All-Controlling Governments Are Identity Theft Accomplices

When governments take on the task of micromanaging our lives, they acquire massive records on the personal information of individuals and their interactions with others.  This information is needed to perform the micromanaging.  It is needed to exercise control of those ruled by the Ruling Class.  It is acquired with the force of law because the Ruling Class is curious.  It is acquired so the Ruling Class can construct still more arguments to control still more aspects of the lives of those ruled.  It is highly useful as a means of enrichment through investments and bribes using insider information for the Ruling Class as well.

Such Big Governments, having their hands in a mind-boggling number of affairs, are massively unfocused.  The People are necessarily uninformed and baffled voters.  The Ruling Class itself is poorly informed about most of the activities of the government and certainly is massively ignorant about the effects of governmental policy.  The All-Controlling Governments are characterized by mismanagement and a core incompetence.  Among the many consequences of this incompetence is the demonstrated inability of All-Controlling Governments to protect the massive information on the People from abusive uses and from identity thieves.  This inability to protect that information or to use it to persecute the opponents of All-Controlling Government is an under-appreciated argument against the Big Government model of rule.

Now that government can manipulate massive databases of private and personal information on individuals, the protection of this data from identity thieves, blackmailers, unethical commercial operations, and enemy governments is a critical responsibility of any government that claims, however falsely, that it has an interest in the welfare of the People.  The federal government has long known that its protections of such data are grossly inadequate.  It has done irresponsibly little to provide improved protections.  Indeed, with the recent creation of the ObamaCare health insurance exchanges it hugely increased the medical and financial data on Americans.  These ObamaCare exchanges are well-known to have an incredibly cavalier concern for data security.  The massive medical computer records required by ObamaCare are another private information leak.

Americans are forced to provide almost innumerable government agencies and operations with highly personal data about themselves.  Government agencies collect such data from employers, medical providers, financial institutions, other businesses, or by surveillance of our telephone and Internet exchanges with one another.  If one operates a business that does government contract work or serves as a sub-contractor to companies that are government contractors, still more data is collected on individuals.

Let us examine some of the evidence of irresponsibly inadequate protection of our personal data, as well as evidence that the government really does not care very much about protecting that data:

Between January 2003 and June 2006, 490 IRS laptops were stolen.  Many were stolen from the homes or vehicles of IRS employees, but 111 were stolen from IRS facilities.  The IRS has no idea what individual or company financial information or what social security numbers and birth dates were made available to criminals or enemy governments.  An inspection of a sample of as-yet not stolen IRS computers revealed that sensitive data was not encrypted as required and that the computers had copious data on taxpayers and IRS employees on them.  Many of the computers with unencrypted data had inadequate passwords or easy means to by-pass the password requirement.

In 2012, the Treasury inspector general for tax administration told a Senate panel that there were 1.8 million instances of tax returns filed with the IRS using stolen identities.  Investigators estimated that more than $5 billion in refund payments may have gone to identity thieves.  Another audit concluded that the IRS was detecting far fewer fraudulent returns than occurred.  The IRS did detect 940,000 fraudulent tax returns in 2011 for $6.5 billion in returns, but the audit suggested there were maybe another 1.5 million undetected fraudulent returns.  It is especially hard for the IRS to detect returns using the identity of dead people or children.  So, the dead file tax returns as well as cast votes!  The IRS delivered 2,137 tax refunds totaling  $3.3 million to one address in Lansing, Michigan.  Treasury investigators believed that nearly 24,000 fraudulent tax returns with Detroit addresses totaled $74 million.  More than 500 returns were filed from three Florida addresses for more than $3 million in refunds.  The IRS deposited 590 refunds totaling $900,000 into one bank account.  In 2013, it estimated that it paid out $5.8 billion in fraudulent refunds and credits.  Most of this, the IRS says is going to organized crime syndicates.

If you are a victim of one of the fraudulent tax returns, it is a nightmare to get things straightened out with the IRS.  A check-up on the theft reporting of 17 taxpayers was found to generate 58 separate case files because the taxpayer was shunted between so many IRS employees, each time having to prove his identity.  When a tax accountant's computer was stolen and she notified the IRS to be on the lookout for fraudulent returns on her clients, the IRS said each client would have to file a separate theft report.  When a client tried to do so, she was told she could not until she was a victim.  She later became a victim.

The IRS does not just do a poor job of detecting fraudulent tax returns, it provides the criminals with the identity information they need to make convincing fraudulent returns.  In May 2015, the IRS announced that a Russian organized crime syndicate had stolen the prior tax returns of 104,000 taxpayers from the IRS website Get Transcript feature.  The information they obtained can be used to make fraudulent tax returns appear to be much more authentic than they would otherwise be.  The IRS claims that information has only been used to file 15,000 false returns so far for a total of about $50 million.  However, the information stolen can be used for false returns in future years and to take out all sorts of loans on individual American's credit.  Russian hackers have also taken information from the White House and State Department websites.  They also recently listened in on sanctions discussions between the US and a foreign government.

The IRS is being sued by a company in California which stores massive medical records under HIPAA protection because 15 IRS agents stole 60 million medical records on about 10 million individuals in March 2011.  The IRS agents were in the building under a warrant to search only for tax information relevant to a former employee of the company.  They were told the medical records had nothing to do with the warrant authorization and they insisted in taking the unrelated medical records anyway, even threatening to use force to take them.  Among the medical records were those for every judge and employee of the California court system, though most of the records were for people outside of California.  The records included psychological counseling, gynecological counseling, sex and drug treatments, and much more very personal information.  Given the IRS penchant for attacking Republicans and Tea Party persons, such a stolen trove of medical records could be used for very nefarious purposes, including blackmail.

The Office of Personnel Management (OPM) had 4.2 million personnel records of government employees stolen in one event this year.  Then soon after, we were told that hackers had acquired Social Security numbers for 21.5 million people primarily from people on whom background checks had been performed.  19.7 background investigation applications and 1.8 million non-applicants were involved.  In addition, 1.1 million fingerprints were taken.

Big Government, All-Controlling Government needs, wants, and acquires massive databases of personal data on the People.  But, it has little regard for the privacy of the People, little competence to protect that privacy, and it is all too often willing to abuse the People using that private information.  This is an important reason to oppose Big Government, however many other critical reasons there are for opposing it.

The 1920s Whose Economic Policies Obama Dislikes

In the last debate with Mitt Romney, Obama said, "When it comes to our foreign policy, you seem to want to import the foreign policies of the 1980s, just like the social policies of the 1950s and the economic policies of the 1920s."  Let us review the economic policies of the 1920s a bit.  We will learn some very important lessons.

Amity Shlaes called Obama out on this.  She notes that real GDP grew by an average of 4% a year in the 1920s.  High unemployment in 1921 at 11.7% was brought down to 2.4% in 1923 while cutting federal spending.  In time, government spending as a percentage of real GDP was cut in half.  80,000 patents a year were being issued on average in the 1920s, which was not again matched until the 1960s.  The 1920s were a decade of growth in technology and for the economy generally.

Now, Obama can not abide by cuts in federal spending.  President Harding cut tax rates as advised by Andrew Mellon, and we know that Obama greatly dislikes that idea.  The income tax marginal rate under the bloated government of Woodrow Wilson for those with an income of $100,000 or more was 60% when Harding took office in 1921.  Under Wilson, those with an income of $1 million or more had paid a marginal tax rate of 77%.  The marginal tax rate for those with income over $100,000 was lowered in 1922, 1923, 1924, and then again in 1925 under President Coolidge, with a final marginal rate of 25%, until 1929 when it was dropped to 24%.  Not only did the economy grow well as noted, but the share of income taxes paid by those with incomes of $100,000 or more steadily and rapidly increased from 1923 to the end of the decade.  The total amount of income tax paid by these higher income taxpayers increased rapidly also.  In 1920, those making over $100,000 a year paid 29.9% of all income taxes.  In 1928, they paid 61.3% of all income tax collected.

Income tax revenues from those making $10,000 or less decreased greatly and stayed much lower throughout the decade.  For those making $25,000 to $100,000, very wealthy people then, the collected tax revenues went down considerably before rising later in the decade to about the level at the start of the decade.  See Tax Rates and Tax Revenue: The Mellon Income Tax Cuts of the 1920s by Veronique de Rugy of the Cato Institute.  The fact that total income taxes decreased somewhat for several years before growing back to levels exceeding that of the start of the decade was fine because the Republican Presidents Harding and Coolidge reduced the size of the government considerably.

Arthur Laffer and other supply side economists have often said that the Mellon tax cuts resulted in both economic growth and an increase in tax revenues. Actually, with such severe tax cuts for all income tax brackets, this is not a sufficiently accurate portrayal of what happened.  However, the income tax revenue collected from those with incomes over $100,000 more than doubled!  Large tax cuts for higher earners result in large tax revenue increases because these taxpayers are much more likely to devote great effort to avoiding paying high income tax rates, including exercising their greater ability to retire early or simply to work fewer hours.  They are also more likely to invest their money in businesses when taxed at lower rates, causing the economy to grow more rapidly, which also adds more to both income tax total revenues in time, but also to other types of taxes as people generally earn and spend more.

It is an interesting fact that if high earners were taxed at lower marginal tax rates than lower earners are, total revenues collected by the government by the income tax would increase and increase specifically from the higher earners.  There is even a very good moral argument that this is the way things should be.  Government legitimately serves only to protect our equal, sovereign individual rights from those who would initiate the use of force to deprive people of their rights.  If one man earns 10 times what another man earns, does it really cost government 10 times as much to protect the rights of the bigger earner?  I do not think so.  Some legitimate costs of government overall scale with the population, some with the area of the country, and some with its GDP.  The area of the U.S. is not changing and the population is growing at a rate of only about 1% a year.  Only a fraction of the legitimate costs of government are left as proportional to the GDP.  Total government spending should increase at a rate greater than that of population growth, but less than that of the GDP.  For both moral reasons and for the purpose of maximizing tax revenues, marginal tax rates should decrease with higher income rather than increase.  Such a tax scheme would guarantee that everyone's effective and marginal tax rates could be reduced with time.

Thus we see that the current highly progressive income tax scheme serves only an ideological purpose of egalitarianism.  It makes the primary purpose of the income tax code that of punishing higher income earners, rather than maximizing the income of the government with a minimum of harm to the People.  It sacrifices economic growth.  It sacrifices maximizing income tax revenues at minimal pain.  It means that those many tax revenues that grow with the economy will increase more slowly.  But this highly irrational progressive income tax system is much beloved by Obama.  Therefore, it should be no surprise that Obama hates the tax and economic policies of the 1920s.  Rational Americans should learn from that period of history and at the least greatly reduce the progressive marginal tax rates of the present insane system.  If we had the wisdom to go further and adopt an income tax code that is regressive, we would all benefit greatly in relatively short order.

More Obama Misdirection in Campaign Ad

This last weekend, I saw an Obama ad actually endorsed by him that sought to push Romney to release more tax returns and made the claim that Romney "paid only 14% in taxes -- probably less than you."  I believe this was a fallacious and misleading claim, but PolitiFact.com ruled it true by ignoring the context of the ad with a giant switcheroo.

The Obama ad is a discussion of Romney's tax returns, which report on his income taxes.  One naturally assumes that the final statement by Obama that Romney probably paid less in taxes than you means that he probably paid less than you in income taxes.  So, let us discuss the truth of Obama's claim based on income taxes reported on the income tax forms Obama is demanding Romney add to those already released.

I was stunned because most Americans who pay any attention to politics, government, and the economy are well aware that about 46 - 48% of Americans pay no income tax at all.  Immediately this would make one think it is unlikely that half of Americans are paying 14% in taxes on their Adjusted Gross Income (AGI).  In fact in 2011, Romney paid a 15.37% average effective tax rate on his AGI and he claims he paid 13% or more in every one of the last ten years.  This contradicts Biden's claim that he often paid no taxes in this period of time.  Apparently, Biden's unnamed source was rather impeachable, as is Biden's intellect.

The median household income in 2010 was $47,022.  According to Table 3.4 of an IRS study of 2010 Individual Income Tax Returns, broken down by tax brackets, one can estimate an upper bound on the average effective tax rate on AGI for a taxpayer with median income.  142.89 million individual tax returns were filed in 2010, we can examine when we reach half this number of tax returns (71,446,026 returns) as we work down the column in the table of tax returns by margin tax rate.  Including all returns with a marginal tax rate of 10% or less, we have accounted for 63,744,030 returns.  The next group in the table is 42,321,591 returns in the 15% marginal tax bracket without capital gains.  Adding this to the lower tax brackets takes us way over the mid-point number on the returns of 71.45 million to 106.07 million returns.  The median return is clearly among the first one-fifth of the returns in this large group of returns.  Nonetheless, the average effective tax for this entire 15% marginal tax rate bracket group is only 5.1% of AGI.  The 10% tax bracket that brought us close to the median return paid an average tax of only 0.7%, so it is likely that the median return paid substantially less than 5.1% of AGI!

So, the Obama ad claim that you probably paid more taxes than Romney is false.  But no, according to PolitiFact.com, the Obama claim is true.  How do they substantiate this claim?  Well they decide that Obama, the context of the remainder of the ad notwithstanding, was talking about the sum of income and payroll taxes.  Of course, they choose not to add in property taxes because that is not something the Democrats wish to consider when they talk about comparing the taxes of the rich and the median person.  According to our Democrat politicians, the Medicare and Social Security money extracted from our paychecks by unpaid tax collecting employers goes into a lock box and is paid back to us when we retire or reach age 65.  They like to call it an insurance premium which will lead to payouts to us in retirement which scale in accordance with the amount of premiums we paid in.  But in this context it is convenient to forget all that and treat this payroll extraction as general tax money and forget that Romney gets a worse deal in payback even than the median taxpayer does from these extractions.

Now most people have an employer who according to the government pays half of the Medicare tax and, generally, half of the Social Security tax.  So, the employee's share of Medicare is 1.45% and his usual share of Social Security, before the recent 2% reduction of limited duration, was 6.2%.  Adding these together would produce an upper bound average tax payment on AGI of 12.75% in normal times, but of only 10.75% in 2011.  This is lower still than Romney's effective tax rate.

Oh, but wait.  The truth, always suppressed by Democrats otherwise, is that it is a fiction that the 6.2% for Social Security and the 1.45% for Medicare paid by the employer is really paid by the employer.  People who are self-employed pay it all and those who work for an employer are actually paid less by that amount because of this extraction.  That money would have been paid to the employee in the market for labor if it were not siphoned off by the government instead.  This is the argument of the Tax Policy Center of the liberal Brookings Institute.  As a result they add in both the employee's and the employer's extractions for Social Security and Medicare and claim that the median taxpayer probably does pay more tax than does Romney.

If the Democrat fiction on employer contributions to Social Security and Medicare were maintained, then Romney could claim his share of those payments as a shareholder in many companies with many employees and show that he paid a much, much larger tax due to his huge employer tax payments!  But it does not work that way.  Inventive approaches to issues are the province of Democrats only.  Republicans are usually too straightforward to make such arguments and if they did, the Progressive media would raise an incredible fuss!

We really ought to also remember that the many companies partially owned by Romney as a shareholder may have paid the world's highest corporate taxes on any profits they made.  They also spent a fortune on foolish laws, mandates, and regulations arising from local, state, and federal governments for vanishingly small or non-existent benefits for Americans generally.  More and more, these governments delight in moving the expenses of gifts to others, commonly to special interests, to the accounts of businesses in the private sector.  The governments are awash in red ink, or they would be if they were forced to do the kind of accounting that businesses are forced to do by governments.  So, they force businesses to pick up the tab more and more often without regard to the impact on lower profitability, less hiring, less capital investment, and more bankruptcies for businesses.  Not only does Romney pay out huge sums on his investment in many companies making these government mandated payments, but he also pays a capital gains tax on any money earned by him due to sales of appreciating stock.  Romney does much more than his fair share in supporting the cost of government.

Slothful IRS Reduces Consequences of Exceeding Debt Limit

Treasury Secretary Timothy Geithner has told us that the government has a few tricks it can use so that even though the government debt exceeds the debt limit, the government will not have to shut down until early August.  One major reason is not discussed.

The IRS is running late this year on refunding excess taxes paid.  Part of the reason for this is that Congress and Obama did not manage to work out an agreement and sign it into law to prevent a drastic raise in taxes until 17 December of 2010.  In addition to changes that affected future payroll withholdings, some changes required retroactive changes to 2010 tax forms, which delayed the start of filing for many people.  Among these,

• Taxpayers were allowed to continue choosing to either deduct state income taxes or the state sales tax.  This affected the 50 million filers who itemize deductions.
• A change was made in who was affected by the Alternative Minimum Tax or AMT, which also affected those who itemize deductions.
• Teachers who claim the $250 deduction for money spent on classroom supplies which had been scheduled to expire.
• Qualified college expenses could allow a deduction of up to $4,000 which had been scheduled to expire.

Consequently, the IRS was going to be jammed more than usual due to these late changes.  There is, however, another problem the IRS has on top of this one.

The first Democrat-controlled Congress of four years ago decided that the IRS should provide loans to first-time home buyers at no interest.  A million home buyers took advantage of this program, so that IRS computers are taking in monthly mortgage payments in addition to handling the usual business payroll tax deposits and trying to get the many refunds out to taxpayers.  The IRS is running seriously behind.  This is the normal problem of poor central planning that we have come to understand is central to big government.

But, government has also earned our cynicism.  Could it be that this is also a good excuse for getting refunds, which averaged $2,324 in 2007, back to taxpayers late?  During the period between now and August, the longer it takes for the IRS to refund excess tax payments, the easier it will be to avoid the consequences of having exceeded the debt limit.  The delays on many tax refunds are expected to be 4 months.  Four months from 18 April will be 18 August.  This is very convenient for our overspending government.  Is it possible the IRS and its tax-dodging leader, the Secretary of the Treasury Timothy Geithner, are taking advantage to the fullest of such excuses?  This would help to allow the administration to continue its free-spending ways unabated until August.

Our Unfair, Discriminatory, Growth-Inhibiting Income Tax

Obama wants to have a discussion about income inequality and increasing the discriminatory nature of the income tax rate structure to reduce income inequality.  He claims he will win that debate.  He clearly believes the American People are merry thieves and covet their neighbor's income if not his wife, his house, his manservant or maidservant, his ox or his donkey, or anything else that is his.  I hope he is wrong and that most Americans will resist the Obama lure for free government goodies and services paid for by soaking the rich.

An increasing number of Americans, especially Tea Party Americans, do seem to think there is nothing wrong with others becoming rich and they even wish them the best.  Many have dreams of becoming rich themselves.  Unfortunately, the young Americans coming out of our government-run school systems have generally been indoctrinated in the idea that income inequality is a great social injustice that transcends such trends as a generally improving lifestyle for all income groups.  They have been taught that those with high incomes have somehow deprived the poor or that they must give back what they have created because, well they somehow could not have created it but for the poor?  Or, in some cases, the rich are pictured as actually having taken more of their share of the dwindling resources of the planet and added more than their share of pollution, so therefore they must be made to pay back the poor whose share of resources and clean air and water they took!  This is nonsense that comes from static thinking and environmental misconceptions I have discussed elsewhere.

The Progressive Socialist Elitist likes to point at the fact that the very wealthy are becoming wealthier at a faster rate than most Americans have been becoming wealthier.  He commonly claims this growing wealth on the part of the very rich is due to the Bush II tax cuts.  He does not point out that the rate of the increased share of total income going to the wealthiest 10% of Americans grew just as fast from 1994 to 2000 under Bill Clinton.  He does not point out that the share of total wealth of the top 10% has risen since 1978, which was back in Jimmy Carter's administration!  Let us look at the historical data of Piketty and Saez (2003) and the update by Saez through 2007 for the share of total income held by the top 10% of tax filers including wages and salaries, pensions received, profits from business, dividends, interest, rents, and capital gains, but excluding Social Security retirement benefits, unemployment payments, and other government transfer payments:

In 2007, the bottom income for the top 10% in income was $109,630, so we are hardly talking about really wealthy or really high income families here.  Saez' 2007 update provides a further breakdown on how the shares of those between the 90th and 95th percentiles ($109,630 and $155,400 in 2007), those between the 95th and 99th percentiles ($155,400 and $398,900 in 2007), and the top 1 percentile with annual income above $398,900 fared historically:

We see that those with incomes in the 90th to 95th percentile range actually lost share in the total national income from 2003 to 2007 following the Bush tax cut and overall had no greater share than they did in about 1970, though they were better off than in the 1940s and 1950s.  So, if income inequality actually were a legitimate issue of social justice, there is no reason to increase tax rates on this group.  If we then examine the group from 95% to 99% of income, we see they increased their share somewhat from 1982 to 1995, but have been rock steady ever since at the same fraction of the national income.  There sure is no reason to increase taxes on this group based on some specious argument that the Bush tax cuts caused them to become proportionately wealthier.  This would argue that tax rates for those earning up to about $400,000 should not be increased based on the specious argument that that would serve social justice by eliminating an increasing wealth inequality!  We are left with only the top 1% of income earners as the sole group of the "rich" whose share of the national income has increased.  They are the sole group making the entire top 10% of earners look as though they have increased their share of the national income.  Their income share has generally increased since 1978, though recessions cause sharp reductions in their share.

So, what is Obama talking about when he diatribes on the social justice need to increase tax rates for those families with incomes greater than $250,000 a year or those single filers with incomes above $200,000 per year?  Apparently, he just wants more of their money so he can exercise the power that comes with distributing it as he pleases for maximal political payback.  We can understand this greed and power lust, but we need not label it as virtue.  The Obama and the Progressive Socialist Elitist game is one of simple power lust.  It is an effort to dangle government goodies before a majority of the population who do not pay their fair share for the goodies they are to receive.  Indeed, let us examine the share of taxes paid compared to the share of national income earned by income groups to evaluate fairness on a more meaningful scale.

Now we can see that the top 1% of income earners had a 22.8% share of total income in 2007, but paid a far larger share of total income taxes at 40.4%.  The 95% to 99% group of top earners had a 14.6% share of total income, but also paid a share of income taxes which was much larger than that at 20.2%.  Our tax code clearly discriminates against them, even though we saw above that their share of total income has not increased since 1995 when Bill Clinton was President and still in his first term of office.  The group of earners between 90% and 95% had equal shares of total income and of total income taxes at 10.6% of each.  All but the top 10% of earners paid less into income taxes than their share of the national income!  In effect, they all received a subsidy paid for by the top 5% of income earners.  This was especially true for the bottom 50% of earners who paid only 2.9% of the total income tax amount in 2007!  Basically, they can vote for just about any wasteful and illegitimate government program because it will be using someone else's money.  They have no stake in the game.  This is by design and exactly how the Progressive Socialist Elitist wants it.  They want this half of the electorate to believe in free lunches, which is what this tax system gives them, except insofar as any of them may realize that hurting the higher income groups actually does hurt the economy.

The unfairness we are actually dealing with in America is the unfairness of stealing the earnings of those who have worked hard and effectively to create wealth, which allows them to be paid well or to use a part of that created wealth as income from their businesses and investments.  These activities do contribute greatly to the growth of the economy and to the decreasing cost of many necessary, or at least desired, goods and services.  With high taxes, we force the higher income earners to move their investments from the highest yielding investments into those with tax protections such as municipal bonds or we force them to hold unto their investments longer so they will pay capital gains taxes more infrequently.  Higher tax rates have always slowed down growth rates by making investment less efficient and by taking more of the time of the high earners due to their having to find ways to minimize loses to taxes.  The net result in tax revenues is that whatever the marginal tax rates are set at, the actual federal government revenues do not rise above about 19% of GDP.  This limit is called Hauser's Law.

Increasing tax rates on the wealthy may make a Progressive Socialist Elitist feel good, but it does not actually increase tax revenues.  This, in a rational society, would keep them from claiming they are increasing rates on the wealthy in order to do more to help the poor and the needy with additional government programs.  Interestingly enough, Obama seems to understand this at times and is more inclined to use the argument that he simply hates the wealthy having so much income and he is eager to do anything he can to take more of it from them.  He covets their income and thinks most voters do also.

Simple fairness would have tax marginal rates the same for everyone with income above about the 20% level.  Most of us are fine with the idea that government should not take food and other necessities out of the mouths of the poorest among us to fund government programs.  Of course those who are rational also want a much, much smaller government exercising only constitutional powers and serving only to protect individual rights.  With a legitimate government being about one-quarter its present size, the tax burden on everyone would be much lighter.  It would be easy to have no deficits and to pay off the national debt, thereby eliminating the interest payments on that debt.  It would be easy to eliminate business taxes, so businesses could much more readily compete internationally and hire many more Americans.  With lower taxes, everyone, most especially the hardest and most efficient earners would be able to create more wealth and grow the economy.  This would make it easier by far for every segment of the population to improve its standard of living, just as has clearly occurred in America from its founding and especially since after the Civil War.

It is important to remember that if you are truly interested in raising the general standard of living in the United States, that growth rates make a huge cumulative difference.  When governments do not interfere with the individual's effort to make his life better, the growth rate of the economy can be increased substantially.  Let us examine the effect on the size of the economy relative to its start size at the end of 20 years for the following growth rates:

2.0% growth yields an economy 1.49 times its initial size.

2.5% growth yields an economy 1.64 times its initial size.

3.0% growth yields an economy 1.81 times its initial size.

3.5% growth yields an economy 1.99 times its initial size.

4.0% growth yields an economy 2.19 times its initial size.

4.5% growth yields an economy 2.41 times its initial size.

5.0% growth yields an economy 2.65 times its initial size.

The only thing keeping the American economy from averaging 5% growth rates is the excessive size and interference of our local, state, and federal governments.  The excessive services and waste is a sad substitute for the robust economy we would otherwise have.  That economy would offer us many more choices tuned to our uniquely individual characters than does the retarded economy of a mixed socialist and capitalist system.  Free capital and entrepreneurial talent and we will prosper in ways that governments cannot compete with the private sector to provide.  What is more, we would then have a moral system allowing every individual to exercise the freedom of his own choices of values and exercising the personal control to manage his own life responsibly and in accordance with his personal values.

Substituting government coercion and threats of brutal force for the free individual choices of the free market and private sector is both immoral and impractical.  Wise men find that moral behavior is favorably linked to practical flourishing in life!  Some rational morality with respect to income tax fairness will yield a robustly growing economy and a better life for almost everyone.  The few left out by the economy will easily be handled by a more robust charitable concern by free men and women.

The September Jobs Horror Story - As Dismal as Dismal August

In September, 204,000 fewer people were employed than in August.  In August, 215,000 fewer people were employed than in July 2010.  Meanwhile, the working age population has been growing.  The September working age population grew by 223,000 people compared to August, at least 60% of whom want jobs.  Yet the usually stated seasonally adjusted unemployment rate remained about the same as it has been for several months.  This is because the number of people the government thinks want work shrank by 619,000 people in September compared to August.  In August the number of people supposed wanting work shrank by 378,000 compared to the number looking for work in July.  As always in a long recession or depression, the shrinking numbers of people known to be looking for work do not mean that more people are not looking for work or wanting work which is hopelessly unavailable.  Obama's promised change has brought an end to the hope for employment.  Many people, especially many of the young people who are coming into the working age now or recently, face horrible odds in finding a job.  They should be attributing this to Obama's transformation of America.  His many anti-business attitudes have certainly had destructive consequences.

The table below presents the jobs numbers taken from the Bureau of Labor Statistics unemployment report for September 2010.  The important ones are that the working age population is growing and so many new jobs need to be created for the majority of that increased number who want a job.  The next number of great importance is the number of people employed.  That needs to increase greatly simply to keep up with the population growth.  When it is falling, that is a disaster.  As noted above, it fell badly in both August and September.  The so-called unemployment percentage is not very meaningful in a long recession.  What is meaningful is the calculation of the number of jobs needed so that as large a percentage of the working age population has jobs as had jobs when the economy was in much better shape, such as in January 2000 when 67.49% of the work age population had jobs or were actively looking for them.  The unemployment rate then was only 4.04%, which was a figure with some meaning in those circumstances.  Of course some of the unemployed then were actually transitioning from one job or career to another and were anything but the long-term unemployed who dominate today's Obama World.

During this recession, the number of missing jobs grew until it reached a maximum number of 23,108,000 jobs in January 2010.  The number of missing jobs then started to decrease and reached a minimum in July of 20,418,000 jobs.  Since then, the number of missing jobs has grown to 21,129,000!  The % Missing Jobs number is less important because that has a similarity to the usual unemployment number: it depends upon the number employed plus the number actively known to be looking for work.  It is of some significance however that that number is considerably higher than the usual unemployment number.

Here are a few interesting employment changes from August to September:

• The number of employed men fell by 633,000.
• The number of employed women increased by 461,000.
• The number of white Americans employed fell by 41,000.
• The number of black Americans employed fell by 161,000.
• The number of Hispanic Americans employed grew by 93,000.
• The number of full-time employed Americans fell by 1,123,000!
• The number of part-time employed Americans increased by 919,000.

It is clear that the changes were very unfavorable to full-time employment, to men, and to black Americans.  They were relatively favorable for women and for Hispanic Americans, though it is likely many of their gains were for the increased number of part-time jobs, rather than in full-time jobs.

This is the last jobs/unemployment report before the election.  Obama's, Pelosi's, and Reid's economic policies and anti-business policies have certainly had a transformative impact on employment.  The impact of ObamaCare on business costs has begun.  The cost of doing financial transactions due to the Dodd-Frank legislation is already going up.  We still wait for news on what taxes will be next year, which is already almost immediately upon us.  Will personal income tax rates go up, will capital gains taxes go up, and will the death tax be collected again as a mechanism to destroy businesses?  We know that the EPA wants to put draconian requirements and costs on using energy that generates CO2, but how expensive will that be in the near future and then in the longer term?  Will the Obama administration ever allow drilling for oil and gas again?  There are many, many business uncertainties and hurdles that the Democrat presidency and Congress have created.  The current dismal jobs situation is the very predictable result.

I will point out explicitly that men and black Americans should be especially eager to see the present Democrat tyranny replaced and punished in the up-coming election.  Most white men will do just that.  Someday, one cannot help but believe that black Americans will catch on to the fact that the Democrats are poison to them and understand that the free market is their only real friend.  Meanwhile, Obama continues to tell us that transferring wealth from the private sector to the public, government sector will somehow create more jobs.  How could he be more wrongheaded on this critical issue?  We are now in a situation in which local and state governments are letting their employees go because the private sector cannot supply the taxes it could in better times, before business fell prey to the Democrat super-majority in Congress and to Obama.

Demorats Maximize Economic Uncertainty

By punting on passing legislation to extend the Bush tax cuts before the November election, the Democrats are once again proving themselves the masters of economic uncertainty.  As I have noted many times, economic uncertainty and the inability to calculate a probable return on investment due to hiring new employees or investing in plant and equipment, causes most businessmen to horde as much cash as possible.  According to Charles Krauthammer this now amounts to about $3 trillion.  The Federal Reserve says that non-financial corporations are reserving $1.845 trillion and financial institutions are clearly adding a lot to that.  It is also true that companies building their cash reserves has been a long on-going process since 1982, so it is not entirely due to the recession or the Obama administration. 

But, the reason for this has been an increasing sense of uncertainty throughout that period.  The socialist onslaught against businesses of the Obama administration did not come from nowhere, but has been building for a long time among the faculty of our colleges and universities and the college-educated elite of the Northeast, the Pacific Coast, and large parts of the Midwest.  Gore and Kerry came close to winning the presidency and in the 2006 elections, the control of Congress was passed to the socialist party.  Large companies with much to lose have become increasingly aware of their vulnerability to socialist redistributionist schemes, litigation, and extortion by Congress, Presidents, and state and local governments.  It is these large companies who are the ones most responsible for this increased cash hording.

Small business has long been the primary engine of growth and hiring.  The Bush tax cuts helped them, but the on-going growth of state and local governments, their regulations and taxes, and federal regulations and mandates substantially defeated the benefits of the Bush tax cuts for them.  The reduction of uncertainty due to the death tax, which wipes out many small businesses, was a Bush tax cut that was delayed in its start and had a brief duration of one year, 2010.  It expires at the end of this year and will return to a tax rate of 55% for any estate worth more than $1 million.  This is a huge business uncertainty for many small businesses.  In addition, these small businesses do not know what the tax rate on so-called profits will be in January, since those so-called profits are passed onto most small business owner's personal income taxes.  Those rates are going up, if the Bush tax cuts are not extended.  The Democrats are divided into those who want to extend the personal income tax part of the Bush tax cuts in total and the larger number who want the tax rates for the two highest tax brackets to go up.  Obama is a rather critical actor who wants those two tax bracket rate increases.  This will affect many small businesses.

Why did I say so-called business profits above?  Because the profit is often a fiction.  Suppose a company's income undergoes fluctuations through the year due to seasonal variations or due to more random fluctuations.  The end of the tax year comes along and a company has to pay taxes on that part of its income that exceeds its expenses to date.  Generally, it had better have some such income in excess of expenses, because it does not know whether income in the near future will be enough to cover expenses.  Nonetheless, it gets taxed on this essential reserve.  Suppose your company earns a lot of income in the Fall, but much less in the early part of the next year.  Every year you have to have some money to carry over to deal with the expenses of the early part of the next year.  This money is not really profit, since it may be barely adequate or inadequate to deal with the seasonal fall-off in income.  Nonetheless, the company is taxed on this. 

If the owner of the company makes enough to fall into one of the two higher tax brackets, his taxes may well be about to go up on this necessary reserve.  If he is in the highest tax bracket, the marginal tax rate will go up by 13.1%.  Because that may be the case, he may well decide to lay off some employees at the end of the year, since he probably has many fixed expenses such as rent and insurance he cannot do much to reduce.  He knows he will have less reserve money he can use to pay employee salaries early next year if Obama gets his way.  Of course, at this time, the small business owner in a lower tax bracket also cannot be sure the Bush tax cuts will be extended.  Uncertainty adds to firings and to less investment in equipment and plant to grow and to become more productive.  This uncertainty or an actual increase in taxes both have the effect of extending the pain of this recession.

It turns out that the Democrats have not even written a tax-cut extension bill yet.  If one is not passed, then the personal income tax marginal rates of 10%, 15%, 25%, 28%, 33% and 35% become 15%, 28%, 31%, 36%, and 39.6% brackets.  If Obama gets his way, the present 33% rate bracket is split, with the upper part of the bracket getting the higher tax rate of 36%.  The split would come at a married filing jointly income of $237,200, which is once again belies his pledge not to increase taxes on married people making less than $250,000 a year.  He would have the highest marginal rate tax increase from 35% to 39.6%.  This happens for married filers making more than $382,550.  The long term capital gains tax will also increase from 15% to 20% for upper income bracket filers and the present 0% rate for lower income brackets will increase to 10%.

In the second quarter of this year, net household wealth decreased by 2.7%, which hardly encourages the small businessman.  Net worth is down 19% since the second quarter of 2007.  The federal debt went up 24.4% in the second quarter this year, following a first quarter increase of 18%.  Apparently with the approach of the November elections, federal spending surged!  State and local government spending has long been going up, though it has slowed lately due to a loss of tax revenues caused by the recession.  The more governments spend, the more wealth is transferred from the private sector to the public sector.  More public sector spending creates more complex laws, regulations, subsidies, and mandates, which decrease American productivity and destroy jobs.  Overall, the spending of all U.S. governments (federal, state, and local)  is given in the chart below as a percentage of the GDP:

From a local maximum in 1991 of 37.22% of GDP, the spending burden slowly fell until it reached a local minimum in 2000 of 32.56%.  This had a lot to do with the relatively good employment numbers from 1998 to 2000.  Since 2000, total government spending has increased, though it was flat from 2002 to 2007, with spending in the range from 34.75% to 35.28% of GDP.  In 2008 it began surging upward to 36.94%, in 2009 it was 42.32%, and in 2010 it is expected to be 43.85% of GDP.  Noting the huge increase in total government spending since 1952 shown in this chart and understanding that the bureaucrats spending this money are creating new business regulations, mandates, and are picking winners and losers by industry, company, and location, this spending increase represents an ever greater burden on businesses.  The more governments spend, the greater the uncertainty for most businesses.

Now we should all be very reassured by the government's proclamation that the recession ended in June 2009.  Ha!!!  By the operational technical definition in use, it did end, because GDP has grown since then.  But, this really depends upon strict adherence to a definition that ties a recession only to GDP losses.  A recession would better be defined as any period of six months or more in which one or more of the following cases occurs:

1. GDP has decreased.
2. Personal net worth has decreased.
3. Unemployment has exceeded 6%.

Real unemployment still exceeds 10% and net worth was down in the first two quarters of this year, so we are still deep in a recession.  It is true that GDP has increased of late, but the rate of increase in the last quarter was very low.  Overall, the suffering rate is very high.  The Democrat cure is to have the governments spend more money foolishly, to increase some taxes, to mandate increased energy costs, and to leave it unclear whether the largest tax increase in history will soon be knocking the legs out from under our staggering private sector.

U.S. State Dept. Tells U.N. We Are Guilty of Many, Many Human Rights Violations

In an early move to placate the international community, Obama had the U.S. join the U.N. Human Rights Council.  The current member nations of this august body of human rights exemplars include:

Angola
Egypt
Nigeria
South Africa
Zambia
China
Kyrgyzstan
Pakistan
Saudi Arabia
Russian Federation
Argentina
Bolivia
Cuba

The U.S. just delivered a 29-page report to the Human Rights Council in which the State Department said that some Americans were still victims of discrimination.  In particular, blacks, Latinos, Muslims, South Asians, Native Americans, and gays are victims of high unemployment, hate crimes, poverty, poor housing, lack of access to health care, and discriminatory hiring practices.

The report welcomed "observations and recommendations that can help us on that road to a more perfect union."  The American Civil Liberties Union approved of the Obama administration's submission to the U.N. Human Rights Council, but decried the fact it did not address the issues of "inhumane prison conditions, racial disparities in death penalty cases, and abuses in the immigration system."  The director of the ACLU's human rights program said, "It is time for the U.S. to match its human rights rhetoric with concrete domestic policies and actions and create a human rights culture and infrastructure that promote American values of equality and justice for all."

OK, you have been wondering when I was finally going to step in here and punch this Progressive viewpoint in its sniveling nose.  Did you notice that human rights are always referred to by statists and not individual rights?  They ought to be the same thing, but somehow they never are.  Human rights are always take to include the obligation of some individuals to serve others, usually in some collective group.  So, to be clear and differentiate my viewpoint from the Progressive idea of human rights, I will address these issues on the basis of our individual rights.

Individuals have the right to freedom of association and they have the right to discriminate.  They are not required to choose who they associate with or how they discriminate on a rational basis.  What is more, government would hardly be the agent anyone rational would turn to for the purpose of determining who each individual shall associate with and to dictate to each individual how they should discriminate.  These issues are much too complex for government, which is incredibly simple-minded and totally lacks the knowledge of how each American individual is differentiated and what their values are.  Individuality and those differing values require individuals to discriminate among those with whom they will choose to associate.  What is more, we should have learned long ago that no good comes of individuals forfeiting their own independent judgment to government beyond those basic protections which government provides by preventing itself and individuals from initiating the use of force against one another. 

If I were to refuse to hire any black Adventist person, let us say, that is within my rights, as long as mine is a private company.  The government, on the other hand, cannot refuse to hire Adventist blacks.  Why?  First, because government must treat every individual equally before the law.  Second, government is the only agent in our society allowed to use force against individuals.  That use of force must be tightly controlled to prevent its abusive use.  One of the most important controls is that it must be applied equally to all citizens, so that the majority of citizens will be inclined to feel the need to protect those who have become the victims of government discrimination on the basis of race, religion, peaceful creed, employer or employee, income, or property.  It is government that proves to be the monolithic rights violator because it has a monopoly on the use of force in a society.  Therefore, legitimate government, as defined in our Declaration of Independence, has the sole function of protecting the equal, sovereign rights of every individual to life, liberty, and the pursuit of happiness.

That being the case, it is very irrational that this report did not bemoan the fact that the government discriminates against people who are more productive and those who earn more income.  When the ACLU calls upon the American values of equality and justice, where is their outcry against the progressive income tax code?  Or, where is the acknowledgment by the government that it has no right to discriminate against hiring white males for government positions.  Where is the acknowledgment that government cannot claim to treat Americans equally and with justice when it discriminates against firms owned by white males when it lets contracts for goods and services?  Where is there condemnation of the fact that employers are forced to keep employee income and tax records and submit reports to governments without just compensation?

While these awful infractions of unequal and unjust discrimination by the U.S. government go unmentioned, the ACLU bemoans the conditions of prisoners, who are treated better here than almost anywhere in the world.  And what are the immigration abuses they are talking about?  Apparently, our policy is only to deport people who are felons, while illegal border crossings and misdemeanors are ignored.  Where is the abuse in that?  When we provide most government services and force many private companies to provide free charity work to illegal immigrants, it is a puzzle to me that we can be said to be abusive.

It may be true that more blacks receive the death penalty, but that may be less because they are black than because of a combination of the nature of the crimes and their likely being poorer and less able to obtain the services of the better lawyers.

We shall have to wait with bated breath for the constructive comments to come from Cuba, China, the Russian Federation, Zambia, Egypt, Saudi Arabia, and Pakistan on how the U.S. might achieve an admirable human rights record.  Do you suppose any of them will do what the ACLU failed to do?  Will they point out that the primary abuses of human rights in the U.S. are due to our government's failure to govern in accordance with our own Declaration of Independence and our Constitution?  Will they point out that our progressive income tax system is a violation of every individual's equal rights to life, the pursuit of happiness, and property?  Do you suppose they will demand that the U.S. government stop its baleful discrimination against the white male minority or the employer minority?

Obama's Job Creation Summit

This is really a funny event.  Obama has gathered together some executives from large companies, government Labor and Commerce Department people, and his ever popular labor union leaders for a jobs creation conference.  After taxing small business owners to death and wanting to tax them still more beyond the grave, after threatening everyone with energy restrictions under the ridiculous claim that CO2 is a pollutant causing catastrophic man-made global warming, after telling businessmen in industry after industry that he has a Marxist hatred for them, after threatening to saddle companies with new health care expenses, after a Stimulus Package that creates no private sector jobs, after threatening business contracts and property, and after making all investment decisions a roll of the dice, Obama is having a job creation conference.  Is he admitting finally that he who sits at the feet of every Marxist professor he can find in college has no idea how the economy works?

Indeed, he does not.  Including labor union leaders in such a meeting flies in the face of its purpose: job creation.  Labor union leaders are experts in one thing related to jobs: killing them.  This is why private sector employees have been avoiding labor unions now for decades.  They have come to understand this.  This is also why the labor union bosses so badly need card check.  Without intimidation, they cannot force private sector employees to join the unions.

The executives of large businesses are not really interested in spurring job creation either.  The large businesses do not hire many people.  It is small businesses that hire most people.  So, if a large business executive were to spur more jobs in the economy in general, he is doing more to grow his competition, the lean and mean small companies who are always trying to make inroads in his product and service areas.  The big businessman usually fears small business.  The last thing he wants to do is to help them grow.

With 15.7 million Americans unemployed, this jobs summit should have an easy job creating new jobs.  There are plenty of sufficiently skilled and interested potential employees available for hire.  All we need is for large numbers of small business owners to gain the means and the confidence to hire them.  Within a framework of Marxist theory, there is no way to motivate the small businessmen to hire.  No, it would require Capitalist theory to understand what government actions and inactions are needed to spur job creation.  The answers are tried and true.  Most small businessmen can tell you what is needed.  They just need these very simple encouragements:

• No new payroll taxes.
• No threats to take down their businesses when they die with a death tax.
• Lower individual income taxes for higher income brackets.  Finally come to understand that the net government revenues increase with lower upper bracket income tax rates than those we presently have, while encouraging growth of the economy.  The onlyreason for higher rates is to punish the rich.
• Remove the minimum wage laws or at least lower the minimum wage.
• Stop increasing unemployment insurance rates.
• Control Workmen's Compensation Insurance costs with tort reform.
• Do not raise the cost of health insurance as ObamaCare will certainly do.
• Do not increase energy costs and lower energy reliability as carbon cap and trade or the EPA's plan to declare CO2 a pollutant will do.
• Do not threaten businesses with union takeovers as card check will do.
• Cut back on government spending so investment capital is available for the private sector.
• Lower corporate income taxes, so American companies can compete with companies abroad, almost all of which now have lower taxes than do American corporations.
• Reduce barriers to trade.  Simplify both import and export laws and regulations.
• Understand that Medicare and Social Security will both be turning in their IOUs in just a very few years and that increasing payroll taxes on them at that time will kill many jobs.
• Reduce the burdens of government regulations, instead of constantly increasing them.
• End subsidies that distort the markets into inefficient activities.
• Allow the drilling of oil and gas fields in the US and its offshore waters.
• Sell off much of the federal lands which are not being used productively, so that private owners can use them productively.  Use the income to reduce government tax rates.
  
• Encourage the states to stop business discouraging activities, such as those common in California, New York, Michigan, and Ohio to name a few.

OK, so if we saw Obama and the Democrat Congress doing these things, rather than the opposite in every case, we small businessmen would be hiring people instead of firing them.  As long as Obama and his cadres of comrades refuse to recognize these basic factors in the economy, there is simply no justification for companies to hire.  It is all very simple, if you are not a childish, Marxist blockhead.

Maryland's Missing Millionaires

Gov. Martin O'Folley of Maryland is a determined class warfare enthusiast. Since Maryland has greatly overextended itself with entitlement spending, including over-compensating state employees (see my 6 June 2009 entry), it was desperate to increase tax revenues. Gov. O'Folley and the Democrat legislature increased the income tax rate on millionaires to 6.25%, among other tax increases. The counties in Maryland add on to the income tax rate, with the richest counties adding tax rates of 3.2% on top of the state income tax rate.

The state anticipated collecting an additional $106 million for the politicians to spend. But, the millionaires wound up paying $100 million less instead. In 2007, 3000 millionaires paid taxes in Maryland, while in 2008, only 2000 millionaires paid taxes in Maryland. Some of this decline was due to the recession. Taxes too dependent upon higher income taxpayers are also subject to greater swings in revenue in accordance with the economy's swings. Highly progressive income tax rates have thus created major recession decreases in California, New Jersey, and New York, for example.

Many millionaires own second homes in other states and these are commonly states with lower income taxes than Maryland has. Florida, Virginia, South Carolina, and Delaware are such states where many Marylanders have second homes. It is easy to change residency from Maryland to the state in which their second home lies and it appears that many did just that. I expect we will see the state of Maryland challenge some of these changes of residency. It will be interesting to see how many millionaires have moved out of the state, when someone figures that out. At least, it will be interesting to see how long it will be before there are 3,000 millionaire tax filers in the so-called Free State of Maryland again.

P.S. Most people call the Governor of Maryland Martin O'Malley, but O'Folley is a more honest name, unless you note that Malley relates to mal, which as a noun is 'evil' in French, as an adjective is 'wrong,' and as an adverb is 'badly.'

The First Obama Stimulus Bill

There is talk about the need to have a second Obama stimulus bill, close on the heels of earlier bailouts for the financial and banking industries, the U.S.-based automakers, and money to help prevent mortgage foreclosures. Most economists and financial experts seem to be of the opinion that the first Obama stimulus bill has not been and will not be adequate to get the economy moving again. It certainly has not caused the private sector to invest and hire employees at what we have come to think of as normal levels. But, the first Obama stimulus bill and the Omnibus spending bill which followed on its heels did serve a purpose. They were designed to shift wealth and income from the private sector, especially the higher income side of the private sector, to the government sector. At this, they are clearly very successful. This is the primary desire of the socialists running the Obama administration and providing the leadership of the Democrat-controlled House and Senate.

Let us examine the first $787 billion stimulus bill to see how this was accomplished. Let us break it down as the Washington Post did on 14 February with costs in billions:

Health information technology (incentives for Medicare/Medicaid providers), $20.8

Health insurance for unemployed, $25.1

Assistance to unemployed families, $57.2

Tax Provisions, $73.8

• Making Work Pay Credit, $400/year for individual, $800/yr. for family, may exceed tax otherwise owed, offered for 2 years
• Tuition tax credit up to $2500, provided family makes less than $180,000/yr.
• Expanded child tax credit for low income families up to $1000 per child
• Families not owning a home in past 3 years get $8,000 tax credit to buy a home before the end of this year

Medicaid, $90

Health, Labor, & Education, $71.2

• National Institute of Health, $9.7
• National Coordinator for health information technology, $2
• Other health, $9.8
• Employment and training programs, $4.3
• Education for the disadvantaged, $13
• Special education, $12.2
• Student financial assistance, $16.6
• Other, $3.6

Housing, transportation, $61.1

• Highway construction, $27.5
• Other transportation, $20.6
• Housing assistance programs, $13

Grants to states to fully fund education budgets, $54

Energy and water, $50.8

• Energy efficiency, renewable energy, $16.8
• Federal loan guarantees for renewable energy & electricity transmission, $6
  
• Other energy, includes modernizing electric grid, $22.4
• Army Corps of Engineers, $4.6
• Other, $1

Nutrition, rural development, and agriculture, $26.4

• Food stamps, $20
• Broadband expansion in rural areas, $2.5
• Other, $3.9

Commerce, Justice, & Science, $15.8

• Grants to extend broadband, $4.7
• State & local law enforcement, $2.8
• National Science Foundation, $3
• Other, $5.3

Defense, Homeland Security, $11.4

• Homeland Security, $2.7
• Military construction, $4.2
• Defense facility repair & energy, $4.5

Environment, Interior, $10.5

• State grants for water infrastructure, $5.8
• Other, includes national park capital improvements, $4.7

Federal Facilities, $6.7

• Construction & repair of federal buildings, $5.4
• Other, $1.3

State Dept., technology & construction, $0.6

Overall, tax reductions for individuals are only $73.8 billion, not one penny of which will go to high income earners. Other than alternative energy, there are no private sector companies which will get any tax breaks. The total tax reduction part of the stimulus bill is only 9.4% of the "expenditure", so Congress got to fully direct 90.6% of the total monies use.

There is no incentive whatsoever for any industry to hire anyone, except in the construction, college & university, public school system, health care, computer & broadband, electric transmission line companies, law enforcement, vocational training, government, building materials, construction equipment, and alternative energy areas. Note that these encouraged areas are either government workers directly or private industry which has long been heavily dependent upon government funding and have been selected to receive subsidies from the remainder of the private sector through increased tax transfers of wealth. The money to be sucked out of the remainder of the private sector will fund these government-favored areas.

A great part of the money seems directed at making the medical industry still more dependent upon government. The $2 billion to set up the National Coordinator for Health Information Technology and the incentives to get Medicaid and Medicare providers to set up computerized medical records are especially interesting. It is perhaps quite rational to have more computerization of medical records and even to then use those records to better assess which medical procedures work best. However, we know that much more than this is afoot. It is very clear that the socialists now running the Federal government intend to use these computerized medical records to gain more control over medical treatments and to reduce the medical-decision power of the patient and doctor. This must happen as a part of the plan to have a single-provider (i.e., government) system of medical and health care.

It is very clear that the teacher's unions and the education establishment are being paid for their strong support of the Democrat Party and of ideological socialism. $79.2 billion is going to state grants for education, education for the disadvantaged, and special education. The colleges are making out big-time. The $9.7 billion to NIH, the $3 billion to NSF, the $1.6 billion for the office of science of the Energy Dept., the $16.6 billion in student financial assistance, and the tuition tax credit of $2500 will flood the universities and colleges with more money to continue to fuel their ever-escalating costs. A part of the $16.8 billion for energy efficiency and renewable energy will also fund university research. The NIH, NSF, Energy Dept. Office of Science money will mostly fund an increase in university research grants and new lab facilities. The student financial aid and tax credits will decrease the pressure to control tuition rate increases. There is little reason to believe that any of this money will provide more spur to the economy than that money would have if left in the hands of the private sector. While it is true that some colleges and universities are private, most are nonetheless strong advocates of much bigger government, for which they are rewarded with research money and many financial considerations already.

The construction projects to be funded are almost entirely for more government infrastructure, to be supported by tax dollars long into the future. Most investors will find little stimulus to their plans in this stimulus bill. Few wealthy individuals will have reason to invest their money in the United States. It will make more sense for them to move more of their money abroad, where the tax rates on higher income people are lower. American multinational corporations will have ever more reason to expand their operations abroad, while contracting them in the United States. Contraction of operations will mean that they will have less expense for providing health insurance and increased sick leave mandated by Congress as well. Many companies must be very worried about this.

This stimulus bill should have consisted of a major decrease in taxes to be realized by every individual and by corporations. As I have pointed out repeatedly, it is very foolish for us to tax corporations at the highest rates in the world, with the exception of Japan, with whom we are about tied. It is equally foolish to maintain a very punitive tax rate on upper income earners. These high corporate and individual rates actually decrease government revenues, so we do not need to take the claim seriously that these high rates make life better for those with lower incomes because then government can do more to help them. Indeed, we can laugh at it derisively and proclaim with assurance that the real reason for these rates is one of envy, hatred, and the desire to take down those who have achieved great success in the private, voluntary sector. Such motivations clearly controlled many of those in the New Deal of the Franklin Roosevelt administration and they now control the thoughts of the Obama administration and the Democrat Congress in their pursuit of a New New Deal. This and only this explains their carefully orchestrated snubbing of most of the private sector and of the very idea of the sovereignty of the individual.

Obama The Idiocentric, Obama the Insane

I have several times noted that Obama is a man who consistently examines a complex issue pertaining to the lives of individuals in society and comes to all the wrong conclusions. I have termed such a person an idiocentric. However, someone who always makes wrong judgments about reality is very reasonably said to be insane. Obama has made it very clear that he is insane.

For a long while the fact that Congress has been under the control of the Democrats, the very extreme socialist nature of the Democrat leadership in the House and the Senate, and their announced intentions to raise taxes on wealthier Americans, on businesses and investment, to force unions on workers and employers, to do nothing to reform either Social Security or Medicare, to further socialize and ration medical care, to do nothing to keep the world's leading terrorist-supporting nation from acquiring a nuclear bomb and missile capability, and to return us to a pre-industrial and pre-energy lifestyle has all hung over our heads as an individually threatening guillotine. Only the presence of President Bush with his potential to veto legislation and the threat of Senate filibusters saved us from the worst of their plans for some time. But it was clear that there was no way that spending was going to be controlled, there was no way that the Bush tax cuts were going to be maintained when they expired in 2010, and there was no way that the U.S. was going to match the corporate and higher income tax rate cuts which were doing so much to promote growth in many other countries.

Now, the Democrats control the Presidency and not only control it, but have placed the most committed socialist of them all into the position. What were Americans thinking about? Apparently only that they were guilty because of past discrimination against African Americans.

When a presidential candidate says that he wants to bankrupt all coal-fired power plants, which produce half of all of our electricity, and replace them with incredibly expensive photovoltaic power plants and windmills, the man should be recognized as insane. When he constantly implies that if only we tax the rich enough, 95% of us can be much better off, the man is a candidate for a careful mental health evaluation. If you take all of the wealth of the top 5% of Americans and redistribute it, this just means that a different 5% of the population is to be destroyed next. This is like eating all of your seed for next year's crop now because it will make your tummy really full now. The pundits like to attribute the problems of the economy prior to Obama taking the oath of office as due to President Bush. He had a hand in it, but the Democrat Congress had a bigger hand in it, and as the election campaign unfolded, fears of what Obama was going to do had a bigger and bigger hand in convincing investors to pull back their money. The drop in the stock market all the way back to last September was largely due to Democrat idiocentricity!

Now Obama is President and he is leading the charge on one insane act after another:

• An $800 billion stimulus bill which will only stimulate government and shrink the private sector.
• A more than $400 billion supplemental spending bill filled with lard and 9000 earmarks.
• Constant negative talk about how bad the economy is and seeds planted for the nationalization of the auto and financial industries.
• A higher income tax rate for those making more than $250,000 of 39.6%, which will hit many small business owners and surely cause them to create many fewer jobs.
• Applying the Social Security tax to those making $250,000 or more, which is an additional tax of 12.4%, though many people are of the mistaken belief that it is half this amount unless you are self-employed.
• Capital gains is to be returned to the 20% rate, despite the fact that a reduction from this rate to 15% under Bush proved a boost to the economy, a job creator, and still increased government tax revenues.
• A plan to decrease energy use by 14% in 10 years and by 80% by 2050. This is a plan to bring back the horse and buggy, except the horse will be biogenetically engineered not to shit, since that produces methane, a greenhouse gas. We will all be Amish soon.

Given such colossal wrongheadedness, we can be sure there will be many more insane plans announced in short order. Basically, we are now to become cannibals and eat the rich. When they are all devoured, we are to live as the Amish do, but we will have no rich, energy using people to sell our organic products to, so the idea that we will live like the Amish is not realistic. It will be more like a return to the caves. Seriously.

Since we will no longer have an effective military defense, it will be better to be in the caves anyway when the Iranians lauch their nuclear warheaded missiles at the Great Satan. Obama is a commited unilateral disarmament kind of socialist, already made apparent by his early policy moves with respect to Russia, Iran, Hamas, Iraq, and Pakistan. The caves will be the best protection we will have left. But be sure that this is not to be a return to life as the caveman knew it. No, the caveman was allowed to burn wood and create CO2 emissions. He was also allowed to wear animal furs. We will be without the use of energy to keep warm and we will be very naked in Obama's future world. And at least 4 or 5 billion people on earth will have to die so that the almighty, pristine earth will be less damaged by the existence of mankind.

Eviscerating the Private Sector

The private sector is under total attack by government, the mainstream media, and socialists, who are now nearly everywhere in charge of educating our children by virtue of their control of the public schools, of colleges, arts and culture, and increasingly of religion. The attack is unremitting and the inroads toward total control of the economy are terrifyingly extensive. What has happened:

• It has been established in the courts that anything we may wish to sell, whether goods or services, is subject to regulation under the Interstate Commerce clause of the Constitution, despite its purpose being to free trade.
• The financial industry was heavily regulated, but now the winners are chosen by the federal government using bailout money, with those not being chosen being forced to merge by takeover with those who were chosen.
• The disposal of waste products is largely controlled by governments, with many areas having draconian recycling laws which make no economic sense.
• It has long been law that governments can prosecute a company for charging more for its goods and services than other companies do (proves monopoly), or for charging the same (proves collusion), or for charging less (proves cut-throat dumping). Woe be the company that angers government.
• Homes and commercial buildings cannot be built in most areas of the country without currying the favor of local and often state governments. When they are allowed to be built, they must often be built according to archaic, expensive building codes. Architectural designs must often be approved by conventional thinking local agencies. Often homes can only be built on very large lots, which means that it only makes sense to build large, expensive homes on those lots.
  
• The Clean Air Act gives the Environmental Protection Agency a very freely exercised power over power plants, manufacturing firms, and the user's of many products such as paints, aerosols, insecticides, and plastic foams.
• The Clean Water Act controls the use of water and the emissions or dumping of chemicals which may pollute water sources. It also means that low spots which are only very occasionally wet, cannot be used, since they are declared wetlands.
  
• Employers are required to hire some people and reject others, sometimes forcing them to adopt racist policies. They are required to serve as unpaid tax collectors and record keepers for governments and their employees. In some cases, they are required to confiscate the pay of their employees.
• People are required to subsidize many businesses through their tax monies. Examples of such businesses are those farmers who grow corn, rice, wheat, soybeans, peanuts, sugar, sugar beets, and many other crops; banks, especially those favored with bailout money; home mortgage holders, especially those in default who will soon be given bailout money; industries protected by tariffs, such as sugar growers, ethanol producers, steelmakers, and many more; power companies using wind-driven electric generators and solar power; companies granted monopolies by government such as cable companies, electric power companies, land-line telephone companies, gas stations on many toll roads, and others; and by companies and individuals given licenses for operation such as cab companies, plumbers, electricians, interior decorators, beauticians, real estate agents, certified public accountants, doctors, psychiatrists, dentists, EPA and FDA and state and local government accredited laboratories; those who purchase energy-efficient cars or who add insulation to their homes; those who send children to college on student loans; those who send children to public education schools; those small businesses who get subsidized loans from the Small Business Administration; those businesses owned by favored minorities and by women; businesses located in depressed zones; and many other activities favored by government.
• Redistribution of income using the progressive income tax, which moves money from those who create wealth and value to those who do not. This is an essential defining characteristic of socialism and has no basis in the American heritage prior to the New Deal in about 1937.
  
• Rare and unimportant species and the occasional hill or mountain take precedence over human needs for land or resources even in situations where the harm to the living species is unknown or minimal while the harm to humans of inaction is very clear and considerable.
• Businesses are required to keep expensive records of all transactions involving money, despite the fact that their only purpose is to be used as evidence against a firm that it is not paying some tax money some government wishes to take from entities with no voting privileges. The more government can tax business the happier it is, since voters care little and understand little about how these taxes have deleterious impact upon their lives. Businesses are required by Sarbanes-Oxley accounting requirements to use accounting procedures which make little economic sense.
  

What do we have to look forward to? Much more of the same. This includes:

• The declaration that the use of most energy forms produces polluting and climate-changing CO2, so our use of all the major forms of energy will be curtailed. This means much less economic activity since coal, oil, and natural gas use will be greatly reduced, despite the fact that this will do very little to reduce climate change, which is dominated by the forces of nature, not by those of man.
• Much more massive redistribution of income, with non-taxpayers receiving deceptively termed tax rebates from hard-working and creative thinkers who earn higher incomes.
• Slower economic growth caused by reduced use of energy, more expensive energy, less efficient investment of income due to government favored redirections, less total investment since lower income people invest less, an unwillingness to invest in longer term projects because of erratic and arbitrary government interferences such as changes of tax law and emission standards, the holding of investments for excessive periods to avoid paying higher capital gains taxes, shifting investment into government bonds, the increased commitment to expanding operations abroad where corporate taxes are lower, and creative and hardworking people working less.
• A great increase in required service to the government or to those charitable activities it may favor. Women will be required to register for the draft. More schools will require community slavery, err... service, before children are allowed to graduate from high school. College loans will be dependent upon signing up for service with the government, which will put many ignorant and untrained young people into the business of using government power, resources, and our tax money to do all sorts of mischief.
• Heavier dependence upon Social Security for retirement as stocks and securities either continue to shrink in value or grow much more slowly. As the economy grows more slowly, the tax income to support those on Social Security will diminish. Obama would give tax rebates to people who do not pay income tax, claiming that the rebate is really because they pay Social Security taxes. The distinction between income tax and Social Security tax will be completely lost. Since the Social Security money already collected has already been spent largely on non-Social Security programs by the federal government, that distinction was already very weak. In order to continue the Social Security program for Baby Boomers and beyond, the tax burden on the remaining workers will increase until they rebel, assuming that their vote is any longer able to take power away from the governments. Obama may choose to rule as his socialist hero Hugo Chavez does in Venezuela where the voters have little say.
• Freedom of speech will be everywhere as limited as it is now on most college campuses and in most public schools. Important issues will no longer be discussed, because if an issue is important, it has the power to make someone upset and it is not allowable to upset anyone, unless he is intelligent, hardworking, and a creative and rational thinker. The remaining pablum which we will be allowed to talk about will be the subject of radio talk show hosts chosen initially to have equal numbers of conservatives and socialists and very few libertarians under a Fairness Doctrine. After awhile, all libertarians and most conservatives will be banned, since it will be claimed that they are guilty of hate-speech and racism or that they are global-warming deniers.
• Human beings will be discouraged from procreating, since they are considered a threat to the planet and natural ecosystems. They cut down forests, build homes, use resources, and breathe out the greenhouse gas CO2. Humans will be considered inherently evil by most people rather than just the elitist environmental radicals of today and those young people recently rolled out of the propaganda mills called schools. Western Europe and Russia, where new births are far below replacement levels, will set the example in the U.S. where our population is damned for growing.
  
• Massive depression of the population will set in as they realize that they cannot do anything unless they get the approval of 25 government agencies, all of whom are fighting for power and have different, often contradictory, requirements. Many more people will turn to alcohol and drugs, as they do in Russia, to forget their helplessness and their total insignificance. Some, those who can remember the time, will dream of living a self-directed life.
• The United States of America will be as jaded as France and Germany. People will lose all sense of individuality. They will be defined only by what gender, race, and economic class they fall into. Employers will have the duty to provide jobs and will be thoroughly hated. More and more, government will attempt to chain them to their posts. Slavery will make a historical return with minorities and women as slave masters of so-called white males. Of course, this slavery will be directed through the agency of government, so that it will be easier for people to pretend that it is just required service. The slave masters will be many, rather than a single individual.
  

If we should fly with McCain, he will push us out of the plane with a deployed, but badly ripped parachute. If we fly with Obama, he will push us out of the plane in a free-fall without a parachute. We sure do have a lot to look forward to as we watch the ground come rapidly closer, before socialism gains its last death grip on us as we imprint the earth. Our deaths as individuals will be unlamented, but we will be damned for that last imprint we make upon the earth.

What is a Rational Tax Policy?

The last few posts have been for the purpose of establishing a foundation for a discussion of what a rational tax policy would be and then to proceed with such criteria to examine the tax policies of the Presidential candidates McCain and Obama. It is not possible to evaluate the soundness of their policies without thinking about the proper purpose for taxes and the least harmful ways to impose them upon the people.

First, the amount of tax money needed to operate a government should generally be determined by which derivative functions it can legitimately pursue as compatible with its fundamental function of protecting the right to life, liberty, and the pursuit of happiness of the individual. If our federal government carried out its work consistent with this constraint, the total federal budget would certainly be less than 40% of what it is now. This would allow huge tax reductions. Both state and local government functions are probably just about as bloated with respect to this purpose.

Second, all government budgets should generally be balanced, with tax income equaling government expenditures. Under severe depressions and during a life-threatening war, the last of which was WWII, government deficits are reasonable.

Third, taxes are not to be used to punish people who are either making high incomes, or who do not wish to buy a home, or who do not wish to install a photovoltaic panel on their rooftop, or who smoke or drink alcoholic beverages. Taxes are not to be used for social engineering purposes, since there is no way to do this which will not derive some people of their right to life, liberty, and the pursuit of their happiness.

Fourth, having satisfied the above conditions, taxes should be levied such that the economy as a whole will be able to sustain a maximal growth rate. The fundamental reason for this is based on the observation several posts ago that personal compensation income, including benefits, has been approximately fixed at 70% of national income for about the last 40 years. People across all income levels see their income grow as the national income grows. Thus, if you hold the best interests of anyone, poor or wealthy, at heart, the way to best improve their lives without doing actual harm to anyone else, is to establish policies which allow everyone the freedom to contribute to the growth of the economy. Putting excessively high marginal tax rates on the wealthy simply discourages them from working an additional hour they would otherwise have chosen to work. Or, it causes them to invest their income in a bigger home instead of more efficient machinery for their factory. With less efficient machinery, they cannot hire more employees or they have to fire employees, because a factory in China is making similar items for less. Or similarly, they invest their money in municipal bonds for the tax deduction, but what municipal activity grows the economy as well as their equipment investment would or as their hiring a new worker and providing him training so he can become productive?

Fifth, taxes should be simple and so straightforward that every voter knows very well how much he is paying in taxes each year. From this standpoint, pretending that an employer is paying half of the total Social Security and Medicare taxes is wrong. It is also wrong to tax corporations, because all of the taxes they pay are passed on to individuals in ways much too complicated for anyone to figure out. Ultimately only individuals pay taxes, so the tax should be levied on them directly so they can be aware of what the cost of government is to them. They must be in a position to determine whether the value of government programs equals their cost. Taxes are the equivalent to prices in the free market for government. In the free market each consumer decides which products and services and how much of each product or service he will buy based on his needs, desires, and prices. The voter should be doing the same with respect to government, albeit government limited by the principle of protecting individual rights, and the cost of government, which is given by taxes.

Personal exemptions on income taxes should be based on the cost of a person having sufficient, but just sufficient, means to feed, clothe, and house themself. No other tax exemptions should exist except qualifying medical expenses, which would not include certain types of cosmetic surgery, for example. This deduction should include the cost of medical insurance. This keeps income taxes fair and simple. The tax rate applied to taxable income should be the same for everyone. Programs such as Social Security and Medicare should be phased out since they are not a proper function of government and their functions should be handled by private industries, such as investments and insurance.

Unfortunately, governments have caused many incredible distortions of the free market with their tax policies of the past and present. People have bought homes eagerly of a size more than adequate to their needs in order to have some tax relief. Ending the home mortgage interest deduction would cause a collapse of the housing market. This is admittedly not an easy problem to solve. But, a drastic cut in the cost of governments as they retract to the size they should be, will allow those with homes to at least not be hit with a tax increase due to losing their deduction for the mortgage interest paid. Over time, a great reduction in the size of government and of taxes, will allow the economy to grow so much faster that people will want larger homes due to their greatly increased wealth. So, how do we get to no mortgage interest deduction from here without collapsing the value of homes on the market? Clearly, the deduction will have to be phased out slowly as the size of government is decreased. In year 1, 97% of the mortgage interest could be deducted, then in year 2 the deduction would be 94% of it, until 33 years down the road, there would be no such deduction. This schedule should be viewed as unchangeable by Congress so that everyone can calculate out the consequences of buying a home with a given size mortgage and not have to worry about arbitrary Congressional tampering with their biggest investment decision. Probably the same should be done with the deduction for state and local income taxes. This gives people a fairly long period to re-adjust their decisions on which states and local areas they will live in. These are long-term commitments that need to be made as a sacred covenant on the part of the government toward the people.

Social Security should also be phased out. The proposals to allow young people to invest a part of the present 12.4% in private investments is the way to go here. The part they are allowed to invest will increase over the years. On the other side, people are living much longer now and are much more healthy and generally can more easily find jobs which are not backbreaking than was the case when the Social Security system was begun. This means that people should be expected to work longer before drawing Social Security benefits. They have no right to draw more in benefits than younger people can afford to pay out in taxes. They voted over and over again for this Ponzi scheme, knowing full well that private investments would have provided them a much better retirement. So, benefits given out should not be extravagant. There should be consequences for choosing to do stupid things!

Similarly, Medicare should be phased out. This can also be handled in a very similar manner as with Social Security.

Corporate taxes as mentioned are simply passed on to individuals in many complex ways. If they were eliminated, then American corporations would be much better able to compete in the world economy. Prices for many goods and services would drop, corporations could make wise business decisions without having to worry about disrupting tax issues, they would export more goods abroad, they would hire more people and pay them better salaries, and they would invest more in equipment modernization and personnel training. There would be a serious resulting boost to the economy as a whole. At the least, corporate taxes should be as low as capital gains taxes, since the role of a corporation is largely one of making capital gains.

Capital gains are taxed without regard to the effects of inflation and without regard for the fact that defering the use of money for a period of time has an interest rate associated with it which should not be taxed for sure. So, what part should be taxed? This becomes complicated. Frankly, it is too complicated, so it is best to set this rate low and just be happy that with a low rate on capital gains, the economy is going to grow at a higher rate and in the end everyone benefits from getting their 70% share of the bigger economy. The capital gains rate should be considerably lower than the tax rates paid by the middle class on income at least. This gives the middle class incentive to invest and recognizes that capital gains are not corrected for deferred use of the money and for inflation. Of course inflation is supposed to vanish as governments learn to live within the much smaller budgets needed to fulfill their legitimate functions.

The Death Tax, which causes governments to dance upon the grave of the recently deceased, while they rip what remains out of the heart of grieving relatives and destroy businesses, whether farms or small manufacturing, retail, and services companies. This allows government to deprive employees, who may already have a struggle to keep the business going without the guidance of the owner, of a job. What sound government tax policy this is! This death tax is clearly all about punishing people who spent a lifetime building wealth and commonly providing many others with jobs. This is envy of the worst kind run amok. Sometimes it is claimed that relatives have not earned the income of an inheritance, therefore the government should keep them from getting it. This is not always true. Often family members have played a major role in helping to build a family business. Besides, if they are undeserving, they will commonly lose the inheritance soon enough. In any case, the on-going business and the wealth assets will be taxed into the future in the normal ways, so governments will get their income. Such businesses as do survive the death of the owner will often generate far more taxes over time than will a business sold in a fire-sale in order to pay inheritance taxes. The death tax is a clear example of political tom-foolery. We citizens who accept this disgrace are the Toms made fools of.

Now, I am not unrealistic enough to believe that this entire goal of returning government to its legitimate functions and thereby reducing its size is going to be accomplished in this upcoming election cycle. First, the people have to become committed to the essential principle of government limited to the purpose of protecting individual life, liberty, and the pursuit of happiness. Given that this will not happen soon, it is still advisable to judge the tax policies of politicians on your rational goals, rather than as a cost-free promise of Christmas gifts all year long, as many voters do.

Politicians will always skew their tax plans in a direction designed to win enough votes to be elected to public office. Some count on the electorate being absolutely uninformed about the economy, business, and of course the function of government. Some are in love with class warfare and play on people's envy for those who might have more worldly goods and income than they do. They know that few voters have even read the Constitution. They know that few voters have read much history and tried to learn its lessons over the ages. They count on voters only seeing the first and most obvious effect of any law, including any tax law. They describe the economy as a pie of fixed size, simply to be cut up in different ways. They count on being able to fool most of the people most of the time. And, they have a long track record of showing that they are masters at doing so! They almost never get voted out of Congressional office until they wish to leave. Yet, most of them vote for bills which are clearly not in the best interest of the people and are certainly not limited to functions necessary to protect individual life, liberty, and the pursuit of happiness. They are masters at using the tax code to manipulate one group of people against other groups of people and give out favors to those they want campaign donations from and whose vote they want.

Still, there are sometimes politicians whose tax plans are more fair and more likely to encourage the growth of the economy than are the plans of the completely committed socialists and demagogues. There are politicians who are counting a bit less on the ignorance of the mass of voters. There are some politicians whose time-horizon is a bit further out than that of others. I will try to judge the plans, as best they are known, of the candidates for the presidency. I will also try to assess the commitment of each based on his prior commitments and his prior votes.