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.

The positive, knowledgeable “Uncle Newt” has left the stage to be replaced by his alter ego, “Nasty Newt.” These two personalities seem to be behind the lack of support for his candidacy from those who have worked with him in the past.

Gingrich is now going after Romney on his track record at Bain Capital and like the Obama administration that likes to pick winners and losers, Gingrich has decided what it good capitalism and what is bad capitalism.

“If somebody comes in, takes all the money out of your company and then leaves you bankrupt while they go off with millions, that’s not traditional capitalism,” Mr. Gingrich said on NBC’s “Today” show.

I think what Gingrich is describing is robbery, not capitalism and he should call the police. How does someone come in and take all the money? You are either brought in by management or you buy your way in. In the former case you are a hired hand and you get paid a fee for your services, you don’t dip that hand into the till. If you buy your way in, you own the company and that includes the cash.

When you buy your way in you are putting your own capital at risk which includes losing it. If a company is in a turnaround situation it means there is a problem. If the problem isn’t fixed the company will probably go under and all jobs will be lost. In conducting a turnaround, yes some jobs are eliminated; uncompetitive plants are shut down; the resources consumed by those inefficient plants are put to better use elsewhere. That is capitalism. On balance it creates more jobs than it eliminates in the overall economy, because capital is free to move to where it is most productive. If Gingrich doesn’t like that, well, neither does Obama and we’re trying to get rid of Obama, not just change the name on the mailbox at 1600 Pennsylvania Avenue.

I Like to Fire People

That quote from Romney was taking out of context. The context being ObamaCare. Romney was saying that if our only provider of health services is ObamaCare, we have no choice and health care will not improve. He said if his health care provider was giving him lousy service he would fire them. He likes to fire people who give him lousy service. This is not about firing your own employees. That is always a difficult an unpleasant task. It is no wonder that Debbie Wasserman Schultz took that snippet and is making an ad to imply that Romney likes firing his employees. For proof of Ms. Wasserman Schultz’s intellectual dishonesty here in an appearance with Chris Wallace she tries to say that Romney is a bad guy because people lost their jobs at companies he invested in, but President Obama is not a bad guy for taking taxpayer dollars and investing in Solyndra which went bankrupt costing 1,000 jobs. At least Romney was not using our money for his investments.

http://www.youtube.com/watch?v=mPAjxij9MZM

So the Democrats are attacking Romney because some people lost jobs in turnaround situations, and Gingrich, Huntsman, and Perry are doing the same. Ron Paul is holding his fire.

The term “firing” is completely different if shown in the full context. Many management books today say you should fire some customers. By that they mean that if a customer takes up more time and resources than they generate in revenue for you, let them go be someone else’s customer. Is that “firing” in the same sense of letting one of your employee’s go? No. Is firing the guy who cuts your lawn because he keeps running over your rose bushes  the same? No.

I am undecided on who I support for president. I have, at various times, considered Perry, Cain, Gingrich and Santorum. But if this line of attack is perceived as a winner by any Republican or conservative, it is more likely to push people into backing Romney. Capitalism is not always pretty, but if Americans want a shot at a better future, capitalism is the system that gives them the best long-term chance at it.

That’s my opinion; I’d like to know yours. Please comment below.

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.

Why does this happen? I believe there are two reasons. The first is the expansive view of the Constitution that many progressives hold. There is very little that they believe the federal government is not allowed to do. Most of our law schools are also espousing the concept of a “living, breathing” Constitution, meaning that what the Founding Fathers wrote is quaint but its meaning must change with the times. The graduates of those law schools eventually make it to the bench and even the Supreme Court. The problem is that if you take that view, the Constitution is meaningless.  If you can say the Constitution meant this in 1792, but those same words mean something else today, you no longer have a Constitution.  As Jefferson wrote,

“Our peculiar security is in possession of a written Constitution; Let us not make it blank paper by construction. –Thomas Jefferson, Letter to Wilson Cary Nicholas, Monticello, September 7, 1803.

The progressives are doing exactly what Jefferson said we should not do, turn the Constitution into blank paper, by contriving different meanings from the words than the authors intended.

The second problem is that the function of the Congress is to write laws. They don’t enforce them, that’s the role of the executive branch. So their knee jerk reaction to a problem is to write another law, regardless of whether the previous law is not working simply because it is not enforced.

So what are the checks on this runaway regulation? Congress keeps churning out more and more regulations that are choking the economy, and the Supreme Court has let them wander far afield of the Constitution. There used to be another check on runaway federal power, but that was eliminated with the Seventeenth Amendment to the Constitution.

When the Founders created the concept of the United States, they envisioned a president elected by the people, a judiciary appointed for life, and a Congress split into two chambers. One of those chambers, the House of Representatives would be the branch of government closest to the people. The other chamber was to represent the states. If you recall it was the states that created the federal government, not the other way around, and the states wanted to have a say in that government. To do so, senators were appointed by state legislatures, and as such, if they wanted to remain in that role they were to represent the interests of the states to the federal government.

The Seventeenth Amendment changed it so that senators would be directly elected by the people. Knowing human nature as I am sure you do, would senators continue to care what their state legislatures wanted or would they start to pander to individual blocks of voters? So with the passage of the Seventeenth Amendment the states were shut out of a direct say in the federal government and were reduced to becoming lobbyists.

If you think of some of the more partisan senators, from both sides of the aisle, do you think they would be appointed by their state legislatures? Do you think there would be any such thing as a federal unfunded mandates? Do you think there would be a Department of Education?, Transportation? Housing and Urban Development? EPA? Most states already have similar departments at the state level. What senators, appointed by their state governments, would pass these laws? Very few, I would venture to say.

Regulations in Action

Consider where we are today. Early in the Bush administration, concern was raised about Fannie Mae and Freddie Mac and their solvency. Christopher Dodd and Barney Frank said they were fine, and Dodd filibustered any attempt to rein them in. The financial industry blew up and what do we now have? The Dodd-Frank Act that layers on massive regulation to the financial services industry and many banks are just sitting on money rather than lend it.

In 2001, Enron went bankrupt taking billions down the drain with it. The principals of that firm ended up with long prison sentences. The accounting firm that audited the books went out of business, but somehow that was not enough. Massive new regulations were needed to make sure it didn’t happen again. In the following video, listen to Bernie Marcus, one of the founders of The Home Depot, which employs 350,000 people today describe what it would be like to start that company today.

http://www.youtube.com/watch?v=MjRIM1LFWRM

In an economy that is in desperate need to create jobs, a company that eventually created 350,000 jobs could not get off the ground today because of regulations. How many more Home Depots are out there? How many companies have said, the hell with it, let’s stay private, even if it means curtailing growth, going public is not worth the cost nor the headaches.

Our government is killing us, economically. It cannot slake its thirst for more tax revenues; it cannot stop spending;  it cannot resist telling us something else we should do for our own good; it cannot help trying to craft the perfect law and regulation that will prevent all harm from befalling even the most naive among us. It cannot be done. But unless and until we unwind the coil of regulation that is choking us to death; unless and until we perform liposuction on the laws that are crushing us under their weight; unless and until we return to Constitutionally limited government and fiscal responsibility and personal responsibility, the terms Life, Liberty, and the Pursuit of Happiness will be redefined to Subsistence, Subservience, and Preying upon each other. Which America do you want to live in?

That’s my opinion; I’d like to know yours. Please comment below.

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.

The Big Ponzi Scheme

Yes, I said it. Social Security is a Ponzi scheme. I wrote about it that way in my book Liberty’s Lifeline, and I was happy to welcome some straight talking from Rick Perry on the same subject. If not run by the government, anyone who ran something like Social Security privately would be in jail, just like Bernie Madoff. The difference between Charles Ponzi or Bernie Madoff and Social Security, is that Ponzi and Madoff had to get people to volunteer their money to the scheme. With Social Security, the government just takes it.

That being said, let’s all agree that we can’t just abandon it. Those who are receiving benefits today and those who are within ten years of receiving benefits, must be protected. We allowed this scam to continue this long and our seniors planned their retirements around it. We cannot allow the rug to be pulled out from under them. But what about the next generation and those after them?

The best plan for going forward is private retirement accounts. The money put into the accounts by the next generations would be their money. They could leave it to their heirs if they don’t live long enough to collect it. If they invest wisely, they could probably live off the income alone and pass the principle to their children which would make saving for their retirement easier. This would have a compounding effect and work toward solving the retirement income problem completely, and privately.

“Invest, did you say,” the progressive asks, “in what? Not the stock market, of course!” Despite the growth through investing in stocks over the long-term is proven as one of the best investments, the progressives will scream, “What about 1929!!! What about 1987!!! Did you forget the dot.com bubble!!! Are you insane!!! It’s a casino, a crap shoot, legalized gambling.” What they are really saying is how will we control the senior vote if they are not fully dependent upon us? If private accounts take hold, the account holders will look for government policies that allow private companies to thrive, which is exactly what progressive policies don’t do.

So progressives don’t believe in investing in stocks, right? Not so fast.

Investing you Can Believe In

If progressives can take your tax dollars, and invest in companies funded by big campaign donors, that push forward their progressive agenda, they think investing is swell. If the investment turns out to be terribly bad, don’t expect to hear many “I told you so’s” from the left. You won’t hear about gambling, casinos, stock market crashes. No, it is about leadership.

That’s what they are saying about squandering $500 million taxpayer dollars on a bad investment called Solyndra, a maker of solar panels that filed for bankruptcy just one year after getting that pile of taxpayer cash. Evidence is leaking out that the green jobs agenda came before stewardship of our tax dollars. There appears to have been White House pressure to push this through before a politically staged photo opportunity for this administration. Oh, they are furiously backpedaling now, working on a timeline to blame it on Bush, naturally, but the stubborn fact that keeps getting in the way is that the Bush administration put a hold on it saying there wasn’t enough information to approve it. Then Obama happened, and it was all systems go.

I noticed that GM stock is trading at around $22.60 per share today. It has to climb to around $53 per share for us to break even on that investment that we positively, absolutely had to make. How’s that Chevy Volt doing? You know, the one that we subsidize to the tune of $7,500 per copy, because you can buy two Toyota hybrids for the cost of one Chevy Volt. Meanwhile, Ford, which turned down a bailout is doing well.

Our government takes our money for the Social Security trust fund and immediately spends it, but progressives tell us how foolhardy it would be to save for our own retirement. If you pay into Social Security all your life but die before you can collect any money, oh, so sorry.  But take more of your money and invest it to protect their union supporters, and campaign bundlers  and that’s okay.

Solyndra’s chief investor, George Kaiser, was also a bundler for Obama’s 2008 campaign, gathering over $50,000 in campaign contributions. Kaiser, together with Solyndra executives and board members, donated $87,050 to Obama’s campaign.

Is your blood boiling yet? There comes a point where you have to ask when does the mere incompetence end and criminal activity begin? While President Obama is jetting around the country trying to sell us on another jobs plan that is all about public sector employees, perhaps we should be looking to do something else.

How about we say goodbye to TurboTax Tim Geithner? He has failed miserably at his job. He should be fired. Next we should start a criminal investigation into the Energy Department people who pushed through this loan to Solyndra and then start a similar investigation over at the Justice Department regarding running guns to Mexico under the Fast and Furious program.

So if you want to invest your own money in some blue chip stocks to reduce your dependency on government programs and build a nest egg that you control and own, that is dangerously reckless. If you want to invest millions in a start-up company making heavily subsidized products, that is on the brink of bankruptcy, to pay back your fundraisers, that’s A-OK. It is time to start getting serious with what is going on in Washington and really clean house.

That’s my opinion; I’d like to know yours; Please comment below.

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?

If we can just keep you out of Washington, so we’re not grappling with your non-leadership, leadership, things may not get a whole lot better until November 2012, but at least they might not get worse. Anyway, isn’t that your new campaign theme, “Just Imagine How Bad It Could Have Been! Vote Obama”?

Take North Carolina for example. Boeing opens a factory there to build its 787 Dreamliner. It hired 5,000 workers and they are ready to go. Then along comes our helpful friends in Washington from the National Labor Relations Board. They say, “Oh, no, this is retaliation. Boeing asked the unionized workers in Washington state for a moratorium on strikes and the union reasonably said they wanted Boeing to promise to never manufacture anywhere but Washington state and Boeing refused. How DARE they?!” So not only did Boeing add 3,000 jobs in Washington state, somehow opening up another factory in South Carolina, a Right to Work state, is retaliation. In an economy crawling along with unemployment stuck at north of 9% Washington is killing 5,000 jobs. When our intrepid leader, President Obama was asked about this he boldly proclaimed that the NLRB was an independent agency and his hands were tied. The President of the United States meekly says he is powerless against a panel of five bureaucrats.

If you asked some of those pesky evil Tea Party freshmen over in the House of Representatives who haven’t spent their entire lives in government service, they would probably say, give us a shot at it. First, we will drain their budget to $1; second tell Boeing to go ahead and make the NLRB’s day; and then sit back and see what action the NLRB will take with $1 in the petty cash drawer. Next step would be to legislate the Department of Labor out of existence, and the NLRB along with it. There are plenty of agencies in the individual states to take up any slack.

Other Award Winning Jobs Moves by the President

As we watch oil rig after oil rig sail out of the Gulf of Mexico to friendlier climes, the Obama administration’s mismanagement of the BP oil spill fiasco adds to the misery. Thousands of jobs were lost or put on hold. Trouble in the Middle East, disruption of oil production in Libya, we should increase domestic oil production but roadblocks to that keep getting thrown in the way. No, green energy is the answer as we watch another heavily subsidized solar energy company file for bankruptcy sending more workers to the unemployment line.

The American people are still waiting for GM stock to his $53 per share so we can break even on this wonderful investment. So how does Washington help? Let’s start by punching a bigger hole in the deficit by subsidizing the Chevy Volt to the tune of $7,500 per car in tax credits. Oh, that’s bad. No, that’s good. Chevy can’t sell them, so there won’t be much in the way of tax credit damage to the budget! Instead, the Obama administration comes out with new CAFE standards to require car companies to produce cars that get 54.5 miles per gallon by 2025. If that doesn’t drive a stake through the heart of GM and Chrysler and saddle the American people with more debt, nothing will. With a $2,000 per car disadvantage over their foreign rivals GM and Chrysler are not going to be able to make small, light cars capable of this standard competitively. Well at least we’ll put those workers on unemployment slowly over the next 14 years.

How much more punishment can this economy take until we put President Obama on permanent retirement? So, please, Mr. President, I would rather you work on your golf handicap than give our economy more handicaps than it can handle.

That’s my opinion; I’d like to know yours. Please comment below.

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.

Bishop’s campaign theme, oddly enough, was that Altschuler was an entrepreneur who created jobs both here and abroad. Only he conveniently left out the part about jobs created here.  In the middle of an economy with high unemployment and a woefully inexperienced administration in charge, it seemed an odd point of attack, but what else did Bishop have? Could he brag about his vote for ObamaCare? He needed a police escort to get him out of a town hall meeting where he tried to explain that vote. Could he brag about the stimulus? We were told that without the stimulus unemployment would rise to 9% while implementing it would cap unemployment at 8% (see chart above). Bishop dutifully voted with Nancy Pelosi for the stimulus and unemployment soared. Most people would conclude that the administration was wrong and the stimulus actually made things worse.

In his Congressional district, the share of the $787 billion that was borrowed for the stimulus from places like China that will have to be repaid by his constituents is roughly $3 billion, however the amount of stimulus dollars that came to the district is between $600 – $700 million. In effect, Congressman Bishop voted for a stimulus program that failed and saddled his constitutents with an additional $2.3 billion in debt to pay for stimulus dollars given to other Congressional Districts.

Mr. Bishop’s ignorance of basic economics explains a great deal of his misguided policies. In defending his bailout of the automobile companies, he says that if he hadn’t done that, we might have had one million more people unemployed. This is economic hogwash, as I point out here and in my book, Liberty’s Lifeline. The left clings to what is called static analysis. What does that mean? It means that no matter what happens people won’t change their behavior.

Picture yourself standing under an umbrella in a rain storm. If someone takes away your umbrella what will you do? You will probably seek some other form of shelter as soon as you can. That is dynamic analysis. You lose your umbrella, you immediately look for a substitute. The left believes that you will continue to stand there in the rain and get soaked. That is static analysis. Under static analysis, the government works. Under dynamic analysis the free market works. Static analysis says that if you raise tax rates, you will collect more money and if you lower tax rates you will lose money. Free markets have proved that lower taxes increase people’s incentive to produce and therefore increase total revenues. Static analysis says that if there are one million people employed by GM, Chrysler and their suppliers, if GM and Chrysler go completely out of business, one million people will be unemployed. Free markets say that people still need transportation. If GM and Chrysler go out of business, poeple will buy from Ford, Toyota, Honda, et. al, and those companies will need to increase production to meet the demand from former GM and Chrysler car buyers. Therefore they will need more employees which they can find from the pool of people just laid off from GM and Chrysler. Will it be all of the former employees? Probably not. Will it be the disaster that Tim Bishop says he prevented? No. But Tim Bishop who spent his entire adult working life in academia or government doesn’t understand this. And since he doesn’t understand economics he has and will continue to vote for bad ideas like the stimulus.

Tim Bishop says he is fighting high gasoline prices with his “Big Oil Welfare Repeal Act.” On his website introducing the bill he says that he is fighting $4 a gallon gasoline prices with this kind of bill. A few lines later on the same web page, he says the bill will have no effect on gasoline prices. So why is he wasting Congressional time with such a measure when we are facing national bankruptcy? Simple. It fits into a nice thirty-second sound bite that he can feed to the public when he runs for re-election, letting them believe he is doing something serious when he is not.

To give you a sample, here is the latest from Tim Bishop’s spokesman, Jon Schneiderman.

Randy Altschuler would rather launch baseless attacks than give a simple yes or no answer whether he supports the Republican budget to end Medicare as we know it. Maybe Randy can go to Brookhaven National Lab and talk to the 1,000 workers who have a job today because Tim Bishop fought the Republican budget, and tell them where he stands on the issues.”

So there you have the crux of Bishop’s weak reelection strategy. Questioning Bishop’s record is a baseless attack. With a budget deficit of $1.5 trillion that Tim Bishop helped create by voting with Nancy Pelosi 97% of the time and Bishop is fighting to keep spending high? The Democrats have no plan of their own (Obama’s budget was defeated in the Senate 97-0) on how to cut spending and that is a defensible position? Medicare is broke. Tim Bishop voted to cut $500 billion in Medicare funding with ObamaCare and now reforming the system before it goes bankrupt is a bad idea? As far as Brookhaven Narional Labs, we all feel for people who lose their jobs, and there are plenty of those stories to tell. But the folks at Brookhave National Labs are government employees, and the govenment in in dire financial shape. So Tim Bishop fights to keep spending high to save 1,000 government jobs, hands the bill to the rest of his 710,000 constituents who must deal with this administration’s disasterous economic policies and he thinks this is leadership?

It’s time that Bishop and Schneiderman start talking about and defending Tim Bishop’s record and what he thinks we should to to get the economy moving again. He squeaked into office in 2010 and things have gotten worse since. In stead of spending time crafting sound bites that can patch over his poor record in Congress it is time to get our country back on the path to success and get Washington out of micromanaging out lives.

That’s my opinion; I’d like to know yours. Please comment below.

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.

The final result cut $61 billion from the budget. All but three Republicans voted for it, all Democrats voted against it. The measure passed. Now it goes to the Democrat controlled Senate and Senator Charles Schumer of New York, wasted no time getting in front of the cameras.

“One thinks they want to use the shutdown to get their way,” Mr. Schumer said on CNN’s “State of the Union with Candy Crowley.” “We are saying, ‘Negotiate,’ and they are saying, ‘Do it my way’ before there are any negotiations,” he said.

Mind you, Senator Schumer was saying this as the senate was preparing to go on vacation, leaving only four days to come up with their version and begin the negotiations, he so badly wants. The senate could have gotten down to work today, and taken two weeks to hammer out their bill, but no, it is those dastardly Republicans who want to shut down the government. What Chuck Schumer is hoping for is a reprise of 1995, where a shutdown of the government played into the Democrats hands. He should be careful what he wishes for. The country is well aware of the dire financial situation of piling trillions upon trillions in debt at a breakneck pace. The Republicans have done what they ran on, curtailing spending. If Senator Schumer wants to cause a government shutdown so that the spending can continue he may be in for a shock.

Schumer’s Hypocrisy

The newly elected governor of Florida, Rick Scott, turned down $2.4 billion in federal money to build a high speed rail link between Orlando and Tampa. This whitest of white elephants would save maybe thirty minutes over driving by car. Governor Scott recognizes that it will probably cost Florida additional funds and a ongoing subsidy that will never end. It is a short term shot in the arm in that it will create construction jobs, but just like heroin produces a short term high, I wouldn’t recommend taking it.

So it looks like Governor Scott is acting like an adult among the spend, spend, spend junkies in government across the country. With the federal government in hock to its eyes, not spending $2.4 billion seems smart across the board. Uh, wait a minute. Senator Schumer has something to say,

“Florida’s loss should be New York’s gain. Other states may not be ready to unlock the potential of high-speed rail, but it is a top priority for upstate New York. We can put these funds to use in a way that gets the best bang for the buck. The administration should redirect these funds to New York as quickly as possible.”  

New York’s gain; I love that. We get to bankrupt our state capital further and be saddled with more rail subsidies ad infinitum. I guess the Metropolitan Transportation Authority tax isn’t enough of a subsidy. Since this very blue state is considered an economic wasteland to the north and west of Abany, our state capital, where is this train to nowhere going to move people at high speed? Perhaps if the train runs from upstate New York to Texas, it might be worth a look. When all the people from New York escape, they can sell the railroad for scrap metal.

That’s my opinion; I’d like to know yours.  Please comment below.

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.

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?