As August 2nd approaches, stipulated by Treasury Secretary and tax cheat Timothy Geithner as the date when the U.S. will reach its statutory debt limit, our illustrious president, Barack Obama, becomes more and more unhinged. From highly partisan, contemptuous and fact-challenged press conferences, to his angry and petulant exit from a meeting with Republicans on the issue, it is clear that Obama is feeling the pressure. This is compounded by the fact that the historically weak-willed Republicans seem shockingly willing to be proven vertebrates, and actually refuse to back down on principle (Senate Minority Leader Mitch McConnell’s recent suggestion to completely abdicate constitutional duty and give all power to the president notwithstanding).
From class warfare rhetoric about tax breaks for corporate jet owners (signed into law by Obama in the 2009 stimulus bill, and less than a rounding error on the federal budget) to fear mongering the elderly to think Social Security checks will not go out, nothing is beneath this integrity-challenged president in his quest for power. He tirelessly repeats his Marxist mantra of needing to get “millionaires and billionaires” to “pay their fair share” and be a part of the “shared sacrifice”, despite the fact that the top 1% of all income earners (a group starting at $380,354/year and including millions of small businesses that file taxes under personal returns…hardly millionaires and billionaires) paid 38% of total tax revenue, while the bottom 50% paid only 2.7%. The top 5% starts at $159,619 and accounts for 58.7% of taxes paid.
This week we celebrate the 235th anniversary of the signing of the Declaration of Independence, the act of which broke ties with King George’s England and gave birth to a new nation. The decision to break with England was not one made lightly, but one that came after “a long train of abuses and usurpations” which finally made the oppression unbearable. And what comprised this long train of abuses? In part, it was the denial of self-governance and obstruction of the administration of justice. It was the erecting of “a multitude of New Offices, and [sending] hither swarms of Officers to harass our People, and eat out their substance”, the subjection of citizens “to a jurisdiction foreign to our constitution”, and cutting off our trade. It was imposing taxes on us without our consent, and exciting domestic insurrections.
It was this and more that led us to dissolve our political bands with England, declare our independence, and shed our collective blood in defense thereof. Yet, if we truly believed that “all men are created equal, that they are endowed by their Creator with certain unalienable rights”, including life, liberty and the pursuit of happiness, what else could we have done? When we truly comprehend that we are all children of God, sovereign by virtue of our very creation, how can we be content to be slaves? How can we be content to suffer the indignities of oppression?
It was this new philosophy that emboldened the hearts and minds of Americans. It was this belief that led Patrick Henry to declare “give me liberty or give me death!”, and that led Nathan Hale to proclaim moments before his execution by the British that “I only regret that I have but one life to give for my country”.
In his press conference, President Barack Obama said that we must close the deficit by tackling everything—naturally, with as many contradictions as possible—including entitlements, though we must still “keep faith with seniors and children with disabilities.”
It sounds grand and noble, but the problem is that if Obama decides to “keep faith” with seniors, he’s going to have to do that by vigorously screwing over the next generation. As Professor Lawrence J. Kotlikoff of Boston University points out in a recent Bloomberg column, we’re broke. (Yes, I know that’s his schtick. But he’s absolutely right.)
How big is the fiscal gap? By my own calculations using the CBO data, it now stands at $211 trillion — a huge sum equaling 14 times the country’s economic output. To arrive at that figure, I assumed that annual noninterest spending, as well as taxes, would grow indefinitely by 2 percent a year beyond 2075, the point at which the CBO’s estimates end.
Most of that comes from entitlement spending, which was where Cato policy analyst Michael Tanner came up with the $119.5 trillion in the hole figure just a few months ago. Obviously, it’s getting worse all the time.
The Congressional Budget Office (CBO) released the 2011 Long-Term Budget Outlook yesterday. As you might expect, both sides are talking up the aspects of the report that play to their talking points. For example, if you listen to our progressive/liberal friends, they’re quick to point to charts in the report showing that budget deficits wouldn’t be as large if the 2001/2003 tax cuts hadn’t been extended. Of course, most, if any at all, don’t acknowledge that the CBO also says this in the report:
Changes in marginal tax rates (the rates that apply to an additional dollar of a taxpayer’s income) also affect output. For example, a lower marginal tax rate on capital income (income derived from wealth, such as stock dividends, realized capital gains, or the owner’s profits from a business) increases the after-tax rate of return on saving, strengthening the incentive to save; more saving implies more investment, a larger capital stock, and greater output. However, if that lower marginal tax rate increases people’s after-tax returns on savings, they do not need to save as much to have the same future standard of living, which reduces the supply of saving. CBO concludes, as do most analysts, that the former effect outweighs the latter, such that a lower marginal tax rate on capital income increases saving. A higher marginal tax rate on capital income has the opposite effect.
In any time of financial crisis, there’s a rallying cry to “soak the rich”. The wealthy are an easy target because there’s relatively few of them and they’ve got money. The poor resent the wealth of the so-called rich (not everyone described as rich really is all that rich). It’s “unfair” that they have so little while those few have so much. Income disparity is used as evidence that our system is somehow flawed. However, the class warfare has got to stop.
Yes, there are rich people. And yes, they often have the means to get out of paying all the taxes they might be supposed to pay via tax shelters, charitable donations, etc. That’s not the point. Let’s leave off tax rates and things of that sort and focus on some simple facts.
I’ve been accused of kissing rich people’s butts because I actually admire what so many of them have done. They built massive corporations, often from the ground up. Or they helped them grow into bigger companies. They are what Ayn Rand termed as “producers” in the grandest sense of the word. They’re not a factory worker who simply takes pride in their job. They are the producers of jobs for those factory workers.
However, there’s been an effort throughout the years to vilify these producers. There’s been an extreme effort to paint them as evil because they have achieved more than the rest of us. That is one of the purest sins: avarice. Those who seek to tear down the rich do so because the rich have what they themselves are missing…or think they’re missing. They seek to destroy what these producers have built because they feel that these same producers aren’t doing enough.
Podcast: $13 Trillion Debt, BP Oil Spill, Alvin Greene, 2011 Budget, and Economic Failing Guests: Mike Hassinger, Doug Mataconis
The Wall Street Journal reports that when lawmakers receive per-diem money for official travel, it’s typical for them to pocket the leftover cash instead of returning it to the Treasury—that, or they spend it on gifts and souvenirs:
When lawmakers travel overseas on official business they are given up to $250 a day in taxpayer funds to cover meals and expenses. Congressional rules say they must return any leftover cash to the government.
They usually don’t.
…”There’s a tacit understanding that if lawmakers don’t spend the money, they get to keep it,” said Rep. Sue Kelly, a New York Republican who was defeated in 2006.
…Rep. Joe Wilson (R., S.C.) said he once bought marble goblets in the Kabul airport as gifts for constituents. Rep. Mark Souder (R., Ind.) said he dipped into his funds to buy a $200 painting of an estuary in Turkey, which hung in his office for a while and was now in his house.
This is not a lot of money when you consider the trillions of dollars that make up the federal budget. But the concept that it might be innapropriate to spend taxpayer money for personal reasons seems to be completely lost on our elected officials.
And here’s the real kicker: When asked about taxpayer money he uses for non-official purposes, Rep. Alcee Hastings (D-Fla) replied, “I’m a generous spirit and a courteous spirit. I stand accused.”
Yes, Mr. Hastings, it certainly is easy to be generous when you’re spending other people’s money.
In my political science class we were discussing the issue of taxation. In order to better understand the issue and to balance out a lot of the negativity we inherently have towards taxation (which isn’t a bad thing) we discussed what we (personally and as a society) actually get in return for our taxes.
I decided to make a “cynical” version of the list we thought up in class. So here are ten things we get from taxes:
1 ) Drug Prohibition - Billions spent each year on making sure no one uses drugs that are “too dangerous” for us. Thank you nanny state! Except for the fatal flaw in this argument: marijuana is illegal yet more harmful substances such as alcohol and tobacco are legal. Not to mention the war on drugs is a complete and utter failure.
2 ) Overpaid Government Officials - It’s a well-known fact that city planners, parks and recreation directors, and many others in government are paid “comfortable” salaries sometimes even more than $100,000. Not only that, but many government officials have guaranteed pensions backed by the state. While people work long hours in the private (productive) sector who have to deal with 401K’s and actually saving and investing for retirement, these government officials have it made!
3 ) The Federal Reserve - Ah yes, the Federal Reserve who claims their existence is necessary to “maintain a strong currency,” have been doing just the opposite. As the dollar loses its value slowly but surely and bubbles have rocked our economy into deep recessions many times since its inception, it’s unfortunate this entity receives tax dollars from the private sector.
4 ) Foreign Aid - None of that money goes to waste, right? It all goes directly to the needy in the most efficient manner, no corruption involved! Right…
Yes, it was indeed 100 years ago yesterday that the House passed a resolution to send the 16th Amendment to the states for ratification, thereby establishing the federal income tax.
Since then, teenage socialists everywhere quickly realized the sins of their ways the day they received their first paycheck….or, the percentage they were allowed to take home at least. (Oh, I’m sorry, did you think you were getting the full amount?)
The tax system in the United States is terribly complicated, and when all of the rules, regulations and instructions are written out, it fills more than 70,000 pages. The darn thing is so confusing that Americans spend about $300 billion per year to hire professionals to pay their taxes for them.
Dr. Paul, once again, outlines the real culprits of the current economic crisis, and points to the real solutions- less government, lower taxes, decreased spending, the end of devaluing the dollar.
H/T: Matt Chancey