When is half of a tank of gas like a Cadillac?

For whatever reason, politicians love to spend most of their time on economics and finance. This is humorous to me since virtually all politicians are not trained in economics, finance, or even business. Politicians are lawyers - they draft and interpret legislation. Yet they constantly argue about dollars since (sadly) this is the universal language that motivates people to pay attention.

Listening to politicians talk about economics and finance is like nails on a chalkboard to me. Whenever I hear about promises of fixing this or changing that, there are never specifics. The current debate about the $700 billion bailout of failing financial firms is a good example. President Bush wants blanket approval for the money without identifying specific uses of the money.

Even worse, when candidates complain about each other, they often confuse voters through a simple strategy of deception and outright lies. As an example, I have heard John McCain say that Barack Obama will raise taxes for families and I wanted to see if it was true. Of course, FactCheck.org has already said that McCain is spreading lies about Obama raising taxes. But I wanted to dig deeper. So I reviewed the non-partisan Tax Policy Center analysis of both candidates' tax plans. In their analysis, they show the impact of each of the candidate's plans to after-tax income, organized by income level (see page 41 of their analysis). You can click on the graph here to get a better view.


One of the things that instantly struck me was that McCain's plan only proposes tax cuts - for everyone. In principle, it sounds real nice. In fact, why not make special promises in order to help get elected? - promise everything to everyone. However, let me point out that balancing the budget is infinitely harder when you cut everyone's taxes (see info on the $400 billion federal budget deficit).

Of course, one way to pay for a tax cut is to reduce spending and it used to be that Republicans were deficit hawks. But over the last 25 years, Republican presidents have done just the opposite - increase spending. As a result, take a look at this graph that shows the budget deficit over time. The picture shows that while Republicans lived in the White House, the deficit ballooned.

Obama actually offsets some of his tax cuts with increased taxes on the rich. In order to increase after-tax income of low income workers, Obama's plan reduces after-tax income of the top 20% of wage earners. This helps pay for (at lease some of) the income increases on lower wage earners.

The deficit is one thing, but let's look deeper into how the tax cuts proposed by McCain vary across income levels. The graph illustrates how after-tax income changes under the two candidates' tax plan. Looking at McCain's plan, it looks like tax cuts increase as income increases. At first glance, this made sense to me. After all, richer people make more money, pay more in taxes and therefore, their tax cuts will be higher. Of course, this would be true on an absolute dollar value. But looking at the graph again...I realized that the graph is showing PERCENTAGE CHANGE in after-tax income and I had to do a double take. McCain's tax strategy actually gives raises to people based on income - the higher your current income the higher the percentage increase in your after-tax income under the proposed tax plan. It's like giving you a 3% raise, giving your boss a 10% raise, and giving her boss a 40% raise!

Let me try to put this into perspective. The lowest quintile means the income level of the poorest 20% of all households. According the Congressional Budget Office, the income level at the 20th percentile is $15,300. Now look at the graph...under the McCain plan, the after-tax income of these households will go up 0.2%, or a whopping $30.60. For the middle quintile, the after-tax income of individuals will go up 1.0%, or an increase of $502, from $50,200 to 50,702.

Now look at people who make a lot of money. Under the McCain plan, the top 1% of earners get an increase of 3.8%. That's not a typo - that says 3.8%. McCain is actually proposing to give low earners a raise of 0.2% and to give rich people almost TWENTY TIMES that raise. I can't even believe that this is politically viable - to literally legislate more disperse incomes. According to the CBO, people in the top 1% of earners make at least $1,071,500. Therefore, an increase of 3.8% means ADDITIONAL after-tax income of $40,717.

In other words, the bottom 60% of earners in this country get (at most) an extra $500 while those at the top increase their after-tax income by over $41,000!

Here are alternate ways to interpret the McCain tax plan:

• According to the proposed McCain tax cut, the INCREASE in after-tax income for the richest 1% of the population is more money than half of the country's workers actually make in a year.
• The bottom 20% of earners get a whopping $30 thanks to McCain, which gets them about 7.5 gallons of gas - a little more than half a tank in most cars. In contrast, the richest 1% get a pay raise of $41,000, which is the price of a brand new Cadillac DTS. Those struggling get extra half of a tank of gas while top earners get another luxury car.
  

I understand the argument that people who make more money should get larger dollar tax cuts. In terms of politics, I believe there are only two extremes in proposing tax cuts:

1. Perhaps the fairest tax cut would suggest that everyone get the same percentage increase in after-tax income.
   
2. Redistribution of income would give bigger tax cuts to the poor and middle class than to the wealth on a percentage basis. Of course, even with this tax cut, most of the dollars would benefit the rich, but that's "fair" since they pay the most in taxes.

But the McCain plan specifically calls for larger PERCENTAGE raises in income for the wealthy.

My employee benefits professor taught us that it is likely that 80% of employee benefit decisions are made due to "self interest of the decision maker". John McCain is easily in the top 20% of all earners and his wife is easily in the top 1%. Is his tax cut really in the interest of the country and the economy or is it practice employee benefits 101?

The story sounds eerily familiar... your company just gave everyone a bonus. Congratulations! You were awarded a half of a tank of gas while the CEO just got a new Caddy.

A tough course under tough conditions

On Saturday, September 13th, I completed the Wo-Zha-Wa half marathon in the Wisconsin Dells in a time of 2:02:55 (a 9:23 pace). Just looking at the time alone, I normally would have been slightly disappointed with the time. However, there were a number of factors that contributed to less than optimal performance.

First, the course conditions were difficult. If you follow the link of the previous posting on this run, you can see the elevation changes, which were significant. The hills were the steepest I've run - ever (remember I live in the flatlands of central Illinois). The course was beautiful, however. It ran through the backroads of the Dells and there's just something about the Wisconsin country that is much more attractive than Illinois. Dairy farmers seem to do better than Illinois bean/corn farmers as the barns are newer and nicer.

The second challenge was that it rained a good portion of the race. While the forecast seemed ominous, it didn't rain the entire time and even when it was raining, it wasn't a downpour.

The third challenge was simply how I felt - it was one of those days that I just didn't feel like running. In fact, based on what they were forecasting (heavy morning rains with thunder), I was actually hoping the race would be canceled. Or, if it was going to be raining heavily, I would have skipped out. When the weather seemed reasonable, I suppose I was a bit disappointed that I had to run (or at least I had fewer excuses to NOT run). At about the 3-mile mark, I could tell - I just wasn't into it. I was actually thinking I'd just turn around and call it a day. But then I realized that I had trained for the event and I'd just fight through it and give it my best.

In addition, race organization was poor. There weren't that many water stops - about once every three miles. Most races it's about every 1.5-2 miles. Plus, usually there are volunteers helping out at those stations, smiling and cheering you on. Not at the Dells - here, they set up unattended tables with water cups. Worse than that, one of the stops actually ran out of water which meant you had to go about an hour with no water. That is just unacceptable.

I felt I did do the best I could, but based on the above, it was certainly a challenging race for me.

A whopping 50 people completed the half marathon that day. On the country roads, you surely didn't have to worry about being crowded by the other participants. As I predicted, I came in dead last in my division (male 35-39). Of course, there were only four others in my division. Overall, I placed 30th out of 50 runners and 27th out of 35 men. Hey, don't make fun...this did appear to be a pretty fast group of runners. Based on the weather, it's also likely that only the diehards showed up.

Overall, the run was not an "event" and this made it much less fun. Unlike the Indy mini-marathon or Bloomington's Lake Run, there was absolutely NO crowd support (did the town even know there was a race?), there was no after race hoopla, etc. I know the weather had a bit to do with it, but come on. Didn't anyone want to celebrate completing the race?

I'll try to convince Ter to go to Vegas in December or to Memphis to make up for this poor experience.

But we did have fun at the Dells... more on this later.

Wisconsin Dells Half Marathon

I'll be running my only half marathon this year at the Wisconsin Dells. Based on last year's results for this race, I would have finished dead last in my age division. But this is a small race, so there really aren't too many in each division. I'm most concerned with potential hills on the course combined with the possibility of warm weather. Regardless of what happens, I know there will be a hot tub waiting for me at the Wilderness Resort. That will soothe my aching muscles! Plus, I know my kids will be having a good time at the Dells.