Sunday, June 11, 2006

June 2006 Desert of the Real Newsletter

Below is a reprint of the June 2006 Desert of the Real Newsletter.

Welcome to the Desert of the Real—
Real Investment Returns in a Dry Season
June 2006 Copyright Robert C. Feightner

Welcome to the Desert of the Real.[1]

In an earlier newsletter, the Author stated that he would address the proposed repeal of the Estate and Gift Tax if Senate Majority Leader Dr. Bill “Kitten Carver” Frist would reintroduce it. Frist, you may recall, committed medical malpractice by media when he watched the manipulative video of Terri Schiavo and made the incorrect diagnosis that she was not in a persistent vegetative state. Frist is also a multimillionaire and his family will be a beneficiary of any Estate tax repeal.


The Federal Estate and Gift Tax, not the so-called “Death Tax” as called by plutocratic apologists, was enacted to prevent the intergenerational accumulation of vast fortunes. US policymakers wished to avoid huge concentrations of fortunes in the hands of a few robber barons and plutocrats like Frist, and others who choose their parents well.

The tax hits only the wealthiest estates in America, those up and often far over 10 million dollars. 71% of the Estate tax benefits go to people that stand to inherit more than 10 million dollars. It affects only 3 of 1000 estates.[2] That’s .03% of estates. But when you consider that many people do not open estates (they have little money or hold their property as join tenants with survivorship right with their spouse or children), the scope is even less. So except for the kicking and screaming of a few thousand very wealthy people, it is off the radar. But boy can those few thousand very wealthy people (the Walton family, heirs to the Wal-Mart billions and the Mars Candy clan) kick congress hard and scream misinformation that many Americans believe.


Read what the New York Times said in its editorial of June 6th:
Abolitionists say the estate tax forces the liquidation of family farms and businesses. In 2000, according to the Congressional Budget Office, 1,659 farms were liable for the tax, but fully 1,521 of these had sufficient liquid assets to pay without selling any land. In 2000, likewise, 485 taxable estates included a small business, but 321 of these could pay the tax without selling any of the firm. Moreover, heirs can spread estate tax payments over 14 years, so even those without liquid assets have plenty of time to take over the farm or firm, manage it productively, and thus generate the cash to pay the tax. So the estate tax wasn't forcing the fire sale of large numbers of family farms and businesses even in 2000, before the Bush tax cuts kicked in. Now that the amount that a couple can pass on tax-free has jumped from $1.3 million to $4 million, the mass-liquidation claim is even less accurate.[3]

So the plutocracy and quasi-aristocracy lobby is fibbing when they call the Estate tax a destroyer of family farms and family businesses. The Estate tax hits the accumulated capital assets of the very wealthy, not Old McDonald and Mom and Pop at the laundry mat.


Imagine you are fertilized human egg. You are given a choice of parents. You can be born Muffy, the shipping heiress. Or you can be Shana, the janitor’s daughter. Or, to quote James Wood’s character, Max Bercovicz, in the Sergio Leone classic gangster film “Once Upon a Time in America”, “Some kids get the good life, and some get it right up the a**”. The mobsters had just switched the wrist tags on a nursery full of newborns to blackmail a corrupt New York City police commissioner. Instead of his first-born son, the crooked cop unwrapped the swaddling clothes from a baby girl. And boy was he mad!

But the gang had lost the code to the true identities of the babies. They could give the cop a boy, but it would be likely that the rotten cop would get the son of another man. Good zygotic luck is just a dirty trick away.

That is the luck of the draw, or luck of the transfer that abolition of the Estate Tax would more greatly benefit. There are myriad of ways to transfer wealth from parents to children or grandchildren. But they are all gifts, nonproductive transfers of wealth. Economic exchanges where no value is given. Economists and the common law recognize that gifts are nonproductive exchanges deserving of little or no legal enforceability. Under the law of contracts, gifts lack “consideration”.

Let’s go at it another way. A father owns a bakery. When he dies, three common events could occur. The bakery could go out of business. But the bakery is a good business so the economy of the community will benefit (measurably in terms of the economic activity of the bakery) if the bakery stays in business. So when the father dies his son Benny could inherit it or the bakery could be sold to a willing buyer that will pay full value for it. The buyer will be a willing buyer that will have an interest in maximizing the productive capacity of the bakery. And the father’s estate is also enriched because it has now received full value for the bakery.
But what about Benny? Benny could inherit the business and drive it into the ground. Or he may loot it for personal luxuries. He may inherit the business and run it well, but even in that event, he has not given value for the business, as would a purchaser-for-value in an arms’ length exchange.

Simply put, the lack of an inheritance tax encourages more nonproductive transfers to the children of fortune when rational economic players could give value where value is due.


Deficit Calling? That darn reality-based politics always intrudes. The Estate tax is estimated to generate $776 billion dollars in the decade starting in 2012[5]. About the cost of the Iraq war, sometimes estimated at $700 billion in today’s dollars. Fiscal discipline may be too much to ask from our “leaders”. The House of Irresponsibility has already passed permanent Estate tax repeal. So the last shot at sanity is with the United States Senate this week.


Arguments for maintaining the Estate tax are legion. Appeals to repeal it merit analysis, but are not persuasive. However, the opinions of most Americans are misshapen by intentional misrepresentations slimed out by a handful of uber-wealthy Americans (Wal-Mart Waltons, Mars Candy heirs, Seattle Times heirs, and Nordstrom heirs). They peddle the lies that the Estate tax closes businesses and farms. They misrepresent the scope of the tax, apparently convincing most Ohioans that the tax will or could apply to them.

The reality-immune from Ohio were recently polled and 60% of them stated that the “death tax” (the incorrect and deceptive appellation that the plutocrats use to confuse the issue) was “completely unfair”. Listen to the polling results from these folks:

According to a poll conducted by the Luntz [AUTHOR’S NOTE: Luntz is a Republican pollster] Research companies, 60 percent of Ohio residents regarded the "Death Tax" (a common nickname for the Estate Tax) as completely unfair, while 52 percent expressed the same opinion when it was labeled the "Inheritance Tax." By contrast, only 46 percent of Ohioans said the gas tax was unfair, and a mere 15 percent said so of the Income Tax.[6]

Read more from the mouths of the misinformed:

Respondents were also much more likely to vote for a candidate who opposed the estate tax than one who favored it. 71 percent of respondents favored candidates who expressed themselves against the estate tax, compared with 21 percent for candidates supporting the estate tax. This margin was slightly larger (72 percent to 19 percent) among Republican voters who were considering casting votes for Democrats in the upcoming election. "From our poll results, repealing or significantly reducing the estate tax looks to be a winning issue in Ohio," said Luntz. "People want taxes reduced across the board, but this tax seems to irk voters particularly."


Virtually no one from Ohio will pay the Estate tax. Almost freaking none. Less than will be struck by lightening, twice, on the same day. Are they unable to grasp the fact that the tax will not affect them? Obviously, because just like people believed (and many still believe) the lies that Saddam Hussein was involved in 9-11 and that the Iraqis possessed weapons of mass destruction, they are utterly misinformed about the Estate tax. They won’t pay it. They will never have to pay it. No one they know or live near will pay it. But they will be forced to subsidize the lost treasury revenue.

Think about it, readers. Even if some readers of this newsletter support repeal of the Estate tax (and care to debate the Author), can you honestly believe that 61% of Ohioans consider a tax that affects only the extremely wealthy (.03% of all estates) “completely unfair” as opposed to 15% of Ohioans that say the income tax is “unfair”. Are Americans that egalitarian on matters of tax that they would support by 71% margins political candidates that favor repeal of the Estate tax versus 21% that favor Estate tax opponents? Ignorance wins, 71% to 21%.

Have lying and intentional misrepresentation become the currency of the body politick. The Author fears that they have.

Welcome to the Desert of the Real!

This newsletter is offered for informational purposes only. Sources of information provided are believed to be reliable, but are not guaranteed to be complete or without error. Opinions and suggestions are provided with the understanding that readers acting on information contained herein assume all risks involved. The Author may or may not buy or sell securities discussed in this newsletter.

[1] The title of this Newsletter, “Welcome to the Desert of the Real”, comes from the 1998 film “The Matrix”. The world in the Matrix is a Simulacrum, a computer–generated illusion. It only “looks” and “feels” like the late 20th century. Instead, human beings are enslaved in tanks of fluid, wired to the Matrix. Also, readers steeped in post-structuralist philosophy may recognize the title as a paraphrase of a quote in Jean Baudrilliard’s 1981 book, “Simulacra and Simulacrum”.

One the subject of cinema, the Guild Cinema, an Albuquerque art house theatre, begins its third annual Film Noir Festival on June 30th. It runs through July 13. Last year’s Film Noir Cinema included the only recently released “first cut” of the classic “The Big Sleep”, the Abraham Polonsky classic “Force of Evil”, Jacques Tourneur’s “Nightfall”, the seminal “Detour” and the inimitable “Murder by Contract”.

The bill has been released for the 2006 festival. One film will be “Requiem for a Heavyweight”. This film, while not “archetypal” Film Noir, explores standard Noir themes such as betrayal by comrades and illusions of hope colliding with stark, battering human reality. The film stars Anthony Quinn as Louis “Mountain” Rivera, a punched out boxer sliding down the fight card. The film also features Muhammad Ali when he was still Cassius Clay, and other former pugilists such as Jack Dempsey, Gus Lesenvitch, and Willy “Will’o the Wisp” Pep.

Other films will be “Night of the Hunter”, a seldom screened English Noir film, “Hangover Square”, the Henry Fonda classic “The Wrong Man”, “Suddenly”, a 1954 film starring Frank Sinatra as a presidential assassin, and “Witness to Murder” from journeyman director Roy Rowland with Barbara Stanwyck as a witness that cannot convince the cops she saw a crime. But the killer knows what Miss Stanwyck saw. . .

Also on the bill is Nicholas Ray’s “Bigger than Life”, the weirdly ironic “Hollow Triumph” and Hollywood insider film “The Big Knife” from the inimitable director Robert Aldrich.

A “series within a series” will be two films from the sub-genre “War Noir”. The films are “Act of Violence”, a post-WWII revenge film, and another WWII revenge film “Attack”. Attack, directed by Robert Aldrich, is notable because it stars war veterans Lee Marvin and Eddie Albert. In the film Albert plays a coward. Albert was a decorated Navy veteran that rescued 70 wounded Marines at the horrific invasion of Tarawa, however.

The series closes with two Irving Lerner films, “Murder by Contract” and “City of Fear”. Both star Vince Edwards, later of Ben Casey fame, as an enigmatic criminal.

[2] Now Playing in Senate: A GOP Double Bill, Washington Post,, June 6, 2006.
[3] “Death and Taxes”, Subscription is required but it is free.
[4] This was the rationalization of Delta House fraternity members in admitting legacy candidate Kent “Flounder” Dorfman, played by Steven Furst. Flounder was a second-tier pledge, but his brother did own a car.
[5] “Death and Taxes”, NY Times.