As if sitting on a couch with Nancy Pelosi talking about global warming wasn’t enough, Newt Gingrich seems to have taken a seat next to Debbie Wasserman Schultz, to attack free market capitalism.
Bankruptcy
Photo by Mike Licht, nationscapital.com
Often overlooked in the class warfare that President Obama is unleashing on America so that he can continue spending, is how business is being strangled by regulations. Every time the government fails to protect our rights and freedoms because it is too busy trying to micromanage our lives, and as a result some calamity descends upon us, the answer is always more regulations. Nowadays, that will typically mean thousands of pages of new laws that turn into tens of thousands of pages of new regulations and those who never met a payroll wonder why we are stuck at 9% unemployment.
Progressives are a funny group when it comes to investing, and I mean real investing, not the phony code word for spending. If they’re the ones controlling the money and especially if the money is not theirs, then investing is fine. If it will compete with one of their sacred social programs and you will directly benefit from it, then bar the door it’s an out of control casino.
Photo by wstera2
Obama has a jobs plan, or so we are told. He will unveil it after he returns from Martha’s Vineyard. I hope it is a little more detailed than his budget plan to cut $4 trillion that no one can find by meticulously searching the Oval Office. I don’t even know what is in the plan and I have a better one. Stay in Martha’s Vineyard, Mr. President. Set a goal to play eighteen on every PGA sanctioned golf course in the country. Don’t you have some friends and family in Hawaii that miss you?
Actual Unemployment vs. Stimulus Sales Pitch
It was a very close race, one of the last decided in the country. Out of 180,000 plus votes the final margin of victory was just under 600 votes. In that election Tim Bishop successfully managed to hide from his record and instead he took advantage of a late Republican primary that was hotly contested and pounced with a campaign of personal attacks on his opponent that was just enough to carry the eight weeks until Election Day. His opponent, Randy Altschuler, wants a rematch and it appears the race will be decidedly different.
The Republicans in the House of Representatives led a freewheeling debate, unknown during Nancy Pelosi’s reign, to put together a continuing resolution for the rest of the current fiscal year ending in October. Hundreds of amendments were offered by both Democrats and Republicans and voted on. Some went against what the Republican leadership wanted, but it was how the House was supposed to work.
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.
| Year | Top 1% | Top 5% | Top 10% | Top 25% | Top 50% | Bot 50% |
| 1999 | 36.18% | 55.45% | 66.45% | 83.54% | 96.% | 4.00% |
| 2007 | 40.42% | 60.63% | 71.22% | 86.59% | 97.11% | 2.89% |
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.
You don’t have to go too far to find a story about people suffering in these tough economic times, and your heart goes out to them. Some have lost houses, are living in cars, really tough stuff. But there is another story under the surface that reflects common attitudes developed growing up in the nanny state kicked into high gear by Franklin Delano Roosevelt.
In the midst of these tough economic times, instead of getting out of the way by cutting taxes and red tape, the Obama administration is focused on piling on more government programs. Worthless stimulus packages, health care reform, and efforts to push cap and trade have not moved the unemployment needle a whit. They extend unemployment benefits and keep whistling past the graveyard hoping they won’t get swallowed up.
Personal Responsibility
Since the Great Depression and the growth of the nanny state, more and more people have bought into the myth that the government can provide all, and our responsibility is to enjoy the ride. An article in today’s New York Times writes about people benefitting from a government program to keep them in their houses if they face becoming homeless. But there are some subtleties in the hard luck stories that give me pause.
There is the case of Antonio Moore who lost his job as a mortgage consultant that paid him $75,000 per year. He lost his 3-bedroom house with a Jacuzzi and his Lexus sedan. He is now faced with eviction from his apartment. The article doesn’t go into details, but in most cases you don’t lose your house and car if they are all paid for. Again, it doesn’t say if Mr. Moore bought his car new or used, but when I think of a car like a Lexus I usually don’t think that fitting in the budget of someone making $75,000 living in the San Francisco Bay area. Had Mr. Moore purchased a Toyota Corolla instead of the Lexus would he be in better shape? Again, I don’t know the details. I am just wondering.
Then there is the case of Dawn Martin.
Ms. Martin is mortified to be asking for help. She grew up wealthy, with vacations spent on Caribbean cruises. “I had everything I ever wanted,” she says.
She and her husband have a painting business that until 2008 was grossing $100,000 per year, but in this tough economy it dropped to $38,000. That’s hard. But then here is the between the lines story:
Her father has money to help if it really comes down to it, she acknowledges.
“I don’t see him letting his grandkids land on the street,” she says, “but he’d hold it over our heads for a long time. That would lower me to a level that I wouldn’t want to go.”
So she is here, at Samaritan House, filling out the paperwork for the homeless prevention program.
So because of her pride, she turns to your family and mine, through higher taxes to fund a government program, to help her through her rough spot before she will turn to her own family. But don’t worry. When our money is gone, she will turn to Dad. The painting business is picking up so Ms. Martin is confident they will be able to sustain themselves. She is able to take our money to tide her over and still maintain her pride.
But what did Ms. Martin learn about money when “growing up wealthy”? Is Dad responsible for not teaching her or was she a rebellious child who ignored him and perhaps that is why he would hold it over her head for a long time. Will she do something different this time around or hope for another government program?
Perhaps I was a little torqued before reading this story by another in the Wall Street Journal that wrote about the homes underlying the Goldman Sachs fraud case. This article talks about a Ms. Onyeukwu, a 43-year old nursing home assistant with pre-tax income of $9,000 per month. She is having trouble paying her $688,000 mortgage at $5,000 per month which is 56% of her pre-tax income. Her solution? Refinance it with a $786,250 mortgage. But hey, the interest rate is lower so her payments of $5,000 per month will stay the same. What is she thinking? I could be way off base here but I’ll bet she could get a nice apartment for significantly less than $5,000 per month. Sell the house, live within your means.
Government as Savior or Government as Pusher?
This is a tale of two government programs and personal responsibility. We had or still have a massive government program that uses threats, goals, and sleight of hand to help millions achieve the American dream of home ownership. This is not through thrift, like our parents did it, but by the government threatening banks with charges of racism (there’s the race card again) if the banks didn’t lower their lending standards. As the housing market took off, the feeding frenzy intensified and everyone was trying to buy houses or finance them with less and less money down. The Community Reinvestment Act, HUD, Fannie Mae, Freddie Mac were all players in this debacle, but don’t expect our elected officials to wade into that swamp to see what happened. No, they will pile the blame on the banks and Wall Street, while they take Wall Street’s massive donations and do nothing but pass meaningless “reform legislation”. Now we need new government programs to keep these people hanging on. How similar is this to the drug pusher who gives you your first hit for free to get you hooked and dependent on them forever.
What About Personal Responsibility?
Unlike the people in the articles, I believe I have responsibility first and foremost for my actions. If I need help beyond myself I turn to my family and then the charity of my church. I believe many conservatives share my views, which is why on average conservatives give 30% more to charities than liberals. It is why I gave the moniker “Buck a Day Biden” to Vice President Joe Biden because in his financial disclosure forms he reported give only about $300 a year to charity. Here is a man who has been drawing six figure salaries from the taxpayers for years, is a millionaire, but will not reach very deep into his own pocket to help his fellow man, but has no problem reaching into your pocket and mine to create some government program to give your tax dollars to someone else.
There is a man named Dave Ramsey, who was a millionaire in his mid-twenties but later lost it all and declared bankruptcy. He now teaches others how to live without debt and take responsibility for their financial lives. It is a lesson all of us should learn and if we do, I’ll have to find something else to write about that sets me off. But in the mean time we have a lot of work to do. First we have to stop the federal government’s runaway train. Next, we have to shrink government. Then we have to go back to being responsible for ourselves and wean ourselves off the government.
If I asked you a simple question, what government organization works well, what would you say? Let’s take a look at two government organizations and compare their effectiveness and motivation.
The Military
Whether you support our troops on the battlefield or want them to always stay home in their barracks, most Americans will say the military does a pretty good job. Why? That is, why are they effective, not just why do people think so? Well, they put a lot of investment in training and technology. They seem to have solved the problem of integration, being based on merit rather than racial prejudice. These are all important things, but I don’ t they get to the core of the issue. The key question is, what happens if they don’t do their job? They die…they die, the guy beside them dies, their buddies die, and depending on the size of the conflict, their families and country may eventually die. With that kind of motivation, race is not even secondary. If the guy next to me has got my back and I have his, I don’t care what color he or she is. We do it right, we live; we don’t, we die.
The K-12 Teacher
K-12 education comes under fire in this country, and rightly so, for failing to produce an educated workforce. In New York, for example we spend over $14,000 per student, per year on education, far above the national average of around $9,000. Are students in New York 50% smarter than the country in general? Hardly. Is the nation as a whole turning out well educated students? Sadly, no.
Our K-12 public schools are a government run monopoly. So what happens to a K-12 teacher if they fail to do their job? If they have been in the job long enough to get tenure, nothing. They will get a raise like everyone else. So what motivates them to turn out outstanding students? I’ll wait.
Let me be clear that I don’t want to lump all teachers together. They are many teachers who, by having what I suppose is a strong moral streak, do a great job because they want to teach. Okay, so let’s look at the teaching profession where there is a group that does their best because they get satisfaction from doing a good job. Now, some studies come out that say the way to improve results is smaller classroom size. The teachers’ unions get behind it and eventually push it through. So what does that mean? If you cut the size of the class in half, you double the number of classes. If you double the number of classes, you have to double the number of teachers and thus have to go deeper into the labor pool to find them. Before you took this step, we can probably assume that all the self-motivated teachers were already on the job. So the additional teachers are motivated by what?
Co -conspirators
That brings us back to the teachers’ unions. When government’s come under pressure to cut educational expenses, the airwaves are soon flooded with the heart wrenching commercials pleading to restore the funding “for the children’s sake.” What you don’t hear is the trailer that says, “This commercial paid for by the PTA,” or “This commercial paid for by the Association of Concerned Parents.” No, what you typically hear is, “This commercial paid for by the X Teacher’s union, Joe Blow, President.”
Who do the unions really represent…really? The students? or the teachers? They want the funds restored so that their membership is not hurt and their dues are not curtailed. If their true concern was for the students, why not support school vouchers and charter schools? They fight the former with a vengeance and the latter, if it is not union organized.
Let’s Not Pick on K-12 Education
Let’s look at other government areas. Government is the only area where union membership is growing. How many people relish going to their Department of Motor Vehicles? How efficient is the Post Office? Amtrak? Fannie Mae and Freddie Mac have a bonus compensation plan, which is a step in the right direction unless it leads to cooking the books and making extremely risky loans that lead to the near collapse of our economy. How can we get this under control?
Controlling the Uncontrollable
Our government is trying to install a massive health care program that will cost a trillion dollars. At the same time, tens of billions of dollars are stolen from Medicare every year and they can’t stop it. Early this year, the Obama Administration passed a $787 billion stimulus package, spent $18 million to build a website to track it, and put Joe Biden in the role of watch dog. How is that working out? A recent report from ABC News, of all places, found that credit for creating jobs was given on the web site to Congressional Districts that do not exist. A $1,000 grant was purported to have created 50 jobs. The New York Times investigated and found that the $1,000 went to purchase a lawn mower. It took from the time of the founding of the Republic until about the mid 1990s to accumulate $6 trillion in debt. It has doubled since then, and it is projected to go from $12 trillion to $14 trillion by next year!
It cannot be controlled. It is impossible to control. The only solution is to cut the federal government down to size. Take out the Constitution and read what the true functions of government are supposed to be. The military, absolutely; the Post Office, yes it’s in there; coin money; establish patents and copyrights; establish the courts; control the District of Columbia; regulate interstate commerce; make treaties; give the State of the Union address. That pretty much sums it up and everything else should be left to the states and local government or the people.
We should jettison all the rest and cut this government down to size and get out of debt. Department of Labor–gone; Department of Health and Human Services–gone; Department ment of Housing and Urban Development–gone; Department of Transportation–gone; Department of Energy–gone; Depatrment of Education–gone; Department of Veterans Affairs–gone, rolled into the Department of Defense; Department of Homeland Security–gone, rolled into the Department of Defense; Department of the Interior–gone; Department of Agriculture–gone.
The amount of money saved would be enormous. Selling all the real estate and buildings would bring in more money. We could then cut taxes to jump start the economy and run a surplus to cut the debt. The next step would be to make it illegal for unions to organize government workers without a referendum approved by all the voters. Side benefits would be less campaign money because there would be less government to influence. Government would be more accountable to the people because it would be closer to the people, that is, at the state level or local level. We can do this proactively, or wait until the government is bankrupt and we have to sell off the parts to the Chinese.
Stock Market Leads the Way
As I write this the stock market is up nearly 200 points, and it has risen in each of the last three months. Commodity prices are rising based on encouraging manufacturing data from abroad. Personal incomes rose 0.5% in April. Chrysler could exit bankruptcy as soon as Monday. Citigroup and GM are removed from the Dow Jones Industrial Average, replaced by powerhouse Cisco and Travelers. Ford motor’s shares rose 4.9% on news that it plans to expand production in the third quarter to try to gain market share from its rivals, and without government money.
The Stimulus Flop
Less than 10% of the $780 billion stimulus package has been spent. President Obama told us we desperately needed or we may be mired in this recession/depression for years . The free marketers said that this economy is strong enough to recover on its own, which the statists sneered at. Government created this mess by their meddling in the housing market and how they mishandled interest rates and the money supply but we were told that “only government” can get us out of it. More recently President Obama, who has been trying to spend every dime Congress will let him get his hands on has said we are out of money. Here’s a thought: repeal the rest of the stimulus and get out of the way of the strongest economy on earth.
Things to Ponder
- Obama opposed bankruptcy for GM and Chrysler. Free marketers said it should be allowed to happen. That’s how the free market works. After pouring billions of taxpayer dollars into these two, where are we? Both are in bankruptcy.
- Bankruptcy for GM and Chrysler would be an extraordinarily long and drawn out process costing millions of jobs and killing the auto industry in the U.S. Where are we? Chrysler may emerge from bankruptcy as early as Monday, Ford is ramping up for the third quarter.
- Without the stimulus package, we were told the unemployment rate could hit 9% by 2Q2010, whereas with the stimulus it will peak at 8% at the 3Q2009. Where are we? It is now at 8.6% and we are in 2Q2009. The stimulus passed, little has been spent and the administration has been wrong again. The free marketers say that unemployment will likely rise quickly and if left alone, the recovery will happen more quickly. If the government meddles and tinkers, we will likely see what happened in the 1930s where this drags on for years.
- President Obama says we’re out of money. So stop spending. Repeal the stimulus that is accomplishing nothing because the bulk of the spending isn’t due to happen for another year or more.
- Watching the Information Technology job boards, I see a big rise in the job postings for sales people. When companies are confident that the economy is turning, they step on the gas for sales to beat the competition. The operational folks will soon follow.
If the Obama administration is not careful and doesn’t reverse course before he bankrupts us, we may be faced with accelerating inflation and sky high interest rates. Shall we get nostalgic for the days of Jimmy Carter?
