Veto by Perdue an act of stewardship
Gov. Sonny Perdue made the right decision —- the only sane decision —- when he vetoed the so-called “Jobs, Opportunity and Business Success Act of 2009,” passed in the last hours of the legislative session.
Unfortunately, some of those running to replace Perdue next year don’t think sanity is such a good idea. They’re also not so sure they buy this concept others call “reality.”
Had the so-called “JOBS Act” been signed into law by Perdue, Georgia’s capital gains tax would have been slashed in half, with the richest 1 percent getting more than 75 percent of the benefits. The corporate net worth tax would be eliminated, and other business taxes would have been cut as well.
In good times, you might be able to make a case for such cuts. But if you hadn’t noticed, times aren’t so good. In fiscal 2009, state revenue has declined by $2.7 billion over projections, a shortfall of 13.3 percent. And it’s not going to get better anytime soon. As Perdue noted in vetoing the bill, state revenue in fiscal 2010 is expected to be down 16.8 percent from 2008. The budget outlook gets even more stark in later years, when federal stimulus aid disappears.
As a result, Georgia is already struggling to provide basic fundamental services such as education, law enforcement and transportation. Cutting revenue even further now would have been deeply irresponsible.
The theory, of course, is that tax cuts stimulate the economy. Tax cuts are good, always good, in every time and setting. More tax cuts. Yuuummm.
In reality, the amount of tax reduction involved in the JOBS Act —- while significant to the state budget —- would have little to no effect on the larger private state economy, which in turn is just a small part of the overall national economy. Much as they might wish otherwise, Georgia officials lack the ability to affect the economy through fiscal policy.
As Perdue pointed out, the state also does not have the option of deficit spending available to the federal government. It has no choice but to balance its books. If legislators want to point out places in the budget to make deeper spending cuts, he said, he would be willing to consider new cuts in revenue as well.
Despite all that, legislators couldn’t help themselves. They were powerless to resist the siren call of tax cuts; they were helpless against its seductive power. Despite the obvious problems it would cause, the bill passed by 2-1 margins in both the House and Senate. Only one of 139 Republican legislators dared vote against the tax-cut measure. Of 97 Democrats, 22 voted in favor of the tax cuts. Notable among the Democrats supporting the measure was House Minority Leader DuBose Porter, who just happens to be running for governor.
Sen. Eric Johnson, a Republican running for governor, also voted for the bill. Another GOP gubernatorial candidate, Insurance Commissioner John Oxendine, says the Legislature should override Perdue’s veto. And Secretary of State Karen Handel, trying to have it both ways, says she would have signed the bill herself but understands why Perdue did not.
As a second-term governor, Perdue is barred by law from seeking re-election, which may have made his decision easier. However, I suspect he would have made the same wise choice four years ago. While he has lacked vision or active leadership as governor, Perdue has been a responsible steward.
Many of those vying to replace him, on the other hand, seem to reject the concept of stewardship altogether. It’s hard to believe, but to paraphrase King Louis XV, “Apres Sonny, le deluge?”
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76 comments Add your comment
Susan Myers
May 14th, 2009
7:43 am
Since when did Porky Perdue ever do what he should for his state?
I Report :-)/ You Whine :-(
May 14th, 2009
7:47 am
Yeah, luring business and jobs to Georgia would be bad and awful, especially if it takes away from the governments that can’t pay for themselves and we have to keep on life support.
Mrs. Godzilla
May 14th, 2009
7:47 am
Good going Sonny!
Susan Myers
May 14th, 2009
7:48 am
-Perdue has been a responsible steward.-
Huh? Fishapalooza.
jt
May 14th, 2009
7:48 am
Don’t tax me bro!
BDAtlanta
May 14th, 2009
7:50 am
off topic:
White House Czar Calls for End to ‘War on Drugs’
http://online.wsj.com/article/SB124225891527617397.html
WE WON!!!!
Susan Myers
May 14th, 2009
7:51 am
BDA @ 7:50,
Yes we can, and yes we did!
jt
May 14th, 2009
7:55 am
“Since when did Porky Perdue ever do what he should for his state?”
Upon taking the Governor’s office, he immediantly increased the tobacco tax. Doesn’t that qualify as good for a lefty.?
Taxpayer
May 14th, 2009
7:58 am
Much as they might wish otherwise, Georgia officials lack the ability to affect the economy through monetary policy.
Well, Georgia could always print its own currency. Maybe join up with South Carolina and Alabama and pass legislation requiring all businesses to accept it just as though it were a part of reality.
jt
May 14th, 2009
7:58 am
BDA- I wouldn’t spark nothing yet.
Redneck Convert
May 14th, 2009
7:59 am
Well, looks like old Sonny don’t beleive in Trickle Down. That tax cut for the highest 1% would sooner or later work its way down to the rest of us if we give it 20 or 30 years. I figure the rich people would get tired of buying bulldozers to pile the money up and start spending some.
I don’t expect much from a radical like Bookman but I expected better from Sonny. By the way, did anybody read if the budget had some more money for the Go Fish program?
Have a good day everybody.
Taxpayer
May 14th, 2009
8:00 am
Unfortunately, Sonny is about the best that the GOP has to offer. Ughhh.
Susan Myers
May 14th, 2009
8:03 am
jt @ 7:55,
Been a long dry spell since then, bud.
Joe Matarotz
May 14th, 2009
8:03 am
Jay Bird, you left out the most important point (as usual). Of those supporting the bill, who stood to gain personally from it?
I Report :-)/ You Whine :-(
May 14th, 2009
8:05 am
“The publication of these photos would not add any additional benefit to our understanding of what was carried out in the past by a ~~~~~~~~~~~~~small number of individuals,”~~~~~~~~~~~~~` Obozo said. “In fact, the most direct consequence of releasing them, I believe, would be to further inflame anti-American opinion and to put our troops in greater danger.”
Take that, Code Pinko!
jt
May 14th, 2009
8:11 am
“would be to further inflame anti-American opinion and to put our troops in greater danger.”
That has been the R & D party’s foreign policy for YEARS.
Susan Myers
May 14th, 2009
8:14 am
Off topic
What is it about Republicans that makes them think it’s okay for other people to pay for their clothing?
http://www.huffingtonpost.com/2009/05/13/fbi-investigating-coleman_n_203204.html
Joey
May 14th, 2009
8:14 am
Taxpayer; A serious question:
Other than Barnes, who are the Democrat’s that you like for Governor?
George American
May 14th, 2009
8:21 am
His stewardship is so good that he’ll be a shoe-in for job at Delta after he gets done with the gubering job.
DB, Gwinnettian
May 14th, 2009
8:48 am
Fostering kids, opposing the Northern Arc, and now this.
You’re a decent bloke sometimes, Sonny.
Bosch
May 14th, 2009
8:48 am
“More tax cuts. Yuuummm”
Funny.
Bosch
May 14th, 2009
8:50 am
Andy,
Yeah, it would be nice to get business here instead of forcing it to leave like bio-med companies will have to do because our legislature wants everyone to adopt a bunch of cells.
Bosch
May 14th, 2009
8:51 am
Make that “forcing THEM to leave”
I Report :-)/ You Whine :-(
May 14th, 2009
8:53 am
The founder of Green”Peace-”
It’s a telling commentary on today’s environmental movement that it will expel one of its own for the crime of having sincere differences of opinion on how to save the planet. “What I see now is that they are in a state of decadence, like when an empire is crumbling,” he says. “They are so wrong on so many issues, from forestry to energy to genetics and agriculture. They are afraid of technology and its ability to improve human life.”
Take that, environmental terrorists!
jt
May 14th, 2009
8:56 am
http://www.legis.state.ga.us/legis/2007_08/senate/sbo/budgethighlights.pdf
Considering the budget FY09
For all of you lefties, the above link shows INCREASES in all goverment programs you love (pre-k, school, etc…)
For all of you righties, it shows INCREASES in figures that YOU too will like.(additional prisons, police, etc…)
More money was seized from us, so what can the R & D party possibly complain about?
Taxpayer
May 14th, 2009
8:58 am
Baker, Porter or Poythress — I think I’d rather have Barnes.
Bosch
May 14th, 2009
9:01 am
Taxpayer,
I wonder if Barnes will reverse what he said when Sonny beat him – that he didn’t need the teacher vote to win. Oops! Apparently he did!
The Snark
May 14th, 2009
9:06 am
Jobs and corporate headquarters have been leaving this states for years, and tax breaks won’t bring them back. Who wants to live in a state that doesn’t educate its children and doesn’t provide basic services and won’t do anything about traffic? Companies will locate here when we have a decent educational system and a state government run by grownups, instead of a bunch of yahoos beating the 1980s “tax cut” drum.
Your morning jolt: Mary Norwood leads in Atlanta mayoral race, says poll | Political Insider
May 14th, 2009
9:14 am
[...] Some opinion: Jay Bookman says the capital gains veto by Sonny Perdue was an act of stewardship. [...]
jt
May 14th, 2009
9:16 am
“Jobs and corporate headquarters have been leaving this states for years, and tax breaks won’t bring them back.”
Compare the tax rates of DETROIT to SOUTH CAROLINA or ALABAMA.
Now say “DUHHH”
Donovan
May 14th, 2009
9:17 am
Is that all Jay and the Jerks can say is “I hate Bush, I hate Republicans, and I hate the richest 1%”? Other than, “Yes we can, yes we did”, sounds about as annoying and hollow as CHANGE & HOPE. My Lord, give it a rest. Until you people figure it out that reducing taxes will increase revenue and Islamic terrorists need to be kept away from us in Gitmo, your robotic sound bytes fall on deaf ears. Sonny and George W. didn’t get elected twice because they were unpopular.
WhoCares
May 14th, 2009
9:20 am
I want to live here. You are free to leave and take the rest of the liberal whiners with you. Wewere fine before you got here and we’ll be fine after you leave. Other than the city of Atlanta of course, which is a complete loss.
Susan Myers
May 14th, 2009
9:22 am
Off topic
Yeah, but who’s gonna deliver it? Palin? Hah!
http://www.bloomberg.com/apps/news?pid=20601070&sid=aB2p31qRJH6k&refer=home
professional skeptic
May 14th, 2009
9:27 am
Tax cuts increase the revenues and client deposits of Swiss banks.
F.G.
May 14th, 2009
9:31 am
Mule Head is not a steward for the State. He has basically sold out Jekyll Island to the Reynolds family and appears to be attempting to make himself a considerable profit after shafting the citizens for eight years.
rightofcenter
May 14th, 2009
9:33 am
Off topic:
Jay, I know you strain to occasionally write something less than glowing in regards to our President. Here are a couple of ideas that could lead to interesting discussions: 1) George Will’s column (specifically his references to the edict to California and Obama running roughshod over the law in his dealings with Chrysler’s creditors) http://www.washingtonpost.com/wp-dyn/content/article/2009/05/13/AR2009051303014_pf.html; 2) The less-than-honest report from Biden on the effects of the stimulus (the job created/saved hocus-pocus really deserves scrutiny) http://www.google.com/hostednews/ap/article/ALeqM5gII_eXwpVyrwITxM1gouPdCc–RgD985HVI00
Taxpayer
May 14th, 2009
9:45 am
Wow, I just scanned through the link to Georgia’s budget highlights. Georgia has a lot to be proud of — spending over half its state budget on education while still managing to come in near the bottom on quality of education; fourth fastest growing state while placing 40th in spending nationwide on transportation; one of the nation’s largest prison populations in a state that, well, lord have mercy, has enough displayed religion to fend off the most persistent of evils, vampires even. The answer to what ails us is obvious, we need more churches and more preying from the steps of the Capitol. I suspect that we’ll be seeing plenty of both as we get closer to election time.
T-bone
May 14th, 2009
9:49 am
Jay, I think you meant “fiscal policy” (government spending and tax collection), not “monetary policy (the control of the money supply). Don’t be ashamed. I’ve never met a liberal that had the slightest idea on how the two differ.
Dave R
May 14th, 2009
9:55 am
Or maybe, Taxpayer, we rely on LOCAL taxes to fund education, and the local school boards aren’t doing what they should do with the money they get.
And maybe we just mete out justice by incarcerating our felons in jails, rather than releasing them back into society where they can repeat what they did before?
And our problem isn’t the amount of money we spend on transportation, but rather, where we focus those funds. That funding formula was done by the Democrat-controlled House and Senate years ago, and doesn’t have enough votes to overturn it today.
oldmac
May 14th, 2009
10:24 am
Corporations don’t pay taxes, coporations collect taxes. Everytime something gets sold, the corp tax goes along for the ride. How dumb do you have to be not to know that?
Get rid of all of em’.
LK
Californication
May 14th, 2009
10:33 am
Fairtax.org
booger
May 14th, 2009
10:33 am
The US has the second highest corporate income tax among industrial countries, and people wonder why jobs are leaving.
Get Real
May 14th, 2009
11:06 am
And what exactly is that corporate income tax rate Booger? I bet its less than what you pay in income tax, but I’ll let you tell me what it is.
N.J,
May 14th, 2009
11:09 am
The Georgia Legislature is almost as bad as the one in Florida.
Every study done by that state indicates that its university faculty is the lowest paid in the nation, an average of 20 percent lower, depending on department, the state claims they dont have the money to raise salaries to national equity, which would cost 25 million dollars a year, yet their House just tagged on, to the bill that is going to cut university faculty’s wages by 4 percent, an amendment that will give the owners of yachts and private jets a tax break that will cost the state 74 million dollars a year. They claim that if they apply the state sale tax to boat and private jet charters, people who currently are paying 1000 dollars a day on those charters, will no longer take them if they have to pay an additional 65 dollars in tax on top of it.
I have only recently looked at some of the schools here in Georgia. The teachers are not all that well paid, but they seem to do a good job. Much of what I see as the problem is an overwhelming pressure on the part of the parents to attempt to assert too much religion into education. Even in the public schools. Miracles dont get the space shuttle into space, science does. There is an entire cultural backwardsness here as a result that anyone attempting to educate childrens is at a disadvantage from the start. Most places that are conservative in both cultural and religious values almost always have poor educational systems, no matter how much money they toss at it. Afghanistan is a good example. Extremely Fundamentalist and conservative in its views. Iraq, the exact opposite for years under Saddam. The best educated in the Arab World.
When religious values insert themselves into secular ones, the result is that you get children who can quote the bible,chapter and verse, and prefer the “laying on of hands” to modern medicine. I see this sort of stuff all the time from people who are actually working in the medical arena.
As to the Chrysler situation, Obama has not rode roughshod over the hedge fund investors in Chrysler at all. He has said do it this way, or take your chances in bankrupcy court and collect 10 cents on the dollar for your investments. After all, its largely the hedge fund investors who put Chrysler in this position to begin with. The conditions THEY set for Chrysler when they put huge amounts of money into the company basically set Chrysler on the road to failure. Hedge funds are usually highly leveraged, and their investments are highly illiquid, difficult to price and sell rapidly. But they often can gain a large profit over the long run, by running a company into the ground and then stripping it of its assets and selling them off separately. Hedge funds are what took over when the hostile takeovers of the 1980’s and greenmail were made more difficult by legislation. The assets held by companies like Chrysler are worth a lot of money. Taking the company to pieces and selling one parts plant to Toyota, another to Nissan, another to Subaru, and so on, would be extremely lucrative to the hedge fund owners, but bad for the national economy. Hedge funds manage close to 3 trillion dollars and make up close to HALF of the 6 trillion dollar of the economy that is sucked out of it and moved outside of the country to protect it from taxation (or moved to Florida, which should change its motto from the “Sunshine State” to “The Ponzi State”)
Every Hedge Fund manager has rejected the idea of inserting more transparancy into their investment schemes. They are insisting that transparency could do more harm to the funds than good and that suggests that these funds do more harm to the main street economy and only good for the investors.
What is known about these hedge funds is that they are largely composed of derivative invesment instruments as well as derivitives that create derivatives that bet on the success or failure of OTHER derivatives.
Republicans look to blame “Subprime mortgages” for the current economic crisis, but the entire subprime mortgage market that went into default was about the same size as the market hit that occured after 9/11 with the loss of the World Trade Center. About a trillion dollars and the economy absorbed those losses and recovered in about a year. The U.S. economy is large enough to take a trillion dollar hit and maybe have a hiccup. What cause the current crisis is that the various investment banks created highly leveraged investments off of the future income from that trillion dollars of mortgages, because the owners would, over the period of the mortgage, pay much more money because of interest, on those houses, than the houses could every be worth when sold. Over 30 years, the purchaser of a 100,000 dollar condo could pay as much as 300,000 dollars to own it, and while he is doing that, the upkeep is his problem, not the banks, not the investors who provide the banks with that money.
And not only were these invesment banks selling credit default swaps on the Collateralized Mortgage Instruments to hedge the risk of default, they were selling credit default swaps to insure against the risk that the FIRST credit default swap would fail. They were taking insurance out on their insurance and again on that insurance.
There was 66 trillion dollars of derivative investments based on that trillion dollars of subprime mortgage base. If that trillion defaulted, the insurers agreed to pay out 66 trillion dollars to people who NEVER provided a dime to provide the funds to even GIVE someone a subprime loan. Those who invested hedged against all losses. They wanted ZERO risk for their investment. If the homeowners PAID, they made money, and if the homeowners defaulted, they made money off their credit default swaps, but the problem was that the investment banks didnt have the assets to pay off the investors when the defaults occured. And most of these investors were hedge funds.
Maggie Magpie
May 14th, 2009
11:45 am
N.J. you do give quantity if not quality. Here’s a tip: you’re not getting paid by the word on this blog so the operative phrase is be succint.
Dan
May 14th, 2009
11:48 am
A little economic education, companies don’t pay taxes. The people who purchase their product pay the taxes. Taxing business is simply a way for pols to fool economically ignorant people into thinking big bad greedy business is paying taxes. Shame is it works
N.J,
May 14th, 2009
12:34 pm
Simply put, the entire economic crisis we are in is not the result of one trillion dollars of defaulted mortgages. Thats a small hiccup in an 11 trillion dollar mortgage market. The real cause is the amount of “insurance” taken out on those mortgages. The investment banks were raising money to give subprime loans by bundling the mortgages and selling them as investments, PLUS selling INSURANCE on those bundled investment to people who didnt OWN the bundled mortgages.
Everytime they sold one of these things, they got commissions, big bonuses etc, that were paid for out of the money they collected on both the Collateralized Debt Instruments as well as the Credit Default swaps, but the premiums of the Credit Default swaps were simply too low to pay off on if the mortgage holders defaulted.
The Main Street Equivalent would be, lets say YOU take out a mortgage, 100,000 dollars, sub prime, adjustable rate, straight interest, it does not matter what the terms are. I bundle your mortgage with ten other 100,000 dollar mortgages, for a total of a million dollars, Then ten people buy the bundle as an investment to collect the money you send in as your monthly mortgage payment. But they want to hedge their investments and all ten investors take out a “Credit Default Swap” each one takes out one for 100,000 dollars. But only pays 10,000 dollars a year for that insurance.. lets say everyone in that bundle defaults after three years.
The insurance company has taken in 300,000 dollars, but owes out 1 million.
But it does not stop there. The banks have let people who dont own that bundle to take out credit default swaps on that bundle. 50 people who do NOT own once red cent of that morgage bundle were allowed to take 100,000 dollar insurance on a bundle of mortgages that they did not own. At 10,000 dollars a year, again.
So when the ten people who took out mortgages default, the investment bank OWES 60 people 100,000 dollars but has collected only one tenth the amount needed to pay that off.
They were BETTING on no one defaulting, and the people who were taking out the insurance who didnt OWN any of the original mortgage on either end were betting that they WOULD default and when they did, they expected their “insurance companies” to pay them off.
This is as if EVERYONE living on your block took out insurance on your home. It would be in their interests to see your house burn down, because they collect on it, but they dont pay your mortgage payments.
That how the deregulated markets of the last ten years have worked, and hedge funds basically are a form of those “derivative” investments.
So if everyone in that bundle defa
rightofcenter
May 14th, 2009
12:37 pm
NJ,
You obviously haven’t looked too closely at our Georgia schools. Our public schools are as secular as any in the country. Please give some examples if you have any. Your underlying premise is very suspect as well – parochial schools are some of the best in this country. Guess they didn’t get your memo. But I’m glad you were a Saddam Hussein supporter – that should put you in pretty select company.
Mr. Snarky
May 14th, 2009
12:39 pm
So is the Georgia Legislature a member of the chamber of commerce? Or is it just a business unit of Georgia Power? Given the clowns that run things, if I could sell my stock, I would.
N.J,
May 14th, 2009
12:50 pm
A hedge might work like this:
finance, a hedge is a position established in one market in an attempt to offset exposure to the price risk of an equal but opposite obligation or position in another market — usually, but not always, in the context of one’s commercial activity. Hedging is a strategy designed to minimize exposure to such business risks as a sharp contraction in demand for one’s inventory, while still allowing the business to profit from producing and maintaining that inventory. A typical hedger might be a farmer with 2000 acres of unharvested wheat in the ground, who would rather tend his crop without the distraction of uncertain prices. He’s a farmer, not a speculator, yet his unharvested “inventory” may have lost 35% of its value ($285,000) in the three months he’s been planning his planting. He might have decided he could live with a price of only eight or nine dollars a bushel, and to offset his planted position with an approximately equal but opposite position in the market for wheat on the Minneapolis Grain Exchange by selling ten wheat futures contracts for December delivery.
http://en.wikipedia.org/wiki/Hedge_(finance)
But some hedges, particularly speculative ones, can hedge on one business going out of business, while another business in the same business stays in business.
If there are ten automobile companies and five go under, the other five benefit by picking up the markets of ones that went under.
Even more and this relates to the sort of hostile takeovers of the 1980’s but it has been incorporated into hedge funds.
Lets say there is a corporation that has ten small companies it owns, and each one makes a million dollar a year in profits regularly, all good going concerns. Lets say that each one has ten million dollars of hard, illiquid assets. Lets say I am a wealthy investor and I want to make a fast buck, rather than small profits annually. I buy up enough shares to control the corporation or a majority of votes at the shareholders meetings. I vote to dissolve the corporation and sell off each individual company for the value of its “illiquid assets” I can even sell them at a bargain price, half the value of its illiquid assets” and still make a bundle if the illiquid assets exceed the value of the shares. Sometimes its better for me to drive down the values of the shares, and so force the corporation to have no choice but to sell off its hard assets. That was the basis for the hostile takeovers of the 80’s. The tax cuts put a lot of free money into the hands of people who made immediate profits by destroying companies that created regular wealth, and modest profits and showed that this could go on for years.
Hedge Funds simply moved this idea off shore so they would not be subject to U.S. law.