September 21, 2014
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Raimondo hedges to minimize RI’s risk...is that bad?
Lonnie Barham

WALL STREET VINDICATION IN R.I.? For the past few years, Americans have mistakenly castigated Wall Street investment firms and banks for investing in hedge funds and short sales. The two terms have become practically synonymous with legalized theft or embezzlement. Yet, those truly knowledgeable of specialized investment mechanisms recognize hedge funds and short selling as legitimate market practices that can stabilize or decrease overall investment risks in a volatile market.
Last week, our own general treasurer, Gina Raimondo, moved $900 million of the state's pension money into these "dastardly" funds in order to minimize the risk of heavy loss in a future down market. In her every action, Ms. Raimondo seems to be honest, up front, transparent and an expert on recognizing investment risks and opportunities.
When someone with Raimondo's credentials tells us she believes hedge funds and short sales are legitimate investment tools, then hopefully the rest of us will finally realize that her private enterprise counterparts, those "evil capitalists" on Wall Street, are not the vultures President Obama and his ilk portray them to be.

HOW TAX POLICIES HARM TOWNS: A taxpayer in Barrington had a parcel of land near the Rayner Wildlife Refuge on which the town levied a tax of $15,000 per year. In an apparent effort to increase tax revenues, without care for the collateral long-term costs, Barrington suddenly declared the one parcel of land to be two parcels and doubled the tax to $30,000 per year. The suffering taxpayer who wanted to keep the land as open space could not afford the increased taxes and sold the parcel to a developer who now wants to build 27 condos on the site. Neighbors are up in arms about the proposed development and have come up with several NIMBY arguments against it, even though the land is zoned for residential use such as condos.
It seems clear that Barrington intends to reject the developer's request. If so, it will be another egregious example of the misuse of governmental power – tax a responsible land owner to the point she has to sell, then tell the buyer he can't use the property as it is zoned.

IS OBAMACARE STILL DOOMED? The Supreme Court decision affirming the Affordable Care Act (Obamacare) includes three provisions that seem to spell the act's doom.
First, it declares the individual mandate a tax – giving Republicans campaign fodder for use against a president who said he wouldn't raise taxes on Americans making under $200,000 per year. The individual mandate tax will cost a couple up to $1,360 per year; the law imposes a 3.8 percent Medicaid surcharge tax on investment income; it includes a 62 percent hike in the Medicare payroll tax for many; it greatly reduces the income tax deductible for medical expenses; and it imposes onerous caps and penalties on the use of health savings accounts and health care flexible spending accounts. Republicans should have a field day flaunting these Obama tax increases during the next four months and may convince the electorate to give Republicans a majority in both the House and the Senate – enough to repeal Obamacare.
Second, the law as currently written has no true penalty for anyone who refuses to buy insurance and also refuses to pay the "penalty" now declared a tax. Since the "penalty" is not written into the tax code, it will be very difficult for the government to enforce the new tax – the court decision spelled out that aggressive measures cannot be used. Thus, the income intended to be raised by the mandate may not materialize, causing health care costs for the uninsured to still be spread across the insured in the form of higher insurance premiums and higher medical care costs – a result that will surely increase public ire and lead the next congress to overturn the law, perhaps with help from Democrats.
Third, the court decision makes it clear that the 26 states who sued to get out of the Medicaid increases mandated by the law are free to opt out without federal penalty. Most of the states that sued will likely opt out, as will other states that simply can't afford the greater cost of expanding Medicaid.
So, half the states may opt out of increasing insurance coverage to the uninsured; those states that opt to stay in will have far less money flowing from the federal government to subsidize health care to the uninsured since the individual mandate is, essentially, unenforceable; and public distaste for even more tax increases may likely lead to the law's repeal anyway. If all of this doesn't spell doom for Obamacare, then we're all living in a parallel universe.

HIGH STAKES GRADUATION TESTING: The ACLU and R.I. Education Commissioner Deborah Gist are at odds on upcoming high school graduation requirements that will restrict diplomas only to those students who have scored at least partially proficient in all subjects on standardized tests. One of Gist's very valid arguments is that employers must be able to depend on a diploma, meaning the holder is prepared for the requirements of the job; she believes passing standardized tests before receiving a diploma tells prospective employers the graduate is indeed ready for the workforce. The ACLU contends the tests should be used to grade how well the schools are doing instead of how much students have learned.
Guess what? We can have both! Why not issue diplomas to all who score proficient, not partially proficient, in at least one of the subjects tested – math, reading and writing? The catch – the diplomas would specify the area(s) scored proficient and those in which the graduate did poorly. If an employer needs an employee who can read proficiently but doesn't need strong math skills, then a graduate who proved his proficiency only in reading might be hired. Conversely, a job that requires reading, writing and math skills would be filled only by an applicant whose diploma showed she scored proficient in all three areas. This method would ensure that all students who made it through 12 years of public education, minus those who ended up proficient in nothing, are allowed to graduate and prospective employers would still be able to easily determine occupational fitness.

QUOTE OF THE WEEK: Former Army National Guardsman Terry Rajsombath, who was badly injured during a firefight in Afghanistan but who still completed the Amica 70.3-mile Ironman race, some of it on crutches, speaking undauntedly about the cost of his next challenge – climbing Mount McKinley: "Empty pockets never held anybody back, only empty heads or empty hearts."


Comments
1 comment on this item

Typical ignorant,erroneous information. The "dastardly" funds are ,in reality,the bundling of high risk securities ,such as unsecured loans,and selling them as derivatives.. The 'vultures"on Wall Street are the executives who made billions from these "investments",got bailed out, and are filling the coffers of PACS {thank you S.C for overturning McCain/Feingold},to prevent any kind of regulation that would prevent the2008 catastrophe from happening again.

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