The vision that you glorify in your mind,
the ideal that you enthrone in your heart
this you will build your life by,
and this you will become.
James Lane Allen
French Socialists Won't Surrender to Economic Reality
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| Courtesy of the Simpsons |
Sequestration: A Test of Obama's
Leadership, Integrity and Character:
EPIC FAILURE
I recently quoted from (retired) Judge Napolitano, a Fox Business (and occasional Reason) contributor, whom suggested by politicizing the modest sequestration cuts Obama is flirting with impeachment. He didn't let the Congress (implied Dem-controlled US Senate which has failed to pass a budget in years, the likely point behind his references to unconstitutional spending) off the hook. One possible motivation: Obama has more spending discretion under a continuing resolution system.
In yesterday's post I had a retrospective of various sequestration notes of Administration fear-mongering and distortion, fact checks, etc. Keep in mind federal spending has gone up every year.
The progressive apologists, like Gray Lady columnist Paul "I have a Nobel Prize and you don't" Krugman, have been in a state of denial over the government's spendthrift ways:
The whole story (of expanded government) is a myth. There never was a big expansion of government spending...Where’s all that spending we keep hearing about? It never happened.Let us quote the "conservative" Washington Post:
Federal domestic spending increased a record 16 percent to $3.2 trillion in 2009, the Census Bureau reported Tuesday. The rise in spending was the largest since the Census Bureau began compiling the data in 1983. Pay for federal employees accounted for nearly $300 billion of the spending and nearly half of that went to the Defense Department payroll.Charles Blahous, a public trustee of senior entitlements, responds:
The spending increase that Dr. Krugman says “never happened” was in fact the biggest single-year spending increase since 1952. But at the same time [the amount of new spending is understated:] annual federal interest costs on government bonds dropped by roughly $66 billion. [Of course tax revenues fall and relief funding increases during a recession, but we have gone through other recessions.] We need to remember that the government is already engaging in historically unprecedented fiscal stimulus, to the tune of deficits equal to 10% of GDP, most of this fueled by increased spending.Now budgeted versus actual spending can differ (e.g., in FY2010, Obama, who had campaigned on defense spending spent on the Iraq and Afghanistan, had budgeted defense at $663B and actual spending was $815B). We have this important indication of budgeted intent, even if not all the budgeted money was spent:
The FY 2010 Discretionary budget was $1.37 trillion [$1.306 trillion was spent]. This was due to a budgeted 13% increase in non-Security spending to $695 billion. Spending for nearly all agencies was up across the board.
The devil is also in the details. For example, unemployment compensation was both more generous and more extended relative to past recessions. The percentage of households above 130% of the poverty threshold enrolled in food stamps has doubled since the Bush Administration and nearly quintupled since the Clinton Administration.
I am tired of hearing the same talking points from the leftists; take the stale class warfare rhetoric. For example, the standard response to the fact low-earning workers do not pay federal income taxes (which in part pay for government operations) is they pay FICA taxes. This is a misnomer because FICA is more of a mandatory contribution towards future retirement benefits [e.g., we don't speak of "401K taxes"]. The only reference to government operations is that any net contribution after pay-go payments to current beneficiaries (and we have been running a pay-go deficit since 2010) must purchase federal debt for the reserve. Second, on average lower-income people will clear more from these entitlements than they contributed. But it goes beyond that: there are various programs with benefits (e.g., earned income tax credit) that offset even FICA taxes. According to the AP:
The Congressional Budget Office began tracking [tax] data in 1979. Middle- and low-income families aren’t paying as much as they used to. The average family in the bottom 20 percent of households won’t pay any federal taxes. Instead, many families in this group will get payments from the federal government by claiming more in credits than they owe in taxes, including payroll [FICA] taxes. That will give them a negative tax rate.When Obama disingenuously drones on about "shared sacrifice", the facts remain:
A new analysis, however, shows that average tax bills for high-income families rarely have been higher since the Congressional Budget Office began tracking the data in 1979. For 2013, families with incomes in the top 20 percent of the nation will pay an average of 27.2 percent of their income in federal taxes, according to projections by the Tax Policy Center, a research organization based in Washington. The top 1 percent of households, those with incomes averaging $1.4 million, will pay an average of 35.5 percent.The middle 20 percent of U.S. households — those making an average of $46,600 — will pay an average of 13.8 percent of their income in federal taxes for this year, according to the Tax Policy Center. Over the past three decades, the average federal tax rate for this group has been about 16 percent. [Some elite wealthy earners pay just under 20%, i.e., unearned income.]But I think using percentages is misleading, because a flat rate ensures someone making 10 times more income pays 10 times more taxes. The progressives don't consider that "fair": they want to double or triple (or worse) what higher income people pay "because they won't feel it". That's not how the economy works: if Warren Buffett and I go to a Dairy Queen, he doesn't pay 20 times what I pay for the same combo. Could he afford it? Of course. But if there was such a pricing game, Buffett could simply hand me a $10 bill and say, "Ron, double your order and bring me back my half."
Imagine if sales taxes were progressive in nature, e.g., 7% on the first $100, 15% on the second, 25% above. Among other things, I would make more frequent trips to my Sam's Club, but I would really have to think about big ticket items like appliances or cars. This has actually been tried in the past: luxury taxes. Let's go to the video tape:
The U.S. enacted a luxury tax in November 1990, established by Congress and signed by President George H.W. Bush. Buyers of private yachts, planes, furs, jewelries and luxury cars are levied excise taxes. When luxury goods exceed certain prices, they are charged with excise taxes. For example, yachts below $100,000 are taxed at regular rates, and for yachts above $100,000, in addition to the regular rates, a 10 percent tax is charged on the excess amount.
However, in August 1993, two years after its introduction, the U.S. Congress decided to end the “luxury tax” because the tax revenues were disappointing and the livelihoods of common folks who made a living by selling “luxury items” were negatively impacted. Within a year, sales plunged 70 percent, and many firms had to lay off workers and even declare bankruptcy. Large numbers of workers lost their jobs. In Florida, 13,000 yacht workers were unemployed, and related industries were also affected.
There are many reasons for opposing the luxury tax bill other than economic efficiency. The rich have purchasing power that could help the government collect more taxes. The rich can spend their money in foreign countries.You would THINK that progressives would have learned their lessons. They will tell you all day long that dollars going to lower-income people will put money back into the economy. But just like the wealthy can determine whether and when to spend, they can also save and invest--the seed corn for economic growth. A lot of progressives are upset people have quite well since the Reagan tax cuts. Should we be surprised when tax rates dropped, the wealthy had more incentive to invest in the higher-earning economy versus engage in tax-avoidance behaviors. Warren Buffett could have retired decades ago and lived an indulgent lifestyle. A lot of people have made good money investing with Buffett and have also paid relevant taxes. Forget Buffett's tax rate (and I won't discuss capital gains unadjusted for price-level changes or double taxation of dividend income); he is paying millions in taxes he wouldn't be paying as a retiree.
Government is a burden on the economy; there is no doubt our Founding Fathers, who debated the existence of a standing army and cautioned of getting in the middle of Europe's incessant disputes and wars, would have ever imagined the spawning of a military industrial complex outspending the next several world powers put together. Until the twentieth century, we had a stable currency without crony bankers and operated, quite often in surplus, without an income tax (except during Civil War times); we overtook Britain as the world's largest economy. We know what happened when Harding and Coolidge, after WWI, responded to the current depression with far different policies and results. Obama and the Dem-controlled Congress, instead of getting out of the way of economic recovery, tried to micromanage it while vastly increasing government burden of taxes and regulations. Obama has never understood his carrots-and-sticks policies exacerbated tax complexity and stoked growth-inhibiting economic uncertainty.
Obama and the Congressional Democrats never understood the consequences of overplaying their hand; even after seeing how the public turned against Clinton's healthcare initiative, Obama pushed healthcare reform, despite rising public opposition. Obama had raised unrealistic expectations about his stimulus bill. The GOP was traumatized about the 2008 election and were wiling to cut deals. For example, he probably could have done something about taxes early, but he waited until after the 2010 election. He has routinely procrastinated on things.
I don'r recall if I published my feeling, but I just knew that the Bush tax renewal, deferred from 2010, wouldn't get settled until the final moments of 2012, and the same thing about sequestration. I was frankly worried when McCain and other defense hawk conservatives started doing their own Chicken Little dance over defense cuts. But keep in mind only a few months remain in FY2013 (through September). So 5 of the year's months of cuts actually occur in FY2014. At first sequestration seemed to be inspired: GOP wanted to protect defense, and the Dems domestic expenditures. I knew Obama wasn't going to touch it last year; I think he secretly fantasized his reelection would sweep House Dems back into power and he could avoid the cuts altogether with an accommodating Senate.
But look--Obama has had 2 years to find $85B in cuts in a $3.8T budget. There are several public watchdog portals describing detailed cuts. It's not only that he has tried to rewrite history over the sequestration concept, but his premature release of imprisoned illegal immigrants (not good for chances of immigration reform) and inaccurate allegations by Duncan, himself and others have badly damaged his credibility. Gallup over the weekend showed his public approval dipping to 47 and net of +2--less than 2 months into his new term. Most families, state and local governments can deal with minor cuts without any of the drama. Some seem to think he's playing for the mid-terms; I think the GOP is more likely to have a good day based on past history of mid-terms and I think there's a high possibility of adverse economic or international events. But one of his most appealing strengths, his unflappable persona, has taken a hit, and his more confrontational style doesn't appeal to independents and moderates.
Price-Gouging Regulations:
Counterproductive Economic Idiocy
I'm a big fan of Matt Zwolinski's economics videos, having embedded 3 or 4 before. Zwolinkski gives his video title a rhetorical 'should it be illegal?' Some meathead (Archie Bunker: dead from the neck up) commented 'yes'. This led to an amusing rant on the commentator here.
Political Humor
Here are a couple of Onion spoofs on Big Nannies in HHS:
And every reader knows how much I despise Obama/Brown's high speed rail boondoggles:
Entertainment Potpourri
Political Cartoon
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| Courtesy of Jack Ohman / Sacramento Bee and McClatchy |
Journey, "Anyway You Want It". Not their first top 40 hit ("Lovin'...Touchin'..."), but I regard this as their signature hit (I prefer a few others): the one which first hooked me as a fan. Great melodic hook, cadence, and vocals (as always). A deceptively hard song to sing. I liked a number of hits in the era with great driving percussion (e.g., Ronstadt's "How Do I Make You", Knack "My Sharona", McCartney's "Getting Closer", Springsteen's "Candy's Room", etc.)
