Thursday, April 21, 2011

Obsolete Government Programs, Part 2 | Medicare

Personal Responsibility

You Paid How Much For Medicare?

~ By: Larry Walker, Jr. ~

Medicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over, or who meet other special criteria. Some say that Medicare operates similar to a single-payer health care system, but with one key exception: Medicare Part A, the part that we pay for all of our working lives, only provides hospital insurance, and it doesn't kick in until after the age of 65. Thus, Medicare is more akin to an excessively expensive, mandatory, long-term health care plan than anything else. Although there is a health insurance aspect to Medicare, known as Part B, it's not free either. Medicare Part B requires the payment of additional monthly premiums upon retirement of between $96.40 and 308.30 per month, depending on the recipient’s level of income at the time.

Medicare is partially financed through payroll taxes imposed by the Federal Insurance Contributions Act (FICA) and the Self-Employment Contributions Act of 1954. In the case of employees, the tax is equal to 2.9% (1.45% withheld from the worker and a matching 1.45% paid by the employer) of the wages, salaries and other compensation in connection with employment. Until December 31, 1993, the law provided a maximum amount of compensation on which the Medicare tax could be imposed each year. But, beginning January 1, 1994, the compensation limit was removed. A self-employed individual must pay the entire 2.9% tax on self employed net earnings, but may deduct half of the tax from income in calculating income tax. Beginning in 2013, the 2.9% hospital insurance tax rises to 3.8% on earned income exceeding $200,000 for individuals and $250,000 for married couples filing jointly. [1]

Times Have Changed: Medicare is Obsolete

In the 1960s, Medicare was introduced to rectify the following problems: health care for the elderly and health care for the non-elderly with pre-existing conditions. The FICA tax was increased in order to pay for this expense. Both problems are listed below, followed by modern day private-sector solutions meant to address the same.

  • The U.S. had no federal-government-mandated health insurance for the elderly; consequently, for many people, the end of their work careers was the end of their ability to pay for medical care.

  • The U.S. had no federal-government-mandated health insurance for all those who are not elderly; consequently, many people, especially those with pre-existing conditions, have no ability to pay for medical care.

Most Americans would be able to afford real health insurance, or better plans, were we not forced to pay huge sums out of our current pay, for benefits that some will never see. For example, Barack Obama paid a total of $48,496.29 in Medicare taxes in 2010 alone. This means he paid $4,041.36 per month for long-term hospital insurance benefits that he won’t realize until he turns 65. A portion of the $48,496.29, namely $5,730.23 was actually paid by his employer, which would be you and I. Could Mr. Obama perhaps find a better deal in the private-sector? I would hope so. Would you pay $4,041.36 per month for long-term hospital insurance coverage if you had a choice? “AFLAC… AFLAC… AFLAC”!

Obama's Medicare Tab

Medicare Benefits

Medicare has four parts: Part A is Hospital Insurance. Part B is Medical Insurance. Medicare Part D covers prescription drugs. Medicare Advantage plans, also known as Medicare Part C, are another way for beneficiaries to receive their Part A, B and D benefits. All Medicare benefits are subject to medical necessity. The original program was only Parts A and B. Part D was new in January 2006; before that, Parts A and B covered prescription drugs in only a few special cases.

Medicare Premiums

Most Medicare enrollees do not pay a monthly Part A premium, because they (or a spouse) have had 40 or more 3-month quarters in which they paid Federal Insurance Contributions Act taxes. Medicare-eligible persons who do not have 40 or more quarters of Medicare-covered employment may purchase Part A for a monthly premium of:

  • $248.00 per month (in 2011) for those with 30-39 quarters of Medicare-covered employment, or

  • $450.00 per month (in 2011) for those with less than 30 quarters of Medicare-covered employment and who are not otherwise eligible for premium-free Part A coverage.

All Medicare Part B enrollees pay an insurance premium for this coverage; the standard Part B premium for 2009 is $96.40 per month. A new income-based premium schema has been in effect since 2007, wherein Part B premiums are higher for beneficiaries with incomes exceeding $85,000 for individuals, or $170,000 for married couples. Depending on the extent to which beneficiary earnings exceed the base income, these higher Part B premiums are $134.90, $192.70, $250.50, or $308.30 for 2009, with the highest premium paid by individuals earning more than $213,000, or married couples earning more than $426,000. In September 2008, CMS announced that Part B premiums would be unchanged ($96.40 per month) in 2009 for 95 percent of Medicare beneficiaries. This would be only the sixth year without a premium increase since Medicare was established in 1965.

Medicare Part B premiums are commonly deducted automatically from beneficiaries' monthly Social Security checks. Part C and D plans may or may not charge premiums, at the programs' discretion. Part C plans may also choose to rebate a portion of the Part B premium to the member. While private-sector health insurance premiums are deducted from employees’ paychecks on a pre-tax basis, Medicare taxes are confiscated from employees on an after-tax basis. Is that fair? Upon retirement, if one wishes to pay for Medicare Part B, the premiums are conveniently deducted from retirees Social Security checks on an after-tax basis. Is that fair?

Still Clueless?

Three-quarters of all taxpayers pay more in payroll taxes than income taxes. Do you get it now? It’s time for this to change. It’s time to stop confiscating money from today’s payroll checks to cover tomorrow’s health care needs. It’s time to give American citizens more of our own money so that we may provide for our current needs. All that we ever hear from the Democrats is how many Americans can’t afford health insurance. Did it ever dawn on any of them that maybe the reason we can’t afford health insurance is because we are being robbed blind by a 15.3% payroll tax? Out of every American paycheck, 15.3% is being literally looted and squandered by the federal government. We are being robbed by a 1933 law which has outlived its usefulness. It’s time to end Medicare and Social Security. All past obligations of Medicare must be immediately privatized through legitimate private-sector insurance companies.

References:

[1] http://www.ssa.gov/OACT/ProgData/taxRates.html

http://en.wikipedia.org/wiki/Medicare_(United_States)

Related:

Obsolete Government Programs, Part 1 : FICA

Social Security - A Breach of Trust

The Social Security Bust Fund

Wednesday, April 20, 2011

Obsolete Government Programs, Part 1 | FICA

My Roots, circa 1918

"Free at last! Free at last! Thank God Almighty, we are free at last!" ~ MLK, Jr.

~ By: Larry Walker, Jr. ~

Are Social Security Benefits an Inalienable Right? ~

The Federal Insurance Contributions Act (FICA) is codified at Title 26, Subtitle C, Chapter 21 of the United States Code. The FICA tax is a United States payroll (or employment) tax imposed by the federal government on both employees and employers to fund Social Security and Medicare —federal programs that provide benefits for retirees, the disabled, and children of deceased workers. Social Security benefits include old-age, survivors, and disability insurance (OASDI); Medicare provides hospital insurance benefits. The amount that one pays in payroll taxes throughout one's working career is indirectly tied to the social security benefits annuity that one receives as a retiree. Some folks claim that the payroll tax is not a tax because its collection is tied to a benefit. The United States Supreme Court decided in Flemming v. Nestor (1960) that no one has an accrued property right to benefits from Social Security. [1]

There has been a temptation throughout the program's history for some people to suppose that their FICA payroll taxes entitle them to a benefit in a legal, contractual sense. That is to say, if a person makes FICA contributions over a number of years, Congress cannot, according to this reasoning, change the rules in such a way that deprives a contributor of a promised future benefit. Under this reasoning, benefits under Social Security could probably only be increased, never decreased, if the Act could be amended at all. Congress clearly had no such limitation in mind when crafting the law. Section 1104 of the 1935 Act, entitled "RESERVATION OF POWER," specifically said: "The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress." Even so, some have thought that this reservation was in some way unconstitutional. This is the issue finally settled by Flemming v. Nestor. [1]

In this 1960 Supreme Court decision Nestor's denial of benefits was upheld even though he had contributed to the program for 19 years and was already receiving benefits. Under a 1954 law, Social Security benefits were denied to persons deported for, among other things, having been a member of the Communist party. Accordingly, Mr. Nestor's benefits were terminated. He appealed the termination arguing, among other claims, that promised Social Security benefits were a contract and that Congress could not renege on that contract. In its ruling, the Court rejected this argument and established the principle that entitlement to Social Security benefits is not a contractual right. [1]

So did you think that Social Security Benefits were an inalienable right? Think again.

Times Have Changed: Social Security is Obsolete

The Center on Budget and Policy Priorities states that three-quarters of taxpayers pay more in payroll taxes than they do in income taxes. The FICA tax is considered a regressive tax on income (with no standard deduction or personal exemption deduction) and is imposed (for the years 2009 and 2010) only on the first $106,800 of gross wages. The tax is not imposed on investment income (such as rents, interest and dividends). As a side note, the Earned Income Credit was enacted in 1975 to “offset the burden of social security taxes and to provide an incentive to work”. More recently the Making Work Pay Credit of 2010 and the 2% Payroll Tax Cut of 2011 were enacted with a redundant goal: “to offset the burden of social security taxes”. Why are Social Security taxes deemed to be so over-burdensome?

Perhaps Social Security has outlived its usefulness. In the 1930s, the New Deal introduced Social Security to rectify the following three problems: retirement, injury-induced disability, or congenital disability. It introduced the FICA tax as the means to pay for Social Security. Following are some of the difficulties that existed for working-class Americans prior to the Great Depression, countered with modern day private-sector innovations meant to address the same.

  • The U.S. had no federal-government-mandated retirement savings; consequently, for those people who had not voluntarily saved money throughout their working lives, the end of their work careers was the end of all income.

But times have changed. Prior to the Great Depression there weren’t many incentives in place to encourage saving towards retirement, nor were there as many options available as there are today. Nowadays employers, employees and the self-employed can choose between numerous retirement plans not limited to the following:

  1. Defined-Benefit Plans

  2. Defined-Contributions Plans

  3. 401(k) Plans

  4. 403(b) Plans

  5. Individual Retirement Accounts (IRAs)

  6. Roth IRAs

  7. Qualified Insurance Annuities

  8. Simplified Employee Pension’s (SEP)

  9. Savings Incentive Match Plan for Employees (SIMPLE)

This isn’t 1933 anymore. The time to end Social Security is now. Since we are able to choose between so many pre-tax options which result in the deferral of income taxes until the funds are withdrawn, why are we still stuck on pouring good money down a bad hole? By now, everyone knows that any surplus once heralded by the Social Security Trust Fund has been confiscated and comingled into the government’s general fund. And we all know that the government’s general fund is more than a whopping $14 trillion in the hole. If working folks and their employers weren’t chained by the bonds of mandatory contributions to Social Security we would be living on easy street.

If we were not forced to pay this mandatory tax of 6.2% (12.4% for the self-employed) on earned income up to the limit of $106,800, we would be able to save a greater portion of our own money into the modern retirement vehicles mentioned above. Loosing employers from burdensome payroll taxes will likewise allow them to provide a greater portion of benefits to employees. However, with government-run Social Security literally robbing us of our retirement savings, and ‘investing’ it in the abyss of debt and irresponsibility, known as Washington, DC, there is little leftover for most Americans to save. In fact, if every dollar of Social Security tax paid on my behalf since I began working had instead been invested in the S&P 500 Index; I would now be a millionaire. But since I haven’t had any choice in the matter, I may just have to settle for the paltry poverty level rations offered by Social Security. What’s worse is that thanks to Social Security, on the day that I die the government-squandered fruit of my labors will go with me.

  • The U.S. had no federal-government-mandated disability income insurance to provide for citizens disabled by injuries (of any kind—work-related or non-work-related); consequently, for most people, a disabling injury meant no more income (since most people had little to no income except earned income from work).

Nowadays, most employers offer mandatory and voluntary disability insurance plans through legitimate insurance companies. Likewise, all employers are required to provide Workers Compensation. Many of us would be able to afford our own portable disability insurance plans were we loosed from the bands of the FICA Act.

  • There was no federal-government-mandated disability income insurance to provide for people unable to ever work during their lives, such as anyone born with severe mental retardation.

Nor is there any such government-mandated disability income insurance today, the key word being insurance. Who in their right mind believes that the federal government provides insurance? If the federal government wants to provide real insurance for persons in need, then the responsible thing to do would be to pay for private-sector insurance policies, on behalf of those in need.

Social Security is an idea that has outlived its usefulness. It’s time for the United States to begin weaning itself off of Social Security. Let’s stop pretending that we are living in 1933. We have options in the 21st Century that didn't exist in the 20th, but our options are severely constrained by the bonds of old stale ideas. Although it’s doubtful whether Social Security ever served its original purpose, it is indisputable that times have changed. In the 1930’s Americans had no safety net, today we know that we must provide for our own retirement security. However, the amount we are able to save is limited by the amount of money being confiscated from our earnings to cover past obligations. Get a clue. Three-quarters of all taxpayers pay more in payroll taxes than income taxes. Do you get it? It’s time for this to change. It’s time to phaseout Social Security. The age of federal government mandated retirement looting is over.

References:

[1] http://www.ssa.gov/history/nestor.html

http://en.wikipedia.org/wiki/Federal_Insurance_Contributions_Act_tax#cite_note-4

Related:

Social Security - A Breach of Trust

The Social Security Bust Fund

Sunday, April 17, 2011

We Are All Billionaires Now

Big Words Small Mind

Tax Breaks for Millionaires and Billionaires ~

“But we cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society.” ~ Barack Obama

~ By: Larry Walker, Jr. ~

The Class Warfare Instigator in Chief (CWIC) has been railing against wealth. People who have saved up for retirement, or who were fortunate enough to acquire assets which have appreciated substantially are not impressed. Anyone with half a brain knows that a millionaire (or billionaire) is an individual whose net worth is equal to or exceeds one million (or one billion) units of currency. Net worth refers to an individual's net economic position. It is calculated by adding the value of all of ones assets minus the value of all of their liabilities. Being a millionaire or billionaire has nothing to do with an individual’s annual taxable income. So when politicians, such as Obama, speak of tax breaks for millionaires and billionaires, do they even know what they’re talking about?

In the United States of America, we don’t pay income taxes based on the value of our net worth. We pay income taxes based on the amount of income earned or produced annually. So where exactly are these so called tax breaks for millionaires and billionaires? I contend that they don’t exist, namely because as I just stated; individuals are not taxed based on their net worth.

At the last count, there were just 412 billionaires in the United States. So the next time Obama refers to “billionaires”, it would be more appropriate for him to refer to them as “the 412 billionaires”. When one studies the IRS’ Statistics of Income reports, the top 400 annual incomes reported on tax returns in 2007 averaged just under $138 million, far short of a billion. Word twisting politicians, namely Obama, would have us believe that there are people making billions of dollars per year, but that’s simply not true. In reality, only 400 households were fortunate enough to report average annual incomes of around $138 million. And as stated, only 412 Americans have a net worth of over a billion dollars. According to the Spectrum Group there were 7.8 million millionaires in the United States in 2009. However, according to a Taylor Nelson Sofres report, half of all millionaire households in the US are headed by retirees.

Good luck to Democrats in first identifying tax breaks that benefit people with net worth’s of over $1 million (or $1 billion). They don't exist. And secondly, since more than half of millionaire households are headed by retirees, most likely the only taxable income they receive is from pensions and investment income (a healthy chunk of that being tax-exempt). So does Obama want to raise taxes on grandpa? You mean to say that when people work hard all their lives and save up more than a million dollars for retirement, now that they have become millionaires they are evil and deserve to pay higher taxes? Get out of town, literally.

So is Obama talking about increasing taxes on investment income? Is he talking about doing away with tax-exempt interest? Does he want to get rid of the favorable capital gains rates? Does he intend to impose a tax based on unearned income (the amount of equity a citizen has in assets on a given date)? Or is he talking about re-imposing confiscatory death taxes? Say what you mean, and mean what you say, otherwise shut the hell up. It’s time to stop inciting envy, strife and class-warfare. On the other hand, if all Obama is trying to say, and rather poorly, is that he wants to lower the top tax bracket down to $250,000 and raise marginal tax rates to 39.6% above that amount (i.e. return to the 1993 tax rate schedules), then he should just continue to say that like a broken record until his demise.

I think I understand what Obama is really saying. What he’s saying to me is that since $250,000 is to $1 billion as $25,000 is to $100 million, if you make $25,000 per year, you're a billionaire. Got it? That seems to be how Obama, sleepy Joe, and the 143 Democrats in Congress see it. With 535 members of Congress, and only 143 of them Democrats, how are they controlling this conversation anyway? After all, there are 311,174,158 citizens, only 412 billionaires, 7.8 million millionaires, and a mere 145 delusional Democrats in DC. Perhaps one of these 145 simpletons can list for the public all of the alleged tax breaks for millionaires and billionaires. I will attempt to identify a few of them presently.

Alternative Minimum Tax (reference)

The Alternative Minimum Tax attempts to ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax. The AMT provides an alternative set of rules for calculating your income tax. In general, these rules should determine the minimum amount of tax that someone with your income should be required to pay. If your regular tax falls below this minimum, you have to make up the difference by paying alternative minimum tax.

Tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain expenses. These benefits can drastically reduce some taxpayers’ tax obligations. Congress created the AMT in 1969, targeting higher-income taxpayers who could claim so many deductions they owed little or no income tax. Because the AMT is not indexed for inflation, a growing number of middle-income taxpayers are discovering they are subject to the AMT.

You may have to pay the AMT if your taxable income for regular tax purposes plus any adjustments and preference items that apply to you are more than the AMT exemption amount.

The AMT exemption amounts are set by law for each filing status. For tax year 2010, Congress raised the AMT exemption amounts to the following levels:

  • $72,450 for a married couple filing a joint return and qualifying widows and widowers;

  • $47,450 for singles and heads of household;

  • $36,225 for a married person filing separately.

  • The minimum AMT exemption amount for a child whose unearned income is taxed at the parents' tax rate has increased to $6,700 for 2010.

Do the AMT exemption amounts (above) look like they’re targeting millionaires and billionaires to you? It doesn’t look that way to me. Not unless, like I said from the beginning, “we are all billionaires”. So just what kind of items can trigger the AMT? Here are a few.

Personal Exemptions – What? Believe it or not, personal exemptions contribute to AMT liability. The exemptions you claim for yourself, your spouse and your dependents are not allowed when calculating alternative minimum tax. It's pretty rare (though not impossible) to see a tax return where someone had to pay AMT solely because of their exemptions, but the more exemptions you claim, the more likely it is that you'll have AMT liability.

Standard Deduction – What? Some 70% of American taxpayers claim the standard deduction (rather than itemizing). The standard deduction isn't allowed under the AMT. Usually this isn't a problem because the AMT generally hits people with higher incomes, and these people are more likely to claim itemized deductions. Yet it's worth noting that a deduction that's so widely used can contribute to AMT liability.

State and Local Taxes – What? If you itemize, there's a good chance you claim a deduction for state and local tax, including property tax, income tax and sales tax. These deductions are not allowed under the AMT. If you live in a place where state and local taxes are high, you're more likely to be subject to the alternative minimum tax.

Interest on Second Mortgages - The AMT allows a deduction for interest on mortgage borrowings used to buy, build or improve your home. If you borrowed against your home for some other purpose, the interest deduction isn't allowed under the alternative minimum tax.

Medical Expenses - The AMT allows a medical expense deduction, but it's more limited than the deduction under the regular income tax. If you claim an itemized deduction for medical expenses, part or all of it will be disallowed when you calculate your alternative minimum tax.

Miscellaneous Itemized Deductions - Certain itemized deductions are available if your total deductions in this general category add up to more than 2% of your adjusted gross income. Among the items here are unreimbursed employee expenses, tax preparation fees and many investment expenses. You can't deduct these items under the AMT, though. A large deduction in this category could lead you to pay alternative minimum tax.

Various Credits - Some of the credits that are allowed when you calculate your regular income tax aren't allowed when you calculate your AMT. The more credits you claim, the more likely it is that you'll end up paying alternative minimum tax. Fortunately, Congress has extended relief for the "personal credits" in recent years.

Well, the AMT certainly doesn’t constitute a tax break for millionaires and billionaires. Heck, we’ve barely breached the $75,000 mark if married ($50,000 if single) and most of the main tax breaks have already dissipated. Next!

Retirement Contributions Credit Limitation (reference)

You may be eligible for a tax credit if you make contributions to an employer-sponsored retirement plan or to an individual retirement arrangement. If you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans, you may be able to take a credit of up to $1,000 or up to $2,000 if filing jointly. The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income. However, income limits apply to individuals with a filing status and income of the following amounts:

  • Single, married filing separately, or qualifying widow(er), with income up to $27,750

  • Head of Household with income up to $41,625

  • Married Filing Jointly, with incomes up to $55,500

So if you’re single and make more than $27,750 you can forget about this tax credit. It doesn’t appear that we’ve tapped into those elusive tax breaks for millionaires and billionaires yet. So let’s try again.

Earned Income Tax Credit Limitation (reference)

The Earned Income Tax Credit or the EITC is a refundable federal income tax credit for low to moderate income working individuals and families. Congress originally approved the tax credit legislation in 1975 in part to offset the burden of social security taxes and to provide an incentive to work. When EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.

Tax Year 2010 maximum credit:

  • $5,666 with three or more qualifying children

  • $5,036 with two qualifying children

  • $3,050 with one qualifying child

  • $457 with no qualifying children

Earned Income and adjusted gross income (AGI) must each be less than:

  • $43,352 ($48,362 married filing jointly) with three or more qualifying children

  • $40,363 ($45,373 married filing jointly) with two qualifying children

  • $35,535 ($40,545 married filing jointly) with one qualifying child

  • $13,460 ($18,470 married filing jointly) with no qualifying children

  • Investment income must be $3,100 or less for the year.

So much for tax breaks for millionaires and billionaires. There don’t appear to be many real breaks for folks making even $50,000 per year. Shall we try again?

Mortgage Interest Limitation (reference)

Interest deductions on home mortgages are limited. The law allows taxpayers to deduct interest on two categories of indebtedness secured by their residences. Acquisition indebtedness is used to acquire, construct, or substantially improve a residence, and cannot exceed $1,000,000. Home equity indebtedness is any debt other than acquisition indebtedness and cannot exceed $100,000.

So if you are lucky enough to be able to borrow more than $1 million on a mortgage, you cannot deduct any mortgage interest for the amount above $1 million. And if you have a home equity loan of more than $100,000, the amount of interest you can deduct is not allowed for the amount above $100,000. This doesn’t look like a tax break for millionaires and billionaires either. Surely there must be a humongous tax break for rich folks with children.

Child Tax Credit Limitation (reference)

The Child Tax Credit is for people who have a qualifying child under the age of 17. It is in addition to the earned income credit, if you even qualify for that. The maximum amount you can claim for the credit is $1,000 for each qualifying child. However, you must reduce your child tax credit if your modified adjusted gross income (AGI) is above the amount shown below for your filing status.

  • Married filing jointly – $110,000.

  • Single, head of household, or qualifying widow(er) – $75,000.

  • Married filing separately – $55,000.

So if you’re married with children and have income of more than $110,000, you don’t get the full $1,000 child tax credit. Oh well, this isn’t a tax break for so called millionaires and billionaires. Maybe if you borrow a ton of money to invest in a graduate degree you’ll get a huge tax break.

Student Loan Interest Limitation (reference)

You can claim up to $2,500 of student loan interest you paid as an above-the-line tax deduction on Form 1040. What? Does the government even have any idea that some people are paying upwards of $4,000 - $10,000 in student loan interest per year? And do they understand that an above-the-line tax deduction on $2,500 can at the most save an individual or couple 25-28% of the maximum amount? So if you’re married and pay $7,000 in student loan interest, you’ll receive a tax break amounting to between $250 and $700 depending on your tax bracket.

But if your income is too high, you won’t get any break at all. You can take this deduction only if your modified adjusted gross income (AGI) is less than: $75,000 if single, head of household, or qualifying widow(er); or $150,000 if married filing jointly. Oh well, we could go on and on, but so much for that theory.

Conclusion

No one pays income tax based on their net worth. We pay income taxes based on the amount of income we earn or produce each year. The simplistic act of raising the top marginal tax rate from 35% to 39.6%, and lowering the top tax bracket down to $250,000 won’t bring in an extra dime from millionaires and billionaires. Although it will take some money out of the pockets of small businesses, families and other hard working Americans, it will leave true millionaires and billionaires unscathed. There’s a dearth of tax breaks for anyone making more than $75,000 per year, and marginal tax rates are already way too high across the board, so Obama's comments are simply absurd. Perhaps one of the other 144 Democratic Party simpletons in DC can list for us all of the alleged tax breaks for millionaires and billionaires. But until then, I’m going to have to ask you to muzzle it. Otherwise, prepare to give up your remaining 145 seats.

It's not the 412 billionaires that worry me; it's the federal government, $14 trillion in debt, with its hand in my pocket. That makes me queasy.

Related - Tax Reform 201: The Optimal Tax Rate

Wednesday, April 6, 2011

Libya 2011 | Beyond La Belle, and Lockerbie

~ By: Larry Walker, Jr. ~

"Repent, for the kingdom of heaven is near." ~ Matthew 3:2 ~

The long spell of bitterness between Libya and the United States seems to be related to a territorial dispute going back to the 1970’s. Shortly after Gaddafi came to power in 1969, he declared that the Gulf of Sidra belonged to Libya, and that anyone crossing beyond what he termed, “The Line of Death”, without permission, would invite a military response. That seemed to be a reasonable position to me; after all, there is a certain line that you don’t cross on my property without a problem. But to the leaders of the United States, at the time, it presented a challenge, a sort of double-dog-dare. The U.S. would eventually cross that line for no other reason than to see what Gaddafi would do. This fatal flaw in past American foreign policy has led to a countless loss of human life and property.

So just where is the Gulf of Sidra? It’s right smack between Benghazi and Misrata in Northern Libya (see Map below). Does this look like a part of Libyan territory to you? It sure looks like it to me. It’s definitely not United States territory. How many lives have been lost due to the United States insistence on policing Libya, and the rest of the planet for that matter, over trivial matters like this? I would bet that I’m not the only one that could have given a flip about the Gulf of Sidra, then as now. Yet, if Libya were to send a fleet of armed vessels into the Gulf of Mexico, just off of our Southern coastline, I would venture to say, “there would be hell to pay”. Perhaps it’s time we put ourselves in Gaddafi’s shoes for a moment.

The Gulf of Sidra is a body of water in the Mediterranean Sea on the northern coast of Libya; it is also known as Gulf of Sirte. The Gulf of Sidra has been a major centre for tuna fishing in the Mediterranean for centuries. It gives its name to the city of Sirte situated on its western side. The gulf measures 273 miles (439 km) from east to west, and occupies an area of 22,000 square miles.

After the coup d'etat which brought Muammar Gaddafi to power in 1969, there have been a number of international incidents concerning territorial claims of the Gaddafi regime over the waters of the Gulf of Sidra.

1973 - Gaddafi’s Line of Death

In 1973, Gaddafi claimed much of the Gulf of Sidra to be within Libyan territorial waters by drawing a straight line at 32 degrees, 30 minutes north between a point near Benghazi and the western headland of the gulf at Misrata with an exclusive 62 nautical miles (115 km) fishing zone. Gaddafi declared it The Line of Death, the crossing of which would invite a military response. The United States [in accepting the invitation] claimed its rights to conduct naval operations on international waters, a standard of 12-mile (19 km) territorial limit from a country's shore. Gaddafi claimed it to be a territorial sea, not just a coastal area. In response the United States authorized naval exercises in the Gulf of Sidra to conduct Freedom of Navigation (FON) operations. On several occasions Libyan fighter planes harassed United States military planes maneuvering in the area.

On March 21, 1973, Libyan fighter planes intercepted and fired on a U.S. Air Force C-130 conducting signals intelligence off the Libyan coast. During the encounter, two Libyan Mirage fighters signaled the C-130 to follow them toward Libya and land, prompting the American plane to take evasive action. The C-130 received cannon fire from the Libyan fighters as it fled but was able to escape by using cloud cover. According to U.S. officials, the American plane was never closer than 75 miles from the Libyan coast.

So the U.S. provoked an incident, just to see how Gaddafi would respond, and then when he responded, we backed down. Didn’t we have better things to do in 1973, like perhaps tackling the looming energy crisis, or overcoming some great humanitarian need? Were human lives really worth the price of conducting Freedom of Navigation Operations in Libya?

Freedom of Navigation Operations (source)

Freedom of Navigation is a principle of customary International Law that, apart from the exceptions provided for in international law, ships flying the flag of any state shall not suffer interference from other states. This right is now also codified as article 87(1)a of the 1982 United Nations Convention on the Law of the Sea. However, not all UN members (notably the United States of America) have ratified this convention.

The United States' Freedom of Navigation program challenges territorial claims on the world's oceans and airspace that are considered excessive by the United States, using diplomatic protests and/or by interference. The United States position is an insistence that all nations must obey the international law of the sea as stated by the UN Law of the Sea Convention, though the United States has yet to ratify the treaty. Some coastal states make claims that the United States sees as inconsistent with international law, which, if unchallenged, would limit navigational freedoms of the vessels and aircraft of the U.S. and other countries.

On several occasions, U.S. armed forces have conducted operations in areas claimed by other countries, such as naval operations in the Gulf of Sidra in the 1980s. Throughout the years U.S. forces have been performing "Freedom of Navigation" operations in the Straits of Gibraltar, Strait of Hormuz, Straits of Malacca, the Indonesian Archipelago, the Black Sea, and occasionally the Canadian Arctic.

One of the notable operations conducted as part of Freedom of Navigation program was performed by USS Yorktown, during which, on February 12, 1988 she was "nudged" by Soviet frigate Bezzavetny in an attempt to divert the vessel out of Soviet-claimed territorial waters; some observers have called the event "the last incident of the Cold War."

So let me get this straight, while I was in junior high and high school, the U.S. government was busy establishing a policy to unilaterally enforce UN laws which the Congress has yet to ratify unto this day. This all looks pretty foolish in retrospect; although I’m sure it was serious business at the time, at least for anyone who actually cared. Apparently for those who did care it was worth putting countless lives in harm’s way. One has to wonder if anyone was really hurt by being prohibited from entering the Gulf of Sidra in the first place. If so, who?

1981 – First Gulf of Sidra Incident

In August 1981, during the United States Sixth Fleet FON exercises, Libyan fighter planes were assembled from elsewhere in the country to fly patrols near the American ships. On August 19 two Libyan Su-22 Fitter fighter-bombers were intercepted by two F-14 Tomcat fighters from the aircraft carrier Nimitz. During the engagement, one of the American planes was targeted by an air-to-air Atoll missile. After evading the missile, both Libyan planes were shot down with Sidewinder missiles launched by the Tomcats. According to some reports, the two Libyan pilots managed to eject and were rescued from the sea. According to other reports, one of the Libyan pilot's parachutes failed to open.

So after a near miss in the 70s, the U.S. decided to send in more ships for another Freedom of Navigation exercise. It would appear that we had no other reason to be in the Gulf of Sidra other than to provoke some kind of response from Libya. When the response came, a Libyan soldier had to die. But even that wasn’t enough. Somebody needed to be taught the lesson of, “do as I say, or else”.

1986 – 3rd American Provocation (source)

In the spring of 1986, the U.S. Navy deployed three aircraft carrier task force groups, USS America, USS Coral Sea and USS Saratoga from the Sixth Fleet with 225 aircraft and some 30 warships across the "Line of Death" and into the disputed Gulf of Sidra. After a day of armed conflict, the operation was terminated after an unknown number of human and materiel losses to the Libyan side and no losses to the American side.

Two weeks later on April 5, 1986, a bomb exploded in a West Berlin disco, La Belle, killing two American servicemen, a Turkish woman and wounding more than 200 others. The United States claimed to have obtained cable transcripts from Libyan agents in East Germany involved in the attack. After several days of diplomatic talks with European and Arab partners, President Ronald Reagan ordered eighteen F-111F strike aircraft of the 48th Tactical Fighter Wing, flying from RAF Lakenheath supported by four EF-111A Ravens of the 20th Tactical Fighter Wing, from RAF Upper Heyford in England to strike targets in Libya in conjunction with fifteen A-6, A-7, F/A-18 attack aircraft and EA-6B Prowler Electronic Warfare Aircraft from the aircraft carriers USS Saratoga, USS America and USS Coral Sea on station in the Gulf of Sidra. The attack lasted about ten minutes, hitting several targets at 0200 on April 15th. Two American airmen were killed when their plane was shot down over the Gulf of Sidra. Forty-five Libyan soldiers and government officials and fifteen civilians were also killed.

Now there was a brilliant idea, “let’s cross Mad Dog’s Line of Death and see what happens. Then if he fights back, we’ll exact an unknown number of human and material losses upon Libyans, and then withdraw.” And later on, “if he so much as lifts a finger, we’ll take him out.” Great plan! You see, just like today, for some it matters whether the lives lost were military or civilian, but not for me. A human life is a human life. Just because one wears a uniform or a badge doesn’t make their life any less valuable. After all, don’t most soldiers have civilian wives, children, parents and siblings? Why do some then discount the loss of military personnel? That one that you killed was somebody’s son, brother, daughter, sister, father, or mother.

Motive behind the 1988 Lockerbie Bombing (source)

The motive that is generally attributed to Libya’s alleged attack on Pan Am Flight 103 can be traced back to the series of military confrontations with the U.S. Navy that took place in the 1980s in the Gulf of Sidra, which Libya claimed as its territorial waters. First, there was the Gulf of Sidra incident (1981) when two Libyan fighter aircraft were shot down. Then, two Libyan radio ships were sunk in the Gulf of Sidra. Later, on 23 March 1986 a Libyan Navy patrol boat was sunk in the Gulf of Sidra, followed by the sinking of another Libyan vessel on 25 March 1986. The Libyan leader, Muammar al-Gaddafi, was accused of retaliating to these sinkings by ordering the April 1986 bombing of West Berlin nightclub, La Belle, that was frequented by U.S. soldiers and which killed three and injured 230. [Then came the bombing of Pan Am Flight 103.]

Conclusion

The damage that America has inflicted on Libya has been for no good reason. By force, America challenged Libya’s rights to its own territory. The losses suffered by Libya far outweigh any damage done to Americans in retaliation. Yet, some Americans will never be satisfied, because they are unable to see beyond La Belle, and Lockerbie. I mean it’s as if Libya, for no reason whatsoever, allegedly engaged in both of these seeming terrorist acts. Yet there is another view. On the other side of the spectrum, there are those who believe that when America plays the role of an aggressive police state, and in so doing provokes, threatens or damages smaller nations, any retaliation is justified. I’m sorry, but you can’t convince me that the U.S. is without guilt in this matter. The U.S. has engaged in numerous attacks on Libya which have resulted in an unknown number of casualties. Instead of offering Gaddafi a noose, perhaps we should be offering him an apology.

Bringing it up to the conflict of the day, what would the United States government do if a large group of armed protestors suddenly rose up and stormed the U.S. Capitol? Does a government have the right to defend itself? Would the U.S. government use force against some of its own citizens, or would its leaders instead step down? If the U.S. government acted in self-defense against even a handful of its own citizens, would it be right for a 3rd party to intervene by launching a type of Odyssey Dawn upon Washington, DC and U.S. military targets?

Get over it. Some of us really do want to work, live and worship in peace. It’s high time that America mind its own business. It’s time to stop playing God. Let Libya resolve its own conflicts. When Libyans break Libyan laws they must pay the price, just as when Americans breach American laws. If there is a way for America to assist Libya diplomatically, then that should be our goal. However a policy of taking lives in the name of saving others is as reckless as attempting to enforce the unratified United Nations position on freedom of navigation.

Shhhhh! They’re watching. Judgment day is coming.

Addendum : The United States doesn't recognize the 12 mile limit from its own shores, but believes everyone else must. Meanwhile, the U.S. claims up to 200 miles of the continental shelf as its territory. See - What Goes Around Comes Around: How UNCLOS Ratification Will Herald Europe's Precautionary Principle as U.S. Law. In other words, unratified means unjustified.