Have you ever observed that
we pay much more attention to a wise passage
when it is quoted
than when we read it in the original author?
Philip G. Hamerton
Retrospective: Obama, Dems and the Budget
A year ago last April, around the time of the initial budget negotiations between Obama and Congress, FT.com noted (my edits):
To meet the 2010 pledge by the Group of 20 countries for all advanced economies – except Japan – to halve their deficits by 2013, the US would need to implement tougher austerity measures than in any two-year period since records began in 1960, the IMF said. The US was the only advanced economy to be increasing its underlying budget deficit in 2011, at a time when its economy was growing fast enough to reduce borrowing. The US lacks a “credible strategy” to stabilise its mounting public debt. On its current plans the US would join Japan as the only country with rising public debt in 2016, creating a risk for the global economy.So how has Mr. Obama exercised his leadership and commitment on reducing the $1.3T deficit by next year? Let us recall the initial budget deal made just a year ago between Barack "Just Call Me 'Mr. Green Shade'" Obama and the House leadership. According to the AP:
The $38 billion in spending cuts agreed to last week [4/12/11] won't keep this year's budget deficit from setting another record high, estimated at $1.5 trillion. Details of the budget cuts are emerging, and they show that most of the cuts either affect only future budgets, or amount to accounting gimmicks that won't reduce actual spending. Obama, meanwhile, is expected to insert tax increases back into the budget debate when he outlines his new deficit cutting proposals tomorrow.Okay, got that? That amounted to about 2.5% of the projected deficit for the year or 1% of the entire federal budget and most of that was sleight of hand budget gimmicks, not real cuts in existing budgets. But Obama has a plan: class warfare tax hikes. Never mind that pesky law of economics--you know the one (supply and demand: when you raise the tax on high income, you shrink the income base). Recall that the high bracket went from 28% in 1989 to 39.6% in 1993 under Clinton. Did federal spending go DOWN with the tax hikes? Of course not. Estimates of revenue gains for restoring the Clinton tax hike have been $70-80B: maybe 2% of the whole budget: how does that solve a problem where you're borrowing 40 cents out of every federal dollar spent? And keep in mind that $70-80B is money being taken out of upper income spending and investing in the real economy (remember Bastiat's "things seen and unseen"?) Note that this tax grab occurs at the expense of economic growth.
Let us review what the Tax Foundation has to say about data following the Bush tax cuts (here and here):
Each year from 2005 to 2007, the top 1 percent's constantly growing share of income earned [21.2-22.8%] and taxes paid [39.4-40.4%] set a record. In 2009, the top 1 percent of tax returns paid 36.7 percent of all federal individual income taxes and earned 16.9 percent of adjusted gross income. Overall, these data on high-income tax returns appear to confirm that the continued economic stagnation had the same diminishing effect on income inequality that most recessions have, and that it occurred for the same reason: a sharp decline in income at the high end. [Note: It's worth pointing out [where effective tax rate dips for the 0.1%] that in the case of capital gains and dividends, income derived from these sources has already been taxed once by the corporate income tax, which is not included here, meaning the average effective tax rate numbers can be somewhat misleading.]Not to mention taxes are based on nominal, not adjusted, interest and capital gains. where income is effectively overstated--in addition to any double counting (not to mention state, local and other taxes). The Obama/Dem attacks on Romney's income and wealth are morally reprehensible; Warren Buffett is a tool being used by corrupt statists whom choke out real competition in the economy with ruinous meddling regulations. I am certainly not impressed by the likes of Bill Clinton and Barack Obama whom have made millions off their political notoriety and think that thus they can speak with integrity on behalf of the people making widgets in the real economy.
Okay, America: do you think Obama will make good on his 2010 international commitment to get the budget deficit down to under $700B next year? Or will it go the way of his other broken pledges to close Gitmo, his 2008 campaign rejection of an individual mandate for health insurance, etc.? Obama thinks that his performance in office merits an A- or at least a B+.
On the Reading List
- Steve Horwitz, "Some Thoughts on Obamacare, Part I: Big Insurance wins"; Some Thoughts on Obamacare, Part II: Unintended consequences". After ranting in yesterday's talk soup over O'Malley's preposterous assertion that the free market in health insurance "failed" and pointing out that the effect of ObamaCare would mean attrition in competition and crony mandate scope creep, I'm delighted to see Horwitz making observations entirely consistent with my own. Mandate/regulatory creep, dominated by crony interests, is very similar to lawmaking/budget creep in general: it's almost if politicians or bureaucrats think that they're not doing job if they don't make new policies telling other people what to do! It's like what Speaker Boehner said to CBS FTN moderator Norah O'Donnell when she asked hopefully whether all that was needed was some minor tweaking of ObamaCare, and Boehner was insistent that you've got to pull ObamaCare out by the roots.
- Reuven Cohen, "Google Predicts Mitt Romney To Win Fall Election?". This Forbes post accordingly notes that at least one academic study pours cold water on the idea that search counts on political candidates correlate with election outcomes. I will point out that Mitt Romney isn't well known by a significant portion of the electorate (in particular, the electorate outside of perhaps New England where Romney served one term as governor just under a decade ago). I'm amused, but if I was running the Romney campaign, never underestimate the power of incumbency, a personally popular President, and hundreds of millions of dollars in negative campaign funds.
- Lee Habib, " This Land Is Your Land?" I remember learning to sing Woody Guthrie's signature song in grade school. But I never knew the "secret verses". I encourage the reader to read Habib's article, but basically Woody Guthrie didn't care for Berlin's "God Bless America", and his song was a response. I had never read or heard the controversial fourth and sixth verses until recently:
And on the sign there, It said "Private Property"
But on the other side, it didn't say nothing!
That side was made for you and me.
In the squares of the city, In the shadow of a steeple;
By the relief office, I'd seen my people.
As they stood there hungry, I stood there asking,
Is this land made for you and me?
Okay, I've officially heard "This Land is Your Land" one too many times. Those verses are so divisive and toxic I need an antidote. With all due respect to Kate Smith and Céline Dion, here's my favorite version:
Economic Liberty and a 13-Year-old Entrepreneur
You would think when it comes to hot dogs, Nathan Duszynski was born to sell them: after all, he has the famous name for it (HT Carpe Diem). Duszynski wanted to earn some money to help out his folks and save towards a future car and college and settled on buying a hot dog cart; his cash-strapped folks agreed to put up half the money towards an $1800 cart. The rest he raised from savings, birthday money, and odd jobs around the neighborhood. Another $700 or so went in cart repairs, supplies and a $208 temporary food vendor permit purchased from the county. A sporting goods businessman in the downtown district in the city of Holland and a mentor to Duszynski agreed to let the boy operate his cart in his parking lot.
Unfortunately, the city of Holland has zoning restrictions in the relevant area (except during annual festival time), Duszynski didn't qualify under a narrow set of exceptions, and the city shut down his business. There were other zoning areas where the business could operate, but he would need to obtain another permit. The dejected young man's spirit was crushed; given a tight family budget in a tough economy (the family is living with friends in the area), having to start over again and raise money for a new permit is probably the straw that broke the camel's back. Duszynski is looking to sell his cart.
I have written a number of commentaries, particularly on the topic of child-operated lemonade stands. One of the reasons I wanted to draw attention to this story (I encourage the reader to read the original post at the above cited link) was a couple of posted comments. Blackhorse's sarcastic remark, clearly a dig at Obama and government in general (see next commentary), is brilliant and flips the trite "privatize gains / socializes losses" saying on its head. (By the way, do you think these ideologues will ever figure out that the free market system doesn't allow for socialized losses? It's the statists whom want a "too-big-to-fail" concept. I suspect the real motivation of progressive Democrats and other statists for "too-big-to-fail" is because they can't pull the strings of a robust, genuine free market banking system.)
The second comment by "Mr. Protectionist" Allbusiness is typical. Libertarians don't have a problem with the rule of law; the problem we have is when local business interests subvert the law through crony political influence to establish high-cost anti-competitive barriers to entry, masked under misleading, disingenuous appeals to "rules are rules". Remember one of my favorite Bastiat quotes: "Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race." The consumer benefits from variety of choice.
A storefront brick-and-mortar restaurant has a number of advantages or alternatives that a food truck or vendor doesn't have (e.g., climate-controlled environment, hosting for special events, more comfortable seating, multiple checkouts, alternative formats (e.g., self-service, freshly-prepared food, cook-to-order, etc.), reservations and delivery services, more scalable operations, greater variety, etc.); they enjoy around-the-clock public services. Food trucks and vendors are often targeting a different type customer (e.g., convenience, finger foods, etc.) and often specialize to provide alternatives to nearby restaurants (e.g., ethnic specialties).
Beth Kregor responds that Allbusiness and others like him should address unfair tax burden with local politicians, not their competition. Besides permits, portable/mobile food vendors collect local sales taxes and any relevant local income taxes; they typically have local suppliers and purchase goods and services in the local area. No doubt a successful portable food vendor can and can be the first step to a storefront as their customer base reaches a critical mass.
Apparently, Nathan did not hear what Obama said the other day. No one who owns a business, did it alone. The government is responsible for your success. However, if your business fails, it is the owner's fault. Nathan, you did not do ENOUGH to insure your success. - Blackhorse
Food trucks or wagons are regulated in every city everywhere. Everyone has to play by the rules, whether your a cute kid or a smelly hippie or a right-wing neocon. As for downtown merchants, yes, they play by a huge set of rules too. The property owners, and ultimately their tenants and customers, paid huge assessments to rebuild the sidewalks and streets, snowmelt, the hardscaping and landscaping, lighting, parking, etc. They deserve some say in who gets to sell at their front door.
The unfair advantage a food vendor has is the real issue; They don't pay property taxes, parking assessments, snowmelt assessments, PSD (marketing) assessments, etc. It is right that this kid can undersell Gregordog (for example), taking away his business, when the kid doesn't contribute one dime to the infrastructure that he takes advantage of? - Allbusiness
Barack Obama and the Politics of Economic Success
What is this infatuation Barack Obama seems to have with Massachusetts progressives? First, you had the "sound bite heard around the world" back during the Democratic nomination battle in 2008 where he self-righteously said, "Don't tell me words don't matter." His speech clearly paralleled one made two years earlier by eventual Democratic nominee and gubernatorial winner Deval Patrick, where 3 of 4 quotes are identical and the phrase "just words" occur multiple times.
So now we have this famous "Cherokee Liz" Warren quote I cited in the January 1 post:
You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.Before going on, let me respond briefly to this beyond my cited earlier post where I pointed out the economic efficiency of a land value tax in contrast to other taxes: "Standard economic theory suggests that a land value tax would be extremely efficient – unlike other taxes, it does not reduce economic productivity." Of course, businesses and citizens do pay off their fair share of relevant bonds and public sector operations (police, firemen, teachers, etc.) through various taxes (income, sales, excise, property, etc.)
But let me point out that many of the functions she lists--schools, police, and firefighters, can easily be privatized. Many individuals or businesses employ or use private security services. I attended Catholic elementary/middle schools and a Catholic university; I have at least a few relatives whom have been home-schooled. Many roads are privately-built; it's just that progressive governments ruled out competition of privately-established highways. Heaven knows how badly maintained a great deal of our infrastructure has been (unlikely in a privatized system). But that doesn't mean we give local government a blank check. And we would much prefer being spared of the unnecessarily nearly quarter of the GDP being ineptly managed and spent by the federal government, excess government costs (especially competition-killing overregulation) occur at the expense of economic growth.
Here are relevant excerpts from a recent Obama speech in Virginia:
There are a lot of wealthy, successful Americans who agree with me -- because they want to give something back. They know they didn’t -- look, if you’ve been successful, you didn’t get there on your own. You didn’t get there on your own. I’m always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something -- there are a whole bunch of hardworking people out there. (Applause.)
If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business -- you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.
The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together. There are some things, just like fighting fires, we don’t do on our own. I mean, imagine if everybody had their own fire service. That would be a hard way to organize fighting fires.I could spend a full week of posts debunking the intellectual drivel in the whole speech, but the most newsworthy excerpt is this section. You don't have to be a rocket science to see many of the same concepts advanced by Elizabeth Warren raised by Obama: schools, roads, firefighting, etc. A couple of points: first, Obama is doing a bait and switch: he's using local public sector services effectively to argue for his spendthrift policies in the federal government. Second, he's making a straw man argument. Libertarians accept basic economic principles about division of labor, the law of comparative advantage, etc. (Unfortunately, we can't say the same of Obama, at least by the campaign he's running, demonizing outsourcing.) The same argument could be made about growing our own food, building our own houses, etc.
As for Barack Obama's argument about the Internet, it is partially true, but the inference Obama intends is false. The Internet, or something like it, was INEVITABLE. The concept of a decentralized network is hardly novel (in fact, if Obama really understood the Internet, he would never have used the example: the idea that the states could operate independent of a central planning authority in the federal government, our ideal of limited government and federalism, is something Obama would never knowingly promote)
It is true that the government had a specific use: worried about a centralized hub being knocked out by say a USSR attack, the Pentagon wanted a mechanism for communicating flexibly about sites independently of each other. A government subcontractor from Rand Corporation designed the basis of the original ARPANET among 4 universities by the Nixon Administration. It soon developed in unexpected ways, e.g., for electronic messaging. Obama would not care for Klein's assessment: " It is only thanks to market participants that the internet became something other than a typical government program: inefficient, overcapitalized, and not directed toward socially useful purposes." In fact, Obama is dismissive of individual achievement, and he confuses voluntary, cooperative behavior with statist coercion.
No, the government is not responsible for individual achievement; as usual, Obama is in a state of denial. There are 101 ways that government stands in the way of individual achievement; individual achievement occurs despite of, not because of government. Anyone who has ever battled bureaucratic inertia or managerial intransigence in the government or Big Business knows exactly what I'm talking about.
To give a minor example, I had a client, the female IT VP of an international tax-free shop chain, whom decided, because of internal bickering between accounting and HR over the ERP system (the accountants had been convinced of false rumors by troublemaker consultants that installation of the new HR functionality caused problems with basic accounting functionality) that, like Solomon, she was going to give accounting and HR their own separate ERP systems. I had to spend several days battling this self-destructive proposed "solution"; the VP even found at least one other IT manager whom had claimed to have done the same thing. Given the VP had power over my continued deployment and I was the replacement to a DBA whom had been fired from the account after 2 weeks by the same VP, the fact that I prevailed was due solely to my efforts, and I know of few professionals whom would have done the same: most would have gone with the flow.
Yes, Sir Isaac Newton may have said, "If I have seen further it is only by standing on the shoulders of giants." But there was only one Sir Isaac Newton; of billions of people on earth, there are few master investors like Warren Buffett, inventors like Edison and Kamen, songwriters like Paul Simon, Paul McCartney, and Diane Warren, businessmen like Henry Ford, Thomas J. Watson (IBM) and Ray Kroc (McDonald's), or PC entrepreneurs like Bill Gates and Michael Dell.
Just to bring a real-life perspective: around 1987-88 a major state university wanted to hire me as a professor for their scientific and technical communication program, and I never took a class or worked as a professional tech writer at the time. I never met a professor in the discipline. They wanted to hire me based solely on articles I wrote. Nobody suggested a topic or an idea; each article was written from scratch. Many fiction authors do the same thing. I know of at least a dozen IT projects which were failing when I joined the project (I was the only change in the team), and I got us across the finish line almost invariably ahead of schedule.
It's called leadership, and leadership makes a difference. This fall, the American people will face a choice, and it will involve whether the people are satisfied with leadership at the top. When I hear only one American in 3 think we're heading in the wrong direction, that suggests the American people have a problem with their leadership. Right now, by any objective measure Barack Obama is a failed leader. A lot of people like Obama. That's fine--I like Barney the Dinosaur, but that doesn't mean I think he's qualified to be President.
Aaron Ross Powell / Cato Institute, Obama's 'Elizabeth Warren Moment'
Musical Interlude: My Favorite Groups
The Babys. "Isn't It Time?"
