Randomly Noted

As many note the passing of  long-time New York Yankees’ owner, George Steinbrenner, and discuss his outsized impact on New York City and on baseball, perhaps his celebrity will prompt the U.S. Congress to finally come to terms with an important tax issue.

It feels unseemly to discuss financial matters right after a person’s death. But it’s a financial news event whenever an American of significant wealth dies because of Congressional inaction. The news is that right now, no matter how wealthy the person who passes away, there is no federal estate tax.

This is not a call for any specific level of estate tax, itself a subject of heated debate in Congress and in the country. It’s a call for Congress to have a consistent level of tax for a reasonable number of years.

As press reports have noted, Steinbrenner’s fortune – Forbes estimated his net worth at about $1.15 billion – wouldn’t be subject to estate tax because in 2010 there is no federal estate tax.

In 2009, the federal estate tax rate was 45%. In 2011, if Congress doesn’t act, the rate will be 55%.

This stunningly irresponsible set of circumstances occurred because of Congress’s inability to act on deadlines it essentially set for itself back in 2001.

At that time, tax-cutting was in vogue, but there was a compromise achieved by essentially making annual reductions in the estate tax temporary. Said another way, Congress kicked the can down the road.

After a declining rate starting from 2001, the rate went to zero for 2010 and then reverts to 55% in 2011. The idea presumably was that no one who voted on the measure would want the zero rate or the 55% rate to ever be put into practice.

Those two opposing-ends-of-a-bell-curve numbers were put there essentially as a warning from Congress to itself. We put off a decision, but we have a whole bunch of years to work things out. They haven’t yet worked things out.

Some have speculated that if Congress finally does get around to stepping up and settling the state tax issue, it will try to apply the rate retroactively, making the heirs of those who pass away in the tax-free year of 2010 pay something.

The idea of retroactivity has raised legal questions. More imporatnt, it assumes Congress will finally do something to settle the estate tax issue.

Pardon our skepticism on that score.

More than once at Davos a quote from Ronald Reagan has been taken in vain.

The quote from the former U.S. president is said to go something like this: “The nine most terrifying words in the English language are, ‘I’m from the government and I’m here to help.’”

After getting an audience chuckle, the speakers using the line go on to say that during the height of the financial crisis, bankers and others were for once indeed glad to see the government, riding to the rescue.

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The chief executive of temporary employment powerhouse Manpower Inc. is clear on his views of banker compensation.

“I’m not happy about it,” said Jeffrey A. Joerres, chairman and CEO of Manpower, which in 2009 ranked 119 in the Fortune 500 list of American companies. “I believe in great compensation for great performance,” but banker pay in many cases has “gotten out of whack” and is a “distraction to us all.”

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A Facebook poll of users revealed some interesting differences about India’s global role as seen from inside and outside the nation.

Presented as part of a panel discussion about India at the annual meeting of the World Economic Forum here in Davos, a majority of global Facebook users, responding to the question of what the world should expect from India, said they want India to be a leader on climate change issues.

When Facebook users within India were asked what India should expect from the world, the largest portion – 42% – said a seat on the United Nations Security Council. The next biggest chunk – 28% – want the world to look after India’s security interests.

Anand Sharma, India’s minister of commerce and industry, protested that the global economic architecture and the U.N. stemmed from post-World War II realities and don’t reflect today’s world, including the role of India, the world’s largest democracy.

Robert Hormats, U.S. undersecretary of state for economic, energy and agricultural affairs, agreed that if the U.N. was created today the Security Council would look a lot different.

Hormats noted the rise of the G20 group of nations as a key policy group – supplanting the G7 – and India’s key role in the G20.

Neal Lipschutz is attending the World Economic Forum in Davos, Switzerland.

A statue in the City of London depicting the authors of the 2002 Sarbanes-Oxley U.S. regulatory legislation?

Such a monument is worthy of consideration, joked Lord Levene, chairman of Lloyd’s, at a World Economic Forum panel discussion here.

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Neal Lipschutz is attending the World Economic Forum in Davos, Switzerland.

A sovereign debt crisis looms as the most likely threat to the global economy, or at least the most popular threat.

Attendees at a World Economic Forum panel discussion here were asked to vote via handheld electronic gadgets on the biggest threat after listening to about 90 minutes of debate.

A sovereign debt crisis brought on by excessive government borrowing took about 51 per cent of the votes. The other two choices given the audience, the threat of protectionism or the threat of too much regulation, won 37 per cent and 12 per cent, respectively.

Neal Lipschutz is at the World Economic Forum in Davos, Switzerland.

When asked about the value of the Chinese yuan at a World Economic Forum panel here, Zhu Min, China’s deputy governor of the People’s Bank of China, emphasized the importance of the currency’s stability, especially as many other currencies have been volatile.

Fellow panelist U.S. Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, then cut in. The yuan can be stable, just a bit higher in value, Frank said.

Neal Lipschutz is attending the World Economic Forum in Davos, Switzerland.

In a debate at the World Economic Forum about the threat of global protectionism, Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, managed to take on Thomas Jefferson.

He said the Jeffersonian notion that farming was a superior form of life has led to subsidies and protectionism in the U.S.

Similar problems exist in the European Union. Saying EU agricultural policy is “ridiculous,” Frank claimed European farmers should be bought out.

The idea that the “noble yeoman” must be protected at all costs leads to protectionism, Frank said.

Neal Lipschutz is attending the World Economic Forum in Davos, Switzerland.

World Economic Forum officials are pleased with the increased participation this year of representatives of emerging economies in the group’s annual meeting getting under way in Davos, Switzerland.

Such emerging country attendance is said to be up significantly from a year ago.

It’s perhaps just one more sign of the shift in economic power and investment interest away from the U.S. and other large Western nations.

That notion of different short-term economic futures for the developed and developing (the very names of the categories are being called into question) markets was reinforced by bond manager Bill Gross of investment firm PIMCO.

In his monthly commentary, published today, Gross advised a globally minded investor to look for a “savings-oriented economy which should evolve into a consumer-focused economy.” China, India, Brazil “and more miniature-sized examples of each would be excellent examples,” he wrote.

As G7 nations and “their lookalikes” delever, they have given up the driver’s seat of the global economy, Gross said.

He saved perhaps his harshest language for the United Kingdom. He called the nation’s bonds “a must to avoid,” citing factors that have placed gilts “resting on a bed of nitroglycerine.”