuck at 9.7 percent, with 15 million Americans out of work. For most people with a job, average earnings fell by 2 cents an hour in March, to $18.90. To add insult to injury, some hedge fund managers and, more commonly, private equity fund managers are able to pay a much lower rate of tax than the typical working professional.

The tax disparity results from an outdated rule that lets a money manager in a private partnership treat a chunk of his fees as if they were long-term capital gains, taxed at a special low rate of 15 percent. Fees for managing someone else’s money should be taxed as ordinary income, like wages and salary, at rates as high as 35 percent.

President Obama has included a provision to end that special treatment in his most recent budget. For three years running, the House has passed a bill to close the loophole. In the Senate both Democrats and Republicans have resisted, all for fear of losing lucrative campaign donations.

If lawmakers cannot even close this blatant loophole, is there any hope for real reform? The answer, now, appears to be no. In its proposal for overhauling the financial system, the administration has called for necessary, though modest, changes in how private investment groups do business — mainly giving more power to regulators to examine their books and to compel disclosures to investors. House and Senate reform bills are weaker.

What is needed is fair tax treatment and stricter oversight. Lawmakers need to protect the interests of all of their constituents — not just a handful of billionaires

http://www.nytimes.com/2010/04/04/op...gewanted=print

Here is something more detailed. Tax breaks for billionaires: Loophole for hedge fund managers costs billions in tax revenue

Tax breaks for billionaires: Loophole for hedge fund managers costs billions in tax revenue
Randall Dodd
July 24, 2007
This policy memo focuses on the privileged tax treatment given to hedge fund managers that results in a conservative estimate of over $6 billion in forgone tax revenue.

Private investment companies, organized as hedge funds or private equity firms, have recently grown into major economic forces in the U.S. economy. They mobilize capital, and often leverage it with borrowed funds, in order to accumulate a tremendous amount of assets under their management. These investments include leveraged buyouts; market-neutral investment strategies in publicly traded stocks and bonds, energy, and other commodities; various arbitrage strategies; as well as many lesser known and some entirely unreported transactions. Hedge funds are big players in the large corporate take-over activity that reached $3.6 trillion in 2006¸ and they are also responsible for a significant share of trading volume on the major stock exchanges and in some over-the-counter derivatives markets.

These private pools of capital are unregulated, or exempt from Securities and Exchange Commission (SEC) regulation, under both the Investment Advisors Act and the Investment Company Act. While these exemptions were once justified on the grounds that such investment firms were small, closely held, and did not raise their capital in public capital markets, the exemptions are no longer consistent with today’s reality. Today these firms are huge, have a wide number and range of investors, and the Internet has blurred the distinction between public and private marketing.

In addition to being unregulated, these financial institutions also reap substantial benefits from special tax provisions that, like the regulatory framework, are no longer appropriate. The professional fund managers of these hedge funds and private equity firms are allowed to treat a substantial portion of their compensation as capital gains, meaning they are most likely taxed at 15% rather than the 35% rate that applies to ordinary income such as wages and salary. Such an exemption, however, makes little sense: in economic terms, the fund managers (also known as investment advisors) perform a professional service, much like lawyers or doctors, and receive remuneration for their labor.

These investment advisors and hedge fund managers can take advantage of this tax structure because they are often compensated through a scheme that, in part, pays them according to the returns on the fund. The industry standard for hedge fund managers is “two and twenty,” which is shorthand for an “overhead” fee of 2% of capital under management plus carried interest (often called a “carry”) of 20% of the returns on the fund. Thus a $100 million fund earning 20% would pay its fund manager $2 million for overhead and $4 million in carry. The carry portion of their compensation is treated under the tax code as capital gains for the fund manager and is taxable at the much lower capital gains tax rate of 15%.

This policy memo focuses on this special tax break, explaining why it is not economically sound and offering reasonable estimates of what it costs the U.S. Treasury and ultimately other tax payers in terms of lost tax revenue.

Tax treatment distorts economic incentives
There are two things economically wrong with this special tax provision for hedge fund managers. First is its impact on economic efficiency. It creates inconsistent economic incentives (i.e., distortions) for some labor income to be treated as ordinary income while other labor income is treated as capital gains, and the work done by investment advisors is undeniably a professional, laboring activity.1 Fund managers at pension funds, trusts, and endowments who provide similar professional services are paid a salary and possibly a bonus, and these are all treated as ordinary income. Only because hedge funds and private equity firms are organized as limited liability partnerships—which are already treated favorably for tax and liability purposes—are these same professional services taxed differently. The result is a distortion in the compensation and after-tax income between these super rich hedge fund managers and millions of others in the workforce.

The second thing wrong with this exemption is that these super rich fund managers do not need and certainly do not deserve special tax breaks. Alpha Magazine reports the compensation for hedge fund managers each year. The top earner for 2006 received $1.7 billion, the second highest received $1.4 billion, and the third $1.3 billion. That adds to $4.4 billion for three people. The top 25 hedge managers received, on average, $570 million for a total of $14.25 billion.

Compensation
Tax Treatment ----------------------
Benefit

Capital Gains
Ordinary Income

Average of Top 25
$570,000,000
$59,850,000
$139,650,000
$79,800,000


Total
$14,250,000,000
$1,496,250,000
$3,491,250,000
$1,995,000,000



Not only do these rich individuals have no need of tax breaks, the hedge fund and private equity industries have demonstrated time and again that they are not exemplary economic citizens who deserve privileged tax treatment. While most fund managers are probably law-abiding investment advisors, there are innumerable examples of wrong doing. The major types of failures and illegal activities include insider trading, IPO manipulation, embezzlement, and defrauding mutual fund investors.2

Defending this tax break are highly paid lobbyists such as Douglas Lowenstein and Grover Norquist who loudly and repeatedly make the claim that taxing hedge fund managers like everyone else will harm the average working family. They claim that taxing hedge funds like normal income will harm pension fund returns. This is wrong on two levels. First, the tax change would apply to hedge fund managers and not investors (many pension funds invest in hedge funds). Second, pension funds do not pay taxes. These lobbyists also claim that it would increase the cost of consumer goods and services because so many stores and chain restaurants are owned by private equity firms and hedge funds. This, too, is preposterous because, again, the tax does not apply to the investors or owners of those businesses but only the investment advisors who manage the funds of those investors. Moreover, the businesses owned by private pools of capital will have to compete with other similar businesses providing consumer goods and services—only now on a level playing field—and they will not be able to arbitrarily raise their prices.

The revenue costs
How much revenue does this loophole cost the federal government? The following analysis creates a reasonable estimate using what information is available from the unregulated, non-transparent hedge fund industry.

The data come from market research firms Greenwich Associates and HedgeFund.net. These firms study the industry in order to help investors become more informed about the size, returns, and range of opportunities available in the area of professionally managed private capital pools. The size of the hedge fund industry is best measured by the amount of capital invested in these funds. HedgeFund.net estimates what is called “assets under advisement” to be $2.4 trillion for 2006. Greenwich Associates regularly reports on its survey of a large number of fund managers, and the results for the past three years show that hedge fund investments’ across-the board-investment strategies returned 10.5% to investors after fees. This implies that returns were 13.1% before fees, and if investment managers received the industry standard 20%, then their remuneration treated as “carry” was $63 billion for 2006 (20% of returns calculated as rate of return times capital of $2.4 trillion).

Of course not all hedge funds are located in the United States, but estimates are that 70% of hedge funds measured by capital invested are based domestically.3 The funds may also have subsidiaries in the Cayman Islands for certain other tax purposes, but the fund managers are taxed based on where they live, and most live in the United States. If we take a more conservative estimate that 50% of hedge fund assets under advisement are managed by advisors located in the United States, then half of those investment advisory earnings are taxable under U.S. law. At the current 15% capital gains tax rate, the taxable amount would result in $4.75 billion in tax payments; at the top rate (35%) on ordinary income, it would sum to $11.05 billion. The loss to the U.S. Treasury, therefore, amounts to at least $6.3 billion a year.

In addition to these aggregate numbers, there are a few specific figures coming out of the private capital market worth considering. Alpha Magazine’s figures for the top hedge fund managers and its estimates of the break out of compensation between salary and bonus can be used to further estimate the revenue implication by applying that break out to the portion of total compensation that is likely treated as capital gains. The different tax rates then can be used to calculate how much these three individuals benefit from this quirk in the tax law.

A simple calculation shows that this preferential tax treatment for the top 25 individuals alone costs the Treasury almost $2 billion.4 It serves to suggest that our estimates of tax losses are indeed conservative, as the losses from these 25 managers alone amounts to almost a third of our total.

Conclusion
Congress has the opportunity to correct a bad economic policy and free up resources to fund better priorities. This analysis points to the need to update the nation’s tax laws dealing with private pools of capital. The current law is generating inefficiencies and great inequality by granting tax breaks to individuals who do not need and do not deserve such favors. The nation has greater and more deserving priorities. If the amount of tax revenue lost to private equity firm managers is equivalent to that lost with hedge funds, then the combined amount would be $12.6 billion. This forgone revenue stream could, for example, fully fund the five-year, $35 billion expansion of SCHIP, the public health insurance program for low-income children.

Notes
1. While investment advisors often invest their own capital in the funds they manage, this tax issue concerns the returns on their labor and not their capital.

2. As for insider trading, the SEC is investigating numerous cases of hedge funds exploiting insider information about merger and acquisition announcements to trade ahead in the credit derivatives markets. In terms of IPO manipulation, Deutsche Bank and several hedge funds were recently prosecuted in France for manipulating an IPO of a telecom firm. Dozens of hedge funds have also been found to have ripped off mutual fund investors by late trading and market timing a large number of mutual funds. This problem was brought to light by Eliot Spitzer’s investigation into Canary Capital Hedge Fund and Bank of America. For recent examples of embezzlement look to the cases involving Bayou Capital, IPOF Fund, and Wood River. In addition there have been some colossal failures, including: Long Term Capital Management (interest rates), Amaranth and Mother Rock (energy), Red Kite (copper), and Bear Sterns’ hedge funds (subprime debt).

3. Alpha Magazine reports that 77 of the largest 100 hedge funds are located in the U.S., and that the 100 largest hedge funds manage 70% of the total capital invested in hedge funds.

4. The calculation is based on Alpha Magazine figures for average compensation breakdown between salary and bonus, which is 70% bonus, and assumes the bonus was treated as capital gains. Thus 70% of compensation is taxed at 15% capital gains rate and benefit is the difference between that and 35%. If entire compensation were taxed at capital gains rate, then the benefit would be 43% higher.

Over a billion dollars in lost taxes to a loophole that allows the highest paid to pay the lowest rate. Those GM workers are all paying over 30 percent between fica/Medicare/social security. I find it interesting none of your news sources informed you the salaried workers at GM were recieving bonuses of 4-16 percent of gross pay. Taking the middle figure and using a 100k base pay which is probably low they are looking at nearly twice the bonus. The truth is profit sharing is a smart move in a union environment as a tool to get those who need an incentive to take ownership. It creates incentives to innovate because of a shared reward. Ask any Executive worth his salt and he'll tell you the most knowledgeable individual about a job is the one doing it. In my own experience I've submitted hundreds of tooling design, software, safety and, process improvements and I am union so your idea of union=dead weight is a stereotype. My motivation comes from a steady message that I have to add value and outperform my outside competition to retain job security but my experience in both a job and union shop is a large minority of manufacturing employees union or not have a "not my job" attitude profit sharing addresses. If GM gets even 10 percent more of it's hourly and salary employees to take ownership of the processes they are involved in the payout from the resulting process improvements will be far more than those bonuses. I Work for a company that aggressively worked to change traditional 60s through 80s manufacturing culture to compete globally and it's a far better place to work as well as a far more profitable company because of it. Your single focus on unions as bad players doesn't reflect a true picture. The attitudes, work ethic, number of "bright eyes" as a percentage of the workforce is probably fairly consistent from middle manager to janitor. Change starts at the top and works down in my experience. In the early 90s in my own job we went through a 2 week training on Kaizan principles and tools, a month of planning followed by a week with Ito. We made huge changes, completely revamped work flow into cells, shrank the footprint by a third, invested in technology that maximized quality and productivity at great expense in the short term but, still paying off 15 years later but, imo the biggest change was the assigning of a middle Manager who treated process improvement and employee ownership like religion. The change worked down when over time it was clear the enviroment was no longer punitive toward mistakes but instead wanted them brought to light to eliminate root causes. Three union employees made up the team that evaluated and recommended 2 million plus in capital equipment purchases. Our manager provided assistance creating evaluation matrixes based on our stated needs and putting our results into a proper proposal for executive then Presidential approval. 7 years earlier the previous management had overseen a capital purchase of over a million that was money flushed down the toilet because they bought outdated tech and crappy light weight CNC equipment that lacked the rail size, ball screws, bearing size, software adaptability, and required manual rather than zero point programming/set up( in layman's terms that meant a third of the time was lost to set up). It was constantly down for repairs, had to be run painfully slow to produce acceptable results and was a boat anchor in a few years. Excuse the long post but I wanted to give you a sense in the changes in attitude in both management and labor American Manufacturers that are thriving had to make. Too just point and blame the union is a real simplification. Failing companies still think the workforce is a problem not a soloution which is the sense I get from you at times.
I received a joint union/company training session on company policies recently. It was an effort to reach the few knuckleheads so this year 40 people don't get fired for doing things that really should be common sense or decency. One of the points the Union Business agent made several times is the Unions position is we are the best compensated work force in the region and their position and the companies expectation is we provide an honest days work. Besides embracing improvement initiatives my local has worked in partnership to increase workforce agility to respond to short term needs, reminds us lives depend on the quality of our work. I wouldnt say Unions dont create some problems for a company beyond earning 15 percent more than non union. To fire someone supervision actually has to do their job and create a document trail. Is needing to take the time to document a problem employee really that much of a hardship though? It is easier to eliminate salaried workers but, there is something for security breeding loyalty too. Salaried workers today are quick to move on a union workforce isnt. If you read this far you at least know the caricature that all Union workers are goof offs is a caricature :)

[Roosveltrepub]

Also good vote by a bit over half the GOP freshman. I want to point out both the Dems and Republicans showed us their hypocrisy yesterday. Many Republicans voted to spend billions on something that DOD and the WH have been saying they dont want or need for 8 years and the no earmark speaker was pushing for a half billion dollar earmark 3 days after saying we were broke on Sunday. On the Dem side they voted for this last year in an exercise to throw good money after bad putting the same regional interests over national ones and more than a few switched votes probably just to give Boehner a black eye.

What's the point of contract competition if the loosing bidder gets the contract too. Failure to perform is a reason to pull a contract but creating a redundency like the alternate engine was just bad governance. We have never had an alternate engine on any fighter and never experienced fleet wide groundings and with defense under pressure can't afford to spend precious defense dollars solely to reward parochial interests.