Bring on 2018

It has been quite a year, this 2017!

Here in Houston we had a hurricane with an epic flood of 50+ inches of rain. That was the end of August, just days after a total eclipse across the continent (we only got a partial eclipse here, though). We’re still working on recovery from the flooding here, four months later. But in the meantime a couple more hurricanes made landfall, harming Florida, and then serious damage to Puerto Rico. And fires started burning in the West, everywhere from California to Montana.

Less disastrous for Houston was having the Astros win the World Series, and we had an actual snowstorm a couple of weeks ago. In Houston, that brings on a sort of spontaneous celebration.

In the larger nation, there has also been good news this year. We got a Supreme Court justice, Neil Gorsuch, who actually reads and understands the Constitution. We got a healthy number of other judges appointed that we think will adjudicate according to the law. (One third of all sitting circuit judges were Obama appointees, so there's a ways to go.) We have an ambassador to the UN, Nikki Haley, who is standing up to that corrupt body of miscreants. ISIS has lost nearly all of its territory. Illegal immigration is down, even without a wall, which is at least an improvement. Unemployment is down, and incomes are beginning to rise.

I don’t know that we can credit President Trump with all of this, but having him in office makes all of those pieces of good news possible, whereas having a Democrat—any Democrat—in office this past year would have meant we would have none of that good news, and probably a lot more bad news that we don’t want to imagine.

A piece from American Thinker, “Trump’s Momentous First Year,” lists Trump’s first year accomplishments, if you’d like something more complete. I’m sure there will be other similar lists as we approach the new year, or the anniversary of inauguration in a few weeks.

But the big good news lately has been about Congress finally passing a tax reform bill, officially called the Tax Cuts and Jobs Act. 

Speaker Paul Ryan, after the passing of the Tax Cuts and Jobs Act
photo by Kevin Dietsch/UPI/Newscom, found here

News surrounding that—because news comes mostly through distorted sources—has been fear-mongering, at best. Nancy Pelosi called it Armageddon. Apparently, Democrats think people will be dying in the streets if they have a little more of their money in their own hands, instead of in government’s clutches. And it’s on the backs of the middle class, they claim. But almost everybody will be getting a tax cut. Those few that aren’t are all above the middle class.

Business Insider offers this estimate, showing what happens in 2018 (and it gets better in 2025): 

   

·         Bottom quintile (Incomes less than $25,000 a year): On average, this group would receive a tax break of $60, increasing after tax incomes by 0.4%. This would account for 1% of the federal tax change. 1.2% of tax units would see an increase in their tax burden, while 53.9% would receive a cut.

·         Middle quintile (Incomes from $49,000 to $86,000): On average, this group would receive a tax break of $930, increasing after-tax incomes by 2.9%. This would account for 11.2% of the federal tax change. 7.3% of tax units would see an increase in their tax burden, while 91.3% would receive a cut.

·         Top quintile (Income of $149,400 and above): On average, this group would receive a tax break of $7,640, increasing after-tax incomes by 1.6%. This would account for 65.3% of the federal tax change. 6.2% of tax units would see an increase in their tax burden, while 93.7% would receive a cut.

·         95th to 99th percentiles (Incomes from $308,000 to $733,000): On average, this group would receive a tax break of $13,480, increasing after-tax incomes by 4.1%. This would account for 22.1% of the federal tax change. 9.3% of tax units would see an increase in their tax burden, while 90.7% would receive a cut.

It’s hard to give tax cuts to people who aren’t paying taxes, so, naturally, people who are paying higher taxes are going to benefit more from a tax cut. Unless you’re really into coveting, that’s understandable and fine with everybody.

So, for the sake of those opposing tax cuts, and the media, and anyone else worried about lessening government’s stranglehold over people’s lives, maybe we need to do a little mini lesson on the related economics of tax cuts.

Taxes are money that the government confiscates by force from its citizens—preferably with the approval of the citizens, to be used for essential government services. Taxes, are, then, the people’s money that has been entrusted to government.

Government only spends money; it does not create wealth. Any “revenue” government generates is actually collecting taxes and tariffs—taking money from the people. So, when we’re talking about a budget, we want it large enough to cover the proper role of government—protecting life, liberty, and property—but not so large that our money is wasted. Early on it was assumed about $20 a year ought to do. Really.

I’ve written a number of times about government overspending [here and here]. We do not have a problem with not bringing in enough tax dollars; we have an overspending problem.

The Laffer Curve
from "The Laffer Curve: Past, Present, and Future," 2004

This tax bill doesn’t address that underlying problem. But cutting taxes is likely to raise government revenue. That’s because of a thing we call the Laffer Curve. [I wrote about it here and here.] According to Laffer’s theory, there’s a sweet spot for getting maximum revenue. Too high or too low and you don’t get that maximum amount. If revenue goes up after a tax cut, then you know taxes were too high.

In complete ignorance of the Laffer Curve, there’s this weird rule requiring any tax cuts to be offset, or “paid for.” The purpose is to keep from increasing the deficit, but it doesn’t really do that. And it’s a futile exercise, since we know from experience what happens when taxes are lowered. Here’s how Philip Bump at the WashingtonPost put it: 

[Speaker Paul] Ryan on Wednesday morning offered his nebulous assessment: “Nobody knows” if the cuts will pay for themselves. That’s true, given the uncertainty that surrounds the models. But that’s a bit like saying “nobody knows” if it’s going to rain when the forecasters say there’s a 90 percent chance: You still will probably grab an umbrella.

So even big government spenders ought to be in favor of lower taxes in order to increase revenue. It’s odd that they don’t; it makes it look like they would rather control larger portions of each individual’s money than have more money to work with.

It has been a rough week for Democrats, who stood against tax cuts for the American people. Afterward, what can they say? “We tried to save you from having more of your own money to spend as you see fit”? Well, they’ve been saying the tax cuts aren’t enough (even though they were against any at all). And they’re complaining that they’re not permanent (they sunset in 10 years, as the Bush tax cuts did, but only if Democrats are in power when the sunset comes).

Bernie Sanders, for example, admitted on CNN that tax cuts for nearly all middle-class American taxpayers “is a very good thing.” But then he added, “That’s why we should have made the tax cuts for the middle class permanent.” Of course, it was the refusal of Democrats to discuss any tax cuts at all that led to the ten-year sunset compromise. So Ted Cruz reached out to Bernie by Twitter, saying, 

I agree, @BernieSanders -- let's make the middle-class tax cuts permanent. Join me, we'll co-sponsor legislation (I've already got it drafted) that does exactly that, and we'll get it passed in January!

One happy detail in the tax cut bill is the elimination of the Obamacare mandate, which, we can hope, will lead to the demise of that monstrosity, hopefully before the demise of the health care sector of our economy.

The best news is that business taxes, which have been the highest in the developed world, were lowered from around 35% to 20%. That’s still quite a lot higher than Ireland (11%) or Russia (12%), where lower business taxes have spurred growth, and would have been a good example to follow, but it’s a good improvement.

There has been some concern that businesses won’t invest the money—that they’re already flush with cash that they’re not putting to use. That isn’t likely true. The Great Recession has gone on too long to keep holding onto money. But there is a hesitation to invest in business when there’s uncertainty—such as regulations being added on that they couldn’t have planned for. But regulatory reform is going pretty well under this administration, so there’s less uncertainty.

Ed Fuelner, at the Heritage Foundation, spread this good news: 

AT&T said it plans to give a $1000 bonus to more than 200,000 employees, and to invest $1 billion in the economy. Boeing announced a $300 million investment. FedEx said it’ll hire more workers, as did CVS—3,000, to be specific. Comcast reacted to the tax bill and to the repeal of net neutrality by saying that 100,000 of its employees will get a $1,000 bonus.

There were others—and more to come, you can be sure. “This is just the first wave of many such stories,” tax expert Adam Michel told The Daily Signal. “These announcements show that businesses across America will put their tax cut to good use.”

We’ll have to wait and see, to know for sure. But, instead of dread going into 2018, we might as well enjoy some hopeful anticipation for a change.

Lower Taxes Lead to Greater Revenue

I’ve been leisurely going through Hillsdale College’s free online American Heritage course. The other day I was listening to lecture 4, “The American Founding,” when I made a connection I hadn’t before.

The lecture is a detailed tracing of the movement from being loyal British citizens, asserting their traditional rights, to being independent peoples with natural rights. But there’s a story along the way, about taxes and duties.

For about four decades, the Whigs had been in power in the British Parliament, and they had lived by the philosophy of, “let sleeping dogs lie,” don’t upset what’s basically working. And that meant they had left the colonies mostly to rule themselves. There were governors, but the governors only got paid when the colonial assemblies voted to pay them. And Britain was three months away. So the colonists were pretty used to being left alone. 

But then a new prime minister comes in and starts to be concerned about those colonists getting too independent, and devises ways to crack down on them. I’ll let Dr. Paul Rahe tell this part (starting at 19:00 minutes into the video):

One of the things he does in April 1764, George Grenville, is to supplant the Molasses Act, which was designed to sort of ban molasses from America, with the Sugar Act. And it reduces the duties—the old duties had been set so high that no one could buy anything—so they cut the duties. In cutting the duties they were aiming at a revenue. And so the discontent in America begins with a tax cut, objections to a tax cut.

Well, the original tax was never paid, because it was so high it couldn’t be paid. The cut means that the British are going to seek revenue from the Americans in their own land. And the Americans respond to this with “no taxation without representation,” and they’re not represented in Parliament.

They tighten up the activities of the vice admiralty courts. The Americans were very efficient smugglers. One of the reasons they didn’t object to the Molasses Act is they smuggled molasses in and just skipped past the act. They’re going to tighten the vice admiralty courts so they can hammer these people. Then the Stamp Acts follow in 1965. The colonists are caught flat-footed. For forty-one years they’ve been left to their own devices, and suddenly there’s interference, and suddenly taxes are being imposed upon them, and there have never been taxes on them before

So here is something that governments knew back in the 1700s: higher taxes don’t mean more revenue; you get more revenue when you lower the taxes.

That’s the Laffer Curve, described by economist Art Laffer just forty years ago.

The Laffer Curve
from "The Laffer Curve: Past, Present, and Future," 2004

In short, there’s a point at which you can maximize revenue (if that is your goal—and it is often the goal of governments), and if you raise taxes above that point, the revenue will decrease. Because people avoid paying the tax if it is perceived as confiscatory.

Apparently the early colonists had no qualms about ignoring ridiculously high taxes, or duties (there are differences, but we’ll deal with them as similar enough for our purposes) by smuggling instead of obeying the British-imposed laws. In our day there might be other methods—moving a business out of the country, giving money to children in a trust where it can’t be touched, investing in times and ways that avoid tax, maybe even avoiding earning income over a certain level.

When taxes fall back into the range that people feel is tolerable, they start putting their money to use again, risking the need to pay the tax, because it’s worth paying in order to accomplish various personal goals.

That’s what happened when Reagan lowered to upper tax rate from 70% to 28%, which led us out of the Carter malaise and into a couple of decades of growth.

So, you’d think that if government officials really had the goal of raising revenue, they would find that sweet spot and use it. But they don’t. So they must have some other goal in mind—like appearing to care about the poor by confiscating from the wealthy,so they can get votes to retain their power.

Confiscatory taxes aren't good for a country. (Note: God asks for a flat 10%, given willingly, and maybe some extra offerings for the poor. Does government deserve more than God?) People take it personally when someone forcibly takes the fruits of their labors to use it for some other purpose. As John Locke put it, back in the day, “For what property have I in that which another may by right take when it pleases himself?”

If we want prosperity and growth in the economy, the way to do that is to set people free in the market, to earn what they can, and keep what they earn. You won’t get equal outcomes, but you’ll get better outcomes for everybody who participates.

More of the Best, Part III

Economic Sphere

Today is the actual anniversary of the first Spherical Model blog post. Hurray! And this is the third day in our 4^th anniversary and 600^th post celebration. The first time I did a “best of” collection, it was at 400 posts. So this new list adds to that list from the past couple hundred posts. The celebration started with the Spherical Model concept, and part II was on the Political Sphere. Come back tomorrow when we look at Civilization.

Today’s list is the Economic Sphere. To start your studies, you might want to read the Economic section of the Spherical Model website. And also take a look at the original “best of” list of Economic Sphere posts. The posts below are more recent. I see the list is long. That’s the problem with being my own editor. I wrote them with the hope they would be of value to readers. They still seem that way to me. So while this isn’t every economic post, it’s more than a top 10. You’re not required to read every post, but I think they could all be useful.

The Spherical Model—Best of: Volume II, Economic Sphere

·         Doing Business:  August 23, 2013 

·         Poverty of Nations Review:

o   Labor:  September2, 2013 

o   Prices:  September 4, 2013 

o   Greed vs. Self-Interest:  September 9, 2013 

·         Beanie Baby Economics:  October 28, 2013 

·         Redistribution:  October 30, 2013

·         Interference and Consequences: November 6, 2013 

·         The Rhetorical Question:  November 22, 2013

·         Economic Schools of Thought:  November 25, 2013 

·         The Fifty-Year War, Part I and Part II: January 13 and 16, 2014 

·         Flat Lining:  May 5, 2014 

·         Prosperity vs. Poverty:  July 21, 2014 

·         Giving until It Hurts:  November 6, 2014 

·         How Much Is 18 Trillion?:  December 9, 2014 

·         Laffer Curve Turns 40:  January 12, 2015 

Laffer Curve Turns 40

If you’re going to mark such things, we could look at a date in late December just past and say that was the birth of the Laffer Curve, 40 years ago. The anecdote is that Art Laffer sketched out his idea on a napkin while at dinner with Dick Cheney, Donald Rumsfeld, and Jude Wanniski.

The Laffer Curve
from "The Laffer Curve: Past, Present, and Future," 2004

The Laffer Curve, basically, shows that there are two points at which tax revenue will be absolute zero: at 0% and 100%. At zero, you obviously aren’t taking in any tax revenue. At 100%, no one would be willing to work just to give it all away to the government, so again you’d get no revenue. So, from there you can see that there is a curve where more taxes brings in more revenue up to an optimum point, and then the curve goes the other way, and more taxes brings in less revenue.

It’s a basic economic concept. I wrote about it in 2011, long enough ago that it’s worth reviewing, so I’m about to repeat that post below, which includes links to some videos that are great for grasping the concept. But, if you really want to educate yourself, you might want to add a couple of additional sources. One is a piece by economist Steve Moore, for Heritage, commemorating the 40 years.  The other is an older but larger document, by Art Laffer, “The Laffer Curve: Past, Present, and Future” from 2004, published by Heritage Foundation. The 18-page file is available here.

OK, so below is my post, “Laffer Curve Primer,” first published here November 28, 2011.

______________________________

In the past week I came across a couple of reminders of the Laffer Curve, grabbing my attention enough to cover it in a post here.

First, I just finished reading Dick Cheney’s autobiography, In My Time. I’m sure I’ll have more to say on that in future posts, but this little anecdote was fun: 

It was in the wake of our loss [Ford’s election bid in 1976] that Don Rumsfeld and I had dinner one night at the Two Continents restaurant in the Hotel Washington with economist Art Laffer, a creative guy who certainly captured my imagination with a curve he drew on the back of my napkin. What it showed was that you can raise taxes only so high before people become disinclined to work. On the other hand, it’s possible to create incentive—and economic growth—with tax cuts. The Laffer Curve subsequently became one of the hallmarks of supply-side economics. I wish I had known how historic my napkin would become so that I could have saved it (p. 78). 

I had a similar response when I first heard of the Laffer Curve. Eye opening. 

Then later in the week I came across an article by Daniel Mitchell spelling out a few of the basics on the Laffer Curve. One of the interesting illustrations shows how much more revenue (about 5 times more) the government took in when Reagan lowered the upper tax rate of 70% down to 28%, comparing 1980 to 1988.  

The article had links to three short videos (about 7 minutes a piece) on the theory and real world evidence for the Laffer Curve, and then the frustration with the way tax bills are measured. They are all informative and clear, but the third one will make you want to do something to change the world. The three together take less time than half a television show without commercials. Definitely worth the time investment. 

The first video gives you the basic theory of the Laffer Curve.

Video II offers real-world examples of the Laffer Curve in action.

 

 

The third video covers the frustratingly inaccurate “static scoring” used by the Joint Committee on Taxation, causing bias toward higher taxes. 


 

 
If these concepts make sense to you, share them with a friend.

Best of Spherical Model Part II

Today we celebrate the 400^th Spherical Model blog post. We’re celebrating all week by collecting some of the better examples of the Spherical Model in the three categories: political, economic, and civilization. Monday we covered both the definition of the Spherical Model and the Political Sphere. Today we’ll cover the Economic Sphere. Then the next post will cover some of the Civilization Sphere.

I started having fun with economics as a freshman in college. It was a basic econ class, but specialized for honor students (which anyone willing to take on the challenge could take). That meant the teacher was actually the person who wrote the book. And it turned out he was funny and delightfully entertaining. As a result I have always thought of economics as the fun numbers science. And I continue to find my favorite economists to be fun and entertaining: Thomas Sowell, Walter Williams, Milton Friedman, and Greg Mankiw, for example. Plus I have had the advantage of a son who graduated with a degree in economics, so when I have technical questions, I can turn to him. My understanding remains basic, but adequate for looking at principles in our real world.

Separating out topics for this Best Of series has been challenging, because there is so much about economics that ties into political freedom and the kindness and honesty of a civilized society. But there are some I want to recommend reading or re-reading. Some are series or are paired together. Starred ones are among the most popular re-reads:

·         Anything Evil about Capitalism, Part I (March 29,2011), Part II (March 30, 2011), Part III (March 31, 2011), Part IV (April 1, 2011)

·         Atlas Shrugged and the Sphere, Part I (April 13, 2011); Part II (April 14, 2011); Part III (April 15, 2011)

·         Global Money Supply and Debt (July 11, 2011)

·         Making Money (August 29, 2011) and The Glooper (August 30, 2011)

·         Numbers Don’t Lie; People Do (September 5, 2011)

·         Econ Lesson (September 20, 2011)

·         The Case for the Free Market (October 17, 2011) and *In the Interest of Brevity (October 20, 2011)

·         * Parabolas (November 21, 2011) and *The Trampoline Effect (March 23, 2012)

·         * Laffer Curve Primer (November 28, 2011)

·         * Bain Basics (January 16, 2012)

·         Fun with Economics (March 21, 2012)

·         Poster Household (April 11, 2012)

·         Low Taxes Don’t Cause Recessions, Part I (July11, 2012) and Part II (July 13, 2012)

·         Dave Built That (August 22, 2012)

·         Marriage: Anti-Poverty Weapon (September 28, 2012)

·         Old Words New Again (January 9, 2013)

·         Simple Math above His Pay Grade (February 20,2013)

·         Glass Breaking Fun (March 13, 2013)

·         Lessons from Economic Sphere (April 26, 2013)

Cliffs, Valleys, and Flash Floods

Every now and then I get annoyed that the opposition to freedom has control over the national vocabulary. So I’m striking back a little bit with my own small force. What I’d like to do away with is “fiscal cliff.” The term implies that, at a certain point (and this time it’s at the end of the year when the Bush tax cuts expire and everybody’s taxes then suddenly rise to previous rates), there will be financial freefall. It’s looking like a game of chicken.

I want to change the metaphor to something closer to what is about to happen.

Back in late 2008 we went off a cliff—we had the sudden drop of a severe recession. What do you expect after a recession fall? That’s right—a bounce back up to where we were. Under normal circumstances, when the economy hits bottom, it heads back up with about the same amount of energy, sometimes climbing higher than previously. Unless, of course, there’s interference “to help.” I wrote about this in “Parabolas” and “The Trampoline Effect.”

Winter Camp Slot, Near Moab, UT
photo from here

Government interference took away the bounce back up. The trampoline metaphor would look like jumping off a cliff onto a bouncy trampoline floor that would just as robustly put us back up where we had been. But the “help” meant someone stopped the bounce from happening, and we found ourselves pretty much stuck down there on the valley floor. Nothing for it but to walk along the cliff wall until we can find a path with enough possible foot and hand holds to allow us to climb back up.

So we’ve been walking along the valley floor, kind of wandering, for four years. Sometimes the floor of the valley has been heading very slightly up, so we’ve tried to follow that direction, moving along this valley as we go.

But now what is about to happen—the sudden across-the-board tax increases—is we get stuck in a tighter canyon; we’re running out of valley floor to walk on, and the cliff we’re inexorably approaching is even more sheer and imposing than the one we dropped down originally. Can it be climbed out? Maybe, with the right  equipment, some skill, and a lot of determination. As Westley said, while climbing the Cliffs of Insanity in The Princess Bride, “Look, I don’t mean to be rude, but this is not as easy as it looks. So I’d appreciate it if you wouldn’t distract me.”

Private sector business is the climber; the distractors, a combination of Democrats, liberals, media (redundant, I know) are pointing out that they’re waiting to kill the climber when he reaches the top, which “does put a damper on the relationship.”

[We could also see the distractors in this climbing scene between Vizzini and the Fezzik the giant:

Vizzini: You were supposed to be this colossus. You were this great, legendary thing….

Fezzik: Well, I’m carrying three people….

Vizzini: I do not accept excuses. I’m just going to have to find myself a new giant, that’s all.

There are so many ways we can apply The Princes Bride to our world.]

It’s a precarious situation we’re in. What’s even worse is that climbing the economic canyon wall, while necessary and difficult, is made more treacherous by an additional looming danger. We hear distant thunder. That means rain, which, in this terrain, means FLASH FLOOD. If there is enough “rain”—quantitative easing, or printing of money that is not backed by wealth created, as well as debt along with mounting interest, now at higher rates because of our twice-lowered credit rating—then we get hyperinflation. We get washed away down the economic canyon.

Flash floods in this terrain are much more dangerous than in, say, a flatter plain, or more gentle slopes. The tight canyon walls direct the path of the flood and speed it up. Everything in the narrow canyon gets washed away. Occasionally there are survivors [the link is a news story about the 2004 Antelope Canyon flash flood and its one survivor; not about economics, but a fascinating story], but deaths are common. In our analogy, the deaths are business closings and more lost jobs.

Is this for certain going to happen? We don’t know. We just know the conditions to watch for, and we see them. Darkening clouds loom above. Thunder rumbles not too distant. We’re up against the cliff wall, struggling against great odds to get to higher ground.

So, in not-very-cheerful summary: the expiration of Bush tax cuts (which, after a decade simply translate as a sudden tax increase) are a huge sheer wall in the way of recovery. But the real fear isn’t a sudden new drop, or recession; we’re already there on the valley floor, so we’re not about to step off a ledge. What we have to fear is the flash flood of hyperinflation, washing us down, down, down the ravine, with plenty of inevitable drownings.

Congress shouldn’t be overly concerned about the looming cliff wall. Dithering about whether we’re going to walk into the wall isn’t the least bit useful. Better would be to put out warnings: get to higher ground. Now! Save yourselves! Government can’t do anything useful at this point but get out of our way.

In a related mistranslation: tax increase does not equal revenue. I wrote about the Laffer Curve here. This video, from Prager University, is one of the better explanations.

 

Laffer Curve Primer

In the past week I came across a couple of reminder’s of the Laffer Curve, grabbing my attention enough to cover it in a post here.

First, I just finished reading Dick Cheney’s autobiography, In My Time. I’m sure I’ll have more to say on that in future posts, but this little anecdote was fun: 

It was in the wake of our loss [Ford’s election bid in 1976] that Don Rumsfeld and I had dinner one night at the Two Continents restaurant in the Hotel Washington with economist Art Laffer, a creative guy who certainly captured my imagination with a curve he drew on the back of my napkin. What it showed was that you can raise taxes only so high before people become disinclined to work. On the other hand, it’s possible to create incentive—and economic growth—with tax cuts. The Laffer Curve subsequently became one of the hallmarks of supply-side economics. I wish I had known how historic my napkin would become so that I could have saved it (p. 78). 

I had a similar response when I first heard of the Laffer Curve. Eye opening. 

Then later in the week I came across an article by Daniel Mitchell spelling out a few basics on the Laffer Curve. One of the interesting illustrations shows how much more revenue (about 5 times more) the government took in when Reagan lowered the upper tax rate of 70% down to 28%, comparing 1980 to 1988.  

The article had links to three short videos (about 7 minutes a piece) on the theory and real world evidence for the Laffer Curve, and then the frustration with the way tax bills are measured. They are all informative and clear, but the third one may make you want to do something to change the world. The three together take less time than half a television show without commercials. Definitely worth the time investment. 

The first video gives you the basic theory of the Laffer Curve.

http://www.youtube.com/watch?v=fIqyCpCPrvU&feature=player_embedded

Video II offers real-world examples of the Laffer Curve in action.

http://www.youtube.com/watch?feature=player_embedded&v=YsB_rnzBA08

The third video covers the frustratingly inaccurate “satic scoring” used by the Joint Committee on Taxation, causing bias toward higher taxes. 

http://www.youtube.com/watch?v=Mw7LtVwDCbs&feature=player_embedded

If these concepts make sense to you, share them with a friend.

Just Another Empty Speech

Do you remember just a month ago when we had a standoff about raising the debt ceiling? It was raised, along with a half-hearted promise to lower spending sometime about a decade down the road. And then, of course, our AAA credit rating was lowered to AA+, which means when we borrow, it will be at a higher interest rate, costing us even more over time. 

So when it was announced that 2 ½ years into his presidency Obama would finally give us a plan to improve the economy—specifically to help correct the lingering high unemployment rate—even the skeptical among us had “hope” that he was going to “change” to something that would work. Something other than “Let’s gouge the rich some more,” which is really getting old. And something other than “Let’s spend lots more money so that the private sector won’t misspend it, no matter how much that causes the recession/depression to linger.” We also wanted something other than, “What Bush left us was a much bigger mess than we had anticipated.” 

So what did we get? “Let’s spend nearly another nearly half trillion that we’ve already clearly shown that we don’t have. It will be paid for, not additional debt, which I’ll explain later, but you can assume it will be by making the rich finally pay their fair share [i.e., gouge the evil rich who already pay most of our revenue]. And Congress has to pass it, or I will go around the country blaming them for all our nation’s ills, since blaming Bush is getting unbelievable.” That about summarizes it.

It turns out I am still capable of being shocked. Obama had the “audacity of hope” to order the Congress to blow off a long-scheduled presidential candidate debate for this earth-shaking speech, almost the very moment Congress returned to session after the August break. We were to assume that he had used his own Martha’s Vineyard golf vacation to prepare, perfect, and hone this most important plan. And we are to assume he was just more than gracious for consenting to put it off till the next day, and further, to speak early so as not to interfere with the opening of football season. 

Imagine if he had actually pre-empted either the debate or the ballgame—on the pretext that his message was so urgent that the world must stop for it! He did not actually present a plan. At Whitehouse.gov it is possible to get a bare outline of the supposed plan, but it’s blissfully free of details [my cursory view of it looked like the bare details repeated a couple of times]. The speech itself presented almost nothing. Just a promise of another speech, a week from Monday, in which he will detail how it will be paid for. In the meantime, let it be known, Congress must pass this undefined plan. 

Did he mention that Congress must pass this plan? Why yes, yes he did. Seventeen times, by my count. [I downloaded the transcript, used find and highlight commands for the word “pass,” left out the few that didn’t relate to this meaning, and counted 17. You can do it yourself.] 

A 44-second montage of the many times he said to pass the plan can be found here: http://bcove.me/8hlvri6g  

Among a few responses I came across after the speech was Kevin Jackson of Blacksphere, which made me laugh out loud, a good thing in bad times:  

Apparently we only got half the speech. The second half of the speech supposedly contains the actual meat of Obama’s program, but that part of the speech is on layaway. It seems America couldn’t afford to hear both parts of the speech together, thus the installment plan. 

The speech may be on layaway, but Obama says that his job-creating ideas of which we will be blessed to hear soon are funded. The new round of blood-letting will cost the taxpayers around $500B, which in government-speak means $1T+. We can spend our way into more jobs.  

Obama has yet again grabbed America by the wallet and said, “Cough.” 

Just like he promised when he was running for office, Obama will create more jobs. Just not in America. 

Speaking of creating jobs, Ford, that all-American force of innovation, announced this week that it will be opening up another factory in India. Are they suddenly anti-American? Or are they trying to find a way to keep their head above water in the face of outrageous union labor and regulations that presumably even Obama is now in favor of scaling back (as long as there’s no loss in safety)? Or maybe it’s just part of doing business worldwide and has no political ramifications at all. Maybe.

Here we are at Friday, and I haven’t tackled the other two charts referred to in Monday’s number-crunching piece. Still considering spelling it out, but here are some basic economic premises Obama seems to be ignoring. 

• When government spends money, that means the private sector has less money to spend on basic economic purposes, including hiring workers. “Stimulus spending” does not “stimulate” the economy; it uses money that would otherwise have been used more efficiently and effectively by private enterprise. The only thing “new” about more stimulus is facing a higher interest rate on the resulting debt.
• When you raise taxes, you don’t necessarily raise revenue, because people change their behavior based on whether they receive less benefit (hold money instead of spending it on capital projects, hold it in forms subject to lower tax rates, or hold it in offshore accounts not subject to the taxes—see the Laffer Curve). So having a plan “paid for” by raising taxes will not guarantee raising revenue. Revenue is more likely to rise with lower taxes that result in growth in GDP.
• Whenever federal spending goes to projects that are not part of the Constitutionally delineated powers, negative unanticipated consequences result. 

So, should Congress consider the plan (once it appears), rather than dismiss it out of hand? Sure. And then, unless it is a plan of significant federal spending cuts from areas where the federal government shouldn’t be involved, and unless it releases money to the private sector rather than raising taxes, Congress should stand firm and refuse to pass it. They have offered alternatives, dismissed out-of-hand by this president. So let this ineffectual man travel around and blame them to his heart’s content. Blaming Republicans, who hold only one-half of one branch, for what he did wrong during two full years of total control will simply not satisfy as a substitute for a plan to get Americans back to work.