These 36 Virginia Corps had a Total Pretax Loss of $0.9 bil in 2009. This Total Loss nearly miraculously turned around to a Total Pretax Profit of $15.8 bil in 2010, and improved markedly from there, with a Total Pretax Profit of $27.9 bil in 2011, for a total Pretax Profit increase of $28.8 bil in just the most recent two years. Whoa!
In deriving Pretax Income, I start with Pretax Income under Generally Accepted Accounting Principles (GAAP), and then exclude several clearly unusual very large items relative to Pretax Income, such as Asset Impairments, and Gains and Losses on both Debt Retirements and Asset Dispositions.
The main driver of this monstrous profit improvement was Freddie Mac, whose 2008 massive Pretax Loss of $44.6 bil, was reduced about in half to a Pretax Loss of $22.4 bil in 2009. And from there, Freddie Mac’s Pretax Loss was reduced further to $14.9 bil in 2010, and still further to $5.7 bil in 2011. Thus, Freddie Mac’s Pretax Losses have been reduced by $38.9 bil in the past three years, and by $16.7 bil in the most recent two years.
Still the US taxpayers have been taken to the financial cleaners with the cumulative massive losses of both Fannie Mae and Freddie Mac, which included gargantuan Derivative Losses totaling more than $120 bil, and occurring in every year from 2004 to 2011 for both of these companies. And a lot more needs to be done to put Fannie Mae and Freddie Mac on positive financial footings.
But given how the Obama Administration and the Fed have very effectively nearly cleaned up all of the financial mess caused by the disastrous financial meltdown in 2008, except for that at independent Fannie Mae and Freddie Mac, I think that if the Obama Administration and the Fed would have been given more power over both Freddie Mac and Fannie Mae, they would have both been almost totally cleaned up by now too, and the housing market would be dramatically better now, and thus the US economy and US job creation would also be much better now, and the US Deficit would be much lower now.
But the Republicans in the US Congress have refused to give the Obama Administration and the Fed the power to totally clean up Freddie Mac and Fannie Mae, which is a main reason that the US housing mess still lingers.
The independent Federal Housing Finance Agency (FHFA) oversees both Freddie Mac and Fannie Mae. It is headed by Ed DeMarco, who was appointed by former President Bush.
President Obama tried to appoint someone to replace DeMarco in November 2010, with someone who is more open minded, and shares both the Obama Administration and the Feds’ views on properly and more expeditiously solving the US housing crisis, but the Republicans in the US Senate incredibly blocked this appointment.
There are 9 US Federal Government Contractors included in these 36 Virginia Corps. Their Total Pretax Income in 2011 was $9.9 bil, up only 3% over 2010, and up 24% over 2009. I think this modest earnings growth shows that the Obama Administration has been keen in reducing the US Deficit by removing excess profits made by these many US Federal Government Contractors.
The remaining 26 Virgina Corps in all the Other Sectors generated Pretax Income of $23.6 bil in 2011, up 12% from 2010, and up a very impressive 75% over 2009.
The main driver of this very impressive earnings growth of the past two years of Virginia Corps in these Other Sectors was the very well run Capital One Financial. Norfolk Southern, Smithfield Foods, and Genworth Financial also all made very substantial profit improvements in the most recent two years.
Virginia citizens should be extremely proud of the operating performance in the most recent two years of their superb Virginia Corporations.
Clearly, the Obama Administration has created an economic environment that has permitted these Virginia Corporations to flat-out flourish.
And the very effective, visionary former Virginia Governor Tim Kaine also was a major contributor to the past success of Virginia companies of all sizes.
With this massive $29 bil Pretax Earnings increase in the most recent two years, there is no way that this very robust earnings growth in 2011 will continue in 2012.
And this earnings growth has markedly decelerated in the 1Q of 2012.
- Extend the 100% first-year tax expensing of equipment and computer software investments made in the remainder of 2012. The CBO-scored cost should not be very significant.
- Substantially accelerate first-year tax depreciation on all new building and building remodeling investments made in the remainder of 2012, and rein in its CBO-scored cost, by lowering tax depreciation in years 2 through 10.
- Pass the Research and Experimentation Tax Credit for businesses for all 2012 expenditures, but substantially enhance it, especially for smaller businesses, and simplify it.
- Give small businesses, creating US jobs in 2012, a 10% tax credit.
- Give businesses a 20% income tax credit for the expenses of moving operations from overseas back to the US. And pay for this by removing income tax deductions businesses now get for moving their production from the US to overseas. This one's pretty cool, where the pay-for is also positive to the US job count.
- Permit US taxpayers, who have their mortgage loans financed by Fannie Mae or Freddie Mac to have their mortgages refinanced at the current lower prevailing market interest rates.
- Pass the substantial amount of school construction infrastructure fix ups for K-12 Schools and for Community Colleges, which is in the American Jobs Act (AJA). And all of these school investments should occur in 2012, and mostly from now through the end of the summer of 2012.
The above first two will result in explosive US economic stimulation, particularly when viewed in light of future business income tax reform, which should result in a much lower business income tax rate in 2013 and going forward.
Thus, businesses will get both the 100% first-year tax depreciation on equipment purchases and the substantially accelerated first-year tax deprecation on building investments in 2012 at a business income tax rate reduction which is much higher in 2012, and then the future earnings from these equipment and building investments will generate post 2012 earnings streams from these investments which are taxed at a much lower post tax reform business income tax rate. Wow, now that is bold economic stimulation.
This above bold economic stimulation effectively works like a back-door, stealth investment tax credit in 2012, due to the expected future reduction in business income tax rates starting in 2013 under any reasonable business tax reform.
The investment tax credit was used first by President Jack Kennedy in the early 1960s to get the US out of a deep recession. And President Lyndon Johnson also used it after he took over. The end result was US real GDP growth which averaged 4.85% from 1960 to 1968. And the US unemployment rate dropped substantially while this investment tax credit was in effect during the 1960s.
This kind of very robust US real GDP growth, markedly north of 4%, and for an extended period of time, is precisely what the US economy now needs. And this very strong GDP growth is by far the best way to substantially reduce the massive US Deficit.
But these explosive economic benefits to US businesses from this accelerated first-year tax depreciation does not necessarily mean that there will be resultant substantial US job creation from it.
Thus, I would make sure that the largest of the US Corps…..say the top 50 or so…..would get these first-year accelerated tax depreciation benefits in 2012 only if they add a sufficient number of US full-time workers in 2012.
And similar economic benefits will result from the Research and Experimentation Expenditures. Not only will businesses get higher Research Tax Credits in 2012 for making investments in 2012, but they will also get 2012 tax deductions from these Research investments made in 2012 at the higher business income tax rate in 2012, and then subsequently get the future earnings stream from these Research investments taxed at the lower post tax reform business income tax rate that will be applicable starting in 2013 and going forward.
And the best way to put Virginia-headquartered Freddie Mac on a solid financial footing is for Republicans in the US Congress to permit President Obama to appoint a new FHFA head.
Below here is the Virginia headquarters location and the Sector of each of these 36 Virginia Corporations.
| Virginia Corporation | Virginia HQs | Sector |
| Freddie Mac | McLean | Government Sponsored Enterprises |
| General Dynamics | Falls Church | US Defense Contractor: Shipbuilding |
| Northrop Grumman | Falls Church | US Defense Contractor |
| Computer Sciences Corp | Falls Church | Technology: US Contractor |
| SAIC | McLean | Technology: US Contractor |
| Exelis | McLean | Communication Equipment: US Defense |
| Huntington Ingalls | Newport News | US Defense Contractor: Shipbuilding |
| CACI Intl | Arlington | Technology: US Contractor |
| ManTech Intl | Fairfax | Management Services: US Contractor |
| Booz Allen Hamilton | McLean | Management and Technology Consulting: US Contractor |
| Altria Group | Richmond | Cigarettes |
| Capital One Financial | McLean | Financial: Banking and Credit Cards |
| Norfolk Southern | Norfolk | Railroads |
| AES | Arlington | Cogeneration Power Producer |
| Dollar Tree | Chesapeake | Retail: Variety |
| Gannett | McLean | Newspaper Publishing |
| Smithfield Foods | Smithfield | Foods |
| Advance Auto Parts | Roanoke | Retail: Auto Parts |
| CarMax | Richmond | Retail: Auto Dealers |
| NII Holdings | Reston | Communication Services |
| MeadWestvaco | Richmond | Paper Mills |
| Genworth Financial | Richmond | Life Insurance |
| Amerigroup | Virginia Beach | Health Insurance |
| Alpha Natural Resources | Bristol | Coal Mining |
| Newmarket Corp | Richmond | Chemicals |
| Universal Corp | Richmond | Wholesale: Farm Products |
| NVR | Reston | Homebuilding |
| Neustar | Sterling | Communication Services |
| Verisign | Reston | Technology |
| Markel | Glen Allen | Property and Casualty Insurance |
| Owens & Minor | Mechanicsville | Wholesale: Health Care Equipment and Supplies |
| Strayer Education | Herndon | Education Services |
| Portfolio Recovery | Norfolk | Accounts Receivable Collection |
| AvalonBay Communities | Arlington | REIT |
| Brinks | Richmond | Transportation of Valuables |
| Maximus | Reston | Business Services |
| Obama | |||||
| Bump | |||||
| PTI(L) | PTI(L) | ||||
| 1 Year | 2 Year | ||||
| PTI(L) | PTI(L) | PTI(L) | % | % | |
| 2011 | 2010 | 2009 | Change | Change | |
| mils $s | mils $s | mils $s | |||
| Virginia | |||||
| Freddie Mac | (5,666) | (14,882) | (22,384) | 62% | 75% |
| US Government Contractors | |||||
| General Dynamics | 3,718 | 3,790 | 3,513 | -2% | 6% |
| Northrop Grumman | 3,083 | 2,595 | 2,070 | 19% | 49% |
| Computer Sciences Corp | 968 | 1,022 | 950 | -5% | 2% |
| SAIC | 747 | 872 | 768 | -14% | -3% |
| Exelis | 537 | 696 | 700 | -23% | -23% |
| Huntington Ingalls | 296 | 206 | 176 | 44% | 68% |
| CACI Intl | 228 | 168 | 153 | 36% | 49% |
| ManTech Intl | 216 | 202 | 179 | 7% | 21% |
| Booz Allen Hamilton | 128 | 49 | (515) | 161% | 125% |
| Total all 9 US Government Contractors | 9,921 | 9,600 | 7,994 | 3% | 24% |
| The Rest | |||||
| Altria Group | 6,072 | 5,723 | 4,877 | 6% | 25% |
| Capital One Financial | 4,587 | 4,330 | 1,336 | 6% | 243% |
| Norfolk Southern | 2,918 | 2,367 | 1,622 | 23% | 80% |
| AES | 2,461 | 2,394 | 1,921 | 3% | 28% |
| Dollar Tree | 780 | 630 | 508 | 24% | 54% |
| CarMax | 667 | 608 | 446 | 10% | 50% |
| Gannett | 653 | 846 | 570 | -23% | 15% |
| Smithfield Foods | 636 | (215) | (382) | 396% | 266% |
| Advance Auto Parts | 633 | 557 | 432 | 14% | 47% |
| NII Holdings | 542 | 598 | 586 | -9% | -8% |
| MeadWestvaco | 422 | 320 | 17 | 32% | 2382% |
| Alpha Natural Resources | 325 | 127 | 93 | 156% | 249% |
| Genworth Financial | 314 | 76 | (792) | 313% | 140% |
| Amerigroup | 310 | 437 | 201 | -29% | 54% |
| Newmarket Corp | 265 | 260 | 239 | 2% | 11% |
| Universal Corp | 243 | 257 | 197 | -5% | 23% |
| NVR | 208 | 322 | 298 | -35% | -30% |
| Neustar | 205 | 206 | 192 | 0% | 7% |
| Verisign | 194 | 95 | 125 | 104% | 55% |
| Markel | 190 | 296 | 199 | -36% | -5% |
| Owens & Minor | 190 | 182 | 188 | 4% | 1% |
| Strayer Education | 176 | 217 | 174 | -19% | 1% |
| Portfolio Recovery | 167 | 121 | 73 | 38% | 129% |
| AvalonBay Communities | 166 | 104 | 125 | 60% | 33% |
| Brinks | 156 | 140 | 166 | 11% | -6% |
| Maximus | 126 | 108 | 89 | 17% | 42% |
| Total all 26 Rest | 23,606 | 21,106 | 13,500 | 12% | 75% |
| Grand Total all 36 | 27,861 | 15,824 | (890) | 76% | 3230% |
