May 12, 2012

The European Revolt Against Reality

The problem with a massive welfare state is not just that the finances don't work, but that it inculcates into a society a culture of entitlement. It infantilizes people into a state of dependency whereby they are not simply unwilling but unable to care for themselves. When the inevitable fiscal crisis hits they are unwilling and unable to give up even the smallest government benefit. No matter what the economics, they demand that the benefit gravy train continue. Even mention that government might have to cut back on anything and they react with anger and outrage, sometimes spilling over into violence.

Such is the situation in parts of Europe, in particular France and Greece. The fiscal crisis is upon them, and rather than face up to it and take their medicine they refuse to believe that anything must change.

If we allow our current situation to continue we will go the way of France and Greece. It is not too late, I think, to recover some sense of fiscal sanity, but every day we allow liberal Democrats or Republicans to hold office brings us one yard closer to the edge of the cliff.

The European Revolt Against Reality
What will it be: "Mitterrand for All" or "Schröder Does Europe"?
Wall Street Journal
May 9, 2012, 4:05 p.m. ET
By Josef Joffe

Forget for a moment François Hollande, who sent Nicolas Sarkozy packing on Sunday. Set aside, too, the triumph of the radical left and the neo-Nazis in Greece who together captured one-third of the vote.

Look instead at Europe's real mess: the sickly state of the EU-15, the core of the Union, most of which today uses the euro: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Luxembourg, Portugal, Spain, Sweden and the United Kingdom.

In the 1970s, their average growth clocked in at 3.2%, in the 80s at 2.5%, in the '90s at 2.2%--and in the '00s, 1.2%. Yes, the 2008 crash was bad for everybody, but Europe is still heading down. This year, growth is likely to end up at an anemic 1%.

Europe has been falling back for decades, and this is the source of all its trouble. Yesterday's economic wonderland, with its ever growing list of benefits and privileges, is losing it. While the U.S. share of global GDP has held steady at around 26% for two generations, the EU-15's share has dropped to 26% from almost 35% in 1970.

Back to Dark Sunday's elections. You might have thought that the French and Greek parties would have hyped themselves as saviors: Anoint us, and we shall lead ye from debt and decline. Wrong. The winners were those who yelled: "Stop the world, we want to get off!" Cursed be the market, blessed be the all-providing state.

Markets ended Mitterrands agenda within two years. The new Socialist President won't have that long.

This is the message of those 52% who voted for Mr. Hollande in France. In the campaign, he had targeted "financial markets" as the enemy of the French social model, while offering to tax, protect and provide. No talk of the real reason those evil markets and their ratings agencies downgraded France: The national debt has surged to 90% of GDP, from 35% in 1990.

In Greece, the big winner was the Coalition of the Radical Left, or Syriza, which won nearly 17% of votes--almost four times its take in the 2009 elections. Together, the far left and far right have overwhelmed a government that had pledged to slash spending and cut into the bloated state sector. The pro-reform coalition of the moderate right and left has lost its parliamentary majority and may have to go into new elections in a few weeks. Hence, the "Nightmare of Anarchy," as Greek daily Ta Nea headlined its post-mortem on Tuesday.

Meanwhile, unemployment now averages close to 11% in the euro zone. The odd-man-out in this drama of decay is Germany. Joblessness, which stood at five million only a few years ago, has dropped to less than three million. The public budget deficit is heading toward zero. Why this Teutonic miracle? Germany had cleaned house before the crash struck.

Go back nine years, when Social Democratic Chancellor Gerhard Schröder launched his "Agenda 2010." He declared to the Bundestag: "We shall reduce social benefits, promote individual responsibility and demand more from each and all." True to his word, he loosened up labor markets, cut payroll, personal and corporate taxes, and enacted a "workfare" program that egged the unemployed off the dole. Angela Merkel is now reaping what her predecessor sowed--efforts for which he lost his job.

Today, elsewhere in Europe, leaders' attempts to change their economies' bad old ways have not met with political boons. Since 2008, a dozen euro-zone governments have fallen like the House of Lehman. Yet what is the alternative but to pursue the reforms? Where would the cash come from, when Germany is the last man standing among the large countries? Perhaps Europe is still rich enough to keep Greece on the dole indefinitely. But it does not have the resources to put France, Italy or Spain on euro-welfare.

Which brings us back to the new French president, who in 1981 was a young Elysée staffer when François Mitterrand enacted the very program Mr. Hollande has been hawking: buy now, pay later, tax forever. Two years later Mitterrand's Socialist Party was drubbed in local elections, Saul turned into Paul and Mitterrand started preaching discipline and markets. This time, the Socialist president won't even get his first 100 days.
For one thing, Mrs. Merkel will not relent. She will not allow Mr. Hollande to loosen the debt brakes enshrined in the EU's fiscal pact by inserting the kind of "growth" Mr. Hollande wants--a euphemism for spending Europe into insolvency. She knows that the euro, indeed the EU, is at stake--and that neither will be saved by Keynes-to-the-max.

"Growth" à la Mr. Hollande will not heal but feed Europe's disease. The country needs labor liberalizations, with youth unemployment topping 22%. The French job market tells a simple, sordid tale: high wages and lifetime job security are great for insiders and deadly for newcomers.

If core Europe does not regain competitiveness now, it will sink and fall apart. So what will it be: "Mitterrand for All" or "Schröder Does Europe"?

Watch the new French president in the coming weeks. My bet is that he will take a page out of "Casablanca" and sputter: "I am shocked, shocked to find out about the mess Mr. Sarkozy has left." Then he will blame Mrs. Merkel's brutishness for forcing him to deliver a "blood, toil, tears and sweat" speech in which he breaks all his campaign promises.

And if he doesn't yield to reality? The markets will speak.

Mr. Joffe is editor of Die Zeit in Hamburg, a senior fellow of the Freeman-Spogli Institute for International Studies and a fellow at the Hoover Institution, both at Stanford University in California.


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April 27, 2012

Why You Can't Tax Your Way Out of a Deficit

In a word: Illinois. George F Will explains:

Illinois is running out of time and money
by George F Will
April 25, 2012

After trying to tax Illinois to governmental solvency and economic dynamism, Pat Quinn, a Democrat who has been governor since 2009, now says "our rendezvous with reality has arrived." Actually, Illinois is still reality-averse, so Americans may soon learn the importance of the freedom to fail in a system of competitive federalism.

Illinois was more heavily taxed than the five contiguous states (Indiana, Kentucky, Missouri, Iowa, Wisconsin) even before January 2011, when Quinn got a lame-duck legislature (its successor has fewer Democrats) to raise corporate taxes 30 percent (from 7.3 percent to 9.5 percent), giving Illinois one of the highest state corporate taxes and the fourth-highest combination of national and local corporate taxation in the industrialized world. Since 2009, Quinn has spent more than $500 million in corporate welfare to bribe companies not to flee the tax environment he has created.

Quinn raised personal income taxes 67 percent (from 3 percent to 5 percent), adding about $1,040 to the tax burden of a family of four earning $60,000. Illinois' unemployment rate increased faster than any other state's in 2011. Its pension system is the nation's most underfunded, and the state has floated bond issues to finance pension contributions -- borrowing money that someday must be repaid, to replace what should have been pension money that it spent on immediate gratifications.

Quinn's recent flirtation with realism -- a plan to raise the retirement age to 67 and cap pension cost-of-living adjustments -- is less significant than the continuing unrealistic expectation that some of Illinois' pension investments will grow 8.5 percent annually. Although the state Constitution mandates balancing the budget, this is almost meaningless while the state sells bonds to pay for operating expenses (in just 10 years the state's bonded debt has increased from $9.4 billion to $30 billion), underfunds pensions and other liabilities, and makes vendors wait (they are owed $5.6 billion).

The Illinois Policy Institute, a limited-government think tank, in a report cheekily titled "Another $54 Billion!?" argues that in addition to the $83 billion in pension underfunding the state acknowledges, there is $54 billion in unfunded retiree health liabilities over the next 30 years. Illinois, a stronghold of public-employees unions, "is on pace to spend nearly $1 billion on retiree health care benefits in fiscal year 2013, more than double what it spent in 2003. Worse yet, these liabilities are growing more than twice as fast as tax revenues."

To prepare for Illinois' probable plunge into insolvency, read "Freedom to Fail: The Keystone of American Federalism" by Paul E. Peterson and Daniel Nadler in the University of Chicago Law Review. They note that only 25 of the world's 193 nations have federal systems, and in most of the 25 the freedom of the lower tiers of government is more circumscribed by the central government than American state governments are by the federal government. American states' greater freedom -- autonomy under America's system of dual sovereignty -- from the central government's supervision requires that they be disciplined instead by the market for government bonds, and by the real possibility of default.

Peterson, a professor of government at Harvard, and Nadler, a doctoral candidate also at Harvard, say that collective bargaining rights for government employees pose "a dramatically new challenge to the viability" of American federalism. They cite studies demonstrating that investors' perceptions of risk of default are correlated with the rate of unionization among government employees. Higher percentages of government employees who are unionized, and larger Democratic shares of state legislative seats, correlate with increases in state borrowing costs.

At least 12 percent of Americans change their residences each year, often moving to more hospitable economic environments. In a system of competitive federalism, Peterson and Nadler write, "If states and localities attempt in a serious way to tax the rich and give to the poor, the rich will depart while the poor will be attracted." And government revenues and expenditures vary inversely.

From September through December 2008, the premium that investors demanded before they would buy California debt rather than U.S. Treasurys jumped from 24 to 271 basis points (100 points equals 1 percent). The bond market, the only remaining reality check for state politicians, must be allowed to work.

Constitutional jurisprudence affirms that states exercising substantial autonomous powers thereby assume concomitant risks. Federal loans or other bailouts of misgoverned states would remove bond market discipline, the only inhibition on the alliance between the Democratic portion of the political class and unionized public employees.

georgewill@washpost.com

You can't tax your way out of a deficit. What is true at the state and local level is true at that national level. The only difference is that the Feds can hide the problem through deficit spending, an option not available to localities (bonds being different than deficit spending).

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April 13, 2012

Around the News

I've got too little time and there's too much going on for a separate post on everything that's going on, so here are a few things that caught my eye and my thoughts on each.

Buffett Rule Baloney

The Buffett Rule: Free-Lunch Egalitarianism
Obama's disguised tax hike on capital gains
National Review
April 12, 2012 8:00 P.M.
By Charles Krauthammer

...Let's do the math. The Joint Committee on Taxation estimates this new tax would yield between $4 billion and $5 billion a year. If we collect the Buffett tax for the next 250 years -- a span longer than the life of this republic -- it would not cover the Obama deficit for 2011 alone.

As an approach to our mountain of debt, the Buffett Rule is a farce. And yet Obama repeated the ridiculous claim again this week. "It will help us close our deficit." Does he really think we're that stupid?

Yes and no.

Yes in that those who want to believe it will. No in that the purpose of the tax is not about raising revenue. One, he is sending a not-so-subtle message to the wealthy: Support me or I will punish you. Two, it satisfies his base who simply want to see the wealthy punished.

The editors of the Wall Street Journal call it right:

The Obama Rule
He says taxation is about fairness, not growth or revenue
The Wall Street Journal
April 11, 2012, 7:04 p.m. ET

Forget Warren Buffett, or whatever other political prop the White House wants to use for its tax agenda. This week the Administration officially endorsed what in essence is the Obama Rule: Taxes must be high simply to spread the wealth, never mind the impact on the economy or government revenue. It's all about "fairness," baby.
...
The Buffett rule is really nothing more than a sneaky way for Mr. Obama to justify doubling the capital gains and dividend tax rate to 30% from 15% today. That's the real spread-the-wealth target. The problem is that this is a tax on capital that is needed for firms to grow and hire more workers. Mr. Obama says he wants an investment-led recovery, not one led by consumption, but how will investment be spurred by doubling the tax on it?

The only investment and hiring the Buffett rule is likely to spur will be outside the United States--in China, Germany, India, and other competitors with much more investment-friendly tax regimes.

Exploiting Trayvon Martin

I made most of my thoughts on the Trayvon Martin - George Zimmerman affair clear in a long comment on this post, but a few more comments are in order:

The New Black Panthers' Unpunished Threats
The Department of Justice appears uninterested in pursuing the group.
National Review
April 13, 2012 4:00 A.M.
By John Fund

...Wednesday, (Attorney General Eric Holder) appeared before the Reverend Al Sharpton's National Action Network to praise Sharpton "for your partnership, your friendship, and your tireless efforts to speak out for the voiceless, to stand up for the powerless, and to shine a light on the problems we must solve, and the promises we must fulfill."

This is the same Al Sharpton who has led several rallies against Zimmerman, in which he called for civil disobedience and an "occupation" of Sanford, Fla., where the shootingThis is the same Al Sharpton who has never apologized to Steven Pagones, the assistant district attorney he falsely accused of raping Tawana Brawley, a black teenager. The "dastardly deed" Sharpton accused Pagones of was found to be a complete fabrication. In 1998, Sharpton was found liable for seven defamatory statements he'd made against Pagones and ordered to pay $65,000.

Earlier in the 1990s, Sharpton had become famous exacerbating racial tensions in New York's Crown Heights neighborhood, tensions that led to the killing of Anthony Graziosi. In 1995, Sharpton denounced the owners of Freddy's Fashion Mart in Harlem as "bloodsuckers" and "white interlopers" over a rent dispute the business had with tenants. A short time later, a man entered Freddy's and told all the black people present, patrons and employees alike, to leave. Once they did, the man firebombed the building, killing seven people -- including a black security guard. Sharpton insisted he bore no responsibility for the incident, saying it was only a tenant/landlord dispute that had escalated out of control. occurred, if an arrest wasn't made.

So AG Eric Holder congratulates Al Sharpton. That Obama would appoint someone who praises Sharpton speaks volumes about our president. But given that he went to a racist church for 20 years, listened to a kook hatemonger preacher and wrote nice things about him in his autobiography, we should not be surprised.

More, if Mr. Holder is so concerned with civil rights, why doesn't he investigate the New Black Panther party? When confronted with this, liberals typically respond that the NBP is small and insignificant. Maybe and maybe not, but what difference does that make? I didn't know that the criminality of death threats depended on the number of people making them.

Conservative opinion on the charges filed against Zimmerman is split. David French says that there's enough evidence to warrant Zimmerman's arrest, but John Lott sees Prosecutorial misconduct. Some conservatives have come out strong for Zimmerman, which is a mistake. Most professional conservative writers and pundits, though seem to be taking a "wait and see" attitude towards guilt or innocence while condemning the circus the left has created.

I've never taken sides in that I don't pretend to know whether Mr. Zimmerman is guilty of anything or not. My problem has been with the disgraceful behavior of Al Sharpton, Eric Holder, Barack Obama, the liberal media, and liberal activists in general. These people, and yes I include our president and his attorney general, have done little but fan the flames of racial division since this thing began.

Does Hillary Hate Israel?

The Secretary of State Hillary, that is.

The Other Hillary Still Just As Appalling
NRO The Corner
By Andrew C. McCarthy
April 12, 2012 3:55 P.M.

As a fitting follow-up to Nina's post on the U.S. government's shocking indifference to the persecution of Christians by Muslims, let's shift to something the Obama administration cares passionately about: the good will of Muslims who wear on their sleeves their hatred for Israel.

In a story that's gotten very little attention, involving a town hall meeting in Tunisia last weekend, Secretary of State Hillary Rodham Clinton was asked how the U.S. could expect people in Muslim countries like Tunisia and Egypt to trust American politicians given that, during the U.S. election season, those politicians cozy up to their "enemy" (in context, an obvious reference to Israel) and "run towards the Zionist lobbies").

Mrs. Clinton responded that she thought this was "a fair question." Really? And the answer to this fair question? Madame Secretary explained that these Muslims who regard Israel as their enemy should understand that "a lot of things are said in political campaigns that should not bear a lot of attention." She also thought they'd find it comforting that President Obama "will be reelected president" and that if people in Tunisia and Egypt just "watch what President Obama says and does" they'll realize they don't need to worry.

Appalling but, by now, not surprising. See CNS News, here, for video & transcript.

Either the secretary hates Israel, she's saying that Obama does but will lie about his true fealings for political expediency, or she's just and idiot.

If At First You Don't Succeed, Try, Try, Again

North Korea admits missile failure
Financial Times
By Christian Oliver in Seoul, Geoff Dyer in Washington and Mure Dickie in Tokyo
Last updated: April 13, 2012 11:27 pm

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights.

North Korea made rare admission of failure on Friday, confirming one of its rockets had failed in its mission to put a satellite into orbit, but the abortive launch was enough to prompt the US to quickly cancel a food-aid programme.

The launch, which many outsiders saw as a cover for a ballistic missile test, went badly for the hermit state, with the missile breaking up after only 90 seconds, although that was long enough to cause fatal damage to an agreement with the US made in February.

The failure will pile pressure on Kim Jong-eun, the new leader of North Korea, whom analysts believe may seek to restore his credentials by conducting a nuclear test.

In recent days, South Korean media have reported that North Korea was already planning another nuclear test. It followed a long-range missile launch in 2009 with an atomic test.

South Korea and the US said the Eunha-3 (Galaxy) rocket blasted off at 7.39am local time, but broke apart after about 90 seconds, sending the shattered fuselage into the Yellow Sea.

In an unusual move for a country that almost never admits internal problems, a newscaster on state television said the rocket had not put a satellite into space.

Do I have to say it? They're just going to keep trying and sooner or later they'll get it right. If this regime survives sooner or later not only will they figure out how to make their missiles work, they'll figure out how to make nuclear warheads for them.

That's the easy part. The hard part is that the DPRK is an impossibly hard not to crack and there really are no good options for us. Certainly engaging in endless talks whereby they promise us this and that and they reneg on every agreement is foolish, but there's not much more we can do to pressure them by way of sanctions. They're already quite isolated, and it affects their behavior not a bit.

What the missile launch does tell us though is that our policy of "engagement" has not tempered them at all. They're just as militant, and whatever our policy is, theirs is to intimidate us.

Another policy (or part of the same one) is that their new leader feels he has to show his generals how "tough" he is. This may mean that he's just as bad as his father... or he has to stage a few displays of strength so he will have credibility to negotiate with a softer line... who knows. They don't call it the "hermit kingdom" for nothing.

It is interesting, though, that they admitted to the failure. This might signal a change, perhaps even a Gorbachev-style glasnost, or it might mean nothing. If the former, then one wonders if Kim Jong-eun understands the forces he is unleashing. Gorbachev didn't but at least when the Soviet Empire collapsed it came in for a soft landing. We should hope the same happens to North Korea.

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March 22, 2012

Paul Ryan's Leads the Charge on the Right for a Sane Fiscal Policy

Whatever else you want to think about Rep Paul Ryan (R-WI-1),when it comes to the budget the man is one of the lights of the Republican party. While many simply repeat stock slogans and the same old mantras and talking points, Ryan delves into the numbers and comes up with an actual plan. He's the Jack Kemp of our day, and someone to take seriously.

To be sure, Ryan's plan is not all that I would want it to be. It does not cut spending nearly enough, and so does not balance the budget for a few decades. It does not touch Social Security and Medicare reforms are put off for ten years.

All of this makes liberal protestations both funny and sad. While the Ryan plan seems a good place to start, the tragedy is that if implemented is not that it would starve the poor and elderly, but that even it may not be enough to prevent a debt crisis.

I'd love to take a few hours, analyze his plan completely... but have no time. So once again I'll have to let someone else to my talking for me.

Paul Ryan Leads
National Review
The Editors
March 21, 2012

Representative Paul Ryan, chairman of the House Budget Committee, has produced another bold budget. He knows that President Obama and the Democrats will not allow his budget plan to become law this year, but he wants to recommit the Republican party to spending restraint, tax reform, and a strong defense.

Naturally, the Obama White House is already shrieking. Ryan's budget, it says, "fails the test of fairness, balance, and shared responsibility." The test of balance? Ryan's plan moves the federal budget into sustainable balance, even on the unfavorable assumptions of the Congressional Budget Office. President Obama has never produced a plan to balance the budget on any time frame. His treasury secretary, Timothy Geithner, admitted as much in recent testimony before the House. Nor have Senate Democrats, who have not produced any budget at all for three years. We doubt that most Americans will find that consistently large deficits and ever-rising debt levels meet their definition of fairness, balance, and responsibility. Nor will they favor what we suspect is the president's real, though secret, plan: to allow taxes to rise on everyone, in effect cycling the middle class's money back to it through Washington for the benefit of the Democratic party.

The Ryan budget would spend $5 trillion less than President Obama plans to spend over the next decade. It repeals Obamacare. It limits Medicaid spending by offering states a capped amount of funds, ending the current practice of bribing them to expand coverage. It commits to a tax code that raises the same revenue, as a proportion of the economy, as we have historically raised, but does so with lower tax rates, less hostile treatment of capital, and fewer loopholes.

The main change Ryan has made between last year's Republican budget and this one concerns Medicare. Last year, he proposed that in the future, the government should defray the cost of whatever coverage plans senior citizens choose, with the amount of the subsidy varying by their age and health risks, and with total spending rising at the rate of inflation. If they choose more expensive plans, they will have to pay more. This year, the budget proposes that instead of rising at a predetermined rate, the size of the subsidy should depend on the results of a bidding process in which insurers in each of Medicare's administrative regions compete to cover the minimum benefits package at the lowest price. In addition, under Ryan's new proposal, one of the options seniors would be able to choose would be a traditional fee-for-service plan run by the government.

In principle, these changes could be advances for conservatism rather than concessions. If competition and price sensitivity drove costs down, a competitive-bidding model could reduce Medicare spending more than last year's proposal would have. (If the program failed miserably, spending would still be capped at the level the Obama administration has stipulated.) It would be important that the implementing legislation gave no artificial advantages to plans that operate on the fee-for-service model. But if that condition were met, the resulting reform would be a giant step toward free markets and national solvency.

Liberal attacks on the Medicare plan have not caught up with these changes. Last year, Democrats argued that since health-care costs rise faster than inflation, a subsidy that rises only with inflation will leave seniors paying an ever-higher share of those costs. They're making the same argument this year. But the new plan is immune to this critique: Seniors will always have an option to pay no more than they are paying now. Ryan can be said to be "ending Medicare as we know it" only in the sense of stopping it from being quite as centrally micromanaged, and unsustainable, as it is now.

As ambitious as Ryan's plan is -- it would accomplish more conservative reform than the last three Republican presidents combined -- it has unfortunate omissions. It says nothing about Social Security reform, and thus fails to restrain the growth in benefits for well-off seniors. Liberals would have given Ryan no credit for addressing Social Security, but it would have been the right policy. The plan is either too vague about tax reform or not vague enough: It makes no sense to commit to a tax code with a 10 percent and 25 percent rate but to remain silent on deductions and even on the level of income to which each rate would apply. The plan says nothing, for example, about the tax treatment of health-care coverage. But if Obamacare is to be repealed, that treatment should be changed to allow a market for insurance purchased by individuals to grow. In at least one area, meanwhile, the plan goes too far, imposing federal limits on malpractice suits, an area that states have traditionally and rightly governed.

Ryan and the Republicans have, nonetheless, put forward a plan to bring the federal debt under control and to avoid massive tax increases. Neither the president nor his Democratic allies have done these things. The contrast is very much to the former's credit and the latter's shame.


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February 19, 2012

More Reasons Why Obama Wants to Talk About Contraception

One reason why President Obama wants to talk about contraception is that he wants to show those Catholics and other Christians who's boss. Another is this:


Photobucket

Ouch

Chart via Powerline

Here's another:


Photobucket

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November 19, 2011

What 'Percent' Are You? The Numbers Behind the Tax Divide Debate

Statistics are funny things, and you can look at any one set of them a zillion different ways. As often as not the result you get depends on what conclusion you're looking for.

Both the right and the left have their own way of looking at how many Americans pay how much taxes, and I thought this article provided a pretty unbiased and fair analysis of the situation.

What 'Percent' Are You? The Numbers Behind the Tax Divide Debate
Daily Finance
by Bruce Watson
Posted 11:00AM 11/18/11

Political positions were, for a time, a matter of color: Republican were red, Democrats were blue, and nonpartisans and centrists -- when they could be found -- might claim purple. But since the Great Recession, percentages, not pigments, are becoming America's great dividers. With conservatives and liberals alike defining themselves and others as the 99%, the 1%, the 53%, the 47%, and various other percentages, it's time to ask just what these numbers mean -- and where the average American family fits in.

When it comes to dividing up our class structure, the middle is a good place to start -- namely, the 60% of households wedged between the poorest 20% and the richest 20%. These families make between $20,001 and $100,065 a year, and were the group hardest hit by the recession: In 2008, their average income fell by 3.6%, the biggest single-year drop in history. At the same time, they were also devastated by rising unemployment, mass foreclosures, soaring tuitions and frozen wages. By comparison, households below the 20% line often qualify for social welfare programs, were far less likely to own real estate, and were less affected by massive layoffs. In other words, they had less to lose, and ended up losing less.

On the other end of the spectrum, many of those above the 80% line were shielded from the harsher effects of economic downturns. And over the last 30 years, the top 20% have done quite well: Their share of all wages paid in the U.S. has gone from 50% to 60%. Everyone else has lost ground.

The 99% vs. the 1%

Members of the Occupy Wall Street movement and their allies don't think this is the best way of looking at America's households: The big dividing line in their view is the 99th percentile. In this country, they assert, there are the top 1% of households, and everyone else.

There's something to be said for Occupy Wall Street's math. As President Obama discovered when he suggested lowering the qualification line for the top tax rate to $250,000, where we place the dividing line between "the rich" and "everyone else" is highly controversial. But moving the wealth line from $100,065 to $1.1 million -- the boundary for the top 1% -- avoids the argument about who exactly is middle class fairly neatly. No matter where your political sympathies lie, it's hard to call millionaires middle class.

And the top 1% have done exceptionally well over the last 30 years: They receive 17% of all wages paid in the U.S -- more than twice the percentage they received 30 years ago. Meanwhile, the bottom 80% of households lost 9% of their income share in the same period, and now receive about 47% of all wages paid. Put simply, the richest 1% gained all the wages the rest of the country lost.

The 53% vs. the 47%

The dividing line between the 99% and the 1% is stark, but some argue there's a better one: The boundary between those who pay income taxes and those who don't. According to the nonpartisan Tax Policy Center, 53% of households pay federal income tax; the rest either break even or get back more in refunds than they pay.

In fact, the second-to-lowest 20% of the country -- households making between $20,001 and $38,043 -- get back about 0.4% more income tax than they pay; for families who make less than $20,000, it's about 6.8%.

Some conservatives -- notably on the Tumblr blog We are the 53% -- have taken these numbers to heart, arguing that this means the bottom 47% is getting a free ride. But the 53%/47% division is a bit misleading.

To begin with, almost all households pay state taxes, Medicare tax, Social Security tax, excise taxes, sales taxes, and a raft of other government fees. When this broader, and more accurate, assessment of taxation is used, the 47% doesn't look to be getting off so easy: The second poorest quintile -- the ones that got 0.4% of their income tax back -- still paid more 10% of their incomes in various federal taxes.

In fact, when everything is factored in, 86% of the country pays more than it gets back in federal taxes. As for the rest, it's not the split you might expect: More than half (8% of Americans) are senior citizens receiving Social Security.

And that last 6% -- the ones who really pay nothing to the federal government? They are unemployed, disabled, in school, or making very low incomes. But even this small group pays state and local taxes, sales taxes, and other government fees.

Where the Poor Pay More

When it comes to percentage of income, the line is even clearer: For some taxes, the bottom 20% of the Americans pay more than the top 20%. For example, a household on the bottom pays almost 54% more of its income into Social Security than a household on the top. The same goes for excise taxes -- fees attached to certain commodities like gasoline and alcohol: As a percentage of income, the poorest 20% pays more than four times as much as the richest 20%.

So where is the ultimate dividing line? The answer might have less to do with money than with the way we perceive it: In a recent poll, The Hill found that 66% of likely voters believe that the middle class is shrinking, and 55% believe that income inequality has become a big problem for the country. Surprisingly, worries about income inequality were higher among those who are doing better: 65% of respondents in the top 20% felt that income inequality was a big or somewhat big problem.

In other words, when it comes to the economy, worrying about the future may be the one thing that cuts across all class lines.

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.

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October 22, 2011

The Obama Economic and Fiscal Record

Today's Questions for the President
National Review

October 21, 2011 10:24 A.M.

By Peter Kirsanow

In a December, 2009 interview with Oprah Winfrey, you graded your own job performance as "a good, solid B+." You added that "if I get health care passed, we tip into A-." Obamacare has since passed.

* The '"misery index" today is at its highest level in 28 years.
* The unemployment rate has been above 9 percent for 27 of the last 29 months.
* Long-term unemployment is at its highest level in more than 70 years.
* The national debt is $14.8 trillion -- nearly $5 trillion more than four years ago.
* The federal deficit is $1.3 trillion -- more than eight times higher than four years ago.
* Federal spending is $3.57 trillion -- nearly $1 trillion more than four years ago.
* The United States' credit rating has been downgraded for the first time in history.
* You spent $814 billion on a stimulus program so unemployment wouldn't rise above 8 percent and would drop to 6.5 percent by today. Since then, unemployment has never dropped below 8 percent and is 9.1 percent today.
* A record 45 million Americans (nearly one in seven) use the food-stamp program -- 20 million more than four years ago.
* A record 3.8 million foreclosures were filed last year.
* Seventy-seven percent of Americans believe the country is on the wrong track.

In an interview with Jake Tapper a few days ago, you didn't give yourself a specific grade but stated that you "believe all the choices we've made have been the right ones." Is it correct to assume, then, that you were actually shooting for the above results?

What might the above figures be if you had made just one wrong choice? What would the above figures have to be in order for you to give yourself a "D" ?

How long was the wait list for your constitutional-law class?

Posted by Tom at 8:22 AM | Comments (1) | TrackBack

July 9, 2011

The June Jobs Report: Big "Surprise," Obamanomics Doesn't Work!

Right now on the U.S. Department of Labor website:

9.2% unemployment for June

How's that stimulus plan working for ya?

June Jobs Report: the Ugly, the Ugly and the Ugly
Yahoo News!
By Daniel Gross
Fri, Jul 8, 2011

Typically, the monthly jobs report contains some good news, some bad news and some ugly news. And optimism had been building over the June figure, in part because alternate methods of measurement had indicated higher jobs growth. TrimTabs earlier this week said its data indicated the economy added 171,000 new jobs in June, while ADP on Thursday suggested 157,000 private-sector jobs had been added in the month. Add in the slight decline in unemployment claims, falling gas taxes and good preliminary news on retail sales, and there was some hope that the soft patch of April and May was over. This morning's ugly, ugly, ugly jobs figure throws a large bucket of ice-cold water on that thesis.


The Ugly #1. The headline number showed that a mere 18,000 payroll jobs were added in June. As Barry Ritholtz of the Big Picture frequently points out, when you're working off a base of 130 million or so, a gain of 18,000 (or a loss of 18,000) is statistically meaningless. The numbers show that the conservative recovery continues, with the private sector adding jobs and the public sector cutting them. The services, mining, and leisure and hospitality sectors all added jobs. In all, the private sector added 54,000 jobs. But government has been shedding jobs consistently for the past year. It did so again in June, slashing 39,000 jobs. Government spending may be higher, but employment at the federal, state and local level is falling.

The Ugly #2. The unemployment rate ticked up to 9.2 percent. Payroll jobs figures are calculated from the establishment survey (calling up companies and asking them how many they employ). The unemployment rate is derived from the BLS's household survey (calling up people and asking them if they've been working). Sometimes the two surveys tell divergent stories. Not this month. The unemployment rose to 9.2 percent. The number would have been worse had the labor force not declined in June by about 250,000 people. Virtually every component of the household survey -- the labor force participation rate, the number of people reporting themselves to be employed, the number of people *not* in the labor force -- moved in the wrong direction last month.

Ugly #3. The trend is not our friend. The monthly jobs are revised in each of the two months following the original report. And the trend over much of the past year has been for the figures to be revised upward. In hindsight, during this recovery, BLS has tended to discover more jobs. But in June that trend seems to have reversed. Looking back, BLS is now concluding that there were fewer jobs added in previous months than originally thought. April's figure was revised from a gain of 232,000 to a gain of 217,000, and the May gain of 54,000 was revised to a gain of 25,000. Add it up, and BLS is telling us there are about 44,000 fewer payroll jobs out there than it thought.

This is just one month, and we should be careful not to read too much into a single data point. But this report really stinks. It is a significant problem for President Obama, for any incumbent, for the U.S. stock market and for consumer-based business. The outstanding feature of the past two years has been the big disconnect between the rapid recovery in the capital markets and the much slower recovery in the labor markets. Put another away, companies have shown that they can massively increase profitability without having to add significantly to their payrolls. Part of this is because U.S. companies have proven to be remarkably adept at boosting productivity -- doing more with less labor or the same amount of labor. And part of it has to do with the fact that, with each passing month, U.S. companies -- especially large ones -- are getting a larger share of their sales from overseas. Some of that comes in the form of exports, which helps support employment. But a lot of it comes in the form of sales of goods and services that are produced outside our borders.

Despite the ugly, ugly, ugly jobs figure, the U.S. expansion is still intact. Macroeconomic Advisers is standing by its call that the pace of growth will pick up in the second half of the year. From industrial production to retail sales, there are signs that demand is continuing to grow. At some point, companies will have to break down and hire people in significant numbers. This report suggests we haven't yet reached that point.

Yeah I know, the liberals will say "it's all Bush's fault!" and "The economy was so much worse than we thought," and "Obama has only been in office less than three years, you have to give his time plan" yada yada yada.

No. The fact is that Obama told us that without his stimulus and spending things would get worse, and with them they would get better, and instead the Pelosi-Reid Congress passed his plan and things have still gotten worse. ObamaCare was supposed to increase business confidence, and instead they're scared to death of it and anyone who can is obtaining a federal waiver.

It's time for a change, a change to the right, to electing true conservatives who will set our country right.

Posted by Tom at 9:30 PM | Comments (2) | TrackBack

January 13, 2011

One More Post on The Gabrielle Giffords Shooting and the Question of Blame

Unless there are major new developments this is going to be it about this incident and then we're moving on.

No, I did not watch President Obama's speech last night, nor do I plan on watching it or reading the text. Most conservative commentators that I trust said 1) His speech was very good,he said the right things and hit the right notes, and 2) the festival-campaign atmosphere with all the whooping and hollering and cheering was entirely inappropriate.

Assuming these commentators have it right, it speaks well of our president but poorly of his supporters. Given liberal behavior this week, I am not surprised.

I first heard of the shooting while at the gym. I saw it on the TV and thought to myself, what a terrible tragedy. We'll have to put up with some calls for more gun control, but that's standard operating procedure for the Sarah Brady bunch and we'll get through it. I had no idea that the left would unleash such a torrent of hate.

Let's start with this amazing video of Pima County Sheriff Clarence W. Dupnik:

Now, I'm no lawyer, nor do I play one on TV, but even I know that it's evidence first, conclusion second.

The tragic shooting of Rep Giffords taught us a lot about our political scene, it just isn't the "heated and threatening rhetoric" that the media is now talking about. The left unleashed a torrent of hate against Sarah Palin, the Tea Party movement, Fox News, and conservatives in general almost immediately after the shooting, and well before any of the facts about the motives of the shooter were known. And by "left," we're not just talking about obscure bloggers, but media people in print and on TV, and politicians.

The shooting taught us about the monumental level of raw hate that the left has for Sarah Palin and the lengths they will go in attacking her. The idea that she is to blame because of some ad that used crosshairs is insane. Reaction is summarized around the Internet, but two good pieces are at Powerline: A Disgrace to Nuts Everywhere and A Disgrace to Nuts Everywhere Part 2.

Before the motives or political affiliation of the shooter were known, a full scale assault was mounted on Palin, the Tea Party movement, conservative talk radio, and Fox News.

Throughout the first eight years of this decade conservatives listed to the left issue the most vile statements about George W Bush; "selected, not elected," "Bush lied, people died," a billion references to Bush as Hitler, usually in the form of something like "BusHitler" or "ChimpyMcHitler." Assassination chic, films about his assassination, and all manner of over-the-top statements were all the rage.

And let's be clear; the hateful, overheated, and sometimes even violent imagery in the rhetoric didn't just come from obscure bloggers. Democrats in Congress and media commentators were guilty as well.

Would you like evidence? Two quickies: Michelle Malkin has put together a progressive "climate of hate:" An illustrated primer, 2000-2010. The Washington Times editorial Taking advantage of tragedy: Hate crimes are down, but liberals use violence to target conservatism provides examples of some pretty big-name Democrats and liberals using rhetoric with some awfully violent rhetoric in it.

Last August James Jay Lee took three people hostage at the Discovery Channel building in Montgomery County, just outside of Washington DC. After a four hour standoff, a tactical squad shot and killed Lee after he pointed his pistol at a hostage. Lee specifically said that he had been inspired by former Vice President Al Gore's documentary "An Inconvenient Truth." Fortunately in this case no one else was killed, but they could easily have been.

Did we see a media campaign to urge environmentalists to "tone down the rhetoric?" Stop their hysterical claims that "the earth has a fever" and that there was "a planetary emergency?" Anyone tell Al Gore to apologize? Of course not. In fact, the reaction of the right was to NOT exploit this, but rather to say "if this had been the other way around the left would exploit it." Sure enough, they have.

Conclusion

What happened in Tucson was that a lone nutcase went on a terrible rampage and killed a wounded many people. Maybe we need to ban the extra large magazines, I'm actually sympathetic to that, although that's a knee jerk reaction that won't prevent diddly.

We've got to find a way to identify and isolate mentally ill people, and keep them from buying guns, but that's a complex issue. Besides what's mentioned in this article on the subject, the other issue is that if someone doesn't want to go to treatment you can't make them. I'm no lawyer, but even basic research shows that you can't incarcerate people against their will most of the time. And anyway, what constitutes mental illness, and who makes the determination? It all seems to obvious after one of these incidents, but there are genuine civil rights concerns.

My heart goes out to the victims of this tragedy. I do hope they knew God so that they are in a better place. You never know when your time will end. Have you said all the things you need to say to your loved ones? Have you gotten in good with your maker?

Finally; what is going on here is clear: The left is mad that they lost the Nov 2010 elections and is trying to get even. They want to shut down conservative talk radio and Fox News, and marginalize the Tea Party movement.

It won't work.

Posted by Tom at 8:30 PM | Comments (3) | TrackBack

December 7, 2010

The Tax Deal is a Good Deal

President Obama and Congressional Republicans reached a deal which will extend the Bush-era tax cuts at all income levels while also extending unemployment benefits. There were spending reductions to match the tax cuts, and there is no plan to pay for the unemployment benefits:

* Extends unemployment insurance for 13 months. Two million workers in December, and 7 million over the next year, would have lost benefits otherwise.
* Provides a one-year, 2% reduction in employees' Social Security payroll taxes, lowering the rate from 6.2% to 4.2%, at a cost of $120 billion.
* Keeps the Earned Income Tax Credit and American Opportunity Tax Credit increases from last year's economic stimulus law, for another $40 billion in tax cuts for families and students.
* Allows business to write off 100% of their capital purchases next year.
* Sets the estate tax at 35% for two years, with a $5 million asset limit that's higher than last year's $3.5 million.

Economically, the tax cuts will help the economy, or at least not extending them would certainly hurt it. At (I think) 99 weeks unemployment benefits are too long anyway, and at that point I think all they do is reduce the incentive to find work.

Contrary to what some knee-jerk supply siders say, tax cuts do not always pay for themselves. In the long run sometimes they do, but not always, because it depends where you are on the Phillips Curve.

Politically, you don't have to go far to see that most Republicans and conservatives generally like the compromise, while Democrats and the liberal base hate it. Much, much, more importantly, Obama doesn't seem to like it.

That alone tells me it was a good deal!

Obama's Base Seems to Hate the Deal

Powerline reports that

A poll conducted by Survey USA provides a sense of the left's dismay at the tax deal President Obama agreed to. Survey USA polled 1,000 people who contributed time or money to the Obama presidential campaign. 74 percent strongly oppose the deal and 57 percent say they are less likely to contribute in 2012 to Democrats who support it.

President Obama Gets Angry!

I haven't found a video that I can post here, but I will post excerpts of the transcript of his press conference on the deal. Various news reports describe the president as "visibly angry." I have underlined the most interesting parts, where Obama describes Republicans as hostage takers and bomb throwers and says that he is itching for a fight:

THE PRESIDENT: Good afternoon, everybody. Before I answer a few questions, I just wanted to say a few words about the agreement we've reached on tax cuts.

My number one priority is to do what's right for the American people, for jobs, and for economic growth. I'm focused on making sure that tens of millions of hardworking Americans are not seeing their paychecks shrink on January 1st just because the folks here in Washington are busy trying to score political points.
...

Q (Chuck Todd) Mr. President, what do you say to Democrats who say you're rewarding Republican obstruction here? You yourself used in your opening statement they were unwilling to budge on this. A lot of progressive Democrats are saying they're unwilling to budge, and you're asking them to get off the fence and budge. Why should they be rewarding Republican obstruction?

THE PRESIDENT: Well, let me use a couple of analogies. I've said before that I felt that the middle-class tax cuts were being held hostage to the high-end tax cuts. I think it's tempting not to negotiate with hostage-takers, unless the hostage gets harmed. Then people will question the wisdom of that strategy. In this case, the hostage was the American people and I was not willing to see them get harmed.
,,,

Q Tell that to the left -- they weren't happy --

THE PRESIDENT: Well, but that's my point. My point is I don't make judgments based on what the conventional wisdom is at any given time. I make my judgments based on what I think is right for the country and for the American people right now.

And I will be happy to see the Republicans test whether or not I'm itching for a fight on a whole range of issues. I suspect they will find I am. And I think the American people will be on my side on a whole bunch of these fights. But right now I want to make sure that the American people aren't hurt because we're having a political fight, and I think that this agreement accomplishes that.
...

Q (Marc Ambinder)Just in the sense that they'll say essentially we're not going to raise the -- we're not going to agree to it unless the White House is able to or willing to agree to significant spending cuts across the board that probably go deeper and further than what you're willing to do. I mean, what leverage would you have --

THE PRESIDENT: Look, here's my expectation -- and I'll take John Boehner at his word -- that nobody, Democrat or Republican, is willing to see the full faith and credit of the United States government collapse, that that would not be a good thing to happen. And so I think that there will be significant discussions about the debt limit vote. That's something that nobody ever likes to vote on. But once John Boehner is sworn in as Speaker, then he's going to have responsibilities to govern. You can't just stand on the sidelines and be a bomb thrower.

What language! How angry! How... prickly.

The Root of Obama's Problem

Barack Obama never had any difficult election races, and is used to people adoring him. No, he's used to them fawning over him. So when the going gets tough, he has no idea what to do. He's not used to having to negotiate from a position of relative weakness and doesn't know how to do it.

Most conservatives and happy with the deal and most liberals are angry because, as Ezra Klein points out, Republicans got that the things that "they really, really wanted," wheras liberals are angry because "Obama and the Democrats didn't fight" for what they gave up but simply caved at the first opportunity. Klein tries to put a happy face on the whole thing, but he's not convincing.

Will Congress Support The Deal?

In the end the leadership of both sides can make any deal they want, but if the rank and file won't support it the whole thing collapses. I don't think we have a solid feel for where this is going, but my guess is it'll probably pass, though it may get changed a bit.

Tea Party Senator Jim DeMint opposes the deal, objecting that the unemployment benefits must be paid for, and that the tax cuts should be paid for.

But just as important, Rep. Ryan (R., Wis.), who is very influential in conservative-Tea Party circles, likes the deal, reasoning that "All things considered, I think it's the best deal we were going to get. It's clearly not a good as we would've wanted, but far better than the alternative route."

House Speaker and Minority-Leader to be Nancy Pelosi says she opposes the deal, saying that "the estate tax in the bill is a bridge too far."

Sen. Frank Lautenberg (D., N.J.) doesn't like it either: "I don't think it's a fair deal. I think a ransom was paid, and it was a very high price."

As for the rest of the Democrats, NRO reports that "Sen. Ben Nelson (D., Neb.) tells reporters that the just-complete Democratic conference lunch with Vice President Biden was "difficult," but there is "no rebellion . . . not yet.""

Conclusion

I'm happier with the politics than the economics of the deal, although extending the tax cuts for all income earners will help the economy (or keep it from getting worse). The politics count, because getting that right paves the way to future victories.

Byron York explains how the Democrats were hoist by their own petard, having boxed themselves into this position by refusing to pass a budget this year. Essentially, they outsmarted themselves and are paying the price.

The Republicans look like they're in a better spot, but that will change if Boehner and McConnell can't keep their troops in order. But the leftist Obama base is angry, and that can only be a good thing.


Posted by Tom at 10:00 PM | Comments (6) | TrackBack

November 14, 2010

Can the Deficit be Reduced by Spending Cuts Alone?

Everyone pays lip service to balancing the federal budget, or at least reducing the deficit. But with the election of the 112th Congress, the issue has taken on a new seriousness not seen before. The Republicans seem determined to make a dent in the deficit, and even the Democrats in the last election cycle talked about getting spending under control.

The doctrinaire right says that spending cuts alone are the answer, and that far from reducing receipts tax cuts will bring in additional revenue. Others on the right say no, that won't do it.

First, let's take a look at the FY 2010 federal budget so we know what we're dealing with:

Federal Budget FY 2010

Now for Revenues v Expenditures:

Federal Receipts v Expenditures FY 2010

Follow the link above if the charts don't fit well on your screen. Also follow the link for dollar figures of each spending category.

The bottom line is this; the deficit will be somewhere around $1.3 billion. Can we close the gap entirely with spending cuts?

Symbols Count

Before liberal commenters point it out, yes I know that eliminating earmarks won't do squat towards reducing the deficit. They account for less than 1 percent of spending, and even without the earmark process much of the money would be spent anyway.

But earmarks are still worth eliminating because the process behind them stinks so bad. There is value in eliminating them for that reason alone.

For that matter, I think that we ought to entirely eliminate the Department of Education and zero out funding for the Corporation for Public Broadcasting, but again, neither are going to get us very far towards reducing the deficit.

A Serious Thinker

What prompted this debate were several posts by Kevin D. Williamson at National Review's Exchequer blog. I'm going to post a few in their entirely and commenters can make of them what they will.

I'll tell you up front that I am sympathetic to Williamson's arguments, and that for a variety of reasons (including this one) I'm not a fan of Grover Norquist.

Grover Norquist Is Living in Candyland
October 18, 2010 1:11 P.M.
By Kevin D. Williamson

Tags: Debt, Deficits, Despair, Fiscal Armageddon, Mitch Daniels, Republicans, Taxes

So it turns out that the cure for "epistemic closure" is great quantities of crystal meth. The things you learn from Grover Norquist.

In case you missed it, Norquist came down like a runaway gravel truck on Indiana governor Mitch Daniels, a favorite around these parts. Governor Daniels's offense was declaring himself open to the possibility that a value-added tax might be an acceptable part of a wide-ranging reform of the federal tax system. Norquist replied, in a Politico interview:

"This is outside the bounds of acceptable modern Republican thought, and it is only the zone of extremely left-wing Democrats who publicly talk about those things because all Democrats pretending to be moderates wouldn't touch it with a 10-foot poll. Absent some explanation, such as large quantities of crystal meth, this is disqualifying. This is beyond the pale."

Here's the problem: The deficit is, by my always-suspect English-major math, about 36.3 percent of federal spending ($1.29 trillion deficit out of $3.55 trillion spending). For comparison: Defense accounts for about 18 percent of federal spending. So you could cut out the entire national-security budget, and another Pentagon-sized chunk of non-military spending, and not quite close that deficit. You could cut the Pentagon to $0.00 and eliminate Social Security entirely and just barely get there.

Even great heaping quantities of crystal meth would not be enough to convince me that is going to happen.

Don't get me wrong: In a perfect world, Exchequer would love to see the budget balanced and some tax cuts enabled through spending reductions alone. Exchequer would also like to be dating Marisa Miller, driving a Morgan Aero, and running a four-minute mile, developments that are about as plausible as Congress's cutting 36.3 percent of federal spending. Not going to happen.

So, our choices are this: 1. Hold out for the best-case scenario, in which a newly elected Speaker Boehner gives President Obama the complete works of Milton Friedman and everybody agrees to cutting federal spending by more than a third. 2. Keep running deficits and piling up debt. 3. Raise taxes. My preferences, in order, go: 1, 3, 2. And No. 2 is not really acceptable.

Like it or not, taxes are going up: If not today, then in the near future. Even once the deficit is under control, that debt is still going to have to be paid down, lest debt service alone overwhelm the federal budget, necessitating even more tax hikes. If Grover Norquist thinks there's a tax-free way out of this mess that is both politically and economically realistic, he is living in a fantasy. There's an old joke that goes: Neurotics build castles in the sky; psychotics live in them. And Grover Norquist seeks tax protection for them.

Norquist's outfit, Americans for Tax Reform, does a lot of good things. (And so has Grover Norquist, over the years.) But here's how it describes itself:

Americans for Tax Reform (ATR) opposes all tax increases as a matter of principle.

That's not a campaign against Big Government -- it's a campaign against math. As ye spend, so shall ye tax. Denying that is not a principle -- it's a tantrum. ATR's pledge reads:

"I _____ pledge to the taxpayers of the __________ district, of the state of __________, and to all the people of this state, that I will oppose and vote against any and all efforts to increase taxes."

And here is how it should read:

"I _____ pledge to the taxpayers of the __________ district, of the state of __________, and to all the people of this state, that I will oppose and vote against any and all efforts to increase spending."

Spending is the issue, not taxes. Spending is the virus, taxes are the symptom. Norquistism, by focusing on the taxing side of the ledger rather than on the spending side, has for decades enabled Republican spending shenanigans of the sort that helped put the party in the minority and ruined its reputation for fiscal sobriety; it is of a piece with naïve supply-siderism. The Bush-era deficits, and the subsequent discrediting of Republicans' fiscal conservatism, are the product.

Give me the grown-up despair of Mitch Daniels any day over the happy-talk daydream that says we're getting out of this mess without paying for it.

And

Real Deficit Reduction vs. Theoretical Deficit Reduction
November 10, 2010 8:11 P.M.
By Kevin D. Williamson

A reader asks: "So an Obama commission proposes a $1 trillion-plus tax hike, and you, a managing editor at the flagship conservative publication, endorse it? Exactly how or why is this a conservative position?"

Answer: A conservative's first duty is to deal with reality -- not with the theoretical world we wish existed, not with ideology, and not with wishful thinking. We are running a deficit of 40 percent, and it is implausible to think that a government with a Republican House, a Democratic Senate, and Obama in the White House is going to balance the budget by cutting 40 percent of spending.

I think it is equally implausible that a government with a Republican House, a Republican Senate, and Ron Paul/Sarah Palin/Mitch Daniels/Rush Limbaugh/The Ghost of Ronald Reagan in the White House is going to balance the budget with spending cuts alone. Why should I rely on the performance of theoretical Republicans when I have the evidence of actual Republican Congresses and actual Republican administrations to inform me that radical spending cuts are unlikely under a unified Republican government?

The burden of taxation is not equal to what the government collects; it is equal to what the government spends. Deficit spending just greases the skids for ever-more-incontinent fiscal shenanigans -- I'd rather the taxpayers bear the pain of government spending as the money is spent than evade it, kicking the taxes down the road to the next generation. We can either pay the taxes today or pay them in the future -- with interest, trillions of dollars in interest. The Bowles-Simpson proposal is far from perfect, but it is three-and-a-half times better than anything I expected from a panel with any political proximity to Barack Obama. It's a good start, and it's politically viable. If the Republicans are smart, they'll run with it and remind voters every five minutes that this is the proposal of the Obama deficit commission's co-chairmen.

If I see a better plan with a real chance of being enacted, it will have my support. But given a choice between an ideologically pure program that never is enacted and a problematic one that gets the job done, albeit imperfectly, I'll take real deficit reduction over theoretical deficit reduction every time.

Nancy Pelosi hates it. That's a useful piece of evidence, too.


Posted by Tom at 9:30 PM | Comments (5) | TrackBack

July 17, 2010

The Push for More Stimulus Spending

Because the economy is lagging and unemployment is at a disturbing 9.6 percent, President Obama and the Democrats in Congress want to pass another stimulus bill.

Stephen Spruiell, writing in the July 19 2010 print version of National Review (digital subscription required), reviews recent history:

If the Democrats prevail, it will be the third time that Congress has extended provisions of the 2009 stimulus bill since its passage in February of last year. Counting the stimulus bill that President Bush signed into in 2008, it will be the nation's fifth round of fiscal stimulus since the first flickers of the subprime mortgage conflagration began to appear at the edges of the economy. It will bring the total amount we have spent on such measures to $1.085 trillion - more than we have spend on the wars in Iraq and Afghanistan combined.

But not all stimuli are the same:

From 2008 to now, the composition of the stimulus bills has changed, from mostly tax rebates intended to boost consumer demand to mostly income transfers from the employed to the unemployed and from the federal government to the states.

This latest stimulus is a bailout of state and local governments in disguise. They wont' call it that, of course, but that's what it'll add up to.

Which is best, a stimulus package based on Keynesian demand-side spending, or one-time tax cuts. The answer is neither:

...consumers and business tend to make spending and hiring decisions based on long-term expectations, not short-term windfalls, as the late economist Milton Friedman explained.

This is why President Bush's one time tax rebate checks didn't work, and why they won't work under President Obama as well. If you want to stimulate business activity with tax cuts, you have to reduce the rate (of whatever tax is under consideration) and do not include a built-in expiration date.

Further, tax cuts must be met with spending reductions as well. The idea that "tax cuts always bring in more revenue" is not true. More accurate is "tax cuts

sometimes
bring in more revenue," because it all depends on where we are on the Laffer Curve.

The bottom line is that sometimes Keynsian spending boosts the economy, and sometimes tax cuts work, but right now we are at insane levels of spending and it must stop. As I've written about a kazillion times, most of the Obama-Pelosi-Reid stimulus has little or nothing to do with boosting the economy and is all about permanently increasing the size of government and payoffs to liberal interest groups.

Time to stop the stimulus and stop the spending.

Posted by Tom at 9:00 PM | Comments (6) | TrackBack

February 2, 2010

Obama v Bush - Budget Deficits

Jim Treacher puts numbers and a graph to a conversation I'm familiar with:

A simple five-step process for understanding the deficit and people's reactions to it

1) Read a story on the Obama administration's pledge to reduce the deficit. Pay special attention to quotes like this:
"We wanted to draw a line in the sand and enforce some discipline in the spending process," White House spokesman Dan Pfeiffer said.

2) Say: "Wow, they sure are spending a lot. Why didn't they reduce it by not increasing it so much in the first place? I'm no economist or anything, but I'm not so sure I like this whole deal."

3) Listen to Obama defender screech: "HOW COME YOU NEVER COMPLAINED ABOUT BUSH'S SPENDING, WINGNUT???"

4) Show the Obama defender this graph, courtesy of the Congressional Budget Office:

Obama v Bush debt.jpg

5) Repeat as needed, i.e., every single time it comes up.

Another way to see how much Obama has increased the deficit relative to past presidents is through this national debt road trip video:


Update

Deficit imperils U.S.'s top credit rating
Washington Times
By Patrice Hill

The United States is drawing closer to the kind of debt crisis plaguing some European countries, where a financial emergency forces political leaders to make draconian spending cuts and tax increases to maintain the confidence of international investors.

Moody's, a top Wall Street credit agency, brought the U.S. closer to such a point this week by, for the first time, warning that the U.S. could lose its gold-plated AAA credit rating in coming years unless it quickly puts into place plans to curb budget deficits of more than $1 trillion that have the potential to destabilize government finances and the financial markets.

"Unless further measures are taken to reduce the budget deficit further or the economy rebounds more vigorously than expected, the federal financial picture as presented in [President Obama's Feb. 1 budget] will at some point put pressure on the AAA-government bond rating," Moody's said in a report Tuesday.

But hey, don't worry folks, move along, nothing to see here.

Posted by Tom at 8:25 PM | Comments (9) | TrackBack

January 15, 2010

Obama's Political Bank Tax

So President Obama is angry at the banks and wants "our money back:"

My commitment is to recover every single dime the American people are owed. And my determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at some of the very firms who owe their continued existence to the American people -- folks who have not been made whole, and who continue to face real hardship in this recession.

We want our money back, and we're going to get it. And that's why I'm proposing a Financial Crisis Responsibility Fee to be imposed on major financial firms until the American people are fully compensated for the extraordinary assistance they provided to Wall Street. If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers.

I'm not quite sure how this is going to "bring us all together, but the way he tells it the American people have been ripped off and he intends to make us good.

Or is that really what's going on?

I think that Peter Wallsten, writing in the Wall Street Journal, is on to something:

Central to the strategy is the new White House plan to tax big banks as punishment for their role in the financial crisis. President Barack Obama announced the proposal Thursday amid reports that financial institutions bailed out by the government are enjoying healthy profits and paying generous bonuses, and as a bipartisan commission began hearing testimony on banks' role in the economic crisis.

But events Friday in Massachusetts showed how the White House and top Democrats aim to use the bank tax as a political weapon:Senate candidate Martha Coakley, Vice President Joe Biden and others used the issue to portray Ms. Coakley, who is vying to succeed the late Edward Kennedy, as tough on bank executives and portray Republican Scott Brown as coddling them.

Wallsten goes on to point out that all polls show the Democrat's healthcare plans are unpopular with the American people, and so a new message is needed. Scott Brown is now running ahead of Martha Coakley to replace Ted Kennedy in Massachusetts, and much of his message is centered around opposing the Democrat's healthcare plans. Seeing a disaster in the making, Obama has decided that a new approach was needed.

Playing her part, Ms Coakley is using Obama's proposed tax to attack Brown. The WSJ article quotes Democrat strategists as realizing that the Tea Party movement is hurting them, and that with the bank tax "we can take populism back to our side."

Politics aside, it turns out that the tax doesn't even make sense. Charles Krauthammer explains:

This is being sold with incredible demagoguery as a payment. The president says I want my money back. In fact, the majority of banks have repaid. Some of the banks never received any of the TARP money, and some of them were forced into receiving it at the point of a gun in the Bush administration.

And, as you pointed out, the real delinquents here, GM and Chrysler, are not being asked to pay anything because of Democratic ties with Michigan and the UAW.

Now, there is merit here if it were portrayed in a different way. The banks, the larger banks, have, as a result of what happened in '09 and '08, an implicit understanding around the world that the U.S. government will step in.

So there is an implicit guarantee of their loans, which means they have preferential advantage in receiving loans because everybody understands in the end the U.S. government will step in. That might be worth taxing. It would be returning the favor.

But, only if you walled off the money and you kept it as a way to bail out the banks if they failed, the way that the FDIC imposes a fee on the regular banks that is set aside and held in case of a bankruptcy.

But this is not how it's portrayed. The way Obama is selling it, it is a punishment for old behavior rather than a fee that you would collect in return for a certain advantage as a result of what happened in '08 and '09.

In the end, the tax will be imposed, and it'll be passed onto consumers in seen and unseen ways.

Don't think that I'm defending the banks. As I said in A Pox On All Their Houses, "conservatives should not defend AIG or the bonuses," because when your company takes bailout money from the government "you do not pay anyone a bonus for anything."

Taxing banks is about the least of what Obama and his radical Democrats want to do. Barney Frank wants to wants to set pay caps on executives at all corporations, whether they took bailout money or not. Seeing where this was going, in
If You take the King's Shilling, You do the King's Bidding
I pointed out that "this is exactly why bailouts are so bad. Once you take aid from the government, you are beholden to them."

Indeed we never should have started down this path. We should have let Bear Stearns, AIG, and the others fail the old-fashioned way. It would certainly have been painful in the short term, but the long term consequences of bailouts are obvious to everyone now, and they're not good at all.

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November 18, 2009

Obama's Fake "Saved or Created" Stimulus Jobs

If you're not reading Mike's America every day, you should be. I am indebted to him for most of the articles that follow.

From the beginning we know that the entire "saved or created jobs" business was a crock. No one can measure something like this so it was obvious that they were pulling the numbers out of the air, knowing that at least for a time the gullible would buy it. As unemployment has crept upwards to it's current level of 10.2 percent, it became harder and harder the media to go along.

Finally, ABC did some investigating, and guess what they found:

Exclusive: Jobs 'Saved or Created' in Congressional Districts That Don't Exist
Human Error Blamed for Crediting New Stimulus Jobs to Nonexistent Places By JONATHAN KARL
ABC News
Nov. 16, 2009

Here's a stimulus success story: In Arizona's 15th congressional district, 30 jobs have been saved or created with just $761,420 in federal stimulus spending. At least that's what the Web site set up by the Obama administration to track the $787 billion stimulus says.

Discrepancies on government web site call into question stimulus spending.
There's one problem, though: There is no 15th congressional district in Arizona; the state has only eight districts.

And ABC News has found many more entries for projects like this in places that are incorrectly identified.

Late Monday, officials with the Recovery Board created to track the stimulus spending, said the mistakes in crediting nonexistent congressional districts were caused by human error.

"We report what the recipients submit to us," said Ed Pound, Communications Director for the Board.

Pound told ABC News the board receives declarations from the recipients - state governments, federal agencies and universities - of stimulus money about what program is being funded.

"Some recipients clearly don't know what congressional district they live in, so they appear to be just throwing in any number. We expected all along that recipients would make mistakes on their congressional districts, on jobs numbers, on award amounts, and so on. Human beings make mistakes," Pound said.

Right, and if you believe that I've got a bridge to sell you. I'll tell you what I think happened: They put immense pressure on their Democrat buddies to come up with the "right" numbers, and sure enough they did. They just hoped that nobody would check. Oops.

But it gets better.

Stimulus dishonesty
Job numbers keep proving to be exaggerated
Union-Tribune Editorial
Wednesday, November 11, 2009

First it was The Associated Press refuting the Obama administration's claims for jobs saved or created nationwide by February's $787 billion economic stimulus measure. Then it was The Sacramento Bee refuting the claims that state agencies had made for California. Then it was the Chicago Tribune refuting the claims that state agencies had made for Illinois.

The errors were not of a minor or technical nature. They were egregious.

AP reported that "some jobs credited to the stimulus program were counted two, three, four or even more times." The Bee reported that California State University said "the $268.5 million it received in stimulus funding through October allowed it to retain 26,156 employees" - more than half its statewide work force. The Tribune reported that Illinois education officials grossly inflated job-saved numbers, sometimes saying school districts had saved more jobs than their total number of employees.

This is a scandal and should be treated as such. It's not government as usual. Instead, it appears to reflect a decision to distort government data collection to support explicitly political agendas.

With U.S. unemployment now topping 10 percent, the Obama administration is struggling more than ever to fashion credible counterarguments to the assertion made by this editorial page and many pundits and economists that the massive stimulus measure was a poorly thought-out pork fest that wouldn't work. What's the easiest way to defend the stimulus? Make up claims about its glorious results.

Politics also appears to be driving state agencies in their willingness to prop up this bogus narrative. It helps them make the case that they should get even more borrowed money from the federal government that they never will have to repay.

Such dishonesty should be completely unacceptable - especially at the federal level. We trust the Office of Management and Budget to provide honest figures on the size of the deficit and the national debt. We trust the Labor Department to provide honest statistics on unemployment and job gains and losses by sector. We trust the Commerce Department to provide honest numbers on monthly imports and exports and the gross domestic product. We trust the Environmental Protection Agency to provide an honest accounting of air and water pollution levels.

All of these statistics end up helping shape the public debate on the most crucial issues of the day. If these numbers can't be trusted, we can't have an honest debate. When it comes to the economic stimulus package, it sure looks like the Obama White House doesn't want an honest debate. Instead, it is going to relentlessly push the very dubious claim that the stimulus was a huge success - no matter what.

We are struck yet again by the contrast between the hopeful and idealistic tone of Barack Obama's presidential campaign and the bare-knuckles Chicago-style politics of his White House. If this hardball approach goes beyond the usual arm-twisting to the routine twisting of government statistics for political purposes, that will be a grim day for America.

Meanwhile, let's revisit the Democrat projections for they insisted would happen if we passed their gargantuan stimulus bill:

Unemployment: Obama v Reality

Obama: The Coming Object of Ridicule

The invaluable Charles Krauthammer sums up the implications for the Obama Administration:

The effect, ultimately -- and the danger for any administration -- is to be an object of ridicule.

Look, this whole discussion has had an Alice-in-Wonderland quality from the very beginning. You can't measure saved jobs. Arguing over the precision or imprecision of the numbers, which are fictional at the beginning, is like arguing that there are twelve angels on the head of a pin and only ten ...

And when you hear these reports, as we're hearing now with the fictional congressional districts, the risk for the administration is that it becomes an object of ridicule. And once that happens, it's hard to actually stop.

And the issue will become competence. There have been ideological objections against this administration -- it's left-wing, it's radical, and all that. But now we're starting a new kind of meme, that it is an administration that really can't get things done...

Once the meme starts, it becomes the subject of late-night comedy. ... When they speak seriously about this - 640,329 jobs saved, comical precision -- and then it turns out a lot of these are fictional jobs in fictional districts, what happens is the administration, already satirized on "Saturday Night Live" as do-nothing, is now going to be seen as an administration that cannot even do nothing competently.


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August 3, 2009

Is Health Care a Right?

Is heath care a right? Short answer; no.

Consider our Bill of Rights

Amendment I

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.

Amendment II

A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed.

Amendment III

No soldier shall, in time of peace be quartered in any house, without the consent of the owner, nor in time of war, but in a manner to be prescribed by law.

Amendment IV

The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

Amendment V

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

Amendment VI

In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the state and district wherein the crime shall have been committed, which district shall have been previously ascertained by law, and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the assistance of counsel for his defense.

Amendment VII

In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any court of the United States, than according to the rules of the common law.

Amendment VIII

Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.

Amendment IX

The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

Amendment X

The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.

Did you read it? I hope so.

Now consider Franklin Delano Roosevelts' proposed Second Bill of Rights, sometimes called his "Economic Bill of Rights"

The right to a useful and remunerative job in the industries or shops or farms or mines of the nation;

The right to earn enough to provide adequate food and clothing and recreation;

The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;

The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;

The right of every family to a decent home;

The right to adequate medical care and the opportunity to achieve and enjoy good health;

The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;

The right to a good education.

Thankfully this was never formally adopted. Unfortunately some of it it has been adopted in practice, which was Roosevelt's intent. He was not one to let the Constitution stand in his way.

The difference between the two is striking. The first tells us what the government cannot do to us, the second what it should do for us. The first simply requires it to stay out of the way, the second to proactively interfere in our lives. The first describes what the government must do in cases where it wishes to charge a citizen with a crime, the latter what it must do to make us happy.

Today we are told by the left that health care is a right. The government may or may not have an obligation to provide it, but it most certainly is not a right as properly defined.

Theodore Dalyrymple has some thoughts in his piece in last week's Wall Street Journal that are well worth pondering.

If there is a right to health care, someone has the duty to provide it. Inevitably, that "someone" is the government. Concrete benefits in pursuance of abstract rights, however, can be provided by the government only by constant coercion.

People sometimes argue in favor of a universal human right to health care by saying that health care is different from all other human goods or products. It is supposedly an important precondition of life itself. This is wrong: There are several other, much more important preconditions of human existence, such as food, shelter and clothing.

Everyone agrees that hunger is a bad thing (as is overeating), but few suppose there is a right to a healthy, balanced diet, or that if there was, the federal government would be the best at providing and distributing it to each and every American.

Where does the right to health care come from? Did it exist in, say, 250 B.C., or in A.D. 1750? If it did, how was it that our ancestors, who were no less intelligent than we, failed completely to notice it?

If, on the other hand, the right to health care did not exist in those benighted days, how did it come into existence, and how did we come to recognize it once it did?

When the supposed right to health care is widely recognized, as in the United Kingdom, it tends to reduce moral imagination. Whenever I deny the existence of a right to health care to a Briton who asserts it, he replies, "So you think it is all right for people to be left to die in the street?"

When I then ask my interlocutor whether he can think of any reason why people should not be left to die in the street, other than that they have a right to health care, he is generally reduced to silence. He cannot think of one.

Moreover, the right to grant is also the right to deny. And in times of economic stringency, when the first call on public expenditure is the payment of the salaries and pensions of health-care staff, we can rely with absolute confidence on the capacity of government sophists to find good reasons for doing bad things.

The question of health care is not one of rights but of how best in practice to organize it. America is certainly not a perfect model in this regard. But neither is Britain, where a universal right to health care has been recognized longest in the Western world.

Not coincidentally, the U.K. is by far the most unpleasant country in which to be ill in the Western world. Even Greeks living in Britain return home for medical treatment if they are physically able to do so.

The government-run health-care system--which in the U.K. is believed to be the necessary institutional corollary to an inalienable right to health care--has pauperized the entire population. This is not to say that in every last case the treatment is bad: A pauper may be well or badly treated, according to the inclination, temperament and abilities of those providing the treatment. But a pauper must accept what he is given.

Universality is closely allied as an ideal, ideologically, to that of equality. But equality is not desirable in itself. To provide everyone with the same bad quality of care would satisfy the demand for equality. (Not coincidentally, British survival rates for cancer and heart disease are much below those of other European countries, where patients need to make at least some payment for their care.)

In any case, the universality of government health care in pursuance of the abstract right to it in Britain has not ensured equality. After 60 years of universal health care, free at the point of usage and funded by taxation, inequalities between the richest and poorest sections of the population have not been reduced. But Britain does have the dirtiest, most broken-down hospitals in Europe.

There is no right to health care--any more than there is a right to chicken Kiev every second Thursday of the month.


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July 29, 2009

Obama Accelerates the Federal Deficit

It is popular on the left to accuse conservatives Republicans of hypocrisy when we criticize President Obama for his large budget deficits. George W Bush and the Republicans in Congress during his term increased the federal deficit, so we have no right to criticize Obama.

Like all misinformation, there's a grain of truth in it; we did support Bush in 2000 and 2004. We also supported the Republicans in Congress. Where it fails is the assumption that we were happy with their fiscal policy. Anyone even remotely familiar with the right knows that conservatives were wary of Bush from the outset, and downright disgusted with him and so many Republicans in Congress by his second term. We supported them in their elections because the Democrat alternative was worse. Even many Republicans who were not really conservative because disenchanted with their own party's lack of fiscal restraint.

Perhaps the best way to illustrate just how much Obama will accelerate the budget deficit is with this video. It was developed by Matthias Shapiro at Political Math, which I found it posted at Hot Air

As the video makes clear, Republicans aren't saints on the matter. Reagan, George HW Bush, and George W Bush all played a role in increasing the deficit. Clinton was actually somewhat fiscally responsible, but it must be remembered most of his spending cuts came from the military, which was reduced dramatically with the ending of the Cold War.

A few months ago I attended a talk by Wayne Abernathy of the American Bankers Association in which he made the point "I know what a hundred dollars is. I know what a thousand dollars is, and I can grasp the concept of a hundred thousand or a million. But what is a billion or trillion dollars?"

The point is that the numbers are so large that they are unreal to us. We'll get upset if our town spends $10,000 on new office furniture that we think is unneeded, but barely sigh when the federal government spends $10,000,000,000 on a new program. This video makes the point:

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July 19, 2009

"States Hit Hardest by Recession Get Least Stimulus Money"

If a state wants a bridge, normally they would raise the necessary funds from tax revenue. If a county wants to build another homeless shelter, they would do likewise. If either is too poor, it may be a good for another state to give them the money. We are, after all, one country and all in it together.

The mechanism by which states give each other money is the federal government. Instead of the tax money being routed through the county or state, it goes through the federal government. If the federal government does not have the money, but the need is great, it can engage in deficit spending, the theory being that we'll pay ourselves back when times get better.

Of course, it's all nonsense. The reality is that federal revenues do not go to the states or localities that need them the most, but are divided up according to how powerful your senator or representative is.

Fox News did a study and the fact is there is an inverse relationship between stimulus spending and need.

The stimulus bill "includes help for those hardest hit by our economic crisis," President Obama promised when he signed the bill into law on Feb. 17. "As a whole, this plan will help poor and working Americans."

But FOXNews.com has analyzed data tracking how the stimulus money is being given out across the 50 states and the District of Columbia, and it has found a perverse pattern: the states hardest hit by the recession received the least money. States with higher bankruptcy, foreclosure and unemployment rates got less money. And higher income states received more....

The spending data come from two reliable sources: the Wall Street Journal and the Federal government's Recovery.gov....

Charts and Graphs Below the Fold

The first graph shows stimulus spending per capita as related to the per capita income by state. If stimulus money was going to those with low incomes, we would expect to see the line go steeply from lower left to upper right. As it is, it's clear that states with the lower per capita incomes are not receiving more money:

Stimulus spending to per capita income by State


Next we see stimulus spending as related to bankruptcy rates. Again, the trend line goes in exactly the opposite direction it should if money was allocated by need:

Stimulus to Bankruptcy by State


Next is stimulus spending as related to foreclosure rates. Ditto to what we saw above.

Stimulus spending to forecloseure by State


Finally, stimulus spending as related to unemployment. Big surprise, states with higher unemployment rates do not get more money than those who don't:

Stimulus spending to Unemployment by State


Two more paragraphs from the story

Breaking down the data by type of spending shows that money for infrastructure was much more likely than social spending to go to high-income states with low bankruptcy and foreclosure rates. Federal spending on construction and repairs to federal buildings as well as repairs to highways and public transit projects drives much of this perverse relationship between economic distress and infrastructure stimulus spending....

Lee Ohanian, an economics professor at UCLA who has extensively studied New Deal policies and depressions, told FOXNews.com that the spending patterns our study found "certainly don't fit what you would think that they would be from the standpoint of government spending as a social safety net.... The pattern does seem quite odd. It is certainly not the way the program was advertised."

Yup. The stimulus money was not allocated based on need, but on political power.

But the stimulus was never about stimulating the economy. It was about two things:


  1. Moving us in the direction of a European-style statist economy. Obama knows that once these programs are in place they're almost impossible to eliminate. The objective of the Democrats was to set up programs that would require future spending, knowing full well that again once in place these programs take on a life of their own

  2. Creating a class of permanent Democrat voters by creating dependency. Once hooked on a program it becomes hard to break the habit. People dependent on the government will tend to vote Democrat.

The Fox story therefore is unfortunately no surprise.

Posted by Tom at 8:30 PM | Comments (4) | TrackBack

June 2, 2009

Are We A Socialist Country Now?

For years conservatives accused liberals of instituting de facto socialism in the United States. "The government may not own the means of production, but there is so much regulation it might as well" went the argument. Liberals scoffed, and both sides went around in circles.

Today the federal government owns 60% of General Motors, obviously a controlling share. Two months ago President Obama effectively fired GM CEO, Rick Wagoner. Last year the government took over Fannie Mae and Freddie Mac. The term is "conservatorship" but many consider it at least partial nationalization. The government also owns large portions of the banking industry. Heaven knows what's going to happen to the health care industry, but we're certainly headed towards at least de facto nationalization.

President Obama says that he doesn't want to run General Motors, and wants to stay out of day-to-day operations. "We are acting as reluctant shareholders," President Obama said Monday, "because that is the only way to help GM succeed."

It's also supposed to be temporary. GM will come out of bankruptcy smaller, healthier, and private again.

I don't believe any of it for a second. I think that once the liberals realize what they've got on their hands they'll be the ones crying "from my cold, dead hands...."

But back to my original question; are we a socialist country now?

Jonah Goldberg, writing in USA Today, has some thoughts on the matter with which I largely agree:

Of course, nationalization of industry is only one kind of socialism; another approach is to simply redistribute the nation's income as economic planners see fit. But wait, Obama believes in that, too. That's why he said during the campaign that he wants to "spread the wealth" and that's why he did exactly that when he got elected. (He spread the debt, too.)

And yet, for conservatives to suggest in any way, shape or form that there's something "socialistic" about any of this is the cause of knee-slapping hilarity for liberal pundits and bloggers everywhere.

For instance, last month the Republican National Committee considered a resolution calling on the Democratic Party to rename itself the "Democrat Socialist Party". The resolution was killed by RNC Chairman Michael Steele in favor of the supposedly milder condemnation of the Democrats' "march toward socialism."

The hope for socialism

The whole spectacle was just too funny for liberal observers. Robert Schlesinger, U.S. News & World Report's opinion editor, was a typical giggler. He chortled, "What's really both funny and scary about all of this is how seriously the fringe-nuts in the GOP take it."

Putting aside the funny and scary notion that it's "funny and scary" for political professionals to take weighty political issues seriously, there are some fundamental problems with all of this disdain. For starters, why do liberals routinely suggest, even hope, that Obama and the Democrats are leading us into an age of socialism, or social democracy or democratic socialism? (One source of confusion is that these terms are routinely used interchangeably.)

For instance, in (another) fawning interview with President Obama, Newsweek editor Jon Meacham mocks Obama's critics for considering Obama to be a "crypto-socialist." This, of course, would be the same Jon Meacham who last February co-authored a cover story with Newsweek's editor at large (and grandson of the six-time presidential candidate for the American Socialist Party) Evan Thomas titled -- wait for it -- "We Are All Socialists Now," in which they argued that the growth of government was making us like a "European," i.e. socialist, country.

Washington Post columnists Jim Hoagland (a centrist), E.J. Dionne (a liberal) and Harold Meyerson (very, very liberal) have all suggested that Obama intentionally or otherwise is putting us on the path to "social democracy." Left-wing blogger and Democratic activist Matthew Yglesias last fall hoped that the financial crisis offered a "real opportunity" for "massive socialism." Polling done by Rasmussen -- and touted by Meyerson -- shows that while Republicans favor "capitalism" over "socialism" by 11 to 1, Democrats favor capitalism by a mere 39% to 30%. So, again: Is it really crazy to think that there is a constituency for some flavor of socialism in the Democratic Party?

When the question is aimed at them like an accusation, liberals roll their eyes at such "paranoia." They say Obama is merely reviving "New Deal economics" to "save" or "reform" capitalism. But liberals themselves have long seen this approach as the best way to incrementally bring about a European-style, social democratic welfare state. As Arthur Schlesinger Jr. (Robert's father) wrote in 1947, "There seems no inherent obstacle to the gradual advance of socialism in the United States through a series of New Deals."

Where to draw the line

Part of the problem here is definitional. No mainstream liberal actually wants government to completely seize the means of production, and no mainstream conservative believes that there's no room for any government regulation or social insurance. Both sides believe in a "mixed economy" but disagree profoundly about where to draw the line. One definition of social democracy is the peaceful, democratic transition to socialism. A second is simply a large European welfare state where the state owns some, and guides the rest, of the economy. Many liberals yearn for the latter and say so often -- but fume when conservatives take them at their word.

Personally, I think socialism is the wrong word for all of this. "Corporatism" -- the economic doctrine of fascism -- fits better. Under corporatism, all the big players in the economy -- big business, unions, interest groups -- sit around the table with government at the head, hashing out what they think is best for everyone to the detriment of consumers, markets and entrepreneurs. But, take it from me, liberals are far more open to the argument that they're "crypto-socialists."

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April 5, 2009

The Coming Entitlements Crunch

We in the West have created a system of old-age entitlements that we're just not going to be able to pay for much longer. Don't get me wrong; I'm not against Social Security type programs. And I do think the government has an obligation to help our citizens as they reach their golden years. It's rather that I don't think the current structure of our programs is going to hold.

Government Social Security type programs worked when the worker to retiree ratio was 16.5 - 1 (figures via ssa.gov), when Social Security was first instituted by FDR. It worked at 10 and even 5 to 1. 3.3 to 1, which is what it is today, is barely sustainable. According to the Social Security Administration website referenced earlier, in 40 years it will be 2 to 1, and they say straight up that "At this ratio there will not be enough workers to pay scheduled benefits at current tax rates."

A piece in the Financial Times (via Mark Steyn at NRO) goes on about our current financial crisis, and how some of the measures the G20 had taken to resolve it. Good so far, but then comes the zinger

As the IMF says, "in spite of the large fiscal costs of the crisis, the major threat to long-term fiscal solvency is still represented, at least in advanced countries, by unfavourable demographic trends".

What's that again?

Until only a few years ago I not read much on demographics. Oh sure, I knew that our Social Security system was in trouble, but who didn't? Beyond that though I didn't really give it much thought as a major force that could change the world. Indeed, upon seeing a book or article on the subject my inclination would have been to cast it aside as horribly boring.

Then I read Mark Steyn's America Alone: The End of the World As We Know It. I looked at the issue further, and discovered that the birthrate figures he cites are correct. Demography may in fact be destiny. But you don't have to buy into all of his conclusions to know that the West is in big trouble.

Back to the Financial Times, and how "unfavorable demographic trends" are

Unfavourable from a treasury's point of view, that is. Increased human longevity is otherwise hardly a bad thing. Fewer people are dying young, in industrial accidents or from disease. If they make it to old age, retirees live ever longer on their pensions. Birth rates are often low, however - leaving fewer children to look after parents in their dotage and a smaller workforce to pay the taxes that also support them.

Officials in many countries are prone to talking about the problem in terms that hide its immediacy: the impact of ageing on the world in four decades' time is more commonly discussed than the weight of the problem in just 10 years. But demographic phenomena can have a significant impact on a society within a short time-span.

Across much of the developed world, the end of the second world war was greeted by a jump in the number of births - the "baby boom". That increase, a working lifetime ago, is suddenly being felt ever more acutely now, as workers drop out of the labour market in large numbers and start to claim pensions.

In the UK, for example, the government expects the extra annual costs imposed by ageing to reach 1.6 per cent of GDP by 2017-18. That is an increase in spending equivalent to the cost of servicing a rise in the national debt burden of about 37 per cent of GDP, according to FT calculations. That outstrips the 29 percentage point rise that the financial crisis and economic downturn are expected to inflict.

France, Germany and the US are among other countries set to see a sudden deterioration in demographic costs in the next decade after a long period of relative placidity. According to the United Nations , the number of working-age adults for each person aged over 65 in advanced economies will decrease in the next 10 years by as much as they have in the previous 30 years. The number of workers per pension claimant will fall from 4.3 to 3.4 in the next decade alone.

Some countries are already much further down this road. It will take another 20 years of greying for Europe to become as elderly as Japan's population is today. The rest of east Asia is in a race to get rich before its people get too old to work. South Korea is currently well placed, with six citizens of working age for every pensioner. Yet thanks to a collapse in its birth rate, it will be one of the greyest countries on earth by 2050.

For societies, even if not always for individuals, it is possible to offset and mitigate many of the problems of ageing. Employment law is changing in order to keep people in work for longer. Nevertheless, the latest explosion in public debt - difficult enough on its own - is exacerbating the impact of an ageing that was always going to be expensive. Together, they promise to make the next decade rather tough for taxpayers.

Yikes. As if this wasn't bad enough, President Obama and his friends in Congress want to increase our debt with their "stimulus" package. I attacked President Bush and the Republicans in Congress for their prolifigate spending (see "Conservatives Gone Bad" under "Categories" at right, or just go here) so I'll do the same to Obama and the Democrats.

The worst thing is I don't know what to do about the problem. You can call me a hypocrite for not having any children of my own, but I don't see how this means I can't bring it up as a problem (see my thoughts on the issue of hypocrisy here if you care).

We're going to have to reform our old-age programs, which in the United States means Social Security. President Bush tried and met a brick wall of political opposition. I don't see it on President Obama's agenda. And from what I see I certainly don't see anyone in Europe addressing it.

As bad as our situation is here we in the United States have it pretty good; we're at 2.1 live births per woman, which keeps our population even (growth is from immigration). Throughout Europe the figure is lower, in some cases dramatically so. The issue, as Steyn concludes, is that

...for Japan, Russia and Europe, we're no longer talking about demographic-economic catastrophe just beyond the horizon - say, mid-century - but within ten years. If you're not talking about this, you're not serious. Which is why the O-man and the G-20 aren't serious.

Indeed.

Posted by Tom at 10:00 PM | Comments (5) | TrackBack

March 29, 2009

Book Review - Basic Economics

Of the many authors whose books I've read over the years, Thomas Sowell is probably my favorite. Certainly that would be the case if you looked at my bookshelf, because I have more from him than any other author.

The reasons for this are many; Sowell is an unusually clear writer, he writes on a variety of subjects, and his research is impeccable. Rather than the "extended editorial" we get from so many populist writers, when you read a book by Sowell you'll find footnotes on every page. If you follow them you'll find they're usually from other scholarly works as well.

Another thing that attracts me is his world-wide perspective on just about any topic. The examples he uses in Basic Economics come from all around the world, and this is typical of his writing. To gather his data Sowell personally travels around the world and interviews scholars, businessmen, and political leaders.

Given that the economic crisis is the biggest thing happening, I figured I'd better bone up on the subject. I stated out with Henry Hazlitt's Economics in One Lesson, a short treatise promoting free market economics. It's a good primer, but without much depth. And although he is mostly right, one has to admit that Hazlett was not trained as an economist.

The same certainly cannot be said of Thomas Sowell. Educated at Harvard, Columbia, and the University of Chicago, he has a Ph.D. in Economics from the latter. After having been an Associate, Assistant, and full Professor at some of the most prestigious institutions in the country, he is currently the Rose and Milton Friedman Senior Fellow at The Hoover Institution at Stanford University. Over the years he has authored a couple of dozen books on a variety of topics, including of course economics.

None of this automatically makes Sowell right. There are plenty of people with fancy degrees who are wrong in their areas of expertise. What it does is lend some background so that when you read Basic Economics, you at least know you're looking at something written by someone trained in the subject matter he's writing about.

As with Hazlitt, Sowell is a conservative free market economist of somewhat libertarian bent. As such, you can expect that many or most of the lessons in his book revolve around his basic world view.

As the title implies, Basic Economics was written by Sowell for the average person who has no particular knowledge of technical economic terms. There is no jargon, no graphs or tables, and no equations that you'll find in textbooks. While it is footnoted liberally, for a book on "the dismal science" it is a surprisingly easy read. What helps keep it interesting is that Sowell uses some very interesting examples from business history to make his points.

For example, did you know...

That White Castle was the largest hamburger chain of the 1930s, with almost as many stores per capita as McDonalds has today?

That A & P Grocery was the Wal-Mart of the 1930s and 40s, because it drove so many mom 'n pop grocery stores out of business?

That James Cash Penny made his fortune because he studied the 1920 census?

White Castle made a fortune because they located their fast food outlets near factories in cities, giving them direct access to a huge market. All their stores were company owned, which gave them a decided advantage over a franchise chain during the Great Depression because a profitable store could subsidize an unprofitable one. But in the 1950s, the great era of factories ended, and workers moved to the suburbs and other types of jobs became more common. White Castle was slow to respond. Ray Croc operated McDonalds on a franchise model, which could grow more quickly than a model in which the company owned all the stores. His franchise stores were mostly in the suburbs, which is where the action was. We know who came out on top.

Before the automobile, it was hard to carry much home from the grocery store, and in any event the range of a horse and buggy was limited. As a necessity grocery stores were mom 'n pop affairs on every streetcorner. The owners of A & P saw how the automobile changed how people could get around, and so they developed the idea of the supermarket, which was so efficient it drove the smaller stores out of business. For a few decades A & P ruled the grocery business, yet was widely despised. In the 1950s the upstart Safeway located it's stores in the suburbs. A & P, whose stores were mostly in the cities, didn't initially put any stores in the suburbs because of the high cost of real estate there. Before long urban decay destroyed A & P's profitability, and the chain is a remnant of the giant it once was.

In the late 19th century Montgomery Ward and Sears Roebuck and Company made a fortune in the mail order business. They were the Amazon's of their day, selling everything from books to bicycles, to furniture to sewing machines to people all over the country. Instead of websites they had lavishly illustrated catalogs. This model worked because most Americans lived in the country, and the economics of large physical stores didn't work out. Then one day a guy named James Cash Penny studied the 1920 census, and realized that for the first time more Americans lived in urban areas than rural ones. He saw that the time for large physical department stores had come, and he built a chain of them. He almost drove Montgomery Ward and Sears out of business before they realized what was happening and hurriedly built their own stores.

These are just a few of the stories Sowell uses to illustrate his points. Many are from other countries, in particular India. Before 1991, business in India was tightly regulated.
A change in government allowed some losening of restrictions, and Sowell uses this to show how the resulting growth benefited more Indians.

Following are a few of the principles of economics that Sowell explains in his book. There are many, many more, so please understand that this is just a brief sample:

Price Controls

Scarcity means fewer goods available relative to the population, while a shortage is a price phenomenon. The earthquake of 1906 destroyed thousands of housing units, but there was no housing shortage because people immediately put extra rooms and buildings up for rent. These people did not do this out of the goodness of their hearts (in most cases, anyway), but were entrepreneurs who saw the chance to make money. As such, although 200,000 had their housing units destroyed, no one was forced to live on the street except for the shortest period. Likewise, Sowell explains how the gasoline "crisis" of 1972 and 1973 was entirely created by the U.S. government and did not reflect a shortage of product.

Complex effects can have very simple causes. For example, it is a simple concept that people buy more at lower prices than at higher ones. It is also simple to understand that producers will make more of something if they can sell it for a higher price than at a lower one. Price controls are also a simple concept. But if you put them all together you get all sorts of complicated reactions, most of which were not what was intended.

Rent control is the most prevalent attempt at price control by well-meaning people that has led to many problems, many of which were directly counterproductive to what the lawmakers intended. Sowell uses examples from Sweden, New York City, Australia, and other places to make the point. Sweden was the most illustrative. After World War II, Swedish lawmakers inposed rent control. With prices low, demand skyrocketed, especially as incomes increased in the post-war boom. No matter how fast they built housing units, the waiting list got longer and longer. Housing units were not scarce in any meaningful sense, but there was a shortage (remember our definitions). Finally, Swedish lawmakers abolished rent control, and prices went up to their natural level. As soon as they did, the waiting lists disappeared. There was neither a scarcity or shortage of housing units.

Other effects of rent control in a capitalist system is to reduce the incentive to build new housing units, and to maintain existing ones. It also incents builders to construct luxury units for the wealthy, since lawmakers almost always make a few exceptions in their legislation. Finally, rent control incents tenants to occupy a larger unit than they would otherwise, since prices are kept artificially low. The net effect is to create a housing shortage.

The concept of Cost is part of this discussion. Prices are not arbitrary, and serve the purpose of forcing people to make choices between scarce products (something is scarce if it isn't available in unlimited supply, such as air, and with pollution that's scarce too). Schemes by well-intentioned people to make things "more affordable" or a "right" ultimately run up against economic reality. Prices are not just a nuisance to get around, Sowell says, but reflect scarcity. Thus it may make some people feel morally superior that they make health insurance a "right," but the always ignore the effects on supply and demand while making their speeches.

Eliminate the Middleman

I think we're all heard the commercials that end with "and what did they do with the middleman, anyway? Something fishy there...." While this makes for a good commercial, it never really works out that way. Farmers are never going to truck their own eggs to the supermarket. Ranchers won't butcher their own stock and can their own stock. Newspapers don't own and operate their own newsstands, and automobile companies discovered a long time ago that it's cheaper to let someone else sell the cars.

There are more middlemen in Third World nations than in industrialized. Far from reflecting inefficiency, it is more efficient in underdeveloped economies to have more intermediaries. Sowell explains in some detail why this is so, but essentially it is because the quantities produced by farmers working small plots is less than in the West.

Metrics

It can be much harder to measure things like efficiency than one might imagine. Sometimes it's relatively straightforward. For example, European farmers brag that they produce more product per acre than their American counterparts. American farmers brag that they produce more per agricultural worker than their European counterparts. Both are factually correct. Who, then, is more efficient? Both, and neither. Each has tuned their efficiency to their own circumstances. Europeans have a shortage of land, Americans, labor.

Other times it is more difficult. During the Cold War, Soviet propagandists bragged that their railroad system delivered more goods per railcar than their American counterpart. And they were right. Did this, then, mean that their system was more efficient? No, because they were using the wrong metric. A better measure of efficiency is whether products get to where they're supposed to be when they're supposed to get there. By this measure, the American system was clearly superior. After all, we're all familiar with stories of Soviet agricultural waste because perishable products rotted before they were delivered. That the American system required more railcars is immaterial.

The Scarcity of Knowledge

A theme among free-market economists is the impossibility of central planners to have enough information to control any aspect of an economy. Frederick Hayek expounded upon this in The Road to Serfdom over 50 years ago, and Sowell continues the tradition in his book.

An interesting example Sowell uses is from 19th century Rhodesia. The British government decided that they knew best how to grow peanuts in Rhodesia, and so micromanaged the process from London. They turned a profitable enterprise into a disaster in just a few years.

In addition to this somewhat exotic example, Sowell uses much from everyday American life in his discussion of the concept of how knowledge affects economic decisions and the perils of government control. Everything from the ability of a literary agent to know the price of a manuscript to a real estate agent understanding the local housing situation are used.

Rich v Poor

Workers and salaries are supply and demand by another name. The same principles of supply, demand, and price apply to workers and their salaries. Demagogues may talk about "exploitation" and demand a "living wage" all they want but they cannot overturn the laws of economics.

We often hear in the press about how the rich are supposedly getting richer and the poor poorer. The term is usually "income inequality." The message is that we are are an increasingly stratified country and that something must be done.

The problem with such studies, Sowell contends, is that they tend to simply compare the income of those in the top 10-20 percent with those in the bottom 10 or 20 percent. What they almost always miss is that people are constantly moving in and out of each bracket. In fact, an absolute majority of people who started out in the bottom 20% in 1975 ended their lives in the top 20%.

"Rich versus poor" thinking also tends to be zero-sum. This is the fallacy of thinking that one person's gain is of necessity another's loss. Although it is rarely stated this way, that's what it often amounts to. What it does is assume that the economic pie is of a given size and does not increate

Speculators

A year or so ago when oil prices spiked, some on the left were telling us that it was all the fault of evil speculators. The message was that there were a group of people manipulating prices in order to make massive profits for themselves at the expense of the common person. Something, we were told, must be done. Typically that something was increased regulation.

Sowell explains speculation in more dispassionate terms. He explains how speculation is not only vital to a functioning economy, it benefits both producers and suppliers.

Essentially, a speculator is someone who buys or sells at a fixed price today for a product to be delivered at a later date. What this does is shift the risk from the producer and consumer to a middleman. The benefit to the parties at each end is that with an assured price their own planning is much simpler. Further, as they are not specialists in the price market or worldwide conditions, they can concentrate on what they do best. This holds true even since the speculator makes money.

Suppose we have a farmer who wants to grow potatoes. He does not know what the price will be at the end of the growing season, and doesn't know much about the potato exchange either. But he does understand farmer. His best course is before he's planted his first potato to go to a speculator and sell the entire crop at a fixed price, one at which he is certain to make a profit (otherwise he switches to a different crop). The speculator is hoping to sell the potato crop at a rate higher than he bought it from the farmer, but of course he may end up selling it at a loss. Because the speculator has reserves (or should, and here is where regulation comes in), he can bear the brunt of a loss without short-term pain.

Note that neither me nor Sowell are against regulation. What we're against are people who prefer to demagogue issues rather than understand the underlying economic principles.

Money and the Banking System

At one time American currency was redemable in actual gold or silver. We were said to be on the "gold standard" as the amount of money in circulation could not exceed the value of the gold in Fort Knox.

It was said that our money was then "backed up" by gold, but this was somewhat misleading. The value of the gold was not somehow transferred to t he paper currency, rather all it did was limit the amount of money that could be in circulation. The reason for taking us off the gold standard was so that the government could issue more money.

The Role of Government

As mentioned earlier, Sowell, like all free market economists, is not somehow against government regulation. Indeed, it is vital to the functioning of an economy.

Even maintaining basic law and order counts for a lot. What we take for granted took millenia to achieve. Further, "law and order" means "white collar crime" as well. An economy can fall apart just as fast if those at the top are allowed to violate laws just as much as if armed gangs are allowed to rule the streets. As such, laws must be easy to understand and reliably enforced.

The dependability if its laws was one of the primary reasons why noneteenth-century Britain was able to leap ahead of it's European competitors, and indeed the rest of the world. The dependability of their laws are why so many third-world nations remain mired in poverty despite both natural resources and foreign aid.

Sometimes economic decisions made through the marketplace are not better than those made by government. For example, a side effect of a coal power plant is air pollution. The people who bear the cost of the generating process is born by people who are not directly involved in the process. Breathing dirty air results in increased medical costs, which in an unregulated situation would not be paid by the utility company. These are called "external costs" by economists, and are the cause of legitimate government regulation, because only it can make decisions efficiently.

The flip side of "external costs" is "external benefits." Making truck companies put mud flaps on their vehicles does not help them, but those who are behind them on the road. Again, we have a reason for legitimate government regulation.

More and More

All this said, we have to recognize that there is a point of diminishing return to such things. Reducing air pollution is all very fine, and it is easy and cheap to get rid of the first 95% of particles from a cola plant. Getting rid of each additional percentage point costs more and more. We have to recognize that there comes a point where the cost exceeds any reasonable benefit.

It is a fallacy that American goods cannot compete because of low-wage earners in third world countries. Historically, high-wage countries have had trade surpluses with low-wage countries. The economic flaw in the argument is that it confuses wage rates with labor costs, and labor costs with total costs. "Wage rates are measured per hour of work, while labor costs are measured per unit of output. Total costs include not only the cost of labor but also the cost of capital, raw materials, transportation, and other things needed to product output and bring the finished product to market." In actuality, high-wage nations have three times the production per hour of low-wage nations.

"Dumping" of cheap products is often used as a justification for protectionist measures, but the argument doesn't stand up to scrutiny. In fact, Sowell says, it has proved impossible to accurately calculate the cost of production in a foreign country, as has been admitted to by the US government. Further, all countries both indirectly or directly subsidize or help various industries, and all impose restrictions of one type or another in imports. Ratcheting it up only results in a trade war of tit for tat.

Economic terminology can be confusing and even misleading. This is particularly true when saying that a particular currency is "strong" or "weak." A "strong" dollar simply means that its value is rising in relation to one or more other currencies. A strong dollar will buy more units of a foreign currency than previously. A weak dollar will buy less. Whether this is good or bad depends on your point of view. A weak dollar means that it takes more dollars to purchase the same amount of foreign currency that it did earlier, and vice versa for a strong dollar. A strong dollar is good if you are buying foreign goods, but bad if you are exporting American goods to other countries.

Economics is not a value system, but simply a means of weighing one value against another. The study of economics does not say whether rent control is good or bad, only what will happen if you impose it. Adam Smith, the father of laissez-faire economics, gave most of his money to charity when he was alive.

The term "greed" is thrown about often but is rarely defined. Ironically, it is often those who set out to make the most money for themselves that end up providing a new product or service that lots of people want, or find a way to make an existing profit at lower prices. Indeed, "lofty talk about 'non-economic values' too often amounts to very selfish attempts to have one's own values subsidized by others."

We also hear much talk about "predatory pricing," especially with regards to large retailers who drive smaller higher-priced rivals out of business. However, there is precious little evidence that this really exists. Both A & P Grocery in the 1940s and Microsoft in the 90s were accused of predatory pricing, both without a single solid piece of evidence.

Conservatives are often accused of promoting "trickle down" economics, but it simply isn't so, because the theory has never existed among economists. Sowell writes that

People who are politically committed to policies of redistributing income and who tend to emphasize the conflicts between business and labor, rather than their mutual interdependence, often accuse those opposed to them of believing that benefits must be given to the wealthy in general or to business in particular, in order that these benefits will eventually "trickle down" to the masses of ordinary people. But no recognized economist of any school of thought has ever had any such theory or made any such proposal. It is a straw man...

Proposals to reduce taxes on capital gains, for example, are often opposed politically by saying that those who make such proposals believe in a "trickle down" theory of economics. In reality, economic processes work in the directly opposite way from that depicted by those who imagine that profits first benefit business owners and that benefits only belatedly trickle down to workers.

Rather, when an investment in a business is first made, the first thing done is to hire people. Capital is spent on buildings, plant, equipment. This obviously benefits those receiving the money. Only years later do most businesses turn a profit. The profit, then is at the end, not the beginning, of the process.

Economics has been called "the dismal science" not because it is boring but because it tends to throw cold water on the schemes of do-gooders. Sowell does an excellent job of explaining why this is so in Basic Economics, and does so with clear writing and without the technical jargon. It is a book recommended for everyone who wants an understanding of fundamental economic issues.

Postscript to the Review: A Note on "Faith in Free Markets"

We on the right are often accused of having "faith in free markets," and sometimes the accusation is true. It usually misses the point, though. As Ramesh Ponnuru recently explained in the most recent print edition of National Review

..."faith in the market," even when taken too far, as it can be, is generally not faith that some group of people have all the right answers. it is confidence that trial and error,k feedback loops, competition, and decentralized knowledge will come closes and closer to the right answers. Friedrich von Hayek's Nobel lecture urged policymakers to emulate gardeners rather than engineers, creating the environment for growth rather than trying to bring it about directly.

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March 19, 2009

A Pox On All Their Houses

This whole situation with AIG and the bonuses is an absolute disaster. Not because of the bonuses, which are small potatoes, but for where all this is headed. In fact the whole thing disgusts me to the point where this is going to be a pretty short post.

First off, conservatives should not defend AIG or the bonuses. The father of modern American conservatism, William F. Buckley Jr., criticized similar behavior by Viacom a few years ago. When your company is failing you do not pay anyone a bonus for anything. When you take money from the government you do not pay anyone a bonus for anything. I've heard all of the rationalizations and none of them hold water. Can't these guys go without the big bucks for a few quarters?

Most Democrats, of course, are demagoguing the issue for all it's worth, the worst being Barney Frank, a man who ought to be investigated himself. Of the many ironies we now know that Sen. Chris Dodd added the very provisions that made the bonuses possible to the so-called stimulus bill that made the bonuses possible, after first lying about it. Tax-cheat Geithner "admitted that his staff encouraged lawmakers to take out a key provision in last month's stimulus that would have taxed executive compensation in an attempt to discourage companies such as AIG from handing out excessive bonuses while receiving billions of taxpayer dollars."

The reason why no one figured out what was going on is that President Obama insisted that we pass his fantastically huge stimulus bill in record speed before anyone had time to read it. Obama didn't read it. No Democrat in Congress read it. We were told it was so important to pass it to "save the economy," a complete fiction since that was never its real purpose.

To cover themselves the House passed 328-90 a 90% tax on the bonuses. Many in the GOP are going along because, after all, the bonuses were outrageous, and there seems no other solution. Minority Leader Boehner said it right though when he said "Are you kidding me? This is joke. Vote no." He might have added that the whole thing pointed to the folly of bailouts in the first place, but oops it was President Bush and Treasury Secretary Paulson who pushed us into accepting the first bailout.

Then we have the news that Barack Obama signed a $500,000 deal for a children's propaganda book days before his inaguration. When Gingrich did something similar in 1994 media outcry was so fierce he returned the money. Yes I know, Newt's deal was for $4.5 million, quite a bit more. I don't see that makes a difference. Anyway, you can be assured that there will be no pressure on Obama to give the money back, or to give it to charity since we're in a terrible recession - oh wait that was his line last week. Rather than take charge and get his economic team in order, Obama's way of dealing with the crisis is to waste time on NCAA picks and jet out of town to do the Tonight Show. Good grief.

Where is all this headed? I'll tell you.

The purpose of the left is to place an upper limit on salaries. They simply don't like that some people make a lot of money. Obama said as much during the campaign, and anyone with eyes to see and ears to hear figured it out. Just as they're getting ready to go after charities, they're going after the wealthy. If you didn't follow my links above, the purpose of the stimulus was 1) to move us in the direction of becoming a European-style socialist state, and 2) create a permanent majority bloc of Democrat voters by making as many people dependent on government as possible. Right now it's AIG, tomorrow it'll be other companies.

Not that there's an easy solution to our current situation. It's mostly a banking crisis, and until Obama and his tax-cheat of a Treasury Secretary figure out how to deal with the "toxic assets," as they're called, we're not going to move forward anywhere fast. If they both didn't behave so badly, I'd have more sympathy, since like dealing with Pakistan there is no easy solution. The whole thing was caused by the malfeasance of both parties over the years. No one is except, though since the Democrats are in charge it is right that they get the blame.

Right now we're all entertained by the circus in Washington. Hold on to your seatbelts, because the next few years are going to be a wild ride.

On Another Note

This is somewhat separate from the subject of this post but I can't resist. Remember that 25 box set of 'classic' American movies that Obama gave to Prime Minister Gordon Brown?

Alas, when the PM settled down to begin watching them the other night, he found there was a problem.

The films only worked in DVD players made in North America and the words "wrong region" came up on his screen.

It was bad enough that the White House gave a stupid gift like this to the world leader or our most precious ally, especially coming on the heals of returning the bust of Churchill and getting as a gift a penholder carved from the timbers of an anti-slavery ship. Now we learn that in addition to being completely insensitive to protocol and history, they're incompetent at the White House as well.

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March 7, 2009

The Left's War on Charities

Liberals constantly tell us what good people they are because they want to help the poor and downtrodden. Why, then, is President Obama out to destroy charitable institutions? From an opinion piece in Tuesday's Wall Street Journal:

Nonprofit leaders are reeling from the recent news that President Barack Obama's proposed budget would limit tax deductions on charitable contributions from wealthy Americans. But now the philanthropic world has something else to worry about. Today the National Committee for Responsive Philanthropy (NCRP), a research and advocacy group, will release a report offering "benchmarks to assess foundation performance." Its real aim is to push philanthropic organizations into ignoring donor intent and instead giving grants based on political considerations.

The committee is part of a rising tide of politicians and activists who are working to change the face of American philanthropy -- and not for the better.

The report, titled "Criteria for Philanthropy at its Best," advises foundations to "provide at least 50 percent of grant dollars to benefit lower-income communities, communities of color, and other marginalized groups, broadly defined." The committee looked at 809 of the largest foundations in the country, whose combined three-year grants totaled almost $15 billion, and concluded that the majority of foundations are "eschewing the needs of the most vulnerable in our society" by neglecting "marginalized groups."

"But it's only advice," you protest. So far it's just advice, I respond. I think that limiting tax deductions was only Obama's first step. His next step will be to say "if you want your deductions back you have to meet my requirements."

Reducing the Charitable Deduction

First, here are the tax brackets for fy 2009:

_______0 to _$8,350 10%
__$8,350 to _$33,950 15%
_$33,960 to _$82,250 25%
_$82,250 to $171,550 28%
$171,550 to $372,950 33%
$372,950 and above _ 35%

The Chronicle of Philanthropy explains that the amount of charitable giving you can deduct depends on your tax bracket, so that if you're in the 33 or 35% bracket, that's what you can deduct (beyond the "standard deduction," and for up to 30 - 50% of your adjusted gross income). Under Obama's proposal, anyone making over $250,000 would be limited to 28% for all itemized deductions.

As an example, suppose

...a wealthy donor in the top tax bracket who makes a $100,000 gift. The donor currently would save $35,000 in taxes, or 35 percent of the gift. Under President Obama's proposal, that same donor would save only $28,000, or 28 percent -- a difference of $7,000.

For all of you liberals who profess to care so much about the poor, what this means is that wealthy people will give less money to charity. Happy now?

And as you might imagine, charities are up in arms over this.

Politically Correct Giving

Reducing the tax deduction is only part of the story. In addition, Obama and his fellow leftists are looking for ways to regulate how charities spend their money.

Let's look at that report mentioned earlier; Criteria for Philanthropy at Its Best: Benchmarks to Assess and Enhance Grantmaker Impact, issued by the National Committee for Responsive Philanthropy. I read the Executive Summary, and a few of the other documents, and most of it didn't look so bad. This stuck out, though, in Chapter 1, "Values:"

A grantmaker practicing Philanthropy at Its Best serves the public good by contributing to a strong, participatory democracy that engages all communities....

b) Provides at least 25 percent of its grant dollars for advocacy, organizing and
civic engagement to promote equity, opportunity and justice in our society.....

Reading on, there is much talk about "income inequality" which we are told "remains a
significant barrier to improving one's quality of life and data suggest that income inequality has been exacerbated in recent years." I'm not so sure about the data, but I do know that it's not "income inequality" that's the problem. The problem is not that incomes are unequal, but that there are too many people whose income is too low. This is a distinction with a difference.

Also worrisome is that Harvard political philosopher John Rawls is cited approvingly:

In A Theory of Justice, Rawls articulated his now famous and often cited principles of distributive justice. The first principle calls for all people to have "equal rights to the most extensive system of basic civil liberties." The second principle, also called the "distributive justice principle," states that the socio-economic inequalities inherent in the free market system are morally justifiable if they "work to the benefit of the least advantaged" in our society. Rawls sought to ensure justice and fairness, with an emphasis on redistributive justice in the welfare state. Rawls asserted that all wealth in society is made by the cooperation of all the members of society in the context of the arrangements of basic institutions. He stated that there are two types of societies: a capitalist welfare society and a democratic property owning society. The first is concerned with order and will support welfare for the purpose of maintaining order and serving capital. The latter will arrange institutions and norms to support democracy and welfare to secure membership. Capital will be arranged to support democracy and people.

Socialist income redistribution, here we come.

Also sticking out in the NCRP report was this in Chapter 1 as well

Advocacy, community organizing and civic engagement have played essential roles in the development of our society and our democracy...

Digging further, one comes across the term "social justice" many times. Conveniently, they define it for us:

Social justice philanthropy is the practice of making contributions to nonprofit organizations that work for structural change and increase the opportunity of those who are less well off politically, economically and socially.

Their recommendation:

Leading the field, 108 foundations (13.35 percent of our sample) provided at least 50 percent of their grant dollars for the intended benefit of marginalized communities. Also noteworthy, 56 foundations (6.9 percent) provided at least 25 percent of their grant dollars for social justice. These are the benchmarks for Philanthropy at Its Best.

This is scary stuff for those of us who believe in traditional concepts of liberty. Hold on to your wallets, because these people want to use charitable causes to advocate for income redistribution and other leftist political goals.

Much of the rest of the proposals were innocuous, and some of the ideas were actually quite sound.

However, read the rest of the Wall Street Journal article cited above. Ms Riley discusses other leftist groups that advocate leftist goals for charitable institutions, such as The Greenlining Institute and the Council on Foundations. Given how leftist the Obama Administration is proving, it can't be long before they enact at least some of their recommendations into law.

Why They're Doing This

Obama makes his purpose clear in "Jumpstarting the Economy", one of the documents outlining his proposal. Under "Financing health Care Reform" it says

The reserve fund is financed by a combination of rebalancing the tax code so that the wealthiest pay more as well as specific health care savings in three areas: promoting efficiency and accountability, aligning incentives toward quality, and encouraging shared responsibility.

This is straight out class warfare. Obama and his fellow leftists hate large segments of America and are determined to punish them. The blather at the end about "shared responsibility" is a lot of hooey. Their idea is that you are not only responsible for your neighbor in a moral sense but as such must be forced to pay for them as well. It's not a matter of doing the right thing out of a sense of moral obligation; the liberals want to force you to do it their way.

When Obama said to "Joe the Plumber" during the campaign that "I think when you spread the wealth around, it's good for everybody" he wasn't kidding.

Obama and the left have a simple objective; they want total control of how aid to the poor is distributed. They'd like government to do as much as possible, and failing that the want to control what private charities do.

Posted by Tom at 8:30 PM | Comments (1) | TrackBack

March 1, 2009

Obama's War on Investors and Business

President Obama has revealed himself to be every bit as left-wing as we had feared he would be. Those conservatives who assured us that he would govern from the center have been proven completely wrong, and he has barely been in office a month and a half.

Economist Larry Kudlow lays it out:

He is declaring war on investors, entrepreneurs, small businesses, large corporations, and private-equity and venture-capital funds.

That is the meaning of his anti-growth tax-hike proposals, which make absolutely no sense at all -- either for this recession or from the standpoint of expanding our economy's long-run potential to grow.

Raising the marginal tax rate on successful earners, capital, dividends, and all the private funds is a function of Obama's left-wing social vision, and a repudiation of his economic-recovery statements. Ditto for his sweeping government-planning-and-spending program, which will wind up raising federal outlays as a share of GDP to at least 30 percent, if not more, over the next 10 years.

This is nearly double the government-spending low-point reached during the late 1990s by the Gingrich Congress and the Clinton administration. While not quite as high as spending levels in Western Europe, we regrettably will be gaining on this statist-planning approach.

Study after study over the past several decades has shown how countries that spend more produce less, while nations that tax less produce more. Obama is doing it wrong on both counts.

Actually, he's doing it right, but by his definition. Obama, you see, isn't really interested in fixing the economy, at least not in the traditional sense.

His real purpose is what he said it would be during the campaign:

I think that Obama's real purpose is what he said to "Joe the Plumber" during the campaign; "I think when you spread the wealth around, it's good for everybody."

He also admitted to Charlie Gibson during a debate with the other Democrat candidates that "I would look at raising the capital gains tax for purposes of fairness."

And of course his 2001 interview with Chicago Public Radio station WBEZ in which he complained that "the Supreme Court never ventured into the issues of redistribution of wealth, and of more basic issues such as political and economic justice in society."

Some will object that President Obama's economic plan must be good because he enjoys high poll numbers. And indeed he does. The Real Clear Politics average has him at a 64% approval rating, which is quite respectable.

The markets, however, see it differently.

Here's the NYSE composite for the past 2 months

NYSE Composite Jan01-Mar01 2009


And here is the Dow Jones for the past 2 months

Dow Jones  Jan01-Mar01 2009


Certainly the markets have been going down for the better part of a year before Obama took office. But if Obama's plan is so good, the markets should have stabilized or moved up by now. Remember, the stock market is a leading indicator, not a lagging one.

Obama's True Purpose

Mona Charen summed up where this is taking us

President Obama has made it abundantly clear that he intends to hustle this country into European nanny-state socialism if he can (and just as fast as he can).

That's one. Obama's other purpose is to enlarge the bloc of permanent Democrat voters by increasing the number of people whose jobs are dependent on government spending.

In an earlier post I listed program after program in the "stimulus" that had nothing to do with economic stimulus. It's all just a giant liberal wish-list enacted into law. One even overturns the 1996 welfare reform It was simply one liberal program after another designed to increase the size of government and create a permanent class of Democrat voters.

If you want to accuse President Bush of using 9/11 to "take away our civil liberties" with the Patriot Act, I disagree but if you want to make that argument, fine (nevermind that the Patriot Act can and probably will be overturned with the stroke of a pen while Obama's program will be next to impossible to roll back). Can't we then accuse President Obama of using the fiscal crisis to push the largest expansion of the government and transformation of our relationship to it since LBJ's Great Society?

Fifty years ago Eisenhower warned us about a military-industrial complex. He had a point, though with the looming threat of the Soviet Union and now of jihadism it's hard to see how we could have done things much differently. Nevertheless, I will certainly agree that our defense establishment should wax and wane with regard to the actual threat out there. Perhaps at times we contract it too much, but certainly we do not need to spend what we did during the height of the Cold War.

While we're at it, I will also say for the record that spending on defense matters to boost the economy or employ people is also wrong. Defense spending should not be justified for these reasons. We have a military to kill people and break things (or to provide a credible threat that they can do so, which is the same thing if you know your Clausewitz), not to provide employment opportunities.

But the non-defense "liberal-industrial complex" never wanes. Once started, it is almost impossible to eliminate programs and positions.

If you don't believe me take a look at your local county, town, or city budget. Most are on line and you can access it fairly easily. If not, hard copies are available by law.

Point is, because they're smaller, it's easier to dig though them. Do so, and you'll be amazed at some of the things that your locality spends money on. We have a "master gardener" program to provide residents of one of the wealthiest counties in the country with landscape management tips. We have guidance counselors in our elementary schools. Yet suggest that either should be eliminated during a time of recession and you'll face a firestorm of protest; from the master gardeners and elementary school guidance counselors.

Go to a public hearing on budgets at your local county, town, or city. Suggestions to cut anything are met with proclamations of dire consequences.

Anyone who has observed these processes knows that is very easy to increase the size of government, but almost impossible to shrink it. By creating more and more whose livelihoods are dependent on government, Obama has assured the Democrat party of more voters.

Obama aims to resurrect not so much FDR's New Deal, as LBJ's Great Society. His programs are not to fix the economy, but to move us towards a European model, perhaps especially the French dirigiste one. He wants to change the very nature of America, who we are and what we think about ourselves. He wants to change us from a nation of entrepreneurs into a nation of dependents. He's likely to succeed unless we on the right get our act together. Time is of the essence, and we must keep him from getting a second term.

Posted by Tom at 9:45 PM | Comments (11) | TrackBack

February 27, 2009

Obama's Porkulus Package will Break the Bank

Via Michelle Malkin, here's Republican House Minority Leader John Boenher's assessment of Obama's federal budget

In 2009, federal spending will approach $4 trillion, or 28 percent of gross domestic product (GDP) - a one-third increase in the size of government in a single year. The budget released by the White House today is loaded with job-killing tax hikes and a slate of even more government spending. Overall, the blueprint projects a record $1.75 trillion deficit this year while doubling the national debt over the next ten years. Following are just 10 fast facts about the Administration's budget, which our children and grandchildren will be paying for far into the future.

1. The Administration's projected budget deficit of $1.75 trillion is higher than the last five years of deficits combined, and under this plan, we will see three consecutive trillion dollar deficits between now and FY 2012.

2. While it was purported to cut the budget deficit in half - from $1.75 trillion in 2009 to $533 billion by 2013 - this budget projects higher deficits in 2014 ($570 billion), 2015 ($583 billion), and 2016 ($637 billion). In 2019, the final year in the budget, the deficit is projected to be $712 billion.

3. Including the recently-enacted trillion-dollar "stimulus" spending bill, discretionary spending will soar by 24 percent this year under this budget.

4. The budget projects that the national debt will increase from $8.4 trillion in 2009 to $15.4 trillion in 2019.

5. The Administration's budget contains $1.4 trillion in tax increases - tax hikes that will impact everyone, from small businesses, charities, and seniors to everyone who owns a 401(k) and anyone who flips on a light switch.

6. After promising that he will reduce taxes on 95 percent of Americans, the Administration's budget establishes a $646 billion energy tax hike that will impact anyone who uses electricity, drives a car, or relies on energy in any way.

7. This budget forecasts more than $1.5 trillion in new health care spending, including a 10-year, $634 billion a health care "reserve fund." The budget also calls for seven percent annual growth in Medicare and more than six percent annual growth in Medicaid over the next 10 years.

8. The budget includes a $750 billion placeholder for a second round of spending under the Troubled Assets Relief Program (TARP), even though the first round of TARP spending is not yet finished, nor is there a clear explanation of how funds under the initial round was spent.

9. The Administration's budget claims that reducing the number of troops in Iraq over the next 10 years will cut the deficit by $1.6 trillion; however, that is only because the budget allocates the same amount of funds for the Iraq war each year over the next decade, even though most combat troops may be withdrawn during the next 19 months. The savings are, at best, deceptive.

10. The budget provides a scant 2.9 percent pay raise for military personnel as required by law, less than a week after Democrats in Congress provided the necessary funding to implement District of Columbia locality pay for overseas Foreign Service officers, which would constitute an 18 percent pay increase.

Heaven help us with this idiot in the White House.

Oh, and let's not have any nonsense from leftie commenters about how Obama "has identified $2 trillion in government spending cuts that can be made over the next decade."

It's all budget trickery, as explained by Brian Riedl and James Capretta. Let's also not have any nonsense about how we can tax "the wealthy" enough to pay for it all, because the Wall Street Journal destroys that argument.

We're going from bad to worse with regard to federal spending with Obama. I did not like President Bush's budgets, or the spendthrift ways of the Republicans in congress, and said so many times on this website. But Obama take the cake when it comes to fiscal irresponsibility

Posted by Tom at 10:00 PM | Comments (0) | TrackBack

February 16, 2009

Are We All Fascists Now?

Liberals are fond of pointing out that their schemes aren't socialist, since they do not advocate state ownership of business. The more extreme socialism gets, the more private property is abolished, but the point is the same.

In this claim the left is surely correct. What they advocate is not socialism.

It's fascism, or at least a form of it.

Don't believe me? In a way I can't blame you. "Fascism" is an epithet, a term of opprobrium thrown around at whomever is on the low end of the political totem pole. As a practical matter it has lost most if not all of it's original meaning. Thus, both the Soviet and Chinese communists used to call each other fascists after their brief period of cooperation in the 1950s.

The cartoon version of fascism is that it is extreme nationalism, guys with guns taking over the government and goon squads beating up opponents, and a government that lets big business run the economy. The first two are aspects of fascism, though neither are central to it, at least in the way that most people think. The third is flat out false.

Yet original meaning, and terminology, counts. So do labels, as long as they're not used as simple insults.

What's interesting is that although today "fascism" is universally seen as a bad thing, not only was this not always the case, but the best people on the left called themselves fascists. It was widely seen as the "third way" between the capitalism and socialism and communism.

Let's go back to basics and discover what fascism is and is not.

There is the "hard" fascism of a Mussolini or a Hitler, which we all know about. Then there is "soft" fascism, of the sort Woodrow Wilson or Juan Peron practiced, and even FDR to a certain extent. Barack Obama and some or many of his followers are of this second sort.

This does not at all mean that all liberals are fascists. What it means is that many in the United States today do subscribe to a soft fascism whether they know it or not.

Jonah Goldberg identified the type in his groundbreaking 2007 best seller Liberal Fascism: The Secret History of the American Left, From Mussolini to the Politics of Meaning (much of what follows in this post consists of parts of my review of Goldberg's book, but since I'm quoting myself I decided not to blockquote it).

Goldberg quotes Mussolini's political platform to make the point

  • Lowering the minimum voting age to eighteen, the minimum age for representatives to twenty-five, and universal suffrage, including for women.
  • "The abolition of the Senate and the creation of a national technical council on intellectual and manual labor, industry, commerce, and labor."
  • End of the draft.
  • Repeal of titles of nobility.
  • "A foreign policy aimed at expanding Italy's will and power in opposition to all foreign imperialism"
  • The prompt enactment of a state law sanctioning a legal workday of eight actual hours of work for all workers.
  • A minimum wage.
  • A creation of various government bodies run by workers representatives.
  • The creation of various government bodies run by workers' representatives.
  • Reform of the old-age and pension system and the establishment of age limits for hazardous work.
  • Forcing landowners to cultivate their lands or have them expropriated and given to veterans and farmers' cooperatives.
  • The obligation of the state to build "rigidly secular" schools for the raising of "the proletariat's moral and cultural condition."
  • "A large progressive tax on capital that would amount to a one-time partial expropriation of all riches.
  • "The seizure of all goods belonging to religious congregations and the abolition of all episcopal revinues."
  • The "review" of all military contracts and the "sequestration" of 85% of all war profits."
  • The nationalization of all arms and explosives industries.

What's important to understand is that these weren't just words to Mussolini; he meant it. He didn't just use this platform as a trick to get into power, because he implemented as much of it as he could once he was in power.

I shouldn't need to say it, but if you presented this platform to any Democrat today they'd accept it as their own.

Mussolini made a big deal about "getting beyond labels" and seeking a "third way" between left and right. He promoted himself as a pragmatist who "made the trains run on time." To be sure, he governed as a dictator. But he was no Hitler or Stalin in his level of brutality. He won reelection in 1924 in what were reasonably fair elections, and his granting of womans suffrage gained him applause from no less a source than The New York Times.

Mussolini defined fascism as "Everything in the State, nothing outside the State." Mussolini himself coined the word "totalitarianism" to describe his system, and it's important to note that he meant it in a benevolent manner, as he saw his system as a humane one in which everyone was taken care of.

The Militarization of Society

A core tenant of fascism is the desire to militarize society whether there is an external war to fight or not. The whole point, in fact, of fascism is to mobilize. What is important to understand, though, is that it is society that is being mobilized, not the military. When we say "militarization of society" we are NOT talking about putting people in uniform and giving them guns. Thus, Roosevelt's Civilian Conservation Corps (CCC) was the most fascist organization ever seen in America.

Worse than the CCC was the National Recovery Administration (NRA), the cornerstone of Roosevelt's New Deal. It was led by General Hugh "Iron Pants" Johnson, and man who questioned the patriotism of his critics in a manner that would have made Joe McCarthy blush. He continually referred to the NRA and it's mission in military terms, saying for example that "This is war - lethal and more menacing than any other crisis in our history." In fact, Johnson was an ardent admirer of Mussolini's fascist government.

The symbol of the NRA was the Blue Eagle. Usually depicted in textbooks as an innocent symbol that businesses put in their window to show that they went along with NRA guidelines("We do our Part" was the motto under the eagle), it was really the method by which Roosevelt and Johnson bullied businesses into joining. The NRA stuck it's tentacles into every aspect of daily life, or at least tried to. The Blue Eagle was used for propaganda in a way that Goldberg says is difficult to exaggerate, and indeed the whole thing was really more an exercise in state religion than economics. Heaven help any business that refused to sign up, because people were admonished by the government not to buy anything from businesses that didn't have the Blue Eagle in their window.

Fascist Economics

It is perhaps in the area of economics that fascism is the most misunderstood. In the left's cartoon version, fascism occurs when right-wing politicians conspire with big business to oppress "the little guy," or that European fascists were tools of big business. Nothing could be farther from the truth. In fact, as Goldberg demonstrates, "in the left's eternal vigilance to fend off fascism, they have in fact created it, albeit with a friendly face."

The fact is that the more free the market, the less fascist, and the more regulated and close to the political center, the more fascist. The far left, at outright government ownership, is socialist. Remember; it was Hitler and Mussolini who promoted themselves by claiming that they were neither left nor right but represented a "Third way."

Both Mussolini and Hitler were supported by small donations, and not, for the most part, by money from big corporations. Both denounced big business and the wealthy time and again, Hitler most notably in Mein Kampf. Their political platforms stressed regulating business and taxing the wealthy to benefit the working middle class.

Fascism is when the state says to business "You may stay in business and own your factories. In the spirit of cooperation and unity, we will even guarantee you profits and a lack of serious competition. In exchange, we expect you to agree with - and help implement, - our political agenda." This was not only the deal that Hitler and Mussolini made with big business in their respective countries, but it was pretty much the one that Woodrow Wilson and Franklin Delano Roosevelt imposed during the First World War and Great Depression as well. None of this can be called "right wing."

Brave New Village

If Roosevelt's CCC was the most fascist organization ever created in the United States, Hillary Clinton's It Takes a Village is the most fascist book.

It's very titleis about as fascist as you can get. If the motto of the Mussolini's fascism was "everything in the State, nothing outside the the State, then the implicit motto of It Takes a Village(to Raise a Child) is "everything in the village, nothing outside the village." The message is clear; your children belong to "everyone" which in the modern world means the state.

"Civil society" has traditionally meant free and open "independent associations of citizens who pursue their own interests and ambitions free from state interference or coercion" and "the way various groups, individuals, and families work for their own purposes, the result of which is to make the society healthily democratic." It consists of churches, labor unions, all those clubs and organizations that people form for their own purposes and as long as they are not outright criminal are outside the control of the state.

Hillary has a different view of civil society. To her it is a "term social scientists use to describe the way we work together for common purposes." This is factually incorrect and startlingly totalitarian. There are no truly free associations or clubs in Hillary's world, for everything in her "village" is managed or controlled by the state to achieve "common purposes."

Cult of Personality

Another aspect of fascism is that the person of the leader is built up and worshiped in proportions far greater than the average admired political leader. With Obama I don't think this needs much elaboration, but I'll quote Mark Levin from last October

There is a cult-like atmosphere around Barack Obama, which his campaign has carefully and successfully fabricated, which concerns me. The messiah complex. Fainting audience members at rallies. Special Obama flags and an Obama presidential seal. A graphic with the portrayal of the globe and Obama's name on it, which adorns everything from Obama's plane to his street literature. Young school children singing songs praising Obama. Teenagers wearing camouflage outfits and marching in military order chanting Obama's name and the professions he is going to open to them. An Obama world tour, culminating in a speech in Berlin where Obama proclaims we are all citizens of the world. I dare say, this is ominous stuff.

Ominous indeed.

Are We All Fascists?

No, not all of us. I have to think that some or hopefully many on the left will wake up and see what they have created. While we on the right have our problems with people like Pat Buchanan, most of us simply want the government to leave us alone. And as I think I made clear above sending troops abroad isn't fascism, whether you like the war or not.

Not Just Me

Now that we're clear on what fascism is and is not, let me go back to the article that prompted this post; Michael Ledeen's We Are All Fascists Now, posted last Thursday at Pajamas Media.

Ledeen notes Newsweek's "embarrassingly ignorant" cover story "We are All Socialists Now" which makes the same mistake I noted above; Obama is not seeking to take over big business, just coopt it for his own purposes. Yes the stimulus spends huge amounts of money, yes the Democrats want to cap salaries, yet they want to regulate like never before, but

But that's not socialism. Socialism rests on a firm theoretical bedrock: the abolition of private property. I haven't heard anyone this side of Barney Frank calling for any such thing. What is happening now-and Newsweek is honest enough to say so down in the body of the article-is an expansion of the state's role, an increase in public/private joint ventures and partnerships, and much more state regulation of business. Yes, it's very "European," and some of the Europeans even call it "social democracy," but it isn't.

This isn't socialism, but fascism, as Ledeen goes on to say.

As tempting as it is to compare Obama to Mussolini, given the latter's political platform and oratorical skills, it's probably Juan Peron he more represents. After all, Obama and the Democrats are not going to abolish our democracy. They don't need to.

Juan and Eva Peron

Writing in last Sunday's Washington Times, Jeffrey T. Kuhner elaborates:

The disastrous path on which America is currently embarked was tried in another country - in the Western Hemisphere: Juan Peron's Argentina. During the 1940s until a 1955 coup ousted him from power, Peron presided over a fascist state.

What is not commonly known about Argentina is that prior to World War II, it was an economic powerhouse. Beginning in the 1880s and continuing through the 1920s and 1930s, it was regarded as one of the most prosperous and advanced nations in the world.

Argentina had a strong industrial base, thriving agricultural exports and a broad and expanding middle class. Like America, it served as a magnet for immigrants from all over the world, especially Italians. Within 15 years, however, Argentina went from being one of the richest to one of the poorest countries.

This was due largely to Peronist policies. Upon coming to office, Peron, along with his popular wife, Eva, established a corporatist state characterized by lavish social spending, elaborate welfare programs, protectionism, confiscatory taxation and runaway deficits.

Peron used strident class warfare rhetoric, attacking big business, the banks, corporations and the propertied class. He greatly strengthened labor unions, making them pivotal allies of his regime.

Peronism transformed the Argentine state. The bloated bureaucracy and massive government intervention fostered widespread corruption. Central economic planning destroyed productivity and growth. Investment capital fled. Inflation and interest rates soared. The middle class was wiped out. The independent judiciary was undermined and eventually smashed. The fawning media class became co-opted by Peron's allies. His -and Eva's - cult of personality fostered a climate of violence and political persecution of the regime's enemies. Argentina degenerated into the Latin American basket case that it is today....

Mr. Obama is taking the first dangerous steps toward an American version of Peronism. His followers see him as a political messiah, a revolutionary change agent who will foster national cohesion and unity. He and the Democrats are plundering the state, using it as a vehicle to reward supporters (and punish foes). He is our Dear Leader, whose image is everywhere from magazine covers to T-shirts to baseball caps. His wife, Michelle, is the Eva Peron of our time - glamorous, chic, a fashion trend-setter who is beloved by the media.

A scary vision indeed, especially since Peronism is still very popular in some circles. The theatrical musical production Evita! was quite popular and won a whole list of awards. Given how things are going now, it's not hard to imagine a Michelle! in our future.

Posted by Tom at 10:00 PM | Comments (16) | TrackBack

February 8, 2009

Obama's New Politics of Fear

Last March, the International Herald Tribune wrote this about candidate Obama

At the core of Senator Barack Obama's presidential campaign is a promise that he can transcend the starkly red-and-blue politics of the last 15 years, end the partisan and ideological wars, and build a new governing majority.

To achieve the change the country wants, he says, "we need a leader who can finally move beyond the divisive politics of Washington and bring Democrats, independents and Republicans together to get things done."

IN Des Moines, a week before the January 3 caucuses in Iowa, he criticized his opponent Hillary Clinton, "urging the crowd to reject the Clintons' politics of cynicism and fear."

And finally, let's go back to his 2004 address to the Democrat National Convention he asked

Do we participate in a politics of cynicism or do we participate in a politics of hope?

Then, from today's Washington Times, here's the politics he has actually brought:

President Obama on Saturday morning warned of a "national catastrophe" if Congress does not move quickly to pass and implement his economic-stimulus plan, praising the Senate's tentative deal on an $827 billion version of the bill.

"If we don't move swiftly to put this plan in motion, our economic crisis could become a national catastrophe. Millions of Americans will lose their jobs, their homes and their health care. Millions more will have to put their dreams on hold," Mr. Obama said in his weekly radio address.

In Williamsburg last week he delivered an bitterly partisan speech in an angry tone before fellow Democrats. Watch the whole thing and see how he talks out of both sides of his mouth the whole time:

Incredible, isn't it?

The Democrat's big criticism of President Bush is that he used "the politics of fear" to divide us. Obama was supposed to end all that.

But we're less than three weeks into his presidency and he's engaged in some of the worse fearmongering I've ever seen.

What's maddening is that Obama's attack on anyone who opposes his super spending stimulus package as trotting out "failed theories that helped lead us into this crisis." The only solution he can conceive of is an old-fashioned massive spending bill filled with pork-barrel spending. This is new?

In the video above he chastises opponents, telling them "don't come to the table with the same tired arguments and worn out ideas that helped create this crisis." Never mind that the idea that tax cuts got us into this crisis is ridiculous, but he seems to be saying the only acceptable ideas from the opposition are ones that involve massive spending.

What's most interesting is that he's doing all this because he seems panicked that the stimulus, his first policy initiative, if you can call it that, has become a hugely divisive bill that the GOP opposes en masse. Worse, a good portion of the public have mobilized against it and are flooding capital hill switchboards. That it will eventually pass is not the point, because the episode has shown that Obama is spectacularly politically inept.

I think that in addition, this episode has revealed that Obama is not used to opposition and doesn't know how to handle it other than lashing out in campaign mode.

Consider; before 2008 he never faced a serious political opponent in any of his races. When he finally did, he had a sycophantic media on his side, blatantly cheering him on. His background and record were not examined by the mainstream media, and we'd never know about Jeremiah Wright or William Ayers were it not for Sean Hannity and others. He allowed a cult-like following to develop in which many of his followers saw him almost as a demi-god.

Halfway through the video above he complains that he and his staff are tired. This is revealing, because it shows that he expected everyone to just bow down and accept whatever he proposed. He can't understand opposition. The idea that he has to engage in persuasion and compromise is unfathomable to him. The world used to be at his feet, and he can't understand the change.

Well, if he thinks this is rough going, wait until he tries to get his health-care proposals through. Or he meets with Ahmadinejad. Or Putin.

Forbes' Peter Robinson details the catastrophe that resulted (h/t Sister Toldljah):

President Bush's moment of nakedness took place more than four years and eight months into his administration. In office less than three weeks, President Obama has already provided a naked moment of his own.

The episode, of course, concerns the legislation now referred to only laughingly as an "economic stimulus." Drafted by the Democratic leadership in the House of Representatives, the bill represents a sham and an outrage. Of the more than $800 billion in spending that the legislation authorizes, less than $100 billion would go to highways, the electricity grid or destinations that might-might-produce genuine economic growth. The rest? Transfer payments to interest groups. More than half the "emergency" spending would not even take place until fiscal year 2010....

As Washington observers recognize, this entire debacle became predictable the moment the then president-elect decided to permit the House leadership to draft his stimulus legislation. While Obama was behaving like a professor, holding seminars with economists Lawrence Summers, Paul Volcker and Christina Romer, Democrats in the House were behaving like politicians, using Obama's call for a stimulus as cover for forking over tens of billions of dollars to Democratic interest groups.

You didn't even have to be a practicing politician to see what would happen. Even an intellectual like Obama himself ought to have been able to figure it out-any intellectual, that is, who had bothered to read the work of Nobel laureate James Buchanan. As Buchanan long ago noticed, economists who support Keynesian spending programs in theory tend to overlook the self-interested behavior of the politicians who must spend all the money in practice.

Permit House Democrats to draft his stimulus legislation? What could Obama have been thinking? Only one answer fits: Obama wasn't thinking....

The glee among Republicans right now is only to be expected. The long faces among Obama's startled supporters in Washington are a lot more telling.

Posted by Tom at 9:00 PM | Comments (2) | TrackBack

February 5, 2009

President Obama and His Porkulus Package

President Obama tries to defend the "stimulus" bill in an op-ed piece in today's Washington Post. Most of it is just a series of talking points, but here's the part that stuck out at me (emphasis added):

In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis -- the notion that tax cuts alone will solve all our problems; that we can meet our enormous tests with half-steps and piecemeal measures; that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive.

I reject these theories, and so did the American people when they went to the polls in November and voted resoundingly for change. They know that we have tried it those ways for too long. And because we have, our health-care costs still rise faster than inflation. Our dependence on foreign oil still threatens our economy and our security. Our children still study in schools that put them at a disadvantage. We've seen the tragic consequences when our bridges crumble and our levees fail.

I'm not quite sure that anyone has said that tax cuts alone will solve all our problems, but if he wants to talk about "failed theories," bring it on.

Look at some of the things in the bill:

• $50 million for the National Endowment for the Arts
• $380 million in the Senate bill for the Women, Infants and Children program
• $300 million for grants to combat violence against women
• $2 billion for federal child-care block grants
• $6 billion for university building projects
• $15 billion for boosting Pell Grant college scholarships
• $4 billion for job-training programs, including $1.2 billion for "youths" up to the age of 24
• $1 billion for community-development block grants
• $4.2 billion for "neighborhood stabilization activities"
• $650 million for digital-TV coupons; $90 million to educate "vulnerable populations"
• $15 billion for business-loss carry-backs
• $145 billion for "Making Work Pay" tax credits
• $83 billion for the earned income credit
• $150 million for the Smithsonian
• $34 million to renovate the Department of Commerce headquarters
• $500 million for improvement projects for National Institutes of Health facilities
• $44 million for repairs to Department of Agriculture headquarters
• $350 million for Agriculture Department computers
• $88 million to help move the Public Health Service into a new building
• $448 million for constructing a new Homeland Security Department headquarters
• $600 million to convert the federal auto fleet to hybrids
• $450 million for NASA (carve-out for "climate-research missions")
• $600 million for NOAA (carve-out for "climate modeling")
• $1 billion for the Census Bureau
• $89 billion for Medicaid
• $30 billion for COBRA insurance extension
• $36 billion for expanded unemployment benefits
• $20 billion for food stamps
• $4.5 billion for U.S. Army Corps of Engineers
• $850 million for Amtrak
• $87 million for a polar icebreaking ship
• $1.7 billion for the National Park System
• $55 million for Historic Preservation Fund
• $7.6 billion for "rural community advancement programs"
• $150 million for agricultural-commodity purchases
• $150 million for "producers of livestock, honeybees, and farm-raised fish"
• $2 billion for renewable-energy research ($400 million for global-warming research)
• $2 billion for a "clean coal" power plant in Illinois
• $6.2 billion for the Weatherization Assistance Program
• $3.5 billion for energy-efficiency and conservation block grants
• $3.4 billion for the State Energy Program
• $200 million for state and local electric-transport projects
• $300 million for energy-efficient-appliance rebate programs
• $400 million for hybrid cars for state and local governments
• $1 billion for the manufacturing of advanced batteries
• $1.5 billion for green-technology loan guarantees
• $8 billion for innovative-technology loan-guarantee program
• $2.4 billion for carbon-capture demonstration projects
• $4.5 billion for electricity grid
• $79 billion for State Fiscal Stabilization Fund

If that list isn't bad enough for you here's another

• $2 billion earmark to re-start FutureGen, a near-zero emissions coal power plant in Illinois that the Department of Energy defunded last year because it said the project was inefficient.

• $246 million tax break for Hollywood movie producers to buy motion picture film.
• $650 million for the digital television converter box coupon program.
• $88 million for the Coast Guard to design a new polar icebreaker (arctic ship).
• $448 million for constructing the Department of Homeland Security headquarters.
• $248 million for furniture at the new Homeland Security headquarters.
• $600 million to buy hybrid vehicles for federal employees.
• $400 million for the Centers for Disease Control to screen and prevent STD's.
• $1.4 billion for rural waste disposal programs.
• $125 million for the Washington sewer system.
• $150 million for Smithsonian museum facilities.
• $1 billion for the 2010 Census, which has a projected cost overrun of $3 billion.
• $75 million for "smoking cessation activities."
• $200 million for public computer centers at community colleges.
• $75 million for salaries of employees at the FBI.
• $25 million for tribal alcohol and substance abuse reduction.
• $500 million for flood reduction projects on the Mississippi River.
• $10 million to inspect canals in urban areas.
• $6 billion to turn federal buildings into "green" buildings.
• $500 million for state and local fire stations.
• $650 million for wildland fire management on forest service lands.
• $1.2 billion for "youth activities," including youth summer job programs.
• $88 million for renovating the headquarters of the Public Health Service.
• $412 million for CDC buildings and property.
• $500 million for building and repairing National Institutes of Health facilities in Bethesda, Maryland.
• $160 million for "paid volunteers" at the Corporation for National and Community Service.
• $5.5 million for "energy efficiency initiatives" at the Department of Veterans Affairs National Cemetery Administration.
• $850 million for Amtrak.
• $100 million for reducing the hazard of lead-based paint.
• $75 million to construct a "security training" facility for State Department Security officers when they can be trained at existing facilities of other agencies.
• $110 million to the Farm Service Agency to upgrade computer systems.
• $200 million in funding for the lease of alternative energy vehicles for use on military installations.

No way no how is most or evevn a majority of this "stimulus" by any honest definition. Much of it is a payoff to liberal interest groups(ACORN, Planned Parenthood), or simply an attempt by Democrats to buy votes to keep themselves in power. It represents 8 or more years of greedy liberals waiting for federal largess, and now it's time for them to get theirs. Speaker Pelosi, Senator Reid, and President Obama are ready to open the floodgates to a never-ending that makes the amount we've spent on Iraq look like a drop in the bucket by comparison.

But even the "stimulus" stuff in the bill won't do much, if any, good. We're told that spending on infrastructure will jump start the economy because at least some of the projects are "shovel ready." This is a term that means "ready to go," i.e. no or little time need be spent in planning, designing, getting permits, etc, because all that's been done. Construction can start within 90 days, which puts people to work.

But even this isn't true, and Popular Mechanics explains why:

The programs that would meet the bill's 90-day restriction are, for the most part, an unappealing mix of projects that were either shelved after being fully designed and engineered, and have since become outmoded or irrelevant, or projects with limited scope and ambition. No one's building a smart electric grid or revamping a water system on 90 days notice. The best example of a shovel-ready project, and what engineers believe could become the biggest recipient of the transportation-related portion of the bill's funding, is road resurfacing--important maintenance work, but not a meaningful way to rein in a national infrastructure crisis. "In developing countries, there are roads that are so bad, they create congestion, because drivers are constantly forced to slow down," says David Levinson, an associate professor in the University of Minnesota's civil engineering department. "That's not the case here. If the road's a little bit rougher, drivers will feel it, but that's not going to cause you to go any slower. So the economic benefit of those projects is pretty low."

That might be acceptable to people focused purely on fostering rapid job growth, but, ironically, such stimulus spending could fall short on that measure, as well. "In the 1930s, when you were literally building with shovels, that might have made sense. That was largely unskilled labor. Today, it's blue collar, but it's not unskilled," Levinson says. "The guy brushing the asphalt back and forth is unskilled, but the guy operating the steamroller isn't. And there's an assumption out there that construction workers are interchangeable between residential and highway projects. But a carpenter isn't a whole lot of help in building a road."

Just as bad, the article goes on to point out, "shovel ready" thinking has actually helped create the current crisis. Because by definition such projects must start immediately, they're poorly thought out and such things as bridges are structurally deficient.

Getting back to tax cuts, though, the Republican Study Committee does have an excellent proposal that would cut a variety of taxes, which would be true stimulus. It wouldn't solve all our problems, but it would go a long way towards getting us out of our economic morass.

President Obama is trying to push the Democrat bill through Congress as fast as possible, because he knows that time is working against him. The more the American people learn about it the more they dislike it. It's time he listened to them and stopped the mad rush towards passing this bill.

Posted by Tom at 9:30 PM | Comments (0) | TrackBack

February 4, 2009

If You take the King's Shilling, You do the King's Bidding

We knew this was coming:

Obama Caps Executive Pay Tied to Bailout Money

President Barack Obama on Wednesday imposed a $500,000 cap on senior executive pay for the most distressed financial institutions receiving taxpayer bailout money and promised new steps to end a system of "executives being rewarded for failure."

Obama announced the unusual government intervention into corporate America at the White House, with tax cheat Treasury Secretary Timothy Geithner at his side....

The pay limit comes amid a national outcry over huge bonuses to executives who head companies that seek taxpayer dollars to remain afloat. The demand for limits was reinforced by revelations that Wall Street firms paid more than $18 billion in bonuses in 2008 amid the economic downturn and the massive infusion of taxpayer dollars.

The limit would apply to top-paid executives at the most distressed financial institutions that are negotiating bailout agreements with the federal government. It also would apply to other banks that receive aid, but they could get around the limits by publicizing to shareholders plans to exceed the salary cap.

This is exactly why bailouts are so bad. Once you take aid from the government, you are beholden to them.

These business executives are playing right into Obama's hands. What idiots. The left pretends to be outraged, but I think many are secretly happy as it gives them the excuse they need to set a "maximum wage," something they've wanted for decades.

We've all seen the stories. Bonuses paid to executives of companies who are losing money and laying off employees. Expensive trips, private airplanes, manicures and spas seem to be the rule.

The situation on Wall Street has gotten so bad that even the pro-business Washington Times editorialized that these "business excesses are disgraceful."

I've run into conservatives who say Obama is violating property rights on this matter. But that's only true in cases where he tries to impose these things on businesses that are not taking government money. More to it, this is about greed, which I also remind conservatives and Christians is also a sin, there being many passages about it in the Bible. To paraphrase Justice Potter Stewart, I may not be able to define greed, but I know it when I see it. And the American public knows what it sees.

If you come to me complaining that you can't pay your mortgage, and I loan you a few thousand dollars, I had better not see you going out to the movies or taking a vacation until you've paid me back.

Right now executive pay is only being capped for companies that take bailout money. As with most things government, I think it'll slowly spread. Once the left gets there way here, they'll come up with other reasons to cap pay all across the board, regardless of whether the company takes bailout money or not. For example, next they'll say that any company that gets a government contract must cap executive pay. Then...who know where this will end.

And years from now, they'll look at the corporate executives who paid themselves bonuses and such while their companies were failing, and say "It is you who are to blame."

Saturday Feb 7 Update

That didn't take long. Financial Week reports that House Financial Services Committee Chairman Barney Frank wants to set pay caps for all corporations:

Congress will consider legislation to extend some of the curbs on executive pay that now apply only to those banks receiving federal assistance, House Financial Services Committee Chairman Barney Frank said.

"There's deeply rooted anger on the part of the average American," the Massachusetts Democrat said at a Washington news conference today.

He said the compensation restrictions would apply to all financial institutions and might be extended to include all U.S. companies.

Give these guys and inch and they'll take a mile.

Posted by Tom at 9:30 PM | Comments (3) | TrackBack

February 1, 2009

The Stimulus and the GOP

Every single Republican in Congress voted against the "stimulus," or American Recovery and Reinvestment Plan (HR-1 in the House), as it's officially called. All 178 GOP Representatives, and all 41 GOP Senators.

I am both proud and glad that they did so, and for three reasons.

One, it is bad economics. I'm not at all convinced that government spending boosts the economy, whether it's for infrastructure or anything else. There's a good deal of scholarship which has concluded the Roosevelt's New Deal didn't get us out of the depression, and perhaps made it worse (here and here for starters) Even if it does, most of the spending will not take place for several years. Further, as has been widely reported, much of the bill is simple pork barrel politics which in no way can be described as economic stimulus. Little of the Democrat stimulus bill consists of tax cuts, the only thing that will really boost the economy. Worst, it does not cut the most important taxes, capital gains and corporate taxes as Larry Kudlow advises, the two that would do the most benefit. The bill would massively increase our deficit, something we absolutely do not need.

Second, I don't think primary the point of the bill is even economic stimulus. What you have is a bunch of Democrats paying off their constituents after 8 years of being out of power. As shown below, most of the spending doesn't take place immediately, and most of it isn't on infrastructure. The Democrats are simply trying to consolidate their majority and implement other parts of their agenda.

In other words, it's old-time politics writ large for the Democrats. Not at all the "new kind of politics" that candidate Obama promised.

Third, the GOP badly needs a rallying point and this is as good a place to start as any. The bill goes against everything we believe in, or say we believe in, so to vote for it would once again tell the people we are not serious. Congressional Republicans didn't just say "no, no, no," however, but offered a credible alternative. Tie this to the election of Michael Steele as chairman of the Republican National Committee, and we may have a winning combination.

I also see almost no downside to our current course of action. There is near zero chance this bill will perform as advertised, so it's not as if we're missing out on enjoying the political benefits of success. Further, when the effect on the budget deficit becomes clear we have to be on record as having opposed it. For the past several years we have been on the wrong side of this issue. Better now than never.

As for President Obama's much ballyhooed attempt at bipartisanship with Republicans, please. He couldn't even keep all Democrats on board. 11 Democrats in the House, including my favorite, former Washington Redskins quarterback Heath Shuler (D - NC, 11th District)., voted against the bill.

It is therefore amusing to see some liberals and Democrats so upset about Republican opposition. If their bill does what they say it will, then they'll be able to say "see I told you so," won't they? What I think is driving their rage is more just incomprehension that anyone could not be wild about their messiah. I encountered this attitude a week ago while supporting our troops at our weekly rally outside Walter Reed Army Medical Center, and it is indeed a thing to behold.

Details, Details

A few tidbits on the Democrat bill from the website of the House GOP

  • The legislation's spending portion contains $355.9 billion in discretionary domestic spending to expand existing programs throughout the federal government. Spending meant to stimulate the economy under this title includes funding for a wide variety of programs ranging from climate change research, federal building repair, the National Endowment for the Arts, the Federal Highway Administration, AmeriCorps, and nurse and physician training.
  • The refundable spending, which is scored by CBO as direct spending, totals $79.9 billion over five years. Unlike long-term, growth-oriented tax cuts that have been offered by Republicans as an alternative to this plan, these refundable tax credits are more akin to increased spending through the tax code.
  • According to CBO, the federal deficit will rise to a record $1.2 trillion, or 8.3% of GDP, in 2009. Even without this massive bill, the deficit will be by far the highest on record nominally and as a percentage of GDP during peacetime, easily exceeding the previousrecord of 6% in 1983 and the highest New Deal level of 5.9% in 1934.
  • According to CBO, most of the $356 billion in discretionary spending provided will not actually be spent until after 2010. In fact, only 8.1% of the spending will take place in 2009.
  • Despite calls by Democrats for increased infrastructure spending to create jobs, a relatively small share of the total $825 billion package is devoted to transportation infrastructure--$44 billion or 5.3% and only $30 billion or 3.6% for highway construction.

Keep in mind that candidate Barack Obama promised to go through the federal budget line by line and cut out wasteful spending. In fact, it's still on his website. Go see for yourself.

Obama and Biden review the federal budget line by line and eliminate programs that don't work or are unnecessary.

Guess that campaign promise is already out the window.

And if you think this level of spending is bad, keep in mind that last week Obama told GOP Rep. Frank Lucas (OK-3rd) that he thought that FDR's problem was that he didn't spend enough money on his New Deal projects. Sheesh.

Now, some details on the GOP alternative:

  • Cut the lowest two income tax rates for 2009 and 2010, from 15 percent to 10 percent and from 10 percent to 5 percent.
  • Extend through 2010 a patch to the Alternative Minimum Tax, which was originally designed to ensure that wealthy people pay taxes, but instead would hit millions of middle-income families with higher taxes.
  • Expand the $7,500 first-time homebuyers tax credit for a principal residence to all homebuyers while limiting it to purchasers who can make a down payment of at least 5 percent of the purchase price.
  • Provide a tax deduction for small businesses with less than 500 employees equal to 20 percent of their income.
  • Offer new tax deduction for those who do not receive tax-preferred, employer-sponsored health care coverage. And provide assistance to the unemployed who do not qualify for a COBRA premium subsidy.
  • Give tax exemption on unemployment benefits and extend temporary federal unemployment benefits through 2009, phasing it out through mid-2010.
  • Allow companies to write off current losses against previous tax years for up to five years. Companies now can only "carry back" losses for two years. The tax break would not be available to banks and other companies receiving help from the $700 billion bailout package.
  • Extend through 2009 a break for small businesses that allows them to immediately write off up certain capital expenditures.

One time rebate checks do not work. It was wrong when President Bush did it and it would be wrong today. For tax cuts to work they have to incent people to change their behavior in a way that lasts. Only if people think that they will have more money in their pocket in the future will they spend in ways the boost the economy.

A bit more about the Democrat's bill from the editors of National Review

Consider the $18.5 billion proposed for renewable-energy projects, less than $3 billion of which would be spent by 2011. Even if we conceded, for argument's sake, that the initial $3 billion would boost the economy in the short run by putting people to work and increasing demand for things like steel and concrete, why should we agree to spend the additional $15.5 billion when we do not share the green lobby's passion for such projects? Clearly, the extra money is being ramrodded through Congress in the guise of "economic stimulus," though it is actually the opposite of that.

Or consider the $30 billion proposed for highway spending, less than $4 billion of which would be spent by 2011. Again, accepting the questionable premise that the first $4 billion is necessary for economic recovery, why pile on $26 billion needlessly?...

Perhaps most egregious is the $80 billion "State Fiscal Stabilization Fund," intended to bail out those states that promised more in Medicaid and other welfare benefits than they had revenue to pay for. Just over $30 billion of the money would be spent by 2011. The rest is reserved for the years 2011 and 2012, with allocations stretching into the year 2019. This is not a stimulus plan. It is an invitation to states to engage in politically popular but unaffordable overspending for years to come.

Man of Steele

No, he's not "our Barack Obama" and I don't think any conservative sees him that way. He is, rather, a smart, articulate conservative who most of all is the fresh face that we know we need. I think I've got a pretty good ear from what conservatives want, both nationally and here locally, and the vast majority of us want to toss the "old guard" and bring in a new generation.

While driving to work in the morning I have had the chance to hear Michael Steele guest host Bill Bennett's morning radio show, and have been impressed every time. He will be the opposite of Howard Dean or Terry McAuliffe, two DNC chairmen who in my opinion came across poorly. Dean was just a ranting nut and McAuliffe too aggressive in an intimidating way. On the other side, our ourgoing chairman, Mike Duncan, was clearly ineffective.

Here is Steele making his acceptance speech:

His Blueprint for Tomorrow seems pretty on target for what we need. Importantly, he doesn't blame Democrats for our problems:

We squandered the trust of voters with a stunning display of spending and government growth that might have made a Democrat blush.

Public opinion polling is very clear on this point, it can best be summed up by these results from a recent national survey by Gallup:
  • 34% say they have a favorable view of the Republican Party, 61% have an unfavorable view
  • 55% say they have a favorable view of the Democrat party, 39% have an unfavorable view
Just as troubling, a majority of voters view our party as more closely tied to the corruption in Washington and the greed on Wall Street than to the interests on Main Street.

The first step to solving a problem is admitting you have one.

I've observed and more recently participated in politics for over 30 years. It's great when your side wins and it stinks when you lose. I've learned, though, to be careful in both instances because things can turn on a dime. Surveying Bill Clinton's victory in 1992, few if any conservatives would have predicted our stunning success a mere two years later. For that matter we didn't think that we'd lose as bad as we did in 1998.

Perhaps oddly, then, I am optimistic about the future of conservatism and the Republican Party. It's far to early to say where all this will go, as Obama is a smart man who will learn from his mistakes. But this joke of a stimulus was a bad start, written as it was by Democrats in Congress

Monday Evening Update

Democrat Senator Ben Nelson (NB) says that wants to cut tens of billions from the stimulus bill, "rejecting the White House claim that senators are complaining about just a tiny fraction of the package."

President Obama does not seem to know what to do. This bill is spiraling out of control, with half the public not believing it will help the economy. A few Democrats in the Senate seem to have figured this out.

The Democrats need to get this thing passed quickly, because time is not on their side. The more this thing lingers the more information about how much pork it contains will come out.

Kevin Hassett, writing at Bloomberg, has the goods

When the stimulus package, the SCHIP expansion and whatever else our representatives in Washington dream up are on the books, it seems likely that the deficit for this year will approach $1.7 trillion. This is an enormous swing in the U.S. fiscal condition.

Under President George W. Bush -- a big spender in his own right -- the federal budget deficit reached a record $455 billion in fiscal 2008, more than double a year earlier. Government bailouts of banks and other industries that started under Bush, and may accelerate under President Barack Obama, will help push the deficit toward that $1.7 trillion mark.

That is $1.7 trillion in future taxes. Nobody knows exactly when the tax hike will come. It might even be that we shall try to foist the costs on our children. Still, those planning their financial futures should account for the dramatically higher taxes that will be the result of this year's policies.


Posted by Tom at 9:30 PM | Comments (0) | TrackBack

January 25, 2009

Book Review - Economics in One Lesson

Some books are only relevant for a few years or even months after they are written. Others stay important for decades or more. The Bible is relevant for all time. Dale Carnegie wrote How to Win Friends and Influence People in 1936, yet is applicable today, as human nature does not change.

While economic issues change, the basic principles do not. As such, Henry Hazlitt's Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics is almost as relevant today as it was when first published in 1946. The latest edition and update, and the one I have, was in 1979. Still a bit old but with many lessons that we can use in analyzing the current situation. Anyway, since he died in 1993 the edition we have is the latest we'll get.

At just over 200 pages it's a pretty short book. Hazlitt states up front that he's not going to footnote everything or provide a dozen examples or pages of statistics, as that's not his purpose here. He wrote many other, longer works on economics and other subjects for readers looking for more depth. Rather, it is to provide a basic overview for the average person who has neither the time nor the inclination to wade through a longer treatise. When it comes to the "dismal science," that's my type of book.

Here, in a nutshell, is the thesis of the entire book:

Economics, as we have now seen again and again, is a science of recognizing secondary consequences. it is also a science of seeing general consequences It is the science of tracing the effects of some proposed or existing policy not only on some special interest in the short run, but on the general interest in the long run. (emphasis in the original)

and elswhere

The whole argument of this book may be summed up in the statement that in studying the effects of any given economic proposal we must race not merely the immediate results but the results in the long run, not merely the primary consequences but the secondary consequences, and not merely the effects on some special group but the effects on everyone.

The difference between a good economist and a bad one, to Hazlitt, is that the good one sees secondary and general effects, while the bad one only the primary one.

Most of the issues discussed in the book are relevant today, but some are not. Relevant are discussions on the evils of public works programs, high taxes, tariffs, government price-fixing, saving particular industries, the minimum wage, rent control, and unions. Not relevant are disbanding large numbers of troops, parity pricing, stabilizing commodities, "buying back the product", and swatting down the alleged benefits of inflation. Some in this latter list will be unfamiliar to the modern reader, because no one anymore, for example, advocates price inflation as a good thing.

We all know that if we drink too much alcohol, the secondary consequence of a hangover will be unpleasant. There's a secondary, "hangover" effect from many economic policies as well. Yet the politics of the matter often mean that they're ignored.

The newspapers today carry news of an economic "stimulus" program that is mostly spending on so-called infrastructure projects. Hazlitt destroys the notion that this type of policy will bring any benefit whatsoever.

It's not that he's against infrastructure projects. If we need a bridge, he says, then by all means built it, and do so with public monies. But these projects should be justified on their own merits, not as part of a plan to "pump money into the economy" or whatever.

For every dollar spent on public infrastructure, a dollar is taken from the private sector, a dollar that would be spent elsewhere. As such, every job created in the public sector is a job destroyed somewhere else. We may be able to hide this with deficit spending, but in the end the piper must be paid. The immediate effect of this type of public works project is to put people to work. It is also highly visible and newsworthy. The secondary effect is to take money out of the economy that would be spent elsewhere. Because, though, this money isn't there and nothing is bought, it isn't directly seen and thus far less likely to be reported on.

Also in the news today are federal lending institutions such as Freddie Mac and Fannie Mae. The Community Reinvestment Act provided loans to people who would not otherwise qualify. The Bush Administration, a few months ago, even pushed banks to lend more money.

Hazlitt explains how by definition government will never do as good a job in making loans as will the private sector for the simple reason that people are more careful with their own money. That this is true is often hidden, because when there is a bank failure due to bad loans it's all over the news, whereby bad loans made by government are hidden with more federal spending. Political considerations also warp government lending, something that can happen in the private sector only if there is excessive or politically motivated regulation.

There is broad agreement today, I think that tariffs harm the economy. This, of course, was the rational behind NAFTA and other free trade agreements. Special interests want tariffs, something that we today call "protectionism," a word that was apparently before Hazlitt's time. We all know that tariffs hurt consumers, but Hazlitt shows that they hurt producers as well. The reason is that a tariff forces consumers to pay more for a product than they ordinarily would, and ever dollar they spend is a dollar less they can spend somewhere else. Thus, producers of other products do not get that money.

Hazlitt does not address issues such as protectionism or about saving industries for for reasons of national security. The book focuses strictly on the economic impact of government actions.

We're all supposed to worry about our trade imbalance because we import more than we export. While too much of an imbalance can be bad, Hazlitt points to John Stuart Mill's maxim that "the real gain of foreign trade to any country lies not in its exports but in its imports." The reason is simple; we import something because doing so is cheaper for the consumer. This is a good thing.

Small fallacies are also addressed, such as the idea that price is determined by the cost of production. If you break it all down it is determined by supply and demand.

Last year we were to believe that high oil prices were due to evil speculators. Hazlitt demonstrates that far from being our enemy, they are essential to economic stability and indeed our prosperity. Speculators protect us from fluctuations in price. None of this is to stay that their activity shouldn't be regulated to ensure honest transactions, simply that in and of itself it is beneficial to our well being.

While one can never say for certain what a historical figure would say about a current issue, it is hard to imagine Hazlitt approving of current government bail outs. Besides the perils of deficit spending, it is a good thing when inefficient businesses to close shop because bankruptcy is a signal that the capital they are using would be better spent elsewhere. Again Hazlitt stresses that he understands that their are negative consequences for individual workers, and that we must address their short-term needs. But by the same token the general consequence of inefficient businesses closing shop is good.

We've all seen the phenomenon whereby someone insists on regulation, price fixing, etc on some other business but "mine is different." Hazlitt addresses this as well in his discussion on government price fixing. Recently we saw this in action with the price of gasoline. No one wants to pay more for essentials, and it is a natural tendency to assume the worst motivations behind the businesses supplying those products. When in the midst of complaining, we forget that in addition to consumer each of us is also producer and taxpayer. As a producer, we want inflation so that we can charge more for our own product to justify salary increases, as consumer we want deflation or price fixing. Profits are only "obscene" when someone else is making them.

We've all heard or seen news stories in which reporters breathlessly go after a "slumlord" for conditions in his buildings. What these journalists fail to tell us is that in the majority of these cases the real culprit are politicians who put rent control into place. The immediate effect of rent control is that poor people have a better place to live. The secondary effect is that their landlord has no money to fix up their buildings. The general effect is that contractors don't build more housing (because if landlords can't make a profit, they won't have more housing built) and so there is a housing shortage. The people who end up suffering are the very people such polices were meant to help.

Liberal politicians and their enablers think they are helping people with policies such as minimum wage laws. They would do better to promote policies that would raise marginal labor productivity. The goal should be profits, which is only way to increase wages without putting other people out of work. Unions have the same effect as minimum wage laws when they agitate for higher wages. They benefit us only when they push for safe working conditions and the like.

We have been fortunate in this country in that for a variety of reasons we have generally had a strong economy. Even during times of depression or recession most of us are better off than 90% of the rest of the world. As such, politicians assume they can do anything and it won't have negative consequences, at least not serious ones. This is incorrect.

Much of the above will be familiar to the libertarian or conservative reader, and indeed most of Hazlitt's arguments were not terribly new to me, though he explains them more clearly than I have seen elsewhere.

At least one thing that was new to me was his explanation that "saving was only another form of spending." The difference was that with "savings" we give the money to someone else to spend, and it tends to be spent on somewhat different products.

When we as consumers spend money directly, it is of course on consumer items. When we put our money in a passport savings account, or mutual funds, or even corporate bonds, it doesn't just sit there. The banker lends it to a business, and the mutual fund and corporate bond managers give it to businesses through the purchase of stocks or bonds. Corporations take this money and spend it on capital goods such as buildings, plant, trucks, computer systems, whatever. The point is that it does get spent, though maybe it takes longer and is on different items.

Economics in One Lesson provides a simple and quick way to understand libertarian free market economics. You will not like this book if you are a fan of the current "stimulus" plan.

If you are of conservative or libertarian bent, I strongly encourage you to purchase and study this book. We need to learn to speak the language of economics in order to fight off the big-government liberals. Our arguments must be clear, concise, and easy to understand, and as such book provides a good primer on the subject for the average person.

Posted by Tom at 9:00 PM | Comments (13) | TrackBack

October 14, 2008

Obama's Socialist Plan for Income Redistribution

If it walks like a duck and quacks like a duck, it's a duck.

Most Democrats at least hide what they are doing. Not so Senator Barack Obama

Here's what he said if you missed it

Barack Obama told a tax-burdened plumber over the weekend that his economic philosophy is to "spread the wealth around" -- a comment that may only draw fire from riled-up John McCain supporters who have taken to calling Obama a "socialist" at the Republican's rallies.

Obama made the remark, caught on camera, after fielding some tough questions from the plumber Sunday in Ohio, where the Democratic candidate canvassed neighborhoods and encouraged residents to vote early.

"Your new tax plan is going to tax me more, isn't it?" the plumber asked, complaining that he was being taxed "more and more for fulfilling the American dream."

"It's not that I want to punish your success. I just want to make sure that everybody who is behind you, that they've got a chance for success too," Obama responded. "My attitude is that if the economy's good for folks from the bottom up, it's gonna be good for everybody ... I think when you spread the wealth around, it's good for everybody."

This is socialism plain and simple.

But wait, there's more:

This is from one of the debates during the primaries earlier this year

GIBSON: All right. You have, however, said you would favor an increase in the capital gains tax. As a matter of fact, you said on CNBC, and I quote, "I certainly would not go above what existed under Bill Clinton," which was 28 percent. It's now 15 percent. That's almost a doubling, if you went to 28 percent.

But actually, Bill Clinton, in 1997, signed legislation that dropped the capital gains tax to 20 percent.

OBAMA: Right.

GIBSON: And George Bush has taken it down to 15 percent.

OBAMA: Right.

GIBSON: And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down.

So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?

OBAMA: Well, Charlie, what I've said is that I would look at raising the capital gains tax for purposes of fairness.

Senator Obama does not like the way wealth is distributed the United States. It's not just that he has different ideas on how to jump start the economy, or how to pull us out of our current fiscal difficulties. No, he thinks he knows better.

Tax policy should be used for two things; funding government programs and inciting certain behavior. The first is obvious. An example of the second is the mortgage tax deduction (which somehow is never described as a 'loophole") which was designed to encourage home ownership.

But Obama is not happy with this. To him taxes should be used to punish some and reward others.

This, then, is the real Obama. The one who wants to remake America. And to think that some say that his radical past and associations don't matter.

On Obama's campaign website is this

Obama's Comprehensive Tax Policy Plan for America will:

* Cut taxes for 95 percent of workers and their families with a tax cut of $500 for workers or $1,000 for working couples.

The Wall Street Journal, in an article today titled Obama's 95% Illusion:
It depends on what the meaning of 'tax cut' is
explains why these promises are misleading in some detail, but the bottom line is pretty simple

Somewhere around a third (or here) of all adult Americans pay no income taxes at all. So how can 95% receive a refund? Simple: You just write them a check. This is income redistribution in the name of "fairness."

On the the WSJ:

Here's the political catch. All but the clean car credit would be "refundable," which is Washington-speak for the fact that you can receive these checks even if you have no income-tax liability. In other words, they are an income transfer -- a federal check -- from taxpayers to nontaxpayers. Once upon a time we called this "welfare," or in George McGovern's 1972 campaign a "Demogrant." Mr. Obama's genius is to call it a tax cut.

The Tax Foundation estimates that under the Obama plan 63 million Americans, or 44% of all tax filers, would have no income tax liability and most of those would get a check from the IRS each year. The Heritage Foundation's Center for Data Analysis estimates that by 2011, under the Obama plan, an additional 10 million filers would pay zero taxes while cashing checks from the IRS.

The total annual expenditures on refundable "tax credits" would rise over the next 10 years by $647 billion to $1.054 trillion, according to the Tax Policy Center. This means that the tax-credit welfare state would soon cost four times actual cash welfare. By redefining such income payments as "tax credits," the Obama campaign also redefines them away as a tax share of GDP. Presto, the federal tax burden looks much smaller than it really is.

The political left defends "refundability" on grounds that these payments help to offset the payroll tax. And that was at least plausible when the only major refundable credit was the earned-income tax credit. Taken together, however, these tax credit payments would exceed payroll levies for most low-income workers.
...

There's another catch: Because Mr. Obama's tax credits are phased out as incomes rise, they impose a huge "marginal" tax rate increase on low-income workers. The marginal tax rate refers to the rate on the next dollar of income earned. As the nearby chart illustrates, the marginal rate for millions of low- and middle-income workers would spike as they earn more income.

Some families with an income of $40,000 could lose up to 40 cents in vanishing credits for every additional dollar earned from working overtime or taking a new job. As public policy, this is contradictory. The tax credits are sold in the name of "making work pay," but in practice they can be a disincentive to working harder, especially if you're a lower-income couple getting raises of $1,000 or $2,000 a year. One mystery -- among many -- of the McCain campaign is why it has allowed Mr. Obama's 95% illusion to go unanswered.

I can answer that last one; because his campaign is incompetent, that's why.

Update

Note to any leftist trolls who may happen by; the issue is not "Joe the plumber". His circumstances are not relevant (and most of what the lefties are saying about him are lies). What's relevant is Obama's plan for socialist income redistribution.

10-27 Update

This is incredible. It's Barack Obama in a 2001 interview with Chicago Public Radio station WBEZ discussing how he wants to redistribute wealth in the United States:


Stop the ACLU has a partial transcript:

If you look at the victories and failures of the civil rights movement and its litigation strategy in the court. I think where it succeeded was to invest formal rights in previously dispossessed people, so that now I would have the right to vote. I would now be able to sit at the lunch counter and order as long as I could pay for it I'd be o.k. But, the Supreme Court never ventured into the issues of redistribution of wealth, and of more basic issues such as political and economic justice in society. To that extent, as radical as I think people try to characterize the Warren Court, it wasn't that radical. It didn't break free from the essential constraints that were placed by the founding fathers in the Constitution, at least as its been interpreted and Warren Court interpreted in the same way, that generally the Constitution is a charter of negative liberties. Says what the states can't do to you. Says what the Federal government can't do to you, but doesn't say what the Federal government or State government must do on your behalf, and that hasn't shifted and one of the, I think, tragedies of the civil rights movement was, um, because the civil rights movement became so court focused I think there was a tendancy to lose track of the political and community organizing and activities on the ground that are able to put together the actual coalition of powers through which you bring about redistributive change. In some ways we still suffer from that.

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October 6, 2008

What McCain Can Do To Win

As I think we're all aware, most of the polls show that McCain-Palin is down about 6 points to Obama-Biden. Six points is outside of the margin or error, and even though the election is of course decided in the electoral college I think it's safe to say that right now McCain-Palin has to play catch up.

This is not as hard as it might seem. A month is an eternity, and bigger point spreads have been reversed. I won't go through them but if you know your electoral history you'll know what I'm talking about.

It would seem to me that there are, generally speaking, three courses of action

1) Talk about Obama's questionable associations, in particular Jeremiah Wright and William Ayers.

2) Promote the McCain-Palin economic package as superior to that of Obama-Biden. Make offshore drilling part of this message. While doing this highlight congressional Democrats who are tied to the fiscal crisis.

3) Portray Obama and Biden as so far to the left so as to be completely out of the mainstream. At the same time, promote McCain-Palin as reformers who will take on their own party and who have and are able to work with Democrats.

I think that McCain ought to do a combintion 2 & 3. No one who is not already turned off by Obama's associations will do so now. The mainstream media is completely in the tank for Obama and is simply not interested in doing any serious investigation.

Here is a recent McCain TV commercial of the type that he needs to do more of

This one has gone viral on right-wing blogs, which is great, but needs to be turned into a TV commercial. If the McCain campaign doesn't do it, one of our 527s need to (if they have, it needs to get out more). The video consists of excerpts from a late 2004 hearing that was to investigate Fannie Mae and Freddie Mac's illegal bookkeeping.

If you only watch one video here, watch this one:

Here's some footage of Fannie Mae CEO calling Obama and the Dems the "Family" and the "Conscience" of Fannie Mae that he ought to be using

Here is one from the NRCC that tells the story that McCain needs to get out more

Blame Alone Won't Work

Attacking Democrats along won't work, though, because Obama himself was not a part of the current fiscal crisis. even though as president I can't see Obama challenging his own congressional liberals, too many people will simply buy the Hope! and Change! mantra for this to be effective.

David Gelernter at The Weekly Standard gets it pretty much right, I think

McCain might break through the media fortress that protects independents from the truth if he'd repeat a small packet of information word-for-word at the end of every single speech. Soon crowds would anticipate these words and reporters would know them by heart, and they'd start making an impression on the country. Here are mine; but whatever words he chooses, he must start hammering home some simple truths right now.

1. Mr. Obama is the most liberal senator in Washington.

2. Like other liberal presidents, he'd load the Supreme Court with the most liberal judges he could find.

3. Like other liberal presidents, he'd spend tax dollars like they were going out of style--when the economy must have a steady, experienced, pork-hating hand at the wheel.

4. Like other liberal senators, Mr. Obama was prepared to surrender to terrorists in Iraq.

5. Like other liberal senators, he is the wrong man to protect your children against Russia, Iran, North Korea and al Qaeda in dangerous times.

6. I fought for responsible regulation of the mortgage merchants when the Democrats were against it. I don't just talk, I act.

7. My closest Senate colleague is a Democrat, Joe Lieberman. I don't just talk bipartisanship, I act.

8. I picked Sarah Palin because our country needs young leaders who don't just talk; who act.

9. I'll do what I know is right, no matter what China or Germany or the U.N. thinks. You can't protect this nation by talking. You have to act.

10. Don't judge me as a politician or speech-maker. Judge me as a man who is more than talk. I would lay down my life for this country.

Some will wonder why energy is not a bigger part of this equation. I think it should included, but the fact is that the financial situation is dominating the news and has pushed energy to the sidelines.

In the end, campaigns are like wars, everyone is full of advice and if you lose the people whose advice you didn't take predictably say "if only they'd listened to me", not thinking that their advice might have made the situation worse.

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June 3, 2007

What a Shame

Peggy Noonan's Friday column in the Wall Street Journal, "Too Bad", has been getting much deserved attention on conservative blogs. So even though you've probably already read it, I thought it worth attention here because much of her column reflects my own views on Presidents Bush 41 and 43. She might not have it all quite right but she's definitely on the right track.

Her piece is mostly a lament about wasted political capital and what might have been. Conservatives are not breaking with the White House, she says, but rather Bush has broken with them (or us). This is simply the final straw in a long train of abuses, from out-of-control federal spending, to a Ted Kennedy-written education bill, to the appointment of Harriet Myers, to the Supreme Court to the incompetence of Alberto Gonzales we have been let down.

As Noonan tells it,

For almost three years, arguably longer, conservative Bush supporters have felt like sufferers of battered wife syndrome. You don't like endless gushing spending, the kind that assumes a high and unstoppable affluence will always exist, and the tax receipts will always flow in? Too bad! You don't like expanding governmental authority and power? Too bad. You think the war was wrong or is wrong? Too bad.

But on immigration it has changed from "Too bad" to "You're bad."

The president has taken to suggesting that opponents of his immigration bill are unpatriotic--they "don't want to do what's right for America." His ally Sen. Lindsey Graham has said, "We're gonna tell the bigots to shut up." On Fox last weekend he vowed to "push back." Homeland Security Secretary Michael Chertoff suggested opponents would prefer illegal immigrants be killed; Commerce Secretary Carlos Gutierrez said those who oppose the bill want "mass deportation." Former Bush speechwriter Michael Gerson said those who oppose the bill are "anti-immigrant" and suggested they suffer from "rage" and "national chauvinism."

Conservatives put up with it because one, we generally support OEF and OIF, and two the Democrats have been gulping the anti-war coolaid. So despite the abuses, we've supported the president. But now we're essentially told that we're racists because we don't support what amounts to amnesty for illegal aliens.

Why is the administration behaving this way? Noonan has some ideas:

I suspect the White House and its allies have turned to name calling because they're defensive, and they're defensive because they know they have produced a big and indecipherable mess of a bill--one that is literally bigger than the Bible, though as someone noted last week, at least we actually had a few years to read the Bible. The White House and its supporters seem to be marshalling not facts but only sentiments, and self-aggrandizing ones at that. They make a call to emotions--this is, always and on every issue, the administration's default position--but not, I think, to seriously influence the debate.

They are trying to lay down markers for history. Having lost the support of most of the country, they are looking to another horizon. The story they would like written in the future is this: Faced with the gathering forces of ethnocentric darkness, a hardy and heroic crew stood firm and held high a candle in the wind. It will make a good chapter. Would that it were true!

I think she's onto something. Bush has also been pandering to the global-warming alarmists, making noises to the effect that "hey I'm onboard too you know! I want to do the right thing too!"

One has to wonder if it's all sheer political opportunism. But if he thinks that embracing leftist causes like amnesty for illegals and global warming will win him any friends he's dreaming. Those who hate him will at this point continue to hate him anyway. And if he's after "legacy" he's dreaming too, because that's wrapped up in the war, whatever name you want to give it.

Some commentators insist that all of President Bush's problems are tied to Iraq. I disagree. Sure, had we destroyed the insurgency early on his troubles would be lessened, I think that the immigration fiasco illustrates that he'd still be in trouble, perhaps more so.

Let's face it, conservatives rally 'round a Republican president over military affairs, and tend to support the mission through thick and thin. Without Iraq though there's just a vague "War on Terror" (terribly misnamed). Given his abysmal performace from a conservative perspective on domestic policies, we'd have deserted him much longer ago. And while without Iraq the left may not hate him with such virulence, they'd still never vote for him.

So even with Iraq as it is, if the president had performed credibly on domestic issues he'd still have a strong conservative base to support him. But even that is gone now.

Noonan ends by comparing reviewing how George H W Bush squandered the legacy handed to him by Reagan, and how his son is squandering his by throwing away the base that elected him.

One of the things I have come to think the past few years is that the Bushes, father and son, though different in many ways, are great wasters of political inheritance. They throw it away as if they'd earned it and could do with it what they liked. Bush senior inherited a vibrant country and a party at peace with itself. He won the leadership of a party that had finally, at great cost, by 1980, fought itself through to unity and come together on shared principles. Mr. Bush won in 1988 by saying he would govern as Reagan had. Yet he did not understand he'd been elected to Reagan's third term. He thought he'd been elected because they liked him. And so he raised taxes, sundered a hard-won coalition, and found himself shocked to lose his party the presidency, and for eight long and consequential years. He had many virtues, but he wasted his inheritance.

Bush the younger came forward, presented himself as a conservative, garnered all the frustrated hopes of his party, turned them into victory, and not nine months later was handed a historical trauma that left his country rallied around him, lifting him, and his party bonded to him. He was disciplined and often daring, but in time he sundered the party that rallied to him, and broke his coalition into pieces. He threw away his inheritance. I do not understand such squandering.

Now conservatives and Republicans are going to have to win back their party. They are going to have to break from those who have already broken from them. This will require courage, serious thinking and an ability to do what psychologists used to call letting go. This will be painful, but it's time. It's more than time.

What a shame.

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November 12, 2004

Immigration and Economics

I had a debate with a friend of mine on the issue of immigration and the global economy. He sent me a copy of the Phyllis Shlafly Report titled "What the Global Economy Costs Americans"

I responded to him with a critique of her column. Sections are reprinted below.

What the Global Economy Costs Americans
by Phyllis Shlafly

The big argument for the tax cut just signed by President Bush is that it will create much-needed jobs. But one big question remains: will those jobs be created for
Americans, or will corporations simply hire more job-seekers from India and China?
First, do we really want these jobs to stay here?  Consider the consequences of forcing
corporations to keep these jobs here. To do these jobs, Americans will want to be paid
more than Indians or Chinese. The increased cost will be passed along to the consumer.
So your bills will eventually (maybe not immediately) go up. You'll pay more for many
services in the long run. Because either prices will have to go up, or corporate revinues
will have to go down. Lagging revinues means recession. Is this really good for the
American consumer?

Second, any discussion of outsourcing must also include insourcing. You don't hear so much
about it, but jobs are coming to the United States. And we are creating new jobs all the time.
In the short term both outsourcing and insourcing cause social dislocations causing politicians
to get involved. Thomas Sowell has an excellent editorial on this which you can find here.

It's time for Congress to call a halt to the scandal of the way big corporations hire foreigners at the same time they are laying off their American employees. The hiring of hundreds of thousands of foreigners is why this year's college graduates face the worst job market in recent memory.
When U.S. corporations built hundreds of plants in Third World  countries, we were
told not to worry about losing blue-collar
manufacturing jobs because we were
keeping the service jobs. Now the high-paying white-
collar service jobs are going
overseas, too, particularly jobs for engineers and computer
specialists.

Follow the money. The big corporations hire aliens from India and China at half or
a third
the wages, work them long hours without overtime pay, and treat them like
indentured
servants unable to quit for a better job. What makes this racket possible
is the partnership
between corporations and government.

The wording in this article is a bit too conspiratorial for me, but I'll answer the substance
anyway.

Yes "corporations" hire illegals because they can pay them less. And politicians are reluctant
to crack down because of the economics of the matter. What economics am I talking about?
Consider the consequequences of tossing all illegals out of the country. The jobs previously
done by the illegals would now be open. But Americans would refuse to take these jobs at the
same wage rates as the illegals were paid. Thus to fill these jobs corporations would have
to raise wages. The consequences of this would be higher prices paid by the consumer. Either
that, or lower corporate profits. And the consequences of lower profits are twofold; lower
investment in new plant and R&D, and lower stock prices. Do you want your 401k to tank?

Now, I am NOT saying that we should ignore illegal immigration. In fact, I'm in favor of a
cracking down. What I AM saying is that we need to understand the economic consequences
of doing so. Unfortunately the Eagle Forum newsletter you sent me makes no attempt to do so.

The corporations make political contributions to assure the passage of legislation that legalizes the importation of foreign cheap labor by the devices called H1B visas L-1 visas, and outsourcing....
I admit that I don't know enough about these issues to really comment on the details.

But the basic economics are clear enough; if you put a halt to these visas you will end up paying
higher prices as a consumer. This may or may not be what the public wants, but before we take
any decisions we need to understand the economic consequences. This article seems to think
that you can cut off visa's and we'll all live happily ever after.

Corporations hire people for less money because they're trying to stay competitive. They want
to offer a good service at a low price. There's nothing really conspiratorial about it.

Ok readers, tell me if I've got it right or not.


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October 25, 2004

The "Social Justice" Candidate

John Kerry now tells us that he is the "Social Justice" candidate;

Democratic presidential nominee Sen. John Kerry said a broad vision of social justice, including care for the poor and those without health insurance, is at the root of his religion and would guide his presidency.
He then went on to quote Matthew 25:40
The King will reply, 'I tell you the truth, whatever you did for one of the least of these brothers of mine, you did for me
This is in context of a series of lessons and parables that Jesus is telling to his disciples as they sat on the Mount of Olives. (Full text of Matthew 25 here for context)

Kerry then told the audience what this passage means to him;

"The ethical test of a good society is how it treats its most vulnerable members," he said, arguing that the government has an obligation to protect the environment, fight AIDS, reduce poverty and defeat terrorism."
Apparently, then, it is to him the justification for government spending. And that is fair enough, as far as it goes. I would not be one to argue that governments should not provide a "safety net" for it's disadvantaged citizens.

But let's think about this a bit more; what Kerry is saying here is that religion will guide his actions as president. What he is clearly saying here is that "because it is in the bible we have to make this public policy."

What comes to mind in a nanosecond is his position on abortion. Consider his answer to a question on this subject in the second debate;

GIBSON: Going to go to the final two questions now, and the first one will be for Senator Kerry. And this comes from Sarah Degenhart.

DEGENHART: Senator Kerry, suppose you are speaking with a voter who believed abortion is murder and the voter asked for reassurance that his or her tax dollars would not go to support abortion, what would you say to that person?

KERRY: I would say to that person exactly what I will say to you right now.

First of all, I cannot tell you how deeply I respect the belief about life and when it begins. I'm a Catholic, raised a Catholic. I was an altar boy. Religion has been a huge part of my life. It helped lead me through a war, leads me today.

But I can't take what is an article of faith for me and legislate it for someone who doesn't share that article of faith, whether they be agnostic, atheist, Jew, Protestant, whatever. I can't do that.

Whoa there, senator. Which is it?

Apparently it depends on which audience he is speaking to. Just last March, when speaking at a church in St Louis, he told is that

``The Scriptures say: `It is not enough, my brother, to say you have faith, when there are no deeds.' We look at what is happening in America today and we say: Where are the deeds?'' preached Kerry.
The contradictions just keep coming.

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September 19, 2004

Two Big Differences

Grover Norquist spoke about the two big differences between the two parties at the GOPUSA conference.

Norquist is usually known for his stand on tax issues, so while we got some handouts on that, his comments centered on ideological differences between conservatives and liberals and the effect that has on intraparty problems and issues.

Difference Number One

This centers on the libertarianism that has become so much a part of the conservative agenda. Many of those on the right "just want to be left alone"; they don't want to force their ideas on other people. For example, gun owners don't insist that everyone else own a gun, they (we) just want to own ours in peace. SUV drivers don't care what anyone else owns, they just don't want the government raising CAFE standards too much.

Me - It will be objected that the Pro-Life and Evangelical Christian lobbies want to impose their views on others. "A woman has a right to do what she wants with her own body" and "keep your religion out of the government" are two standard rallying cries you'll hear (They're too trite to rate the label "argument"). As to the former, there 's more than one body involved, and you don't have the right to kill it. To the latter, no one (well, no serious person) is trying to make Christianity the official religion of the country. But to say that a Christmas display is "imposing religion", or that a public official can't use his or her religion as a guide to public policy is lunacy. If you can't use religion as a guide to decision making, it has no value.

Difference Number Two

The Democratic party today consists of a number of interest groups who are all in competition with each other. No such situation exists within the GOP.

For example, environmentalists and labor leaders are often at odds with each other. The former want a pristine environment regardless of the economic impact, and the latter are concerned with jobs. Remember the Spotted Owl controversy of the late '80s? Conservatives watched with amusement as liberal interest groups went at each other.

No such direct conflict exists on the right. This is not to say that there is ideological uniformity on the right (nor should there be). For example, it is possible to be pro-gun yet "pro-choice", and thus be at odds with pro-life conservatives. But this is incidental, not inherent, in the two positions. There is no inherent reason why fiscal conservatives should find themselves in conflict with religious conservatives, to choose another example.

The reason for this is that the Democrats have become the "takings" party. Their groups want to "take something", or "regulate something". They want law after law after law after law. If they cannot continue to pass these laws, or keep tax rates high, they will wither on the vine. They depend on continued, activist change. Conservative groups face no such challenge, for they just want to be left alone.

The Consequences

The result of these differences is that the liberal coalition is high maintenance, while the conservative one is low maintenance. Norquist's theory (as I understood it) was that this will make the interest groups of Democratic party much harder to manage. The party bosses already have a hard time satisfying the various coalitions, keeping them from each other's throats will become ever more difficult.

More on Norquist's ideas on these subjects can be found here and here.

Me - What we have seen over the past twenty or so years is a trend towards ever more stringent enforcement of ideological orthodoxy among the Democrats, while the GOP is truly the "big tent" party. I plan on writing more extensively on this subject in the future, so check back.

Back to Taxes

It would be impossible to write an article about Grover Norquist without discussing taxes. That would be like writing an article about CBS without mentioning the forged documents Dan Rather unwittingly tried to foist on us.

Norquist's organization is Americans for Tax Reform. On their agenda is enactment of a flat tax and elimination of the IRS. Social Security and Medicare should be totally privatized. The Federal government should be cut in half.

Now, these things are not going to happen. No how, no way.

So it is tempting to write him off as a utopian dreamer. This, however, would be an error.

For the real value and purpose of people like Grover Norquist is that they change the terms of the debate. It is now "acceptable" to talk about flattening out tax rates, whereas thirty years ago this would have gotten you booed off the stage. Reagan was the first to reduce the top income tax rate from it's absurd level of 90% (I believe). That was the start, now the objective is to keep making it flatter and flatter.

For example, Steve Forbes famously ran for president as a single issue candiate on just this issue. I do not believe that he would have been able to do so without the prior efforts of people like Grover Norquist.

If you'd like a philosophical label, you can use the Hegel's dialectical formula of history: Thesis + Antithesis = Synthesis

What do I think?

I am personally in support of a flat tax, although I recognize that political realities are such that it will not occur, at least not in our time.

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