I like to think that while I am a very well informed person when it comes to US political news, I generally remain somewhat detached regarding what the latest artificially created crisis du jour facing the nation is. I find that regardless of what dire consequence both sides try to convince us will happen if the other side gets their way, life goes on, business as usual for the rest of us, and inevitably some compromise is reached which allows both sides to claim victory. It is a cycle I’ve seen play out so many times in my relatively short time on Earth that I find it quite comical. However, I do find my blood pressure rise ever so slightly when contemplating the mismanagement and lack of leadership in energy policy in this country. The recent Keystone XL Pipeline debacle is a perfect example of how DC politicians chose to put political posturing ahead of US energy security, national security and true environmental policy.
As Congress debates the extension of the payroll tax cut, a measure that the White House said would stimulate the economy and create jobs, I offered my own thoughts on alternatives that would encourage economic growth and protect Social Security.
Topping the list of unfinished business this year is the impending collision of two closely related crises: the expiration of the payroll tax cut and the acceleration of Social Security’s bankruptcy.
Last year, Congress voted for a payroll tax cut that averages roughly $1,000 for every working family in America.
As warned, it failed to stimulate economic growth and it accelerated the collapse of the Social Security system. But as promised, it threw every working family a vital lifeline in tough economic times.
We need to meet three conflicting objectives: we need to continue the payroll tax cut; we need to stimulate real economic growth and we need to avoid doing further damage to the Social Security system.
But first, we need to understand that not all tax cuts stimulate lasting economic growth. Cutting marginal tax rates does so because this changes the incentives that individuals respond to. Cutting infra-marginal tax rates - such as the payroll tax - does not.
With the economy in a sustained recession, unemployment at or above nine percent for approaching three years, and tens of millions of Americans struggling just to put food on their table, perhaps few people or organizations have been showered with such hostility and ill-repute as have “corporations.” Yet, of all of the root causes of our current economic malaise, such contempt may nowhere be more misplaced.
Obama, after the shellacking his party took in the 2010 elections and with no end in sight to the economic downturn, has turned to finding a scapegoat or two to deflect blame for the anger and frustration America feels. His two favorite targets are Republican “obstructionism” and those evil, faceless corporations that steal from the poor to sate their insatiable greed.
Maybe he has a point though. After all, we all know that Steve Jobs became one of the richest men in the world as the head of Apple by hiring legions on thugs to go out across America to households and college campuses, brandishing guns and clubs and threatening violence if the poor masses did not give these brutes their money in exchange for little pieces of molded plastic and silicon and copper which Jobs called “Macs” and “iPods”, “iPhones” and “iPads”. His reign of terror was so complete that every time Jobs released a new version of these little pieces of plastic, hundreds and thousands of people would camp out overnight at one of his stores to give up their money in exchange for these gadgets, in the hope that by voluntarily doing so his thugs would not show up at their homes, schools and places of businesses and threaten them there.
Recently, the Pontifical Council for Justice and Peace (a branch of the Roman Curia established to promote justice, peace and human rights in the world from the perspective of the Roman Catholic Church) released a treatise on the global monetary system entitled “Note on Financial Reform”, which examines what it believes to be the root cause of global suffering and inequality, and proposed solutions to remedy that suffering. Normally a religious pronouncement of this nature would elicit little more than a few raised eyebrows, but coming from on official body of a church whose adherents account for nearly one quarter of the global population, one must give weight to the commentary regardless of concurrence in the conclusions.
Weighing in at just under 6500 words, a detailed analysis in this space is impossible, so some general summarizations are necessary. In short, the Pontifical Council seems to believe that the root of global suffering lies in an unequal distribution of resources, growth of credit markets that far outpaced real markets (agriculture, manufacturing, etc.), a world too enamored with capitalism, a lack of regulation and control on national and supranational financial transactions and markets, and the need for governing authorities to submit acquisition of material wealth and national sovereignty to the needs of the global “common good.”
With all due respect to the august body of the leadership of the Catholic Church, while they make a valid point regarding the physical suffering of many, the assessment of the root causes is, in my opinion, deeply in error, and as a result the Council’s conclusions and proposals are also in error.
Rick Perry has found himself at the bottom of the second tier after what seemed like a cake walk to the presidency. But the Rick Perry bankroll has pundits on the ready for the next move upward. On Monday, Perry tickled the media with a preview of his 20/20 Flat tax. His overall plan which is named “Cut, Balance and Grow” seems much less catchy, especially if he has his eye on a primetime ABC host slot.
If one were going to summarize the plan, they might suggest that Perry believes in “caps”. His 20% flat tax is optional, so essentially everyone paying more than 20% currently can move to 20% while everyone paying less can still pay their current rate. It also moves the corporate rate to 20%, kills the death tax, and removes taxes from qualified dividends and capital gains. The plan also includes capping spending at 18%. I believe talking about caps on spending as a percentage of GDP are a mistake for the simple fact that if you do this, what are the odds that congress will ever spend less than this amount? Then again, after what we’ve seen in the last three years, it doesn’t sound half bad.
James Pethokoukis breaks down Perry’s plan over at The American:
—A choice between a new, flat tax rate of 20 percent or their current income tax rate.
—The new flat tax preserves mortgage interest, charitable and state and local tax exemptions for families earning less than $500,000 annually, and it increases the standard deduction to $12,500 for individuals and dependents.
—Abolishes the death tax once and for all, providing needed certainty to American family farms and small businesses.
—Lowers the corporate tax rate to 20 percent—along with a tax holiday for foreign earnings—and moves toward territorial taxation.
As a voracious consumer of news regarding current events and politics, it occurred to me this week that to a person of sanity and sound reason, listening to and reading the coverage of what is going on in our nation and world today is so far removed from reality, historical experience and logic as to be the product of a journalist reporting live from the bottom of that rabbit hole in Lewis Carroll’s Wonderland. We regularly hear from people considered leaders by many, uttering the most incredibly nonsensical things with a straight face, fully expecting the rest of us to believe them. Indeed, often these things are uttered with such seemingly powerful sincerity that even the sane begin to question themselves.
So, here are a few random thoughts from the passing week…
Judging by recent stories from California, the nickname for that state should be changed from the “Golden State” to the “Granola State”, because it is positively the land of fruits and nuts. California, with a debt rating of A- (the lowest of any state), annual deficits of billions of dollars, and long-term debt obligations to public employee unions that amount to hundreds of billions of dollars, nevertheless recently decided to double down on lunacy by passing the “California Dream Act”, a state version of the federal law that would give in-state tuition and more lavish taxpayer-funded benefits to illegal aliens and their children. This is a magnet for more illegal immigration, and in the end the state will continue its rapid descent into bankruptcy.
Sometimes I see things that I just can’t believe are true. This is one of those times.
Earlier this year, the Louisiana legislature almost unanimously passed a law that prohibits the use of cash in secondhand transactions.
The story on this one is that the law is intended to create a paper trail when people steal things like copper or other materials from a construction site. Forcing a check, money order, or electronic payment would make it easier for law enforcement to find a thief. I understand that argument, but there are some real problems with this law.
U.S. currency is valid for all transactions. On the front of our currency is the line “This note is legal tender for all debts, public and private.” Prohibiting the use of legal tender is a bit of an oxymoron.
Records of each transaction must be kept for 3 years. When you hear people like me fussing about unnecessary government regulations hindering businesses, this is the type of thing we’re talking about. This law requires businesses to keep very specific records for each second hand transaction so that law enforcement can find people they suspect are thieves.
The information to be collected by the dealer includes: date, location of purchase, name and address of seller, driver’s license or passport number of seller, license plate of vehicle used to deliver the goods, a full description of all materials being purchased.
For several years now there has been an ongoing debate regarding the impetus for President Obama’s economic policies. Were they the work of the smartest president in history, a man so intelligent that his wisdom could supplant the collective experience and choices of 300 million Americans, and in so doing restore our economy? Were they the well-intentioned but errant contemplations on an Ivy League egghead with lots of “book learnin’”, but without a shred of private sector experience that is the proving grounds for such ideas, being exposed to the unmerciful judgment of markets?
At this point I have come to the conclusion that it is an intentional effort to replace America’s free-enterprise system with a democratic-socialist style, centrally-planned, government run economy. Look at the evidence…the massive stimulus package which failed spectacularly, the auto union bailouts, government employee bailouts, Cash for Clunkers, Son of Stimulus, and myriad other economic “remedies”. Combine this with calls for increased taxes of “the rich”, more regulation and more government intervention in the market, and we end up with a long-term stagnant economy. One can no longer chalk it up to pure stupidity. If it were pure stupidity then the law of probabilities would dictate that Obama would have made the right decisions, even if only by accident, somewhat approaching fifty percent of the time.
For the last few weeks, protesters have camped out in New York City to express their grievances with Wall Street. The complaints are somewhat familiar and to some extent, I can understand where they’re coming from. They are upset with what they see as government colluding with corporations for taxpayer-funded bailouts during very tough economics times.
The frustration with corporatism is understandable, libertarians and free market conservatives have expressed the same sentiment for years only to take a back seat to the idea that what’s “good for business” is good policy. But as we’ve come to learn, so-called “pro-business” policies aren’t always a good deal for taxpayers. And by that I mean that we truly want a level playing field, but not through excessive taxation or regulation. Rather, keeping government out of the business of picking winners and losers.
But some members of the nascent “Occupy Wall Street” have expressed demands (note that these demands are unofficial), which for all of their supposed distrust of government, these guys have a very utopian idea of what government should be — likely enough to make Karl Marx and Che Guevara proud. Nevermind that they would be economic suicide.
Among the suggested demands for the movement are (with my comments next to them):
President Barack Obama made his pitch yesterday to jack up tax rates on high-income earners and bring a host of new fees that will reach across income groups — offering $3 in tax hikes for every $1 in spending cuts:
Drawing clear battle lines for next year’s elections, a combative President Barack Obama on Monday demanded that the richest Americans pay higher taxes to help cut soaring U.S. deficits by more than $3 trillion. He promised to veto any effort by congressional Republicans to cut Medicare benefits for the elderly without raising taxes as well.
“This is not class warfare. It’s math,” Obama declared, anticipating Republican criticism, which was quick in coming.
The president’s proposal, which he challenged Congress to approve, would predominantly hit upper-income taxpayers and would also target tax loopholes and subsidies used by many larger corporations. It would spare retirees from any changes in Social Security, and it would direct most of the cuts in Medicare spending to health care providers, not beneficiaries.
Benefit programs wouldn’t be unscathed. Obama’s plan would reduce spending for those, including Medicare and Medicaid, by $580 billion. But with Republicans calling for massive cuts in entitlement programs, Obama said he would veto any legislation that cut Medicare benefits without raising new revenue.