Posts Tagged ‘taxes’

Video Analogy

Take a few minutes and see a video analogy of big government and where we will all be if President Obama continues to get his way:

Watch the debt climb.

See the bureaucrats running their departments.

Observe the few trying to prevent the disaster.

Note the apathy among the dedicated workers.

Witness the tipping point, and the unstoppable aftermath.

Notice the businessmen, stripped of their dignity, thrown into the maw.

Watch how the workers are tossed in immediately after.

Whose children are these – yours, mine, or will they be our grandchildren?

Stalin culled out the thinkers and entrepreneurs and worked them to death in the Gulags. Mao selected the landlords, business owners, and intellectuals and put a bullet in the back of their necks. Obama is not a dictator, and does not have the power to become one. His kinder, gentler way of crippling a free economy is to ostracize, criticize, tax, regulate, and marginalize those who create jobs and write the paychecks.

 “Spreading the wealth around” will soon lead to no more wealth to spread around.

VOTE THIS NOVEMBER!

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Twelve Provocations

He is bigger than me, nasty, and cruel – the bully, assigned the seat behind me in 4th grade. Every few minutes, he reaches forward and tweaks my ear. I quietly seethe in growing anger, but continue to hope his harassment will cease. It is not to be. In an instant reaction of boiling rage, I rise, whirl, and attack. After getting in a few good hits and some choice words, I am sent to the principal’s office feeling relieved and rather proud.

The Bully

The Bully

The Obama Administration has been tweaking the American people’s ears for 17 months. Each time a new story breaks, it is another drip in the water torture of those who value their country and way of life and wish to preserve it. The retaliation will begin in November. Let’s look at a few of the reasons.

Stimulus Bill: Well north of $800 Billion is committed to this blatant purchase of public employee and union loyalty. The vast bulk of this pork barrel is targeted at maintaining employment in the public sector – not at energizing private, wealth producing industry.

TARP Automaker Bailout: Diverting money from a financial bailout fund, GM and Chrysler were forced into a perverted form of “bankruptcy” directed by the Obama Administration. Bond holders were ripped off and the UAW paid off. Instead of allowing the courts to settle the issues, the Administration propped up zombie companies solely to preserve union pensions, dues, and votes at taxpayer expense.

Blame America First: The President never misses an opportunity either at home or overseas to criticize America for deeds of the past and lecture citizens on the unfairness of our free economy and lifestyles. Americans want a President to lead and support them – not continuously degrade the nation’s accomplishments and the efforts of its entrepreneurs.

Close Guantanamo Bay: This idea was inept foolishness, and has not been accomplished. Americans do not want terrorists on US soil and feel they should be dealt with fairly, by the military, in a far away place.

Terror Trials in NYC: Based on PC instead of common sense, the Administration’s promise to hold the trials of the 9/11 defendants in New York in a civilian court instead of relying on a Military Tribunal has enraged millions. There is no cogent excuse for this decision and the pushback has been massive and widespread.

Health Care Bill: Against the will of the majority of the American people, this monstrous 2700 page bill was passed into law before anyone could read and understand its unintended consequences. Sold partly as a way to “bend the cost curve down”, recent developments have pointed to the exact opposite. Doctors are trying to sell their practices to escape the business. Major firms are charging huge amounts against future earnings, and it is estimated that half of those presently insured will lose the coverage they have within 3 years.

Border Security: The Administration has avoided securing the border apparently for political reasons, the security of the American people and the rule of law be damned. Out of desperation Arizona passed a law to enable local authorities to participate in the apprehension of illegal immigrants and turn them over to ICE. Instead of enforcing Federal law, the Administration is suing Arizona!

Cap & Trade legislation: In the depths of the worst recession since the 1930s, and after candidate Obama’s admission that “energy costs will necessarily skyrocket”, the Administration plans to push for passage of “Cap & Trade”. This will create a huge market in carbon credits ripe for manipulation and punish job creating businesses with crushing increases in costs. It will kill yet more jobs when we least need such results.

Oil Spill response: Two months of uncontrolled oil gushing into the Gulf of Mexico has fouled beaches, smothered fish, drowned wildlife, and tossed thousands out of their life’s work. Foreign countries’ offers of aid are spurned by the Administration out of hubris and refusal to suspend the Jones Act. Instead of gathering experts and planning a response, a “commission” consisting of anti-oil zealots is appointed and deep oil drilling is prohibited for 6 months throwing thousands more out of work. There is no direction and no clear lines of authority. Operations and plans by states and municipalities to protect themselves are quashed by federal bureaucracies. Throughout this time, the President plays golf, throws parties, and attends private concerts. The Nero Administration is totally dysfunctional while the greatest environmental catastrophe in America’s history runs amok with no coordinated reaction.

Spending: No Administration in history has spent more money, most of borrowed from China and future generations, than this one. The Federal Budget Deficit has quadrupled on an annual basis and these tankers full of red ink are projected as far as the eye can see. This has to be reversed immediately by stopping the Administration in its tracks before the plunge toward national bankruptcy and the destruction of our children’s’ future is irrevocable.

Tax Increases: The Administration is rubbing its hands together awaiting an expected increase in revenue from the expiration of the Bush Tax Cuts. Unfortunately the consequence is that businesses are allocating as much revenue as possible into 2010, and hoarding cash. This is a recipe for compounding and prolonging the recession since money on the sidelines cannot create jobs through purchasing and expansion.

McChrystal Article: The Afghan people live in and prefer the 7th century. Attempting to drag them kicking and screaming into the 21st goes against their grain. They have proudly defeated outside invaders for a thousand years and see no reason to quit now. Presidential preferences (Bush and Obama) to eliminate opium cultivation, turn Islam from a lifestyle into a religion, stand up a secular democracy, and eliminate the Taliban may be a bridge too far. Obama already canned one general, and now fires McChrystal over an article in which the general and his staff let their guards down badly. This is not the President’s fault directly, but the overlapping and confused lines of authority between the military and various civilian officials are similar to the oil spill debacle. The apparent lack of direct leadership and control from the Oval Office cannot help but add to the impression that the Administration is in way over its head.

Foreign Relations: The act of sending the Churchill bust back to England and presenting schlocky DVDs to the British Prime Minister was crass. The ill treatment of the Israeli Prime Minister was inexcusable. Pulling the plug on missile defense in Poland and the Czech Republic was pathetic, and expecting the Iranian Mullahs to abandon their nuclear ambitions by smiling at them is naive at best. Dissing Honduras after the court legally deposed a President and leaving Columbia twisting in the wind on trade are alerting our historical allies that the US is not a dependable partner. Bowing to foreign heads of state is unacceptable conduct by an American President. Jimmy Carter may yet live to see himself elevated in history by the abject performance of this President.

The Obama Administration is the bully, the American people; its victims. Our ears are stinging from this continued abuse. As Americans it is our duty to the nation and its future to whirl and fight back. Your opportunity to vote this November must not be missed.

Fix it Right

Social security is nearing its moment of truth. If this massive time bomb is not drastically modified before the fuse gets too short, we may well have a violent backlash. Say “Greece”. Future generations will realize they are being taxed beyond their capacity to pay to support growing numbers of retirees with Social Security benefits as they live well into their 80s and 90s. The graph below demonstrates the decay of Social Security deficit projections in just the past year. Where will that money come from?

CBO Social Security Deficits

There are three options:

1. Do nothing, allowing the future to unfold leading to national financial ruin.
2. Kick the can along to the next generation with tax increases and band aid fixes.
3. Fix it now- forever- while the popular inertia is behind the idea.

1 and 2 are already discredited having been practiced over the past 50 years. Buying votes from senior citizens over the past 3 generations and fearing their retribution every other November has brought the system to the breaking point. The third choice is the only realistic path and we may just be witnessing the grass roots support to get it done.

Social Security was passed as a self sustaining government run plan to provide a minimum level of benefits to retirees, many of whom were entering old age destitute from enduring the Great Depression. Over the years it was larded with additional benefits, recipients, and the billions collected from payers were squandered on present spending. The money was replaced with government IOUs. The system just went into the red and those IOUs must be covered through additional taxes, deficits, and borrowing.

One way to save the system would be to ratchet the retirement age up over time to the equivalent of what it was in 1935. If it was a fair age of eligibility then, it is fair now. In 1935 life expectancy was 61.7 and eligibility began at 65. Today the average is 77.8. Using the original formula, benefits should start at just under 82 years of age. Although many seniors would be able to work well into their 70s, expecting them to do so until 82 is not realistic.

An alternative would be to allow anyone to retire at any age but be eligible for only monthly benefits based on lifetime contributions, and accrued interest divided by the number of months actuarial tables show as additional lifespan. These benefits could be paid until death based on this formula since half the recipients will pass on prior, and half after the expected life years point arrives. The longer one works before retirement, the higher their benefits would be.

Neither of these ideas will be palatable to seniors, but something like this has to be done to save our young and unborn from the consequences of an overly generous and unsustainable retirement program. The follow-on benefit will be that a majority of folks approaching retirement age will be highly motivated to save and invest on their own behalf well ahead of reaching their golden years.

These are just a couple ideas from which to start discussion. However no such dialogue can possibly start; and this huge problem cannot ever be solved without a tectonic change of leadership in Washington. There may be a loophole in history forming right now that could lead to such a move. The growing rage at the grass roots level, if coordinated and successful, could well bring a flock of principled and courageous new legislators to Congress in November. They would join the remaining battle scarred incumbents who after fighting for their political lives may indeed be ready to do the right things.

Let us hope the power and inertia of the tea party movement does not metastasize into a third party fiasco, but instead elevates strong, fiscally responsible candidates from both parties into office. There are good Democrats in the field who are running far to the right of the present administration, understanding that courageously breaking with past party orthodoxy is the only hope of being elected. There are mediocre Republicans presently in office who will be broomed out as happened to Bob Bennett of Utah.

It is our responsibility as voting citizens to elevate to office those who swear to address this entitlement Tsunami immediately for the benefit of our nation and its future generations.

Curing Recession

There have been 16 recessions and 2 depressions since WW I.  The most interesting things about six of them are how they were cured and how long the expansion period lasted afterword.

1920-21 Depression: Response – Harding Administration cut taxes and drastically reduced the size of government. The recovery became known as “The Roaring ‘20s”, continuing with only minor pullbacks until 1929.

1929-33 – The Great Depression: Response – The Hoover Administration raised taxes, reduced money supply, and signed the Smoot- Hawley Tariff Act. FDR raised taxes, borrowed heavily, and created millions of government jobs. This failed by 1937 creating the dreaded “double dip” depression. Unemployment peaked at 25% and never got below 14% for ten years. Mobilizing for WW II finally ended this unprecedented period of despair.

If you have any doubt about the true underlying strength and spirit of the American people; listen to this cut made in 1933 – the absolute depths of the great depression:

1945 Recession: War production ended and 12 million service members returned to the workforce. Ignoring “new New Deal” dreams of the late FDR and President Truman, Congress lowered taxes and refused to raise government benefits. The peacetime recovery lasted only about 3 years. Truman’s “Fair Deal” inserted government into housing, tightened the money supply and raised the minimum wage – choking off the recovery in 1949.

1960-61 Recession: Response – JFK lowered taxes which spurred recovery. This wonderful expansion lasted until 1969 – over 8 years.

1981-82 Recession: Response – Fed Chair Volker choked inflation and Reagan Administration cut taxes. It was 8 years of expansion until a mild pullback occurred.

1990-91 Recession: Response – Mild tax policies and the “peace dividend” at the end of the cold war energized this recovery. Welfare reform and balancing the budget under Clinton inserted workers into a growing economy while more money was available to finance private industry growth. The expansion lasted ten great years.

2001 Recession: Brought on by the Dot Com crash and followed by the 9/11 attack, this one was cured with two rounds of tax cuts by the G. W. Bush Administration. The following expansion lasted 6 years.

2007 – ? Recession: The crumpling housing market set this one off, followed by the collapse of financial, insurance, and auto industries. The Obama Administration took office as it deepened. This one has now lasted 3 years and is only showing very weak signs of recovery.

The question is: “Why is this recession hanging on?” Look at the Great Depression and the Hoover and Roosevelt responses to it. Huge government spending to create government jobs not a “cure”, but a canard. Tax increases are economic poison to a recovery. Massive borrowing raises the national debt and leads to higher interest rates, inflation, and scarcity of private funds to finance growth. Expansion of entitlements drains present and future treasury assets, further weakening the nation’s fiscal stability.

The discredited New Deal playbook has been used and failed miserably before. Government spending cuts and tax relief have been used at least six times. Each application resulted in quickly rebounding expansions at least twice as long as the average business cycle.

Perhaps President Obama should ditch the Teleprompters and take a hint from Sarah Palin. He should write on his palm:

“CUT SPENDING”
“CUT TAXES”
“CUT ENTITLEMENTS”
“CUT REGULATION”

Last Great Hope

President Obama may indeed prove to be the great instigator of “change we can believe in” in spite of himself. History may well remember him as the president who caused a massive shift in American history; sparking another century of American exceptionalism, global leadership, and economic prosperity. Such change will however unfold quite the opposite of Obama’s own vision.

For three generations the US has slid down the path of bigger government, expanding social programs, and unsustainable entitlement expansions. The nation has seen year after year of irresponsible spending, regulatory growth, ballooning bureaucracies, earmark projects, and misallocation of resources. Combined, these various headless monsters of government largess and nanny state tax and control policies have pushed our future to the edge of the abyss. The spending and resulting debt obligations are about to destroy our future.

Change is certainly coming, and soon. The question is; will it be a total national financial collapse, or will it be responsible change forged by new leaders; smart, strong, and principled enough to initiate vital changes through law in a peaceful manner.

President Obama is burning through borrowed trillions by the carload. He is supported in this by a compliant Congress and a cabal of inner circle sycophants with no experience in the private sector. They try to emulate FDR, but overlook the fact that his policies prolonged the Great Depression. Meanwhile Obama squanders his political capital at an alarming rate. Stimulus, Omnibus, cap & trade, health care, civilian trials for terrorists, and gays in the military are draining the confidence and goodwill with which he took office. His recent emasculation of US Nuclear Response Doctrine has weakened our deterrent capabilities.

In the interim, a giant has begun to stir. The 50% of Americans who still pay income taxes are becoming alarmed. Millions of families with little ones are awakening to the fact that if something is not done to reverse this course; their children will reach adulthood amongst a mountain of debt and unfunded liabilities. Gen X and Gen Y are realizing that the Boomers and the Greatest Generation have expropriated trillions of their future earnings. Investors are hoarding gold instead of buying into businesses. Corporations don’t expand fearing the unknowns beyond the horizon like tax rates, carbon regulation, and health care mandates. Consumers keep their wallets shut and save to pay their mortgages or to have something in case of a job loss.

The choice between fiscal Armageddon and a dawning day of economic prosperity rests entirely upon the giant mentioned above. Its members must unite and vote into office driven, principled candidates who will stop the present administration and its actions stone cold. These new representatives must reform entitlement programs into self sustaining entities no matter who complains. Lower benefits and a later retirement age are better than default and no benefits. They have to blockade the out of control spending and address the massive deficit. Everything from replacing sand on California beaches to entire cabinet departments must be eliminated.

Cutting federal spending has to be the first step. Reagan and Bush 43 both lowered taxes but did not reign in spending. The “starving the monster” theory did not work – it just borrowed to sustain itself. The monster must be domesticated or dismembered. Fresh leadership is needed in Congress to halt the fiscal bleeding. Such action will translate into knowledge that taxes will not have to rise, draconian mandates and regulation will be forestalled, and the debt danger will be addressed. Consumers and business will gain confidence knowing that impending financial disaster has been averted. Private investment will increase, hiring will go up, and the unemployment rate will sink.

The next seven months may be the last, best chance for America as we know it and wish it to stay; that shining city on a hill, the destination, opportunity, and home of all those who “yearn to breathe free.”

Fear Itself

When Franklin Roosevelt took office, his words “The only thing we have to fear is fear itself” had poignant meaning. Unemployment was at 25%, and the stock market was in the tank. The new president had his hands full when he stepped into the White House.

President Obama was sworn in with unemployment on the rise, the financial establishment in turmoil, a sick stock market, and a housing market implosion. There were plenty of things to fear at that moment, including world wide economic weakness. Obama faced similar if not as serious problems as did Roosevelt.

FDR fought the difficulties of his time with massive government programs and spending that had little positive result, but enormously expanded the national debt. The Great Depression slogged on with only minor relief until the outbreak of WW II ended it. President Obama is following the same path, fully expecting different results from repeating the same policies. In the process, he is only feeding the fear that is crippling what should be a strong resurgence.

The TARP bailout was not created to provide a piggybank for picking winners and losers in industry. It was put in place to prevent collapse of the large financial houses and banks that were teetering on catastrophe. Once in office, Obama dragooned TARP funds to bail out Chrysler and GM – acts that were never permitted in the original legislation. The banks are repaying the funds with interest, but the auto companies are not. A trip through bankruptcy court would have been the best cure, but that would have required the companies and the UAW to severely adjust their bankrupt practices. Obama cushioned his union backers at the expense of taxpayers. The Hugo Chavez act of basically nationalizing the car makers struck fear into large corporations and small firms since it begged the question of who might be next.

Next up was the so-called stimulus bill to the tune of about $800 Billion. Hysterically rammed into law in the first weeks of the new administration, it was a commitment to borrow money from abroad and blow it on pork and make-work projects. Obama promised that unemployment would not go above 8% if it passed. Now it has topped 10%. The only jobs the bill “saved” were those of federal, state, and municipal workers. In the meantime, evidence has surfaced that the bill’s extension of unemployment benefits has enabled folks to postpone actively seeking employment. The mere fact the results were the reverse of what was promised, after committing such a huge mountain of money creates more fear of government action.

President Obama declared that under his cap & trade legislation “electricity costs will necessarily skyrocket.” If this scheme becomes law, it will chase manufacturing jobs overseas and destroy the housing market. Since the bill has stalled in Congress, the EPA has stepped in. They seized the power to regulate carbon outputs by issuing an “endangerment finding” declaring CO2 a “harmful pollutant.” Every business person in the country knows what that will dramatically increase the cost of doing business, which will lead to higher prices and less demand for products. Less demand means less commerce and fewer jobs. They stand in fear of the fact that such rulemaking and regulation could well destroy their livelihoods.

Let us not forget the Damocles Sword of health care reform. It hangs over the heads of every firm and individual that currently has a health care plan. Will it pass? Will it fail? Will some middle ground be agreed upon? Until one of those questions is answered in a definite manner, the 85% of Americans who currently have health live in fear that the plan they have today may well be history soon. Who can make any rational decisions to grow a business, change jobs, or even plan for the future with such uncertainty?

How about the threats and near certainty of higher taxes to help pay for all this largesse, regulation, and additional entitlement spending? How could the rational man or woman be tempted to risk starting or investing in a business, or hiring more workers, knowing that even more of their hard-earned money will be taken from them at virtual gunpoint? Most businesses and individuals refuse to invest under such circumstances. Obama’s statement to Joe the Plumber that he wanted to “spread the wealth around” basically means that he intends to take from those who earn and give to those who don’t. Job creators are fearful, and many will keep their money in their mattresses.

The biggest and most frightening monster under the bed is national debt and the huge unfunded obligations of entitlement programs. These liabilities being transferred onto future generations add up to well over $100 Trillion and climbing. Americans are becoming acutely aware of this impending catastrophe and are very concerned that instead of doing anything about it, this administration is making the situation vastly worse. Millions are buying gold instead of products out of the fear of future inflation.

The shaky situation among some EU countries of course adds somewhat to the fear that most Americans feel at the present time, but it is nothing but a minor concern. The US economy has rebounded strongly from most past recessions and there is no reason it should not be doing so right now – except for the real fears outlined above – all products of this administration and its policies.

We Americans do not fear fear itself; we fear our futures are being squandered in front of our eyes by the misguided and damaging policies of this administration. We do fear risking our capital on promising, job generating opportunities and then seeing the overreaching laws destroy the business. We do fear working our selves to the bone and being taxed to the point we retain only chump change. We fear the spending, the debt, the regulation, and unprecedented government control of our lives and businesses.

Sending the President and Congress on a 3-year non working vacation would do more to bring this economy back than any and all of the destructive, loopy, expensive and foolish actions they are presently promoting. Being completely absorbed in their own self importance, they will ignore this suggestion, but the American people have the opportunity to broom scores of them from office this fall. Be sure to vote in November and then plug your ears. When the polls close, there will be power shift that may well reinvigorate the nation and its people.

Change We Gotta Believe In

Prior posts on these pages have emphasized the unsustainable trajectory of out of control entitlement programs and deficit spending by this and former administrations. If these massive time bombs are not drastically modified before the fuse gets too short, we may well have a violent backlash. Future generations will realize they are being taxed beyond their capacity to pay to support growing numbers of retirees with Social Security and Medicare benefits as they live well into their 80s and 90s. The stats are available for anyone to look up, so we shall dispense with them here and address the choices going forward.

There are three options:

1. Do nothing, allowing the future to unfold leading to national financial ruin.
2. Kick the can along to the next generation with tax increases and band aid fixes.
3. Fix it now- forever- while the popular inertia is behind the idea.

1 and 2 are already discredited having been practiced over the past 50 years. Buying votes from senior citizens over the past 3 generations and fearing their retribution every other November has brought the system to the breaking point. The third choice is the only realistic path and we may just be witnessing the grass roots support to get it done.

Social Security was passed as a self sustaining government run plan to provide a minimum level of benefits to retirees, many of whom were entering old age destitute from enduring the Great depression. Over the years it was larded with additional benefits, recipients, and the billions collected from payers was squandered on present spending. The money was replaced with government IOUs. The system just went into the red and those IOUs must be covered through additional deficits and borrowing.

The only way to save the system is to ratchet the retirement age up over time to the equivalent of what it was in 1935. If it was a fair age of eligibility then, it is fair now. In 1935 life expectancy was 61.7 and eligibility began at 65. Today the average is 77.8. Using the original formula, benefits should start at just under 82 years of age. Although many seniors would be able to work well into their 70s, expecting them to do so until 82 might not be realistic.

An alternative would be to allow anyone to retire at any age but be eligible for only monthly benefits based on lifetime contributions, and accrued interest divided by the number of months actuarial tables show as additional lifespan. These benefits could be paid until death based on this formula since half the recipients will pass on prior, and half after the expected life years point arrives. The longer one works before retirement, the higher their benefits would be.

Neither of these ideas will be palatable to seniors, but something like this has to be done to save our young and unborn from the consequences of an overly generous and unsustainable retirement program. The follow-on benefit will be that a majority of folks approaching retirement age will be highly motivated to save and invest on their own behalf well ahead of reaching their golden years.

Medicare was passed in 1965 with a promised yearly cost of $500 Million. LBJ purposely withheld internal projections that showed a widening gap between proposed spending and estimated liabilities. As of 2008, the total unfunded liabilities going forward stood at $74 TRILLION! This cannot possibly be allowed to continue on this trajectory. Here again, folks who reach 65 and are expected to live another 15 years on average are being given basically free medical care and prescription medicines at the expense of a shrinking (in relative terms) base of taxpayer support. Compassion for the aged is a wonderful and noble thing, but the word “impossible” is quickly appearing over the horizon. What methods will prevent this catastrophe from engulfing future generations?

One concept would be to structure payable benefits based on paid in taxes and accrued interest as suggested above. Instead of cash transfers or payment of hospital and drug costs, the monthly benefit would be directly paid to a private insurer of the recipient’s choice against the cost of a catastrophic health insurance policy. The recipient would pay the difference monthly between the policy cost and the Medicare subsidy. The beneficiary would be expected to pay out of pocket for routine medical treatment up to so much per year. Over and above that outlay, the policy would kick in – exactly like Health Savings Accounts.

A second idea would be for the government to establish purpose built hospitals in large urban centers specifically to treat seniors who could not afford private care. These would be last resort type options and would probably be about as efficient as the Postal Service. The twin benefits would be that treatment would be cheaper and somewhat limited in quality, but the thought of ending up in such a facility would motivate savings and planning to avoid such a situation.

These are just a couple ideas from which to start discussion. However no such dialogue can possibly start; and these huge problems cannot ever be solved without a tectonic change of leadership in Washington. There may be a loophole in history forming right now that could lead to such a move. The growing rage at the grass roots level, if coordinated and successful, could well bring a flock of principled and courageous new legislators to Congress in November. They would join the remaining battle scarred incumbents who after fighting for their political lives may indeed be ready to do the right things.

Let us hope the power and inertia of the tea party movement does not metastasize into a third party fiasco, but instead elevates strong, fiscally responsible candidates from both parties into office. In the next piece we will offer some suggestions on how to reduce discretionary spending by eliminating expensive and useless programs and subsidies.