President Obama wants to have it both ways.  He wants to appear to be fiscally responsible and he knows that to do so, that something has to include Social Security.  However, to try to keep as many Democrats in office that he can he has to play that other favorite card of the Democrats, that Republicans want to push grandma in her wheelchair down the stairs by privatizing Social Security.

In a campaign stop in Racine, Wisconsin the president had this to say, “”I’ll fight with everything I’ve got to stop those who would gamble your Social Security on Wall Street. Because you shouldn’t be worried that a sudden downturn in the stock market will put all you’ve worked so hard for—all you’ve earned—at risk.”  Oh, really, Mr. President?  Then perhaps you can show us where all the Social Security money is that you don’t want to put at risk.  The problem is that the government spent it all.  That’s right, there’s no lock box, no account, no bank vault, no hole in the ground were the money is buried, earning nothing.  I only wish I was able to put “at risk” all the money that the government took out of my paycheck along with my employer’s contributions. 

Based on my last annual statement from the Social Security administration, the government collected about $170,000 from me and my employers on my behalf.  Had I the opportunity to put that “at risk” in the stock market, the Dow Jones 30 industrials to be precise, including all the ups and downs, that $170,000 would be worth about $800,000 today.  Thank you Democrats for keeping me safe from accumulating that amount of wealth and instead “investing” it in ethanol, turtle crossings in Florida, bridges to nowhere, airports in John Murtha’s district that no one flies to, etc.  By Social Security estimates, that money they took from me and my employers, will be paid back to me and run out about ten to twelve years before I expire.  So instead of having a real nest egg that I can live off of and pass the rest on to my heirs, my getting Social Security will depend on the next generation getting taxed to the eyeballs to pay me and they can hope the next generation does not rise up in arms when they get the bill.

Everyone who supports the Social Security system as it is today, acknowledging that we have to fulfill our commitment to those who have retired or are very near to retiring, should join Bernie Madoff in cell block C, for the Ponzi scheme the government created.  President Obama, it is time to stop lying to the American people.  We don’t want government to run our lives.  You have crammed your left wing agenda down our throats and we will give you our rebuttal on November 3.  Then your one term will be up two years hence.

Revised GDP numbers suggest that going down is exactly what the economy is doing.  The government revised second quarter GDP growth from 2.4% down to 1.6%.  Even Paul Krugman is saying the stimulus didn’t work, but his solution is to drive the country into bankruptcy faster.  Krugman’s complaint was that the stimulus wasn’t big enough.  He also believe we should,” use Fannie Mae and Freddie Mac, the government-sponsored lenders, to engineer mortgage refinancing that puts money in the hands of American families.”  Fannie and Freddie have already sucked $160 billion out of the Treasury and Mr. Krugman wants to back up and re-inflate the housing bubble.  Talk about failed policies of the past, sheesh!

The solution to the jobs issue is private industry.  The problem is that this is the most anti-business government in memory.  Business is the target of the administration’s ire, tax policies, health care policies, cap and trade schemes, repeal of the Bush tax cuts, card check, financial regulation, have I left anything out?  So business is sitting on its hands.  No matter how much cash it may be accumulating it does not want to take any steps, like expanding, until the full weight of all these choking policies are understood and priced out or until the Democrats are run out of the Congress and the anti-business sentiment is lifted there.

So let the Joe Biden show continue.  The man who says he know little about economics and proves it with every speech will go on telling us how the stimulus is working exactly as planned.  President Obama will continue to take a new vacation about every 90 days and we will cross our fingers that there is something left to recover when we recover our government from these inexperienced, clueless dolts.

In the August 23, 2010, New York Times, Paul Krugman decries that if we don’t let the Bush Tax cuts expire and thus have a massive tax increase in the midst of a weak Obama recovery, it will be so unfair, so evil… 

First let’s look at how twisted the logic of the left has become.  Mr. Krugman says, “These same politicians are eager to cut checks averaging $3 million each to the richest 120,000 people in the country.” Er, not really, Paul, unless the richest 120,000 people are stupid enough, with all their financial advisors, to have that much tax withheld from their incomes.  You see, Paul, the only reason the government would have to cut them checks is if they paid too much in taxes during the year, and since the current rates are already in place it is unlikely that they would change their behavior to suddenly have an extra $3 million sent to Washington.  Here’s the problem with your thinking, Paul.  It is not your money, it is not my money, it is not the government’s money to begin with.  It belongs to the people who have earned it.  It is the people to provide revenue to the government.  It is not the government who gives money to those who produce.  Got it?

Like most on the left Mr. Krugman always associates tax cuts with a loss of revenue and tax increases with a gain in revenue, and ignores how people change their behavior with regard to these changes.

As this chart shows, at the end of the Clinton administration and the dot.com bubble the economy fell into recession.  The Bush tax cuts were implemented in 2001 and they were across the board tax cuts, not just for the wealthy.  A second set of tax cuts came in 2003.  As you can see revenues started to fall before the tax cuts, but bounced back sharply after the cuts in 2001 and 2003.  But Mr. Krugman would have you believe that if you cut taxes, revenues fall and if you leave them along or increase them, revenues increase.  You can also see that Clinton’s tax increase in 1993, didn’t have much effect in changing the rate of revenue growth, but when the Republicans took over Congress in 1994 and instituted tax cuts in 1997 you can see the slope of the curve bend upwards and it is even steeper with the Bush tax cuts.  So in the absence of the 2001 recession, revenues collected increased with tax cuts, not tax increases.

Let’s look at who is paying what share of the taxes.  The follow chart shows what percentage of the tax burden was paid by what percentile of the income earners by Adjusted Gross Income.

So even as the Bush tax cuts reduced tax rates across the board, the “evil” rich still ended up carrying a larger share of the overall tax burden than they did before the cuts.  So just what is Mr. Krugman’s beef? 

I argue that were are nearing a dangerous threshold politically, where the majority of voters may soon find they pay no taxes and the minority pays all.  If that tipping point is reached, what is to prevent this majority from voting for massive tax increases that will only affect the minority?  All Americans should carry some share of the cost of government.  It should not be a free ride for some and a minority pays the tab. 

To further emphasize the fairness issue look at the following chart from the IRS in 2004.  The brown bars show the share of the income that the percentile on the vertical axis earns.  The blue bar shows the share of the total income tax bill they pay. 

The problem folks is spending.  As the first chart makes pretty clear, we have not been suffering from a revenue problem, we have been suffering from a spending problem.  This administration and their instigators, like Mr. Krugman, have been urging reckless spending upon reckless spending and even decrying that the administration has not spent nearly enough.  Krugman is sloppy in making his case and tries to convince his readers that we will be carrying buckets of money to the wealthy when the truth is that he wants to open the spigot wider from those who produce in this country to the profligate government who can then spend it on more turtle crossings in Florida, and to prop up the unions, and bankrupt states.  Stop spending, cut taxes, shrink the federal beast, and we will be in good shape in short order.

As many people have said, “I never got a job from a poor man.”  In looking back at my own career, I have worked for several companies that were started by entrepreneurs and who became wealthy. Do I care if they were wealthy?  No.  Do I wish they were taxed to the eyeballs?  No.   If they were, those are jobs I would probably wouldn’t have had.  Opportunity is what made America the country where people around the world fight to get into, not bashing the successful.  All who stive to come here want to become those wealthy successful people and give the same opportunity to their children.

Many states have a constitutional requirement to balance their budgets while the federal government has no such limitation.  As such, a number of stately are longingly looking toward Washington to throw some cash their way so they don’t go bankrupt.  It is not going to get better.

If you think Washington awash in debt, is a problem, it is chump change compared to what is brewing at the state level.  Trillions in unfunded pension liabilities are looming and those who are benefiting from those generous plans or who are going to, don’t care about the rest of us who have to pay for them and then go provide for ourselves.

Lawsuits are starting to be filed to stop states from altering the terms of these plans.  The time to act is sooner rather than later, but that is lost on one teacher in Colorado who says, “Why is the state so quick to break its promises.”  Perhaps we should explore how these promises were made, in both directions. 

Unions backed Democrats almost exclusively.  Democrats riding union support into office had a debt to repay.  They repaid it by supporting the kinds of contracts that the unions wanted and the unions returned the favor with their loyalty.  Who paid the bill?  The rest of us.  How much say did we have in the process, next to none.  In private industry, unions negotiate with management.  Unions have almost no say in who gets hired into management and will sit across from them at the bargaining table.  So the adversarial relationship has management supporting the shareholders and unions backing the workers.  As management became more enlightened and took better care of their employees, the need for a union middleman faded away.  That is why in private industry union representation is down to about 7% and falling while in the public sector is around 37% and growing.

The public employees argue that their generous pension plans is merely deferred compensation to make up for their salaries during the time they worked.  The only problem is that the unions did a good job not only on the pensions but on the salaries as well, so that the average public sector employee makes about 34% more than his private sector counterpart.  Fair being fair, our public sector friends would probably recognize their good fortune and agree to help fix the problem, right?  No chance.  As one put it, “I shouldn’t be responsible for past pension underfunding and foolish risks managers made with my money long after I retired,”  Okay, let’s give that a closer look.

Why do you think the pension is underfunded?  Could it be that the government entity could not afford to make the extravagant  payments the union contract required and still balance the budget?  If they tried to raise taxes to cover the shortfall then even the unions with all their political muscle couldn’t get those responsible re-elected.  So it was better to sweep it under the rug for a future administration to deal with.  What about those risky investments?  Well, with risk goes reward.  If you need bigger payoffs on your pension assets to make up for the shortfalls in funding that you didn’t want to make, you may take bigger chances to make a bigger payoff.  But if you are wrong, instead of fixing the problem, you make it worse.  So the real problem is that the unions and the politicians they fought to elect negotiated contracts that were unrealistic and unsustainable.  What does the union member say. “I’ve got mine, you go get yours.”

What are some of the onerous changes that states are asking for?  In New Jersey, Chris Christie asked for a one-year freeze on public employees pay and for them to contribute 1.5% of their salary toward their retirement.  Outrageous!  How about in Colorado where they asked for a 2% cap in the Cost of Living Adjustment (COLA) for retirees instead of 3.5%, in an environment with 0% inflation.  Dastardly!  One individual’s justification was that he does not and cannot pay into Social Security so the pension is all retirees have to live on.  He fails to point out that being prohibited from contributing to Social Security puts 6.2% more of his salary in his pocket, since he pays no Social Security taxes, and if he had the self discipline to take that and invest it in the Dow Jones Industrial Average he would have far more money of his own than he would ever get from Social Security.

This problem is not going away.  Once upon a time, public sector employees did earn less in salary than those in the private sector, but those days are long gone.  They earn more, can retire earlier, can retire with more money for longer periods of time and put the burden on all taxpayers who have to cover their pension while providing for their own.  Their “too bad” attitude is shameful.

Republicans have to learn to stop fighting by the Marquis of Queensbury rules, while Democrats, bite, kick, pull hair, scratch and hit below the belt.  Yes, Christ told us to turn the other cheek, but he also overturned tables, formed a whip out of cords and drove the money changers from the temple.  In other words, sometimes you have the hit the bully hard between the eyes before he learns to stop being a bully.

So if the Republicans regain control of Congress in November, they should open the new Congress in January with detailed hearings on what happened to Fannie Mae and Freddie Mac and don’t pull any punches.  By that I mean if they need to put Andrew Cuomo in the witness chair, even if he is the governor of New York, which he probably will be, then they should do so.  It’s time to stop playing patty-cake.

For all the hoopla of the Dodd-Frank Act, Fannie Mae and Freddie Mac were left out of the new regulations.  Oh, we’ll get to those later.  Okay, let’s get to them with the Republicans in charge.  Let’s expose how it was our government that got us into the housing mess and let’s do this before the Democrats re-write history and paper over their culpability in the greatest financial crisis since the Great Depression.  It’s time to put the big lie to “it’s all Bush’s fault and Republican policies.”

The papering over has already started by none other than Franklin Raines the former head of Fannie Mae who received bonuses of over $90 million while at the helm of Fannie Mae and was also charged with cooking the books that helped him receive those bonuses.  He reached a settlement with the SEC and gave back about $1.8 million from the profits in the sale of Fannie Mae stock and gave up $5.3 million in future benefits related to his pension.  But he essentially kept the rest, what the Wall Street Journal called a “paltry settlement.” 

Mr. Raines claims the demise of Fannie Mae and Freddie Mac, to which taxpayers have already coughed up $145 billion, was due to bad credit decisions made after he left the firm.  To put it in his own words:

 “The Journal had been warning for years that the on-balance sheet portfolios of Fannie and Freddie would lead to their demise. Mr. Carney suggests that excessive leverage was the culprit. Unfortunately, neither of these were involved. Nope. Just bad credit judgments. Decisions made, by the way, while operating under close regulatory scrutiny.”

According to the Wall Street Journal “What he doesn’t say is that Fan and Fred had a political and legal mandate to support low-income housing.”  To meet this mandate which had increasing goals each year, Fannie and Freddie had to cast a wider net to find these borrowers and the wider they cast the net the lower their standards had to be.  Thus more creative types of mortgages were created to lower the bar such as, interest only loans.  This scheme would continue to work as long as housing prices kept rising but that could not go on forever.  When the music stopped a lot of people were left standing without chairs and we all lost.  People’s credit ratings were destroyed, mortgage securities were worth far less than face value, people walked away from houses, and taxpayers were forced to pick up another “too big to fail” enterprise.  By the way, where in the Constitution does it authorize the federal government to get involved in helping people buy houses?

The secret veil put in place by the main stream media has been lifted.  With the Internet and the bloggers and cable television and talk radio, the main stream media can no longer keep information that does not comport with their agenda hidden from the American people.  The American people are energized and informed but that may not last long after the election, if we don’t continue to engage them.  Uncovering the true “swamp” that is our federal government and draining it should begin by letting the sun shine in.  So let’s do away with the good ol’ boy politics of not rocking the boat when you gain control so that they won’t rock the boat when they get it back.  If we don’t have a new class of non-incumbents who are willing to go to Washington and clean it up, really clean it up, we need to get rid of them and put new people in their place.  If that means replacing Republicans with better Republicans or Democrat incumbents with better Democrats, so be it.  We have to end the process of only being able to choose between two pathetic life time politicians who have never lived in the real world.

The talking points have been established that it was eight years, eight, of failed Bush and/or Republican policies that got us into this mess and President Obama and the Democrats are working hard to get us out of it.  Let’s take a closer look.

What blew up in 2008?  It was the housing market.  The underlying cause of the problem has Democrat/liberal/progressive fingerprints all over it going back to Franklin Roosevelt who created Fannie Mae.  Add into that mix Lyndon Johnson privatizing Fannie Mae to hide it from the budget and creating HUD; Jimmy Carter creating the Community Reinvestment Act; Bill Clinton pushing for more home ownership among those who could least afford it, Andrew Cuomo as HUD Secretary pushing Fannie and Freddie to take on riskier mortgages; Barney Frank and Chris Dodd fighting against regulation before they were fighting for it (and where have we heard that formulation before?); and when housing prices run out of gas and the house of cards that the Democrats built collapses, it’s all Bush’s fault.

Let’s look at the timeline.  When he took office, President Bush was handed a recession from Bill Clinton resulting from the dot.com bubble.  In less than a year we had 9/11.  In spite of that, Bush pushed through tax cuts and got the economy to grow through most of his presidency.  The Democrats took control of Congress in January 2007 and in December 2007 the economy went into recession.  One year later Barack Obama is elected President of the United States.  Now, more than a year and a half after Obama is in office the economy looks like it is slipping into a double dip recession, and this is the Republican’s fault?  Who has been spending like a drunken sailor?  Who wasted almost $1 trillion on a stimulus plan that was so ineffective the Obama administration had to invent a new statistic, “jobs saved”, to hide its dismal performance.  They add on ObamaCare, which no one in Congress read before voting on it and no one knows what is in it and so no small business is going to hire anyone until they know what it costs.  How is that the Republican’s fault or Bush’s?

We are just a few months away from the tax cuts put in place by President Bush expiring.  President Obama wants them to expire.  This will place an additional massive burden on small businesses and just about everyone else and he wonders why aren’t companies hiring?  The man came into office with no executive experience and the year and a half he has been in office he hasn’t seemed to pick up any.  Could it be because he is surrounded by advisors who have little to no executive experience themselves?

To my fellow Americans I say, hang in there it is less than 100 days to vote the bums out.  Perhaps not all of them, but at least we can bring in some adult supervision.  It’s time to stop steamrolling the American people with the socialist programs and to let “We the People” take back our government.

The Democrats like to point to the Clinton presidency as proof of their fiscal responsibility.  It was a period of strong growth, balanced budgets, and prosperity.  They then point to the Bush presidency, all eight years of it, and deride it for deficits, and ultimately a very severe financial crisis.  But it is worth taking a moment to recall that the federal government is made up of three co-equal branches of government with built in checks and balances.  The Congress is not subordinate to the president and it does not work for him.  It is an equal branch of government that checks and balances the power of the presidency.  For the purpose of this discussion, I will leave out the third branch, the judiciary.

Despite the famous 1992 Clinton campaign slogan, “It’s the economy, stupid,” the recession had already ended in March 1991.  When Clinton took office he had a Democratic Congress and he pushed through a massive tax increase in 1993 without a single Republican vote.  We know what happened to Congress in 1994, the Republicans took over for the first time in 40 years.  Speaker of the House Newt Gingrich tried to pass a Balanced Budget Amendment to the Constitution, which was included in the Republicans’ Contract with America.  It passed in the House but failed by one vote in the Senate.  After losing this round, Gingrich met with the Republican leadership and put forth  the idea of acting as if the amendment had passed and just start submitting balanced budgets.  They succeeded in the last three years of the Clinton presidency to produce budget surpluses and decrease the national debt.  This included a tax cut by the Republican Congress in 1997, and the economy grew much stronger after the Republican takeover of Congress than under an all Democratic government.

In the 1996 election, the Democrats regained control of the Congress under Nancy Pelosi and Harry Reid.  Up until that point the economy had grown steadily under President Bush despite two wars.  With Bush in the White House and the Republicans in control of Congress we had tax cuts and seven years of economic growth.  In December of 2007  the economy went into recession, almost one year after the Democrats regained control.  Now with a Democrat in the White House, and the Democrats in control of Congress we are looking at massive growth in government, a whopping tax increase bearing down on us that will hit on January 1, 2011, and a growing debt that may eventually bankrupt us.

So what is all this talk about eight years of failed Republican policy?  Under Clinton and a Democrat Congress it was two years of a tax increase and modest growth.  Under Clinton and a Republican Congress it was six years of tax cuts, budget surpluses and strong economic growth.  Hmmm….same president, different parties controlling Congress.  Under Bush we had seven years of growth and tax cuts with a Republican Congress.  Under Bush and a Democratic Congress, recession, fiscal crisis.  Hmmm…same president, different parties controlling Congress.

But don’t expect honesty on the campaign trail from the Democrats.  It’s just not the Chicago way.

President Obama’s new tack on the campaign trail is to get people to forget the last year and a half and try to scare the voters by saying, “Remember who got us into this mess and who is getting us out of it.”  Is that supposed to rally the voters to the Democrats jamming budget busting program after budget busting program down their throats?  Let me make two points to any voter to whom that strategy may give pause.

1. George W. Bush isn’t running for office
2. According to the Bureau of Economic Statistics, the recession started in December of 2007.  Who was in control of Congress for a full year by December of 2007?  That’s right, the Democrats.

So if you want to punish those who were in charge when the recession hit, with Bush gone, that leaves the Democrats.  Fire away.

An article in today’s New York Times is just one more, “Don’t let a crisis go to waste,” move from this administration.  The article, titled “As Oil Industry Fights a Tax, It Reaps Billions From Subsidies,” uses the same tired talking points to justify another tax increase that will ultimately be passed along to consumers.

The article talks about how the oil companies take advantage of tax credits and breaks and then it also talks about how many oil based companies re-incorporate in countries like Panama, the Marshall Islands, the Cayman Islands, and Switzerland because it will lower their taxes.  When with the Statists get it?  If you raise taxes both corporations and people will change their behavior to lower their taxes.  Impose a millionaire’s tax in Maryland and Maryland discovers they have one-third fewer millionaires a year later and hundreds of thousands of dollars in less revenue.  Impose among the highest tax rates in the developed world on businesses and businesses will move to where the taxes are lower.  Create tax breaks and then somehow the Progressives are surprised that companies took advantage of them.

The initial thrust of the article was that the tax on oil companies was necessary to pay for the cleanup of the oil spill in the Gulf.  Pardon my confusion, but didn’t the government just get BP to pony up $20 billion into an escrow fund for this purpose?  Hasn’t BP said from day one that they will pay the cost for the clean up?  So why are the Progressives in Congress rushing to put a new tax in place other than to take advantage of a crisis to reach into your wallet?

Another unintended consequence of our onerous tax policy is that when companies incorporate in other countries, those countries often have lower engineering and environmental standards.

I am no fan of corporate welfare so why don’t we take the IRS code and run it through a shredder?  Get rid of the tax breaks across the board.  Lower the tax rate to a fixed number that is on par with other developed countries.  According to the Heritage Foundation, the freest economy in the world is Hong Kong, which oddly enough is located in Communist China.  The Chicoms were smart enough to leave well enough alone when Hong Kong reverted to their control from Britain in 1997.  Their individual tax rate is progressive ranging from 2% to 17% or an option for a 15% flat rate depending on which liability is lower.  The top corporate tax rate is 16.5%.  Their five-year compound annual GDP growth rate is 5.7%; unemployment is 3.5%; and their inflation is 4.3%.  By comparison, our top corporate tax rate is 35%, more than double that of Hong Kong; our five year compound annual GDP growth rate is 2.2%; unemployment is 9.4% (at the time of this study); and inflation is 3.8%.

If we could implement real tax reform it would not only simplify our lives, save several hundred billion dollars in compliance costs, reduce uncertainty for business, create jobs, and grow the economy.  With a larger pie, overall tax revenues will also increase. 

In that Heritage study the United States has the eighth freest economy in the world, down one place from the year before; not the direction we should be going.  Imagine if we set a goal to become the freest economy in the world.  Americans like a challenge so let’s set our sights on becoming number one.  The first three to concentrate on passing are those directly in front of us: Canada, Switzerland and Ireland.  On this Fourth of July, let’s plant our flag and get to work.

Well the cat’s finally out of the bag and it’s been loosed by none other than President Obama himself.  Once again out on the stump where he is most comfortable and away from the Oval Office where decision making is required, the president is now taking a new tack, or it is an old one?  He is now saying how much worse things could have been if not for his stimulus program.  This is the standard progressive/statist line that we didn’t do enough… if only we spent more money our program would have worked.

But here’s the problem.  To get the $787 billion stimulus package passed the president said that if we did nothing, unemployment would rise to 9%, but if we passed his stimulus package it would go no higher than 8%.  Where is the unemployment rate?  It is at 9.7%.  So if things could have been worse if they did nothing, his economic team is totally clueless because they were the ones who put forth the 8% vs. 9% argument.  Now Obama is trying to tell us that if we did nothing, the unemployment rate could have been in the double digits.  Who says so?  Is this his own projection or is his economic team back at the Ouija board?  Is anyone from the economic team being fired?

Here is an alternate theory.  If the stimulus plan was not implemented and the president cut taxes by $787 billion instead and promised not to introduce any new government programs for two years, that the unemployment rate would be much lower.  How can I make such an outrageous claim?  Let’s look to history.  In 1920-1921 there was a steep recession where the unemployment rate hit 11.7%.  Back then, government didn’t saddle businesses with regulations and businesses were free to cut wages and make other adjustments without government meddling.  Within one year the unemployment rate fell to 6.7% and the following year it was down to 2.4%  Contrast that to the Great Depression where we had massive government intervention and massive government spending and the unemployment rate never fell below 14.7%.

Bringing Jobs Back to America

Another brilliant example of your government killing the economy comes from the company Bucyrus Erie.  They were bidding on a job in India to provide heavy equipment to help them mine coal for a power plant the Indians were building.  Bucyrus Erie went to the Export/Import bank, a government agency, to try to get a loan guarantee to finance the deal.  Because a coal plant would increase the carbon footprint of India, the Ex/Im bank turned down the request.  This didn’t stop the plant being built, it just meant that the heavy equipment was going to be provided by China or Russia instead of the USA.  There would be no effect on the carbon footprint, a big effect on jobs in the US.  At the same time, President Obama is on the stump talking about how hard he is working to bring jobs back to the US.  Really?  They must have read his speech over at the Ex/Im bank, because they are reconsidering Bucyrus Erie’s request.

More government is killing our economy.  Our economy is very tough and it is extremely hard to bring down, but the current administration is trying its best to do so.