Taxation

New Deal Economics

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A great op-ed piece by Amity Shlaes in the Wall Street Journal responding to Paul Krugman’s incessant campaigning on why New Deal spending works. Unfortunately our President-Elect seems to subscribe to Mr. Krugman’s brand of misguided economics.

Some highlights from the WSJ piece:

The New Deal is Mr. Obama’s context for the giant infrastructure plan his new team is developing. If he proposes FDR-style recovery programs, then it is useful to establish whether those original programs actually brought recovery. The answer is, they didn’t. New Deal spending provided jobs but did not get the country back to where it was before.

This reality shows most clearly in the data — everyone’s data. During the Depression the federal government did not survey unemployment routinely as it does today. But a young economist named Stanley Lebergott helped the Bureau of Labor Statistics in Washington compile systematic unemployment data for that key period. He counted up what he called “regular work” such as a job as a school teacher or a job in the private sector. He intentionally did not include temporary jobs in emergency programs — because to count a short-term, make-work project as a real job was to mask the anxiety of one who really didn’t have regular work with long-term prospects.

The result is what we today call the Lebergott/Bureau of Labor Statistics series. They show one man in four was unemployed when Roosevelt took office. They show joblessness overall always above the 14% line from 1931 to 1940. Six years into the New Deal and its programs to create jobs or help organized labor, two in 10 men were unemployed. Mr. Lebergott went on to become one of America’s premier economic historians at Wesleyan University. His data are what I cite. So do others, including our president-elect in the “60 Minutes” interview.

Later, Lee Ohanian of UCLA studied New Deal unemployment by the number of hours worked. His picture was similar to Mr. Lebergott’s. Even late in 1939, total hours worked by the adult population was down by a fifth from the 1929 level. To be sure, Michael Darby of UCLA has argued that make-work jobs should be counted. Even so, his chart shows that from 1931 to 1940, New Deal joblessness ranges as high as 16% (1934) but never gets below 9%. Nine percent or above is hardly a jobless target to which the Obama administration would aspire.

What kept the picture so dark so long? Deflation for one, but also the notion that government could engineer economic recovery by favoring the public sector at the expense of the private sector. New Dealers raised taxes again and again to fund spending. The New Dealers also insisted on higher wages when businesses could ill afford them. Roosevelt, for example, signed into law first his National Recovery Administration, whose codes forced businesses to pay an above-market minimum wage, and then the Wagner Act, which gave union workers more power.

As a result of such policy, pay for workers in the later 1930s was well above trend. Mr. Ohanian’s research documents this. High wages hurt corporate profits and therefore hiring. The unemployed stayed unemployed. “If you had a job you were all right” — the phrase we all heard as children about the Depression — really does capture the period.

Great stuff, and scary in terms of the plans our future President has for this country. Read the full article here.

Obama and the Tax Tipping Point

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Another great WSJ op-ed piece…

Other nations have tried the ideology of fairness in the place of incentives and found that reward without work is a recipe for decline. In the late 1970s and throughout the 1980s, Margaret Thatcher took on the unions and slashed taxes to restore growth and jobs in Great Britain. In Germany a few years ago, Social Democrat Gerhard Schroeder defied his party’s dogma and loosened labor’s grip on the economy to end stagnation. And more recently in France, Nicolas Sarkozy was swept to power on a platform of restoring flexibility to the economy.

The sequence is always the same. High-tax, big-spending policies force the economy to lose momentum. Then growth in government spending outstrips revenues. Fiscal and trade deficits soar. Public debt, excessive taxation and unemployment follow. The central bank tries to solve the problem by printing money. International competitiveness is lost and the currency depreciates. The system stagnates. And then a frightened electorate returns conservatives to power.

The economic tides will not stand still while Washington experiments with European-type social democracy, even though the dollar’s role as the global reserve currency will buy some time. Our trademark competitive advantage will be lost, and once lost, it will be hard to regain. There are too many emerging economies focused on prosperity and not redistribution for the U.S. to easily recapture its role of global economic leader.

Tomorrow’s children may come to question why their parents sold their birthright for a mess of “fairness” — whatever that will signify when jobs are scarce and American opportunity is no longer the envy of the world.

READ IT HERE

Obama Plans To Sock It To Small Business

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More clear evidence of his advisors’ lack of understanding from another Wall Street Journal article…

Mr. Obama’s tax increase would hit the bottom line of small businesses in three direct ways. First, because 85% of small business owners are taxed at the personal income tax rate, any moderately successful business with an income above as little as $165,000 a year could face a higher tax liability. That’s the income level at which the 33% income tax bracket now phases in for individuals, and Mr. Obama would raise that tax rate for those businesses to 36%…

Second, the Obama plan phases out tax deductions (the so-called PEP and Pease provisions), thus raising tax rates imposed on this group by another 1.5 percentage points. Finally, Mr. Obama would require many small business owners to pay as much as a four-percentage-point payroll tax surcharge on net income above $250,000. All of this would bring the federal marginal small business tax rate up to nearly 45%, while big business would continue to pay the 35% corporate tax rate…

Mr. Obama responds that more than nine of 10 small businesses would not pay these higher taxes. Last Thursday he scoffed in response to the debate over Joe the Plumber, saying that not too many plumbers “make more than $250,000 a year.” He’s right that most of the 35 million small businesses in America have a net income of less than $250,000, hire only a few workers, and stay in business for less than four years…

However, the point is that it is the most successful small- and medium-sized businesses that create most of the new jobs in our dynamic society. And they are precisely the businesses that will be slammed by Mr. Obama’s tax increase. Joe the Plumber would get hit if he expanded his business and hired 10 to 15 other plumbers. An analysis by the Senate Finance Committee found that of the filers in the highest two tax brackets, three out of four are small business owners. A typical firm with a net income of $500,000 would see its tax burden rise to $166,000 a year under the Obama plan from $146,000 today.

READ IT HERE

Obama’s Tax Cuts Nonsense, Experts Say

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The Wall Street Journal posted a piece by the sage staff on the implications of the Oblivious Obama tax cuts.

Now we know: 95% of Americans will get a “tax cut” under Barack Obama after all. Those on the receiving end of a check will include the estimated 44% of Americans who will owe no federal income taxes under his plan.

In most parts of America, getting money back on taxes you haven’t paid sounds a lot like welfare. Ah, say the Obama people, you forget: Even those who pay no income taxes pay payroll taxes for Social Security. Under the Obama plan, they say, these Americans would get an income tax credit up to $500 based on what they are paying into Social Security.

Just two little questions: If people are going to get a tax refund based on what they pay into Social Security, then we’re not really talking about income tax relief, are we? And if what we’re really talking about is payroll tax relief, doesn’t that mean billions of dollars in lost revenue for a Social Security trust fund that is already badly underfinanced?

READ THE FULL ARTICLE TO SEE THE ANSWERS…

“It’s interesting that Mr. Obama calls his plan ‘Making Work Pay,'” says Mr. Biggs, “because the incentives are just the opposite. By expanding benefits for people whose benefits exceed their taxes, you’re increasing their disincentive for work. And you’re doing the same at the top of the income scale, where you are raising their taxes so you can distribute the revenue to others.”

Even more interesting is what Mr. Obama’s “tax cuts” do to Social Security financing. As Mr. Biggs notes, had Mr. Obama proposed to pay for payroll tax relief out of, well, payroll taxes, his plan would never have a chance in Congress. Most members would look at a plan that defunded a trust fund that seniors are counting on for their retirement as political suicide.

And that leads us to the heart of this problem. If the government is going to give tax cuts to 44% of American based on their Social Security taxes — without actually refunding to them the money they are paying into Social Security — Mr. Obama will have to get the funds elsewhere. And this is where “general revenues” turns out to be a more agreeable way of saying “Other People’s Money.”

Yep. It’s just that easy to fool a majority of the American people. Repeat a slogan (95%) long enough and trust they won’t look into it, and the press won’t cover it. Obama’s play them like a fiddle.

FT: Most Americans Do Better with McCain Tax Plan

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The Financial Times posted a piece comparing the McCain and Obama tax plans in a clearer and more concise way, called “McCain is no salesman on tax proposals”. Here are some highlights…

So much has gone wrong for John McCain that it is surprising he is not further behind in the polls. He has been a victim of circumstances and his own bad judgment. Some of his errors, however, are more perplexing than others. How is it, for example, that Mr McCain has been so thoroughly outmanoeuvred on tax policy?

Both candidates have offered complex tax proposals. Proliferating alternative baselines (with or without the extension of the Bush tax cuts, with or without a “patch” for the alternative minimum tax, and so forth) deepen the confusion. Unable to fathom the details, voters are left to weigh the competing slogans. Mr Obama promises to cut taxes for 95 per cent of working families. Mr McCain says the rich need a tax cut, too. Guess who wins that argument.

Here is a fact you might not have noticed. It certainly seems to have slipped by most Americans. The typical US household would get a bigger tax cut under Mr McCain’s proposals than under Mr Obama’s. I know a few politicians who could do something with that…

Mr McCain wants to abolish the tax-break for employer-provided healthcare and replace it with a refundable $5,000 credit. Mr Obama says that a family health plan might cost $12,000 a year – leaving families who buy their own policy $7,000 worse off. This is incorrect. So far as I know, Mr McCain has never taken the trouble to explain why.

Suppose a family currently has a $12,000 policy provided by an employer. Under the McCain proposal, instead of attracting relief as at present, this benefit would be taxed as ordinary employment income – but the extra tax paid would be more than offset by the new $5,000 credit. In the first analysis, nothing changes so far as employers are concerned: all the action is on the employee’s pay cheque. The policy delivers a net tax cut to middle-income households and is enough to make the McCain tax plan on average a better overall deal for them than the Obama plan…

As well as failing to drive this home, Mr McCain has only weakly resisted his opponent’s notion that “wealthy companies” can afford to pay more. Business taxes, in the end, are paid by people – in lower wages, higher prices and lower dividends in their 401k plans. The point is not just that US corporate taxes are high by international standards and that this discourages investment and employment but that the burden eventually falls on ordinary Americans. Perhaps Mr McCain’s recent emphasis on corporate greed makes it difficult for him to point this out.

When Mr McCain misrepresents Mr Obama, he cannot even do it plausibly. Mr Obama is indeed planning to cut taxes for 95 per cent of working families. Rather than saying, “No he isn’t”, Mr McCain could have said: “Look at what his changes do to marginal tax rates, at the bottom of the income scale (as benefits are phased out), as well as at the top.” Rather than saying, “He wants to raise your taxes,” he could have said, “His spending plans will force him to raise your taxes.”

Critical reading…READ IT HERE

GET OUT THE VOTE!

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We conservatives need to get out the vote now more than ever. Much like the Democrats encourage each other, with the motivation and intention to skew the election results away from the stance of the population, rather than any interest they claim to have in providing fairness and true representation of the country’s views. They know this with total clarity and have combined to that end with great sinister cooperation.

We need to spread the word far and wide that in every town, in every county, in every state (even the liberal ones) we need to make our voices heard and our votes counted. It’s easy and doesn’t take much time, and even if it did freedom isn’t free and being busy is no excuse.

First, vote yourself. No matter how much you’re certain of the positive or negative outcome regardless of your vote, you need to be counted or you can’t complain about the result. Second, spread the word to your conservative family, friends, and neighbors. Press them with reason that voting is the only way to bring about change since we’re not quite yet to a point where we need a coup.

It’s common knowledge that when we conservatives vote, we win. We’re always the majority in common sense, charity, and altruistic (largely Christian) effort to truly lift the less fortunate from the chains the Democrats have forged around their necks.

We’re the majority of the country’s population for heaven’s sake!

But unfortunately, we’re far behind in activism and “community organization” and representation in the media. This is likely due to the fact that we’re busy working on the American Dream, with little time for protesting outside corporations all day with signs and slogans (where do they get the time?) Our singlular focus on getting a piece of the pie must change, until the country changes and we can all go back to focusing on our pursuit of happiness and prosperity.

We must gain a greater awareness of the state of the nation. Our inaction is causing a shift in power as the Democrats register and hype those over which they preside as masters and keepers. Our inaction leads to the persistence of the programs and policies we so often decry. Our inaction will keep the country in the depth of recession and depression. Will it be another 50 years like the Democrats and closet-Socialists gave us? It’s up to us.

Democrat policies and the communities the left organizes are the source of our financial crisis. This kind of policy, enforced by the same guilty parties, will never lead to a better outcome. They need to be removed from office and their policies discontinued.

Vote and help those around you to vote. Plan a carpool for election day, make reminder calls, take the time to persuade and befriend those you know are conservative and remind them of the urgency of the emergency in this country. We are on the verge of an all Democrat government siege. That kind of crisis is actually far more dangerous, and in more widespread and moral ways, than the current mortgage crisis. There’s no doubt about it.

Please be sure to vote and open your mouth. The liberals around you will try to suppress you, as that is the only way they will win. But stand for your values. Again, please be sure to vote and open your mouth.

Video: Escaped The Plantation, Voting McCain

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Perhaps the best speech given during this entire campaign cycle.

The O-Team
More genius by ZO. See more great clips here

Obama Votes Present on Fannie/Freddie

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Again, the WSJ is on the ball today…

If Sen. Obama were truly looking for a kind of deregulation that might be responsible for the current financial crisis, he need only look back to 1998, when the Clinton administration ruled that Fannie Mae and Freddie Mac could satisfy their affordable housing obligations by purchasing subprime mortgages. This ultimately made it possible for Fannie and Freddie to add a trillion dollars in junk loans to their balance sheets. This led to their own collapse, and to the development of a market in these mortgages that is the source of the financial crisis we are wrestling with today.

Finally, on the matter of deregulation and the financial crisis, Sen. Obama should consider his own complicity in the failure of Congress to adopt legislation that might have prevented the subprime meltdown.

In the summer of 2005, a bill emerged from the Senate Banking Committee that considerably tightened regulations on Fannie and Freddie, including controls over their capital and their ability to hold portfolios of mortgages or mortgage-backed securities. All the Republicans voted for the bill in committee; all the Democrats voted against it. To get the bill to a vote in the Senate, a few Democratic votes were necessary to limit debate. This was a time for the leadership Sen. Obama says he can offer, but neither he nor any other Democrat stepped forward.

Instead, by his own account, Mr. Obama wrote a letter to the Treasury Secretary, allegedly putting himself on record that subprime loans were dangerous and had to be dealt with. This is revealing; if true, it indicates Sen. Obama knew there was a problem with subprime lending — but was unwilling to confront his own party by pressing for legislation to control it. As a demonstration of character and leadership capacity, it bears a strong resemblance to something else in Sen. Obama’s past: voting present.

READ IT HERE

Why Do Our Taxes Go To ACORN?

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You might ask, as I did when I found out the Democrat shell company ACORN is federally funded, why this is the case. A Wall Street Journal piece today lays out some detail we didn’t know, and now we feel like being militant ourselves.

“But the organization’s real genius is getting American taxpayers to foot the bill. According to a 2006 report from the Employment Policies Institute (EPI), Acorn has been on the federal take since 1977. For instance, Acorn’s American Institute for Social Justice claimed $240,000 in tax money between fiscal years 2002 and 2003. Its American Environmental Justice Project received 100% of its revenue from government grants in the same years. EPI estimates the Acorn Housing Corporation alone received some $16 million in federal dollars from 1997-2007. Only recently, Democrats tried and failed to stuff an “affordable housing” provision into the $700 billion bank rescue package that would have let politicians give even more to Acorn.

All this money gives Acorn the ability to pursue its other great hobby: electing liberals. Acorn is spending $16 million this year to register new Democrats and is already boasting it has put 1.3 million new voters on the rolls. The big question is how many of these registrations are real.”

READ THE ARTICLE