New Taxes, Anyone?

By Eddie Howell

 The late conservative columnist Robert Novak said that God put the Republican Party on earth to cut taxes. The GOP has a very mixed record in this regard; their opponents the Democrats have been very consistent in their efforts to increase taxes and spending. Since it's hard for tax revenues to keep up with massive spending programs, stratospheric deficits have resulted, to which both parties have contributed.

Both presidential candidates have spending plans that would strain the deficit, but depending on the makeup of the Congress over the next few years, there could be some restraint applied. Of the two candidates, Hillary Clinton has the most aggressive spending plans, seeking to provide everything liberals could wish for, and maybe even outdo Bernie Sanders' admittedly socialist agenda. Free or nearly free college, more government regulation and enforcement for mandatory benefits for workers (child care, paid family leave, equal pay for equal work), more refugee and other immigration with benefits, plus more military adventures abroad. If you listen to Hillary's speeches, you may note that almost everything she proposes will require more government, more regulation, and much more spending, not to mention more in-your-face and on-your-back government. While supposedly aiming the financial burden at the “rich,” it turns out that the rich are everyone who owns a business, and ultimately anyone who has a job and is currently paying income taxes. But it's true that higher incomes are hit harder as percentages, due to the Buffett Rule.

According to Tax Foundation analysis, Hillary's plan, if enacted would increase tax revenue, and decrease after-tax income across the board, and reduce economic output. In other words, it would lead to a recession. There would be reductions in jobs, wage rates, and capital investment. Not a good prospect for middle-class earners who haven't seen a real raise in years.

Donald Trump's plan calls for significant corporate and individual tax reductions that would stimulate economic growth. According to Tax Foundation analysis for Trump's plan, wages would increase, jobs would increase, and capital investment would increase.

Neither plan looks likely to decrease the national debt, but progress on that can be made only by cutting spending. You can be sure that Hillary's plan will exacerbate the deficit problem more than Trump's. Her plans for more social engineering and massive immigration would preclude any deficit-reducing progress. Spending cuts would be easier to find in a strong economy than in a declining one.

Economically, it's a clear choice: pro-growth with Donald Trump or no-growth (except government) with Hillary Clinton.

Some Comments on President Obama’s Economic Speech of December 6, 2011

President Theodore Roosevelt. Photo via Wikipedia

The president spoke in Osawatomie, Kansas on Tuesday, December 6, 2011, on his version of Theodore Roosevelt’s “New Nationalism,” essentially trying to make a case for a more socialistic approach to the economy, with the idea of government striving to make everything “fair” and supposedly advancing the middle class.

The comments cover a good deal less than the entire speech (video found here and here), but I believe they address the main ideas he expressed. The text is found at the Washington Post website. The president’s words are in bold, mine are not.


For many years, credit cards and home equity loans papered over the harsh realities of this new economy. But in 2008, the house of cards collapsed. We all know the story by now: Mortgages sold to people who couldn’t afford them, or sometimes even understand them. Banks and investors allowed to keep packaging the risk and selling it off. Huge bets – and huge bonuses – made with other people’s money on the line. Regulators who were supposed to warn us about the dangers of all this, but looked the other way or didn’t have the authority to look at all.

It was wrong. It combined the breathtaking greed of a few with irresponsibility across the system. And it plunged our economy and the world into a crisis from which we are still fighting to recover. It claimed the jobs, homes, and the basic security of millions – innocent, hard-working Americans who had met their responsibilities, but were still left holding the bag.

The president conveniently leaves out the fact that banks were under heavy pressure from the government to make these loans, and Fannie and Freddie purchased them. The Democrats in Congress, led by Barney Frank, would not permit the needed regulation of Fannie and Freddie, claiming that they were on sound footing. Financial companies issued extremely risky derivatives, which should have been stopped by government regulators but weren’t, and now, banks have it set up where derivatives take priority in bankruptcy, over the interests of investors. See Gary North’s informative article here.

Community agitators like ACORN (which previously employed Barack Obama)  increased pressure on banks to make the bad loans. The “breathtaking greed” was driven and incentivized by the government through purchase guarantees and “affordable housing” pressure. Banks shared blame as well, but it was primarily a government- and Federal Reserve-caused situation. The bailouts (under Bush’s administration) set the tone for further legislation handled in an “emergency” fashion, (Obamacare, cap and trade, etc.), with little to no debate and in the dark of night, with 1,000-plus-page bills which were not read and perhaps not yet entirely written when voted upon. This is the fault of government.

But this isn’t just another political debate. This is the defining issue of our time. This is a make or break moment for the middle class, and all those who are fighting to get into the middle class. At stake is whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home, and secure their retirement.

Obama is correct that the middle class is at stake. It is Obama’s policies that are destroying the middle class through ensuring massive unemployment and an economic environment that discourages business growth and hiring. His answer is higher taxes and more spending. More “stimulus,” when the stimulus to date is proven ineffective.

Now, in the midst of this debate, there are some who seem to be suffering from a kind of collective amnesia. After all that’s happened, after the worst economic crisis since the Great Depression, they want to return to the same practices that got us into this mess. In fact, they want to go back to the same policies that have stacked the deck against middle-class Americans for too many years. Their philosophy is simple: we are better off when everyone is left to fend for themselves and play by their own rules….

According to Obama, the government needs to make sure a good outcome is experienced by all who “work hard.” The task of government in the economy is punish fraud and abuse, and to provide an appropriate, rather than oppressive, tax and regulation environment. The Federal Reserve has harmed the economy through massive money printing and artificially low interest rates that discourage investment and saving. The government should not interfere with the free market, which they constantly do through corporate welfare and “crony capitalism” which is actually not capitalism but more like fascist corporatism.

They should stop all subsidies, bailouts, and special tax treatment, and trust the free market, in which companies and individuals pursue their own self interest without government interference.

Now, just as there was in Teddy Roosevelt’s time, there’s been a certain crowd in Washington for the last few decades who respond to this economic challenge with the same old tune. “The market will take care of everything,” they tell us. If only we cut more regulations and cut more taxes – especially for the wealthy – our economy will grow stronger. Sure, there will be winners and losers. But if the winners do really well, jobs and prosperity will eventually trickle down to everyone else. And even if prosperity doesn’t trickle down, they argue, that’s the price of liberty.

It’s a simple theory – one that speaks to our rugged individualism and healthy skepticism of too much government. It fits well on a bumper sticker. Here’s the problem: It doesn’t work. It’s never worked. It didn’t work when it was tried in the decade before the Great Depression. It’s not what led to the incredible post-war boom of the 50s and 60s. And it didn’t work when we tried it during the last decade.

It’s called free market capitalism and it does work and will work whenever it’s allowed to operate. The reason the Great Depression got so bad and lasted so long is that government tried to fix it. There was a depression in 1920 that started out as bad as the one in the 1930’s, but lasted less than two years, because neither the government nor the Fed did anything to interfere. They didn’t enshrine the mistakes as they did in the 1930’s and in the 2008 collapse. The government should have simply let the recession run its course, and by now, bad debt would be liquidated and we’d be back to normal growth. But no, politics trumps all. See Tom Woods's eye-opening video on the 1920 depression here.

When Obama says “It’s not political,” he would be more accurate in saying, “It’s not just political, it’s very, very political.” He is the servant of the unions, the radical environmentalists, and the socialist left.

This speech, delivered in the form of populist rhetoric, is an attempt to make the case for socialism. Theodore Roosevelt was something of a “Progressive,” as some liberals like to be called today, but people don’t generally understand that Progressivism is the belief that economic, social and cultural decisions that people traditionally make for themselves, should instead be made by a group of elite “experts,” acting for all. Thus we got big government, big bureaucracy, less freedom, and even eugenics. Now we have abortion, and may soon have more government-rationed health care and government-rationed or mandated who-knows-what.

Remember that in those years, in 2001 and 2003, Congress passed two of the most expensive tax cuts for the wealthy in history, and what did they get us? The slowest job growth in half a century. Massive deficits that have made it much harder to pay for the investments that built this country and provided the basic security that helped millions of Americans reach and stay in the middle class – things like education and infrastructure; science and technology; Medicare and Social Security.

Actually, we had strong job growth, compared to today. The deficits came mainly from wars that started after 9/11/2001 and continue today. And Bush’s worst deficits pale in comparison to those racked up under the Obama Administration.

Obama wants more “investment,” i.e. government spending, in education and infrastructure. But if the economy could just be allowed to recover, these issues would be taken care of without massive borrowing and endless debt.

We simply cannot return to this brand of your-on-your-own (sic.) economics if we’re serious about rebuilding the middle class in this country. We know that it doesn’t result in a strong economy. It results in an economy that invests too little in its people and its future. It doesn’t result in a prosperity that trickles down. It results in a prosperity that’s enjoyed by fewer and fewer of our citizens....

According to Obama, we need government in control to make sure the incomes and outcomes are what they should be. But experience has shown that government is hardly qualified to run anything outside its actual constitutional responsibilities. They are poorly qualified to give guidance on running business or the economy, when their own business and their own finances are out of control. It’s the private sector that needs to be able to invest, not the government. But politicians put many roadblocks in the way: bans on energy development and oppressive EPA regulations, just to name two.

America can’t afford four more years of Obama. That should be the focus of the GOP message. A few more years down the current path and we’ll be worse off than Greece.

Wealth and income inequality is not the problem. It’s simply a convenient propaganda component to stir up class envy, which, I repeat, is the very life blood of liberalism, and class warfare is its process.

Krauthammer On Target about 2012 Budget Cuts; Will Obama Allow Default?

U.S. Treasury Dept. building (Dreamstime.com)

Where are we on the debt-ceiling negotiations? Do we need to raise the debt ceiling? What if there is a default? Will the military get paid? Will Social Security and disability checks, and veterans’ benefit checks go out?

We are faced with a weird combination of actual danger and fear mongering. There are some facts to be considered when following the “negotiations,” which increasingly look like a stalemated process, but which, as August 2 nears, are likely to end in some kind of agreement to raise the debt ceiling. Conservatives can only hope that the GOP leaders can manage to assert their House majority power and hold firm on (1) real cuts and (2) no tax increases.

One way of addressing this is the “cut, cap and balance” legislation the House Republicans are uniting behind. It addresses the issues of the day and offers a mechanism to bring spending under control for the longer term.

I think GOP should consider the advice of Charles Krauthammer, and require substantial cuts in the 2012 fiscal year. The president wants everything to happen after the 2012 elections, giving him an election-year pass on these issues. Also, Mr. Krauthammer suggests, wisely, I think, that the GOP should point out the president’s way of framing all his arguments, that only he is the one trying to resolve the issue, while his opponents are only seeking to help billionaires and special interests, and further their own political interests. If the president is so serious about budget cuts, where was he in the last two years? Along with the congressional Democrats, who presented no budget at all, he was very busy not presenting a budget that might cut spending, knowing full well that a serious, extended agreement on the debt ceiling was needed. Now, he’s suddenly the hero of the hour?


Social Security checks’ status in the event of default represents a curious issue. Mr. Obama, cynically using seniors’ and veterans’ checks as a bargaining chip in the negotiations, says August checks may not go out if default happens. This contradicts his Office of Management and Budget Director’s statement that the Social Security Trust Fund is solvent through 2037, so no discussion is needed. However, this is untrue. As pointed out, again by Charles Krauthammer, as well as others (Gary North, for example), the Social Security Trust Fund has no tangible assets. It has been raided and spent by the politicians for decades. What it has are non-negotiable government bonds (IOU’s). It’s not only not solvent through 2037, it’s barely, if at all, solvent now.

In fact, the big three programs, Social Security, Medicare, and Medicaid, are a ticking financial time bomb, representing unfunded obligations of tens of trillions of dollars. Yet the Democrats have no desire to deal with this.

It has been said that military and Social Security checks, etc. for August will go out unless either President Obama or Treasury Secretary Timothy Geithner issues orders to stop them. If there is any real possibility of them not going out, then the Administration needs to get its priorities in order. And they ought to apologize for lying to us about the solvency of the Social Security Trust Fund. Rep. Allen West views Obama’s threat as “sad, pathetic, and fear mongering” (video via CNS News):



Of course there are other consequences if default happens: Markets will respond negatively, America’s creditors may be ready to cash in, etc. The world’s safest investments, U.S. Treasury bonds, may be seen as not so safe after all. Anyway, a default would be bad. How bad, we’ll have to wait and see, if it happens.

A few points to remember:

1. Even though G. W. Bush over-spent, his deficits pale in comparison to what the Obama regime has added to our debt.


2. Obama has never been serious, and is not now serious about spending cuts. He still wants a trillion-dollar tax increase (in addition to what we’re scheduled to get under Obamacare). He wants any spending cuts that are agreed to, to happen in the out years, well past election day.


3. He constantly says the Republicans are only interested in political posturing, when what they are trying to do is the thing they were elected to do. Obama is the one who wants smooth sailing into the 2012 elections. He wants to blame the GOP for anything that goes wrong, and he steadfastly refuses to show actual leadership on anything to do with the debt or budget. He threatens to veto “cut, cap and balance” if the Congress passes it. His strategy is to stir up class warfare.


4. As has been pointed out numerous times, even if Obama could take all the money from all the rich, it wouldn’t even begin to solve the problem.

If “cut, cap, and balance” somehow passes both houses of Congress and lands on Obama’s desk, the GOP should not offer any further deals. In fact, they shouldn’t anyway. Let Obama deal with the default. It will be his choice. Sen. Mitch McConnell is right about one thing: these problems cannot be adequately dealt with while Obama is still in office. But Republicans need to stand strong if they are serious about spending cuts. Otherwise, it’s just more of the same tax-and-spend and the Republicans will be weakened as a result of caving.

Related articles

• Social Security benefits, the trust fund and why the federal budget and deficit matter (quinnscommentary.com)
• Obama officially threatens to veto 'Cut, Cap and Balance' (thehill.com)
• Call Obama's bluff? YES! (thedaleygator.wordpress.com)

Unemployment Up! What a Surprise! But Why Is It Surprising?

Dreamstime.com

Economists were reportedly taken by surprise when the June unemployment figures showed 9.2 per cent unemployment, with only 18,000 jobs added. May’s figures were revised downward from 54,000 jobs added to only 25,000. Bureau of Labor Statistics figures show 14.1 million people unemployed, including 6.3 million unemployed for 27 weeks or more, and 982,000 discouraged workers among 2.7 million “marginally attached” to the labor force, people who wanted and were available for work, but not counted as unemployed because they had not looked for work in the 4 weeks preceding the BLS survey. Another 8.6 million were working part time when they would prefer to work full-time.


For an article on comparatively rosy expectations, see this.


The New York Times reports as follows:

Economists were stunned. They had been expecting job growth to strengthen in June as oil prices eased and supply disruptions caused by the Japanese tsunami and earthquake receded. Instead, the government’s monthly snapshot of the labor market showed that several industries, including construction, finance and temporary services, shrank. At the same time, leading indicators like wages and the length of the average workweek, which tend to grow before employers begin adding more jobs, actually contracted. [1]

Of course, these days, analysts always seem surprised at unfavorable economic news, perhaps still waiting for good results from Obama’s “stimulus,” and when the results don’t come, some complain that it’s because the stimulus was too small. Anyway, they don’t want us to cut spending any time soon.

The reasons for the unfavorable unemployment picture and its continuation are not that difficult to understand. The Heritage Foundation’s Morning Bell blog article of July 8 sums it pretty well. Mike Brownfield explains that in order to keep up with population growth, 100,000 to 125,000 new jobs are needed each month. Also, he quotes Rep. Paul Ryan and comments as follows:

“Investors and businesses make decisions on a forward-looking basis. They know that today’s large debt levels are simply tomorrow’s tax hikes, interest rate increases, or inflation – and they act accordingly.” [– Ryan]

It is this “debt overhang,” and the President’s threatened tax hikes, Obamacare, his incessant meddling in business (whether through the EPA or the NLRB) and the uncertainty those actions generate that are weighing on U.S. growth, investment and job creation today. [2]

The article contains some interesting insights, and I recommend reading the whole piece.

At best, business is risky, and when government adds threats of higher taxes, publishes new and invasive, costly regulations, and takes on ever-increasing debt, these things add to the already substantial market risks and can hardly help but slow things down. Everything we buy has been produced and sold by businesses, who have seen to it that we have stores (or website warehouses) filled with merchandise. Merchants are trying to put on the market the things that people want, in spite of all government’s efforts to stop innovation, competition, and profitability, and punish success. We should appreciate the fact that in order to have job growth, there must be profits and expansion. For some good information on the nature of business, see this.


The result of Obama’s economic activities will be to further slow or reverse economic growth unless serious changes are made. The Administration shows no inclination toward a pro-growth approach, but instead wants more spending and more taxes.


[1] Motoko Rich, “Job Growth Falters Badly, Clouding Hope for Recovery,” 07/08/2011, The New York Times.


[2] Mike Brownfield, “Morning Bell: An Economy in Panic,” 07/08/2011, The Foundry blog at The Heritage Foundation.

Related articles

• Job Growth Dismal, Unemployment Hits 9.2 Percent in June (usnews.com)
• More Than 25 Million Americans Are Unemployed Or Can't Find Full Time Work (npr.org)
• The Great Jobs Drought (growthology.org)

Some Comments on President Obama’s Cleveland Speech on the Economy

In this article, I am commenting on some of the things President Barack Obama said in his September 8, 2010 speech in Cleveland, Ohio (more precisely, Parma, Ohio). Lest his remarks be taken uncritically, I have tried to provide some counterpoint. The President’s statements are in bold and everything else is not in bold. [1]

Instead of coming together like past generations did to build a better country for our children and grandchildren, their argument is that we should let insurance companies go back to denying care for folks who are sick, or let credit card companies go back to raising rates without any reason.  Instead of setting our sights higher, they’re asking us to settle for a status quo of stagnant growth and eroding competitiveness and a shrinking middle class.

The argument is that we should not have socialized medicine, and while the insurance industry regulations need to be revisited, it was not necessary, and it is an unwise policy to replace the entire health care structure. Most Americans agree with this. Obama’s and liberals’ answer to everything is more government control and/or more government spending. I haven’t heard any conservatives “asking us to settle for a status quo of stagnant growth and eroding competitiveness and a shrinking middle class.” Those are precisely the things Obamanomics are bringing us through higher taxes, over-regulation, bailouts and government takeovers. If government would simply get out of the way, a free market would very soon restore prosperity.

“Past generations” felt compelled to support the big government policies of FDR during the Great Depression, which vastly expanded government size and power, and contributed to worsening and prolonging the Depression. (See my previous article here.)

With all the other budgetary pressures we have – with all the Republicans’ talk about wanting to shrink the deficit – they would have us borrow $700 billion over the next 10 years to give a tax cut of about $100,000 each to folks who are already millionaires.  And keep in mind wealthy Americans are just about the only folks who saw their incomes rise when Republicans were in charge.  And these are the folks who are less likely to spend the money – which is why economists don’t think tax breaks for the wealthy would do much to boost the economy.

“Economists” in that last sentence must refer to Keynesian economists who think the only solution to our economic problems involve massive government spending. Obama shows his narrow outlook on this situation when he says the wealthy are “less likely to spend the money.” If they did receive a continuation of the Bush tax cuts, they would be very likely to spend the money on business investment that would create jobs.

How they can still get people to believe the following myths is somewhat surprising:

Myth #1: The Bush tax cuts decreased, and continuation of them would decrease revenues to the government. Not so. Check tax cuts back to JFK, Reagan, and Bush, and you will find that revenues to the government increased under these tax cuts. Revenues would increase again if all the Bush tax cuts were extended. Boehner’s suggestion of extending all the Bush tax cuts for two years, and rolling back spending to 2008 levels, would produce a substantial improvement quickly. If businesses knew their tax rates were frozen for two years, they would feel free to expand and hire.

Myth #2: Increasing taxes on the wealthy does not harm others in society. Not so. Increasing taxes on the wealthy equals increasing taxes on those who are in a position to provide jobs, if the economy encouraged it. Figures from the Bureau of Labor Statistics show clearly that this isn’t happening now. Obama’s argument appeals mainly to class envy.

This isn’t to punish folks who are better off –- God bless them.  It’s because we can’t afford the $700 billion price tag... And for those who claim that our approach would somehow be bad for growth and bad for small businesses, let me remind you that with those tax rates in place, under President Clinton, this country created 22 million jobs and raised incomes and had the largest surplus in our history.

Jobs were created and the surpluses happened after Republicans gained control of Congress in 1994. Clinton and Gore got on board with this reality, announcing that “the era of big government is over,” something that Obama would never do. For him, the era of big government is just beginning. And, punishing some of the wealthy by redistributing some of their wealth would please Obama.

As Jake Tapper of ABC News reported,

The president defined the Republican economic philosophy as, “Cut taxes, especially for millionaires and billionaires.  Cut regulations for special interests.  Cut trade deals even if they didn’t benefit our workers.  Cut back on investments in our people and our future.” [2]

“Millionaires, billionaires, and special interests” means employers, whose wealth and income Obama wants to redistribute. Of course, here, as elsewhere, when Obama says “investment,” he means “government spending.”

Also,

Senate Republican Leader Mitch McConnell in a statement pushed back against Mr. Obama’s speech.

“If the President wanted to have an immediate impact on hiring, he could begin by changing his mind and announcing today his opposition to the job-killing tax hikes on small businesses,” McConnell said, “ America’s job creators have already been hit with higher health care costs and related taxes, new bureaucracy and a financial regulation bill. Americans want jobs, not more government, more debt and more taxes. Let’s start today with a declarative statement against tax hikes on the small businesses that are critical to expand and create jobs.” [3]

And, Obama would have us believe that it’s somehow John Boehner’s fault that our economy is in such dreadful condition.

The President derided House Minority Leader John Boehner as representing simply saying “no” to Obama’s policies without proposing any positive steps to helping the economy. Not true, of course, but the “no” aspect is valuable too. As one of Jake Tapper’s commenters said,

No is a pretty sound position when the nation is careening off a cliff in massive debt.

America is on a path to bankruptcy. This is no longer news and no longer debatable. What remains in question is, what are we going to do about it? [4]

Interestingly, The Hill is reporting today (09/08/2010) that momentum is building for extending all the Bush tax cuts, since the President avoided a direct veto threat, and Sen. Ben Nelson (D-Neb.) expressed support for extending them:

Sen. Ben Nelson (Neb.), a centrist who has been a key vote on several Obama administration initiatives, said Thursday that he supports extending all of the George W. Bush-era tax cuts until the economic recovery has taken root. Raising taxes on wealthier taxpayers could hurt the economy, he said…. 

Tax policy experts expect Congress to approve an extension of all of the Bush-era rates in a lame-duck session after the elections. [5]

This could make Obama’s argument a moot point, which would be good news. Also, that's the only good argument I've heard for having a lame-duck session. The Democrats are trying to figure out something to help the economy before the elections (such as announcing this?), and they know that Obama’s policies aren't working.

The past several months have helped many Americans gain perspective on Obama’s policies. People who previously had little desire to follow day-to-day politics now find that they must pay closer attention, because these things hit them in the pocket book, lessen their freedom, and weaken the nation. After Election Day, it appears that Obama’s party will be less powerful in Congress.


[1] Items in bold are from “Remarks by the President on the Economy in Parma, Ohio,” 09/08/2010, WhiteHouse.gov.

[2] Jake Tapper, “Still Fear vs. Hope? Obama Attacks John Boehner, GOP’s Economic Vision,” 09/08/2010, ABC News, Political Punch.

[3] Ibid.

[4] Commenter “Skip” at Tapper article 09/08/2010. See [2].


[5] Vicki Needham and Ian Swanson, “Momentum builds for extending all of President Bush’s tax cuts,” 09/09/10, The Hill, On the Money blog.


Photo: Senator Ben Nelson of Nebraska, official portrait, via Wikipedia.

Obama Blames Bush and Whines about the Economy, or Happy Labor Day to the Unemployed

Now President Barack Obama wants approval for a $50 billion “jobs bill,” that Republican leaders rightly point out would have little effect other than increasing US indebtedness when spending is already out of control. No new jobs would be brought about until next year perhaps, and the bill is hardly worth its price tag.

And Obama has turned up the volume, for campaign season, on his “Blame Bush” strategy, which by now is wearing quite thin. Obama, during his presidential campaign seemed to be confident about having all the answers, but since his economic policies have been a big failure thus far, he has to blame Bush, propose more stimulus, and do more whining.

An AP article reporting on Obama’s newest stimulus proposal includes the following about Obama’s statements to a “cheering crowd at a labor gathering” in Milwaukee:

Casual in brown slacks and open-collar white shirt with rolled-up sleeves, Obama took a populist tack in his speech, mixing attacks on Republicans with praise for working-class and middle-class Americans.

He said he'd “keep fighting, every single day, every single hour, every single minute to turn this economy around.” He said interest groups he has battled “talk about me like a dog.” [1]

I’m not sure if he meant that even during vacation times he’d keep “fighting.” Or when he could spare some time from whining about groups that “talk about me like a dog,” he’d “fight.” He did say every single day, hour, and minute. That doesn’t leave much time for other things. Such inspirational rhetoric from the Chief.

He talks about helping the middle class at the same time he is destroying the middle class. And young people trying to enter the job market are probably rethinking their devotion to the Messiah’s “hope and change” promises. There have been changes, but not what was hoped for. There are 14.9 million people still unemployed, and another 8.9 million underemployed [2], and still more who have given up looking for work, but Obama hails the “positive news” of 54,000 private sector jobs created.

Oh, and by the way, Obama wants to exempt companies from paying Social Security taxes on newly-hired people that were unemployed. And, he wants to continue R&D tax benefits. In the context of the employment and tax picture as seen by employers, these things are not enough to encourage hiring to any significant degree.

Further, the AP article reports as follows:

He also acknowledged that the past eight months of modest private-sector job growth hasn't been enough to bring down the unemployment rate. He said economic problems facing families today are “more serious than ever,” and seemed to ask the audience in Milwaukee — and voters nationwide — for patience.

“Now here's the honest truth, the plain truth. There's no silver bullet, there's no quick fix to these problems,” he said, adding that it will take time to “reverse the damage of a decade worth of policies” that caused the recession. [3]

He’s right about the problems getting worse under his administration. And his policies certainly can’t and won’t improve things much. He is wrong about “‘a decade worth of policies’ that caused the recession,” if he means something other than the real estate bubble and the misbehavior of Fannie Mae and Freddie Mac, resulting from actions and inaction of the Democrats and the Fed, and Bush’s ill-advised last-minute acceptance of (Democrat) Paulson’s demand for a $700 billion bail-out blank check.

Obama’s beloved health care bill ensures that there won’t be fiscal sanity for the foreseeable future, and his promotion of the cap and trade bill proves he doesn’t care. Obamacare and the impending EPA regulations on CO-2, plus the end of the Bush tax cuts, the double-dip, and the worsening of real-estate troubles, virtually guarantee that banks and businesses will keep holding on to their cash for some time. Economists who say the economy will improve around 2014 may be counting on Obama being out of office by then. If Republicans gain control of Congress this year and de-fund Obama’s main initiatives and overturn his regulations, and extend the Bush tax cuts, things could get better much sooner.

Meanwhile, the President stays in campaign mode, though his message now is far less appealing to his election supporters than in 2008. But he can campaign. He just isn’t good at governing.

[1] Darlene Superville, Associated Press, “Obama assails GOP, promotes new jobs program,” 09/06/2010. Yahoo! News.

[2] Bureau of Labor Statistics, “The Employment Situation -- August 2010,” 09/03/2010.

[3] Superville, see [1].

Photo: Vintage 1956 postage stamp with Labor Day theme (Dreamstime.com)

Senate Shows Some Sense about VAT; Will Obama?

“It is the sense of the Senate that the Value Added Tax is a massive tax increase that will cripple families on fixed income and only further push back America's economic recovery and the Senate opposes a Value Added Tax.”
– Non-binding Senate Amendment of 04/15/2010 by John McCain, passed 85-13, with 12 Democrats and one Republican voting against it. [1]

The Value-Added Tax (VAT) taxes almost all items at each stage of production or handling (where “value” is added). Manufacturers, distributors, and retailers will each have to pay some of it, but, of course, it all must end up being paid by the consumer or final user.

Paul Volcker, former Federal Reserve Board Chairman and current Obama advisor has mentioned the Value-Added Tax as an idea worth considering. President Obama will likely find this additional tax irresistible. As Charles Krauthammer explains, Obama will want this tax to help pay for Obamacare.

For the politician, it has the virtue of expediency: People are used to sales taxes, and this one produces a river of revenue. Every 1 percent of VAT would yield up to $1 trillion a decade (depending on what you exclude -- if you exempt food, for example, the yield would be more like $900 billion).

It's the ultimate cash cow. Obama will need it. By introducing universal health care, he has pulled off the largest expansion of the welfare state in four decades. And the most expensive. Which is why all of the European Union has the VAT. Huge VATs. Germany: 19 percent. France and Italy: 20 percent. Most of Scandinavia: 25 percent. [2]

And of course, Obama will want it all the more since it’s the fashion in Europe, which is Obama’s example for economic policy. Soon, we’ll be more like Greece, which has a substantial VAT and is still facing bankruptcy, except for a proposed Eurozone bailout.

It is encouraging, even admirable, that the Senate voted so overwhelmingly for the anti-VAT resolution, but when Obama and his minions start applying the pressure, one has to wonder if this resolve can hold up.

Liberals see this as the panacea for the endless and, as everyone admits, “unsustainable” spending, which goes right on, unsustainable or not, with no letup in sight. VAT would look like such a tax blessing, liberals (some, hopefully not all) seem to think that adoption of it would somehow lead to reduced spending. Actually, it would reduce consumer spending, but not government spending.

Here is a sample of some of their thinking. From Alain Sherter at a BNET finance blog:

My colleague (and stalwart editor) Cait Murphy says the U.S. urgently needs to reduce the federal deficit, and she argues in favor of a value-added tax as a good way to rein in spending. Exhibit A in that argument is that the national debt is spiraling out of control; Exhibit B is that rich people and corporations can’t afford to share more of the economic burden…

Here’s why I disagree. First, as the N.Y. Times’s David Leonhardt has noted, the nation’s total nonfinancial debt isn’t growing especially fast by historical standards. And that’s counting the recent growth in federal expenditures. Not that rising budget deficits aren’t a concern — they are. Just not immediately.

Besides, during the recession U.S. households and businesses have slashed spending. If Keynes is right (and recent history emphatically suggests he is), then the only way to fill in the resulting hole in the economy is for government to boost outlays in order to stimulate growth. Of course, there’s precedent for doing the opposite — it’s called the Great Depression. [3]

To me, both sides of this argument are wrong. First, the VAT would not slow spending. If more revenue were coming in, there would be even faster growth of spending. As long as liberals are in charge, there will be constant spending growth, no matter what is said.

Second, Keynes is wrong and has always been wrong. Keynesian spending grows government and little else. Has all the current spending brought the economy back to normal? Also, unprecedented government (Keynesian) spending characterized and prolonged the Depression years. But that is a topic that takes good Austrian School economics to really deal with. (See Mises.org.) Whatever recovery we have will be in spite of liberal policies, not because of them.

What could we expect if we got a VAT? What about Europe? As The Wall Street Journal points out,

One trait of European VATs is that while their rates often start low, they rarely stay that way. Of the 10 major OECD [Organisation for Economic Co-operation and Development] nations with VATs or national sales taxes, only Canada has lowered its rate. Denmark has gone to 25% from 9%, Germany to 19% from 10%, and Italy to 20% from 12%. The nonpartisan Tax Foundation recently calculated that to balance the U.S. federal budget with a VAT would require a rate of at least 18%.

Proponents also argue that a VAT would result in less federal government borrowing. But that, too, has rarely been true in Europe. From the 1980s through 2005, deficits were by and large higher in Europe than in the U.S. By 2005, debt averaged 50% of GDP in Europe, according to OECD data, compared to under 40% in the U.S. [4]

Whatever VAT we might get would be in addition to the income tax and state and local sales taxes that we already pay. Those and other taxes drive our average “Tax Freedom Day” to April 9. [5]

Caroline Baum at Business Week quotes Dan Mitchell, of Cato Institute as follows:

“There is no way to finance all this new spending without an additional broad-based tax,” says Dan Mitchell, senior fellow at the Libertarian Cato Institute in Washington.

Which is exactly why a VAT should be avoided, he says. “It’s akin to giving the keys to the liquor store to a bunch of alcoholics.” [6]

She goes on to point out the regressive nature of the VAT, which hits lower-income people substantially harder than others. [7] (Emphasis added)

On top of the economic slowdown we’ve been experiencing for the past two years or so, the economy would take another hit with a VAT. It would definitely slow things down a lot. Since people would have even less disposable income, economic activity would be significantly diminished. Whatever rate the VAT started at would fairly soon be increased. If anyone thinks that a VAT would reduce either spending or the deficit, they would be mistaken. It would push us even closer to the edge of the cliff.

In other words, we would soon be much more like European countries economically: facing ever-increasing deficits, very high taxes, constantly ballooning spending, permanent double-digit unemployment, and no letup in entitlements until we face financial collapse.

The only way to get the economy back on track is to encourage private sector economic growth: Forget VAT, cut spending, phase out entitlement programs, cut taxes (thereby increasing revenue to the government), and pull back on regulation. This, of course, assumes abandonment of any cap and trade program and repeal of Obamacare and perhaps the remainder of the stimulus.

The path we are on, which VAT would accelerate, leads to socialist decline, inflation caused by the Fed monetizing the debt, and widespread poverty with much of the middle class moving down a few notches to join a perpetual government-dependent underclass. This seems to be what the Administration wants: A more-needy populace looking to ever-growing government for more and more help. Not getting much, but supposedly filled with “hope.” Welcome to the “change.”


[1] “US Senate Registers Strong Opposition to Value-Added Tax,” 04/15/2010, Dow Jones, at NASDAQ.com.


[2] Charles Krauthammer, “The VAT Cometh,” 03/26/2010, Real Clear Politics.


[3] Alain Sherter, “Debt and Taxes: This is No Time to Cut Federal Spending,” 04/12/2010, Industry.BNET.com.


[4] Editorial, “Europe’s VAT Lessons,” 04/15/2010, Wall Street Journal online.

[5] Caroline Baum, “U.S. Consumption Tax Is Tempting VAT of Poison: Caaroline Baum,” 04/15/2010, Business Week online.


[6] and [7] Ibid.

Photo: Dreamstime.com

These Benefits Will Hurt

What would “Health Care Reform” do for employment?
1. New federal payroll taxes. These taxes are paid partly by employers and partly by employees – at least in theory. They are all paid out of money earned by employees. They all increase the cost of employing people, thus are a disincentive to hiring. Taxes on “higher income earners” potentially hurt all workers, through job losses or lower pay.

2. New state taxes. States will have to deal with unfunded mandates to handle greatly increased Medicaid enrollment. The federal government will pay a lot of this, but by no means all (except maybe in Nebraska?)

3. Employer penalties for not providing insurance coverage. Diana Furchtgott-Roth explains:

Employers who don't offer health insurance and whose workers use tax credits to purchase insurance on the private market would be fined $2,000 per worker. For some firms this would create a substantial disincentive for hiring low-wage, unskilled workers such as teens, whose unemployment rate is now 26%, or adults without high school diplomas, who have a 15% unemployment rate. Other firms would be tempted to pay the penalty and get rid of the company health plan. [1]

Americans for Prosperity reports, “CBO estimates employers would opt to drop as many as 5 million workers from private insurance, and pay the fine instead of maintaining current coverage.” Employers with 50 or more employees would be required to provide insurance or pay the fee. [2] This is about the only way employers would see any reduction in costs.

Employers with more than 200 employees would automatically be required to enroll all employees in an insurance plan. [3] Thus some additional people might be covered, but this would likely result in layoffs or hiring freezes for many employers who aren’t already doing this.

4. Taxes “Cadillac” health plans. On this, unions would get a break. Also, this tax wouldn’t start until 2018. If Obama doesn’t want to introduce this tax now, it’s doubtful is successors would, either. [4]

5. New taxes on health insurance companies and drug manufacturers will discourage employment in those fields and raise costs and premiums.

6. Taxes on investment income.

The Heritage Foundation states the following:

The new White House proposal to impose a Medicare tax on investment income would reduce demand for investment, which is the last thing that the economy needs right now. It would slow recovery, reduce employment opportunities, and hinder wage growth. [5]

The Heritage Foundation estimates that the White House plan would result in an average of 115,000 lost jobs per year, and reduce household disposable income by $17.3 billion per year (between 2011 and 2020). [6]

All these new taxes, about $493 billion [7], come at a very inopportune time, during an economic downturn. Even in better times, this plan could be expected to cause a downturn.

Heritage, again:

[T]he President's plan relies on deep cuts in Medicare payments to hospitals and other institutional providers. But the chief actuary of the Medicare program has said repeatedly that these cuts are not realistic because they would push many institutions into serious financial distress. Still, the Administration claims that hundreds of billions of dollars from these cuts will materialize from 2020 to 2030, thus justifying its claim of large deficit reduction during that time. But it is far more likely that the Medicare cuts and tax increases will never be sustained, even as the entitlement costs from the Obama plan soar.[8]

What would “Health Care reform” do for (to) consumers/workers?
All additional taxes to suppliers and providers must be passed on to consumers (or insurers), as must all upstream costs, including direct taxes, fines, fees, compliance expenses, etc. Also, consumers must purchase insurance or pay a $750 fine (tax). Failure to do so could result in jail time. Such a mandate is blatantly unconstitutional and against all U.S. tradition. And, this runs counter to Obama’s pledge not to raise taxes on people making under $250,000 per year. Further, there is no serious attempt to deal with tort reform. And, there seems to be no real assurance concerning federal spending for abortions.

Where are these lower costs supposed to come from? Lower costs will be just for those who will get subsidies. The real cost of health care will increase and quality will be diminished.

Spending estimated at more than $2.5 trillion over a decade still won’t be covered by the large tax increases, so only in the Twilight Zone would this plan reduce the deficit. Even if the plan itself tended toward deficit reduction (which it doesn’t), federal spending on many other items would more than offset any expected deficit reduction. Counting on Obama’s “reform” to create jobs and reduce the deficit is like counting on the “stimulus” to end unemployment, only less certain.

Greatly increased bureaucracies associated with “exchanges,” oversight panels, etc. will lead to ever-increasing cost and loss of freedom.

The current entitlements of Social Security and Medicare are unsustainable, and young people today should not expect to benefit from these programs when they reach retirement age. To add new entitlements through “health care reform” demonstrates either woeful ignorance or a serious lack of concern about the future of our economy. This so-called “reform” would be destructive to employment and the economy as a whole.

These entitlements, added to already ever-increasing record deficits, threaten the stability of our economy. Perhaps members of Congress will think again before repeating their mistakes.


[1] Diana Furchtgott-Roth, “Obamacare 2.0 Is a Job Killer,” 02/23/2010, Real Clear Markets.


[2] and [3] AFP Blog, “The Ten Worst Provisions in Senate Health Care Bill,” 03/05/2010, Americans for Prosperity.

[4] James C. Capretta, “The President’s Health Reform Proposal: More Like $2.5 Trillion,” 02/24/2010, The Heritage Foundation.


[5] Karen Campbell, Ph D. and Guinevere Nell, “The President's Health Proposal: Taxing Investments Undermines Economic Recovery,” 02/25/2010, The Heritage Foundation.


[6] Ibid.

[7] Furchtgott-Roth, see [1].

[8] Capretta, see [4].

Photo: Official White House photo by Chuck Kennedy. Found at whitehouse.gov.

Special Tax Treatment for Special Taxpayers

Speaking of the “Health Care Reform” legislation:
“‘I guess this bill is only good if it doesn't apply to you,’ GOPAC Chairman Frank Donatelli said…. ‘If this bill is so good, why does everyone need an exemption in order to vote for it? ... We see the drug companies get a special deal. We see what happened in Louisiana and most notoriously Nebraska in the Senate where they got special deals. And now the unions get a special deal….’” [1]

Arm-twisting, bribery, intimidation, and special treatment are required for the Democrats to make progress on getting “health care reform” passed. It appears that the top Democratic leadership doesn’t much care about the specifics of the final bill as long as they can get the votes and satisfy powerful client special interests. The American people should get this kind of consideration, eh? Most are solidly against this “reform.” [2]

To go along with so many other unconstitutional and destructive Obama policies and proposals, they’ve added the little detail of exempting union members’ “Cadillac” health plans from the proposed heavy tax. People whose insurance is covered by a collective-bargaining agreement get an exemption. Not other citizens. Isn’t there something in the Constitution about the “equal protection of the law”? [3] There’s also an item about “titles of nobility,” and while this isn’t a title as such, Obama doesn’t mind treating certain “classes” of people like they’re privileged characters compared to the rest of us. [4]

Specifically, “The deal reached by unions and the White House would tax family insurance plans worth $24,000, up from the $23,000. The average employer-sponsored family plan cost $13,375 in 2009, according to the Kaiser Family Foundation. The deal also would delay the tax until 2018 for policies covering workers in collective bargaining agreements,” according to an AP article. [5]

Is this a sweetheart deal or what? It’s worth $60 BILLION [6] according to estimates, leaving that much to be made up in other ways (i.e., taxes). This will kill and bury Obama’s “promise” that families earning less than $250,000 a year would get no increase – “not one dime” – in taxes. Of course, that was pretty well gone anyway. What someone said of Clinton may go better for Obama: “He kept all the promises he intended to keep.” “Deficit-neutral”? Are you kidding?

And in typical Obama and Congressional Democrat fashion, this agreement was reached behind closed doors. Obama’s talk of “transparency” in government now has to be regarded as a joke. But not funny.

Meanwhile, as the Obama Administration and Congressional Democratic leadership are busy with this socialist program, complete with more unsustainable entitlements and plenty of new taxes, they claim to be concerned about unemployment – which they want to deal with by more and more spending. When these new taxes come on stream, they will deal a serious blow to employment and likely make for a double-dip recession, with little relief in sight. The deficit will increase as a result of new taxes, not decrease. The mounting deficits could put the dollar itself in serious trouble.

I hate to sound pessimistic. With a common-sense approach to the economy, big improvements could soon be made. But nothing the administration is doing seems to point in that direction. Union bosses needn’t worry, though. The administration will try to protect them, as long as it means union support for their unpopular and misguided policies.

[1] Fox News.com, Major Garret and Trish Turner contributing, “Democrats Hammered for ‘Back-Room’ Deal with Unions on Health Care,” 01/15/2010, at http://www.foxnews.com/politics/2010/01/15/democrats-hammered-room-deal-unions-health-care/

[2] Rasmussen reports that 36 percent of voters favor the plan, while 56 percent oppose it, including 44 percent who are “strongly opposed,”

[3] “The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States.” Article IV, Section 2, Clause 1 of the United States Constitution.

[4] Ibid, Article I, Section 9, Clause 8: “No Title of Nobility shall be granted by the United States…”

[5] Erica Werner, Associated Press, “Obama, Democrats Make Closed-Door Deal With Labor Unions on Final Health Care Bill,” 10/15/2010, CNS News.com, at http://www.cnsnews.com/news/article/59869

[6] See [1] and [5].

Public domain photo from photos8.com