Taxes, Revenue, Fines, and Fiscal Cliff: How guns, asbestos, financial fraud, and occupational safety describe the true problem.
By Dana Brown
I just read an article where some state representative wants to publish all names of lawfully registered gun owners in a state. First this made me mad, then I started thinking, which is a very dangerous thing indeed. I found that I had seen this before permeating across everything I am involved with. This epiphany, emanating from the backlash of “gun rights” to all the freedoms and liberties we have, to the role of government in our lives, I come to the conclusion and unfortunate analysis, that on almost every issue, when the government steps in with a solution, it is usually either NOT a solution or it is a solution and the government does not ENFORCE that legislative solution. You can take any governmental issue, program, or law from the fiscal cliff “debate”, fiscal policy, occupational safety laws, environmental laws, guns, investing laws, HFT algos, banking financial and security capital reporting, or even the government’s own numbers supposedly collected and reported on our behalf our citizens, and ask yourself what is common theme in the government response. It is clearly total lack of accountability on all parties, and a focusing the enforcement only on those that are trying to comply with the rules, and while total scofflaws are not even on the radar of the enforcement. Our government is very good at writing new laws, but terrible at implementing them and even worse at enforcement. All too often the enforcing agency pursues the “path of least resistance” with violators and “negotiates a settlement” that is usually an advantage to the violator, and not to society at large. We are “paying for enforcement”, the protection that enforcement was to provide, and information developed by the governmental agencies, and the governmental agencies rarely come through with the “product” for the people, that we are “buying” with our taxes. Government has breached that contract and the agreement. We simply do not get what we pay for.
Remember that “fines” go into the “General Fund”, just like taxes on income, estate, corporate, and there is no talk or chatter at all about increasing enforcement, or taking the fines to maximum as s legal way to increase revenues, without further lawmaking. The laws, fines, and case histories already exist. All that is needed is for the governmental agencies to get off their collective asses and DO THE JOB WE PAY THEM TO DO! I have been absolutely astonished with the fact that the United States Government with all their rules, and penalties for not complying, has not even considered “more enforcement of the bad guys” in terms of financing debt. Seems to me that having criminals and bad people pay fines is better than pawning off debt to the next generation. All laws are passed with provisions of enforcement i.e., they can apply administrative fees (fines) for behavior they want changed. In June of last year Supreme Court Justice Roberts made a decision for just that on Obamacare, stating that congress was in their right to assess the “fees” which are in fact taxes to have outcomes. “Conservatives” felt totally betrayed by that decision, however, it then applies to everything the government does and particularly with fines and administrative sanctions. The “problem” with the fines and then application and enforcement action on an industry is very “selective” to say the least. The usual outcome for any enforcing agency is usually to “go after the little fish” and those that are “trying to comply” and hammer the hell out of them, instead of taking the scofflaws “out to the woodshed” and fining the hell out of them. Don’t believe me? Look at the Martha Stewart Case of insider trading for a measly $200,000, and the Bernie Madoff case of $1.2 Billion Ponzi Scheme. JAIL TIME bitchez! Where are the cuffs on the Libor Scandal with Central Banks and Sovereign institutions manipulating the rates? How about MF Global and Jon Corzine with “Vaporizing” $29 billion of investors and client’s accounts? Then we have Phoenix Capital and the hits keep on coming. Throw in the High Frequency algo traders and Martha Stewart’s “infraction” is miniscule. It comes down every time to Accountability and equal application of the law, which turns out are not equal and enforcing agencies are not accountable, and neither are the scofflaws and outright criminals. They worry about the small infractions and “technicalities” that really do not constitute intentional breach of law, and ignore gross offenders, because of ease of enforcement action.
If the law is not enforced, and the fine not assessed to the proper level, the “behavioral change” that the law intended and lobbied for, is actually made worse, as the “Good Guys” join the “Bad Guys” because they have no option. Would Bank of America, Citigroup, Wells Fargo be a “good investment” and have an elevating stock price if they “disclosed” true value of reserves, and the quality of “assets” on the balance sheets? Would you keep money in any of those banks if you knew they were levered in derivatives and empty MBS securities to a level of 200-500:1 to real cash value? We see that in the very criminal banking/financial/investing/trading sector, and everybody knows it. How does that work into the discussion of “Fiscal Cliff”, or “Spending Cuts”. Taxes do not have to be raised, and spending could be cut drastically, we could stimulate growth, and get that better world we are all wanting. How? Do tell! Fines. It is simply fines and administrative penalties, and they are already on the books, voted for, and very poorly enforced, meaning bad people profit by breaking the laws that good people follow. Making “Bad People” pay good fines, instead of making “Good People” pay bad taxes should be the clarion call of everyone. We really do not need new laws and continuing resolutions. Funding IS available. Whether it is asbestos laws, storm water discharge laws, employee safety laws, employment wage laws, investing laws, banking laws, gun laws, the Government usually puts a larger burden on the well meaning and reputable, and then gives the violator a large break. Happens all the time. Just think of a HFT algo trader doing all the trades in all the milliseconds in a day, then in a week, then in a month, and then in a year, and not making the buy, just pushing around the price. BILLIONS of violations per day, for tens of THOUSANDS of dollars of fines per violation, per day! By black letter law “to protect the investing public”, each of those violations are assessed fines “per day”, “per violation”. By black letter law, the security originators or RMBS and CMBS, derivatives, and any securitized product is supposed to be disclosed,…. ALL of it, the values, contents, quality, risks, from buyer to seller AND their positions. Not so much for Goldman Sachs, and the guy’s doing “God’s work”, apparently. Accountability of the SEC, and the enforcement of those two examples alone would result in astronomical penalties, because it is their business model. And this is the business plan modern financial/banking/investing.
There is no “mark to market” asset pricing. Remember “per violation”, “per day” for every violation is a separate fine. I think the HFT’s, Investment Banks”, and the big five banks alone would make a considerable dent in the debt issue. However, the courts usually let them off with a hand slap, and the Judges do not care about society in the larger sense. They incorrectly weigh the damage done to the individual’s portfolio, market confidence, or the nations economy by these power drunk and ethically depraved individuals and institutions. That’s why we have laws, penalties and fines. It is to Alter that undesired behavior. Those Judges need to be removed from their posts. The same Judicial body that allows Libor scandal perpetrators and participants and to walk, then put Bernie and Martha in jail are not fit to “pass judgement”. If they fail to apply the law Judges need to resign, or be removed from standing. My recommendation to these intellectual wizards is a lobotomy, for their idiocy. But this is not in this just this industry sector, this is the type of regulatory activity throughout all areas where there are laws. This is more the “norm” rather than the exception. The penalty and enforcement is not commensurate with the effect on the individual’s transgressions that committed the violation, nor does it account for the “effect on society”, and why there are larger penalties that judges refuse to access. If the law is not enforced, and the fine assessed to the proper level, the “behavioral change” that the law intended and lobbied for, is actually made worse, as the “Good Guys” join the “Bad Guys” because they have no option. We see this in the financial/banking/investing criminal enterprise. So you see with the “Gun Issue” and the political hacks and newspapers wanting to hang “Good People” out to dry with their desire to publish the names of legal permitted gun owners. The result is the “Bad Guys” are given advantage to do bad things, and “Good People” are harmed and disadvantaged, even though the law is supposed to prosecute the “Bad Guy’s” actions. A reformed criminal agrees: ““They just created an opportunity for some crimes to be committed and I think it’s exceptionally stupid,” said Bob Portenier, 65, a former burglar and armed house robber turned crime prevention consultant. Professional burglars are always looking for an edge, and like most folks, they read the paper, said Portenier. “Criminals are always looking for opportunity and words travels through the grapevine—burglars trade secrets and when you see something like that in the paper, that’s is something burglar’s are going to talk about,” Portenier said. “‘Did you see in the paper where all these people have guns and their addresses?’ and that kind of stuff, they’ll say.” While some burglars may use the newspaper’s information to avoid guns, Portenier said others will target homes with guns.” That is just how bass-akwards our politicians and governmental agencies think. NONE of them think with the “intent” and “penalty” of the existing laws, not one. They infringe on the good people who have nothing to hide and no reason to fear. As in taxes, those “Good People” are suffering attrition. There are less and less of us. Because the Government with it’s authority to “assess fines and penalties” in the form of taxes, and chooses not to enforce on the wicked, then the wicked grows.
When “Bad Guys” are punished the undesired activity is inhibited. If it is not, the “Bad Guys” tend to win. How? Take construction, with some environmental laws and worker safety laws, two in particular; fall protection and asbestos rules. Some on the right call these “regulations” inhibitors of growth and job killers, but a paralyzed worker or mesothelioma or asbestosis case costs about $750,000 per case and up for duration of life costs, pain and suffering notwithstanding. The costs of these are going to grow even more and are long term medical costs, and are even a bigger issue with Obamacare as this is nationalized, costs and inclusions of even more patients. The contractors that hire workers are making profit at the costs of risks the worker takes, in construction, especially in practice with modern contracting, the risk/reward is really in favor of those that are not “productive” because the true skill set is not paid equitably. The worker is taking the risk and the employer is taking the reward without the risk. A Company should not profit from sticking workers in meat grinders, exposing them to toxics without proper protection, and to falls without protection, nor can we have pillows at every workstation. Having fall protection is NOT an “inhibitor to job growth”, however naptime and pillows for workers at break time is for instance. Besides, the injuries from companies in violation drive up workman compensation insurance premiums, which costs everyone. That is why we have laws to “protect workers”. It also sets an “industry standard” not only for how the work is done, but also with standards, it stabilizes prices in construction. Bids and bid spreads are much easier to estimate and are more inline with the planning projections of financing. There is a need for “creative destruction” of “Bad Companies” as well as “Bad People”. Take for instance a roofing company that has 50 guys on a roof all the time with fall hazards, and no fall protection measures, that company probably “got the contract” due to a lower bid than it really takes to do the job. By doing the job unsafely and violating a hell of a lot of rules,the employer cuts the safety and production costs of doing the job properly and transfers the risks to the employees, and then employer takes the “reward” without assuming the risk. Those types of companies then have altered the “value” of those jobs, and those that “do it right” are penalized by losing that particular bid because they have a higher unit cost and a slightly lower production rate to do it safe.
The “Good Company” is then later forced to remain competitive to “copy the winning bidders behavior” of no fall protection or continue to lose bids and market share. The top cost for an OSHA “willful” violation, which is a situation that has the “eminent risk of death and debilitating injury” is $70,000 per violation, per day. The above mentioned violation for the company could be an assessment of a maximum of $3,5000,000, plus all the “Significant violation at $7,000 per violation per day, per violation. Now when you think “this is a construction company” and the roofing job would not even amount to $200,000, well, there ARE 50 human beings in harms way, risking lifelong debilitation, paralysis and/or death. THAT is the value, not the “project bid”, many Judges make that mistake as well. Values are not the same for these two assets. I think you would agree one human is worth more than a $200,000 roofing contract. The “Bad Guy” should lose his company and should not in business. Funny how the “Capitalists” talk about “creative destruction” when it comes to money, but not human risk, skills, or endeavor. If the law is not enforced, and the fine assessed to the proper level, the “behavioral change” that the law intended and lobbied for, is actually made worse, as the “Good Guys” join the “Bad Guys” because they have no option. You see that in construction. OSHA IS sitting on it’s collective ass. This is the situation in 2006 was that OSHA only collected on average $2,700 for a occupational death with significant violations, and they only collect about 47% of the fines assessed, in fatalities. OSHA is not a standout either, most of the other agencies from SEC, OSHA, EPA you name the alphabet soup, are not doing their jobs either, that we are paying them to do. OSHA did have an epiphany in the last year though. They received a study that showed that if OSHA had more unannounced enforcement visits, worker injuries go down and so do insurance costs. Think it is still a burdensome set of laws? So now OSHA knows by an academic study that when they actually do their job and enforce, it saves lives and prevents injury. Why are they not doing more?
Take EPA for instance. Take the asbestos issue in which EPA has laws on the books for 30+ years. Construction companies know there is asbestos rules, and building owners, real estate agencies “know” about this, because it is expensive to abate and can cause exposure to long term expensive liabilities. Asbestos has proven to cause diseases with the lungs, and these diseases are expensive and cause a massively debilitating toll not only on the patient, but on the family of the patient as well. Asbestos use and importation has not been banned in the United States, in fact in 2011 our importation rose 13%. The Super Storm Sandy strike area is about to seed a calculable bloom that in 15-30 years of asbestos related disease will skyrocket about baseline levels from all the recovery construction on all those older homes and businesses. It will take a lot of workers, and there will be workers with long hours and a larger duration of exposures. We know the rates. There are rules. There are agencies to enforce those rules. They simply do not enforce them, and when enforced the fines are assumed as a “cost of doing business”. In our neck of the woods, not notifying the project (required of ALL demolitions of commercial building regardless of whether asbestos is present or not) is a violation of a maximum of $10,000 per violation, per day, failure to use people trained, certified, $10,000 per violation, per day, and there it goes on and one. It is a “regulated activity” precisely because it caused death and disease and the human, societal, and individual cost of that is not equal to the “costs” of the project. Simply put the risk of the cost of the injury to a person and worker is more than the cost of a piece of drywall installed by that worker. This is why there is a law, because if you prorate the costs of asbestos related disease and added that in the cost per square foot of construction, it should equal the cost borne by those in society whom contract the disease caused by those whom profited from the construction that caused said exposure. That is equitable.
Developers, cities, and building owners do not see it that way. St. Louis airport with complicity of EPA Region 7 federal employees, illegally ignore the asbestos regulations and demolished thousands of structures and exposed multiple people to asbestos, in violation of the rules. Nuclear enrichment sites at Hanford Washington, and Paducah, Kentucky, and even EPA itself all violated Clean Air Act standards for “National Emission Standards for Hazadous Air Pollutants, at multiple sites and including 3 “research sites” for what the EPA called the “Alternative Asbestos Control Method”. Citizens were not protected by the very agency that was supposed to enforce the rules, all the while enforcing them “on the little guy” and ignoring for the politically connected from either the “red team” or the “blue team”. It is in fact so bad, there are building owners and developers making calculated decisions based “on getting caught” and the amount of the fines that are usual and customary. For instance a normal “renovation” of a building with asbestos fireproofing is usually an expensive process, and it takes time for the notification, planning, professional and enforcement oversight (supposedly enforcement oversight). The prices range geographically based on the “enforcement” of those regulations. In States where there is more enforcement of the rule the cost is anywhere form $8-15 per square foot, based on wages, consumables, etc. This can mean for a regular renovation or demolition “abatement” in the $100,000 to millions in costs. But remember, if not done properly, the medial costs of the asbestos exposure to the humans IN the construction sites that are not complying will be in the millions to tens of millions. Buildings and their worth and value should not be measured in “people”. That is why the laws exist, however, the developer, building owner, and contractors all across this country KNOW the governmental agencies will likely not show p, AND if they did they already know the limitations of the fines, and that is already factored in. Why would anyone pay $100,000 to a million to abate asbestos from a building, it the maximum fine would be say $10,000 if visited and caught, which is a low likelihood possibility. If caught, that $10,000 will probably be reduced much like the OSHA wrongful death assessments. The “value” of these buildings is also a reflection on these laws and the enforcement. If the building owner, developer, contractor lied, or avoided the asbestos/OSHA or any other rules, do you really think they actually used the materials specified, or built to the codes required, and then getting back to the enforcement issue, did the codes inspector actually do their jobs, that we pay them for?
The financials also packaged these properties and buildings into the RMBS and CMBS securities, and assessed “values” on these buildings and the security as well, then sold them. Not only did they misrepresent the “capability of the mortgagee to pay” in the basket of MBS, but they also misrepresented the quality of the building construction, whether or not the building has asbestos contamination, or lead paint, or any of the other laws we have poorly enforced, and the properties are actually high level liabilities, in terms of environmental, securities, life span, or building code, and therefore not worth the stated value. What is the one thread tying this long rant all together? Government is broken, we the people do not get the services or protections we are paying for, and are being asked to pay even more, for even less protection from the existing laws. The political geniuses only talk about “increasing taxes” or “decreasing spending”, and all they want is the status quo of what I have witnessed and explained, nothing about efficiency, nothing about collecting more fines. There is no discussion about taking out the “Bad Guys” with these fines, and protecting the “Good Guys” who play by the rules, and do good work and can increase the economic prosperity and produce jobs and economic growth. All we are doing is taxing the “Good Guys” even more, and the “Bad Guys” always find a way to game the system. IF they are not penalized for gaming the system, it continues to go on, and the cancer eating away will eventually kill the patient. Just like the burglar knowing where the guns are and are not, gives them advantage, so does lack of meaningful punitive enforcement gives advantage to the unscrupulous and criminal, and penalizes the contentious and committed professionals and skilled trades who are doing good works.
Governmental agencies need a collective mental enema. Start doing your jobs, period. Governmental employees receive pay, protections and benefits solely to DO THOSE JOBS. IF governmental employees are unwilling or unable to do those jobs, they should be terminated for cause because there are plenty of unemployed people out there that WILL do those jobs. That starts within the Government those employed. We ARE paying you, and not to set on your ass and be ineffective. These agencies cost taxpayers literally trillions a year, and if they are not working, and generating revenue from fines of “Bad Guys” and enforcing the mission of the agency or the laws of the land entrusted to that agency, then shut it down. Why pay for it. For instance, is there really any reason to have the Department of Labor, Bureau of Labor Statistics to calculate their meaningless unemployment number that has been revised every time it has been released. Or how abut the “Massaged” GDP or the Fedeal Reserve’s “inflation”? As of this writing UE is officially at 7.8% according to BLS, where if measured to “true” UE it would really be 10%? GDP reported at 2% instead of a –2%, and the annualized inflation of 2% reported without food and energy now at 10%? These numbers are not for the politicians. They are for “we the people”, so we can make decisions. Since they are not doing it for us, why pay for the damn data, or keep those idiots in a job that can’t calculate properly, and are lying to the very public that is paying them? Enforce fairly and firmly. The laws exist, and exist for a reason and the fines exist, and it is a legal form of revenue generation. It will fuel creative destruction of the morally decayed and depraved businesses (criminal enterprises) and foster a crucible of transparency and growth of those we want in business What needs to happen?
First, we need to make clear as a country, that taxes will not be paid without a budget passed every year by law. The Congress and the Senate are in violation of the law. They need to be sanctioned and fined, both parties and all congressmen. I think pay docking is a great start and change the benefit structure and pension and claw them back to reality. A national Tax Boycott needs to be undertaken by our entire country. Both the Republican and Democratic parties simply are not adult enough to make the simple acknowledgment if they cannot run a budget, they should not be in their seats, and WE are not paying for this bullshit anymore. Second, if we are paying for it, then make it work, and put fraud and efficiency on the front burner. Taxes are not the only form of revenue generation, fines and sanctions. Government agencies should not be defined by the amount of fines they collected, but they should be able to show where real enforcement was needed and actions were taken, and then only “help with compliance” with good faith violators. If they are a gross violator or any statute, they should not be in a “assistance program”. Fraud in contracting needs to stop. We pay for literally thousands of “Contracting Officers” in all areas of the government service. With all that effort and spend, there should be no fraud, and fraud on governmental contracts should have an “individual” and company “death sentence”. Fraud and profiteering on the government tit means no more work… ever. Third, enforce the damn rules on the books before adding others. Equal under the law just means just that. If there is political intrusion into enforcement and/or special favors, the whistle blower statues protect the governmental employee. The Senator or Congressman needs to be vilified for intruding into settled law. If they do intrude and collude, they need to share the sentence and sanction as a co-conspirator. Think about the effect on election contributions and lowering the effect of money in the political system when the political party member, lobbyist, or congressman serves the same sentence as the party asking for “special favors” in enforcement or contract. Fourth, stop curtailing rights of law-abiding citizens and start standing up for law-abiding citizens.
We need as a society, to start making a demarcation between bad guys and good guys. Too many times as we have seen, the political reaction is to curtail rights as a first step, rather that the difficult process of identifying bad guys, and then hammering and sanctioning them. Good and evil does exist, and we are getting to an area in our government, society, and lives where that line is becoming less clear. That is the intent and effect of laws, to make that line clear. Fifth, face the fact that criminal organizations in banking, financial, construction do exist and need to go away, and “creative destruction” of business with business plans based on illegal activity need to cease to exist. If that means those TARP banks, and those that received POMO from the Federal Reserve market manipulation that has profited at the expense of future generations that had no say, clawbacks are legal. Strip all assets for the corrupt criminal organizations. Angelo Mozilo, Jamie Dimon, Loyd Blankfien, Hank Paulsen, Timothy Geitner, Jon Corzine and their ilk, should not be in possession of ill gotten gains just like any other common larceny or confidence man running any other scam. They all should be imprisoned. ALL of their assets should be seized, and yes, those laws are on the books and any other criminal is treated the same way.
In closing, I am sure that if you did the math, added up of all the revenues of fines for bad guys, end and prosecute governmental contracting fraud and programmatic fraud, and clawbacks for corruption and trillions of ill gotten gains of bankers from our so called “economic fixes” that did not work, we could pay quite a bit of that debt down and become a fiscally strong country again, brimming with growth and capital. If we hold up the Government up to a mirror and it reflects the citizens of the country, we in the United States should be embarrassed about the bloated, corrupt, inept, impotent, bankrupt, ineffective dolt we see in the mirror. We should also get off our collective asses and do something about it. The options are either suicide or change our lives and vision.1 views