Compare the Growth of Household Net Worth Under Trump and Biden Administrations

Today's Wall St. Journal has a remarkable graph that compares the change in household net worth during the Trump administration with that for 3 years of the Biden administration.  In nominal dollars, the data is very comparable.  However, when the net worth is corrected for the high inflation of the Biden years, the results of the last three years are catastrophic for America's households.  Here are the graphs:

The effort of American to increase their household worth has been very effectively thwarted by the Biden administration.  This comes on the heels of about a 29% increase in household worth under the previous Trump administration.  The low inflation rates of the Trump administration, the sane energy policies that did not attempt to kill the coal, oil, and natural gas industries, and a decrease in major economy-killing regulations, make an emphatic economic difference that allows families to increase their wealth dramatically.  In contrast, the Biden economic controls create stasis and long-term stasis causes people to give up their effort to lead a productive life.  The Biden governing plan is to reproduce the world Ayn Rand so dramatically pictured for us in Atlas Shrugged.

It is no wonder that so many Americans who have voted for the Democrats reliably for decades are having second thoughts about doing so in the upcoming 2024 election.  Yet, it is also a wonder that many tens of millions of Americans will still vote for him.  These are people who simply do not value individual merit.

Inflation and its Effects are Worse than Most People Think

You know that the government's consumer price index leaped up to 7.9% in February, compared to a year ago.  We have all heard that this is its highest level in 40 years.  Frequently, the government likes to remove the effects of food and energy prices, because they can fluctuate greatly and because they affect the non-elites the most.  That gasless, foodless inflation rate leaves an inflation rate of 6.4% for February compared to a year earlier.  The Producer Price Index went up even more at 9.7% compared to a year ago.  This promises price increases going forward.

Barron's has stripped out all the costs except those that are not necessary goods for everyone.  Essential foods, housing, gasoline, and utilities constitute these necessary core items.  The inflation rate for these critical items for February was 16%.

Since then, about one-tenth of the world's oil and about a quarter of the exported wheat has vanished, thanks to the Russian invasion of the Breadbasket of Europe, namely Ukraine.

It is not enough that less than wealthy Americans lost their jobs and small businesses in horrific waves of brutal Covid-19 mandates.  Now the senseless over-spending of the Biden administration and the Democrat-controlled Senate and House of Representatives has drastically diluted the value of the dollar.  The same Americans most hurt by the Chinese Communist Party generated and released Covid-19, the Democrat fear-driven response of mandates directed at small businesses, and the rising energy costs due to the irrational belief in catastrophic man-made global warming are being slammed to Earth. 

The Democrats are brutally unfeeling and staggeringly irrational.  About half of all Americans voted for them and gave them the power to do this this evil work.  Many of them are now the greatest victims of the Democrat misuse of their rule.

Did You Know that We Need Big Government to Protect Us from Walmart?

Walmart is the biggest retailer in the world, with $443.85 billion in sales in 2012.  It has 2.2 million employees.  It offers low prices to bring in customers for the goods it efficiently supplies.

The U.S. federal government can only tell us how many employees it had in 2011.  It had 4.403 million employees.  The state governments had 3.779 million full-time employees and 1.534 million part-time employees.  The local governments had 10.786 million full-time employees and 3.202 million part-time employees.  Each of these governments inefficiently supply services for which their customers are forced to pay.  They also produce copious mandates that the People are forced to obey. They command forced labor from employers and businesses for the convenience of government.  Federal, state, and local governments all produce mandates that Walmart must obey.  Federal, state, and local governments spent a mere $6.5 trillion out of the national GDP of $15.0 trillion (43.3%) in 2011. 

Now which of these would a rational person fear, Walmart or Government?  I fear Government, but Progressive Elitists fear Walmart!  Yes, they offer Walmart as a primary reason why we must have Big Government.

Why?  Well the story is that Walmart moves into a town or small city and offers goods at such low prices that they drive all other businesses that used to be in the town out of business.  Walmart pays its employees so poorly that they are in danger of starvation and poverty overtakes the town.  A minimum wage increase mandated by government is required to make Walmart pay a "living wage."  In addition, Walmart is killing American jobs because it brings many of its goods in from other countries.  Walmart is a monster, a very unethical killing machine!  Progressive Elitist after Progressive Elitist will use this story to justify Big Government, including MBAs from the Wharton School of the University of Pennsylvania and the Columbia Business School.

OK, let us ask a few questions about this story. 

When Walmart moves into a town, how does it find the manpower to open its store before it has driven all of the other businesses out of business and taken their employees away?  Does it not have to pay prevailing wages to induce those initial employees to work for them?  It is common for new stores to have tens of applicants for each person they can hire.  Yes, according to studies for every 100 jobs created at the Walmart store, in time about 50 retail jobs in other stores are commonly lost.  Yet this is a sizable net creation of jobs.

It is said that Walmart is evil for putting many other retail businesses out of business.  But all Walmart does is to offer products for sale at good prices.  It is up to the people who used to go to the pre-existing retail stores to actually choose to go to Walmart.  They are the ones who do not go to Joe's Grocery Store and Madeline's Clothing Store.  They have the option to choose to pay higher prices in those stores and support those who have long been in their community.  If anyone made unethical choices, would it not be these customers who had no loyalty for the original shop owners of their towns?

Of course, it is not always the case that these smaller stores were even doing their best to provide the lowest prices they could.  A few of them may have taken advantage of having little competition in the town for the kind of goods they sold.  Some of them morally deserved to go out of business in many cases.  No doubt others did work hard to provide the best service they could, but so surely did many a buggy maker, a stabler, a blacksmith, a wagoner, and a saddler when they were mostly put out of business by the advent of cars and trucks.  Logically, the Progressive Elitist claim would be that all car and truck makers and trucking companies were unethical in putting these older companies out of business.

On Black Friday, there were labor union organized protests at many Walmart stores.  They claimed that 825,000 Walmart employees make less than $25,000 a year.  This may be true, but many of them are likely part-time employees.  The majority of Walmart employees are full-time, which is actually unusual for retail stores.  The average full-time associate earns $12.81/hr. and the average employee (full and part-time) earns $11.83 per hour.  Walmart says that 99% of its employees make more than the minimum wage in their areas, which is highly at variance with the usual story told casually by the usual Progressive Elitist.

Walmart, in a McKinsey & Company study that George Will referred to in 2006, found that Walmart contributed 13% of all of the national productivity increase in the late 1990s, which held down inflation greatly and made Bill Clinton look good as President.  It accounted for $200 billion in savings on the cost of goods each year, which is surely a larger savings now that Walmart is even bigger.  George Will pointed out that the average Walmart shopping household makes less than the national average, so these cost savings go to these poorer households, doing them much more good than food stamps and earned income tax credits did for them then.  But as usual, one can count on the Progressive Elitist, who claims to champion the poor, to actually abhor anything that really helps the poor outside of a government dependency program.  They hate Walmart.

But, Walmart's business model depends upon these less affluent customers and those customers respond in droves by going to Walmart for its convenience and low prices.

Everything in the Democrat Economic Central Planning Arsenal is a Dud

The government told us the GDP growth rate in the first quarter was 1.8%, which is not a healthy growth rate at any time and is especially weak if an economy is recovering from a recession.  In May, the government increased that reported first quarter growth rate to 1.9%.  This was still not good, but it seemed to leave the door open to optimism that while recovery was slower than in other recessions, it would occur.  Then, the bottom fell out.  The first quarter GDP growth was revised downward to 0.4% and the second quarter GDP growth was said to be an anemic 1.3%, which has just been revised down to 1.0%.

Jobs growth is not keeping up with the growth in population.  The annual Consumer Price Index (CPI) stands at 3.6% and is running much higher in the last half year.  The average American worker workweek decreased by 0.1 hours and earnings fell by $0.03, which is no way to keep up with the inflation.  Labor productivity has very unusually been falling lately as well.  These factors bode ill for further hiring.

The rest of the world economy is not in good shape either, so there is no chance that exports will do much to change the bleak picture of the American economy.  The Purchasing Managers' Index (PMI), a measure of business purchasing activity, fell to a two-year low in August to 49.0.  Numbers below 50.0 mean contraction of business activity is going on.  Among the European countries with reduced activity are Great Britain, France, Spain, Italy, Ireland, and Greece.  The positive PMI's of Germany, Sweden, and Switzerland dropped.  The PMI of Japan is at a 3-month low and Taiwan's PMI is very negative at 45.2, its lowest value since January 2009.  Canada's GDP contracted, largely due to a 2.1% drop in exports.  The leading retailer in Australia expects falling sales.  China has a PMI on the edge of contraction and its exports to the U.S. have fallen.  The world economy is staggering.

In the U.S., the favorite Democrat central planning tools of stimulus spending and quantitative easing, or creating money from thin air, have not worked.  What a surprise!  Despite the GDP growth of the first half of the year being only 0.7%, the White House is telling us that GDP growth for the year will be 1.7%.  Wow, what a howler that is!  This means they are predicting growth in the second half of this year at an annual rate of 2.7%.  I suppose they think that growth will occur because businessmen and consumers are trusting that Obama's speech on his economic recovery plans this week will solve all of our problems!  For that to be so, all Americans would have to regress to the point that they believed that he could stop the oceans from rising and cure all of the diseases of the world, as many did when they first voted for him.  I think many even of those favorable voters have learned something since!  Even if that were the case, that growth which has not been evident through August, would have to occur entirely in the last 4 months of the year.

Let us examine a few issues with the stimulus approach loved by socialists.  The CBO, not really a very reliable source, recently released a report saying that the $787 billion American Reinvestment and Recovery Act has really cost us a $825 billion increase in debt.  They claim that they cannot figure out how many jobs were created by it, but it was somewhere between 1.4 million and an unbelievably generous 4 million.  I do not think they seriously try to estimate the number of jobs lost due to the bill.  So let us divide $825 billion by 1.4 million jobs and we find each job cost $589,300.  While some investment is needed to create meaningful jobs, that is enough money to pay someone the median income of $46,300 for 12.7 years!  I could readily provide several scientists with jobs with that amount of money, but the federal government is always incompetent and inefficient!  While I do not believe there is even a 1% chance that the stimulus bill created 4 million jobs, even if it did, each job would have cost $206,250 which would have allowed me to provide at least 1.5 long-term new jobs in my laboratory instead of a mythical job.

The CBO report claims that printing up $0.825 trillion in a $15 trillion economy added between 0.8% and 2.5% to the GDP in real, inflation-adjusted growth.  Printing this amount of money diluted the value of all money by at least 5.5% since 0.825/15 = 0.055.  One could argue that the dilution of money value is proportional to the smaller value of money in circulation, making the dilution much greater than this.  The act of printing that money did nothing to add to productivity so its effects upon production are transitory.  Worse yet, that monetary dilution devalued all property, including the already depressed housing market, and all commodities, such as oil, cotton, corn, wood, and metals.  Despite these huge negative effects, the CBO tells us that the expenditure increased the GDP by something in the range from 0.8% to a totally unbelievable 2.5%.  Well, this is another instance of the very bad track record of the CBO showing its lack of understanding of economics or its adherence to rules which do not correspond to reality.

The CBO then goes on to say that direct government purchases of goods and services have a multiplier effect of 1.0 to 2.5 for every dollar spent!  Well that is very interesting.  If that were so then the stimulus bill expenditure of $825 billion would have increased the GDP by between 5.5% and 13.75%!  Clearly, direct expenditures by government have no advantageous multiplier effect.  In fact, we can calculate the effect from their own numbers for the GDP growth they claim for the stimulus bill.  0.8/5.5 = 0.145 for the lower bound multiplier and the upper bound multiplier would be 2.5/5.5 = 0.45.  These calculated multipliers ranging from 0.14 to a clearly too high 0.45 are way below 1.0, which is more like what one expects from an incompetent and inefficient government with no real interest in human productivity.

Alan Reynolds, an unusually insightful economist, has written an excellent article entitled The Fed vs. the Recovery, which first appeared in the Wall Street Journal on 26 August 2011.  It is on the CATO Institute website here.  He says:

In demand-side theorizing, monetary stimulus means the Fed buys more bonds. The Treasury has certainly been selling a lot of bonds, and the Fed has been buying (monetizing) a huge share of those bonds. That helped push the broad M2 money supply up at a 6.8% rate over the past six months. Yet the only thing we have to show for all that stimulus over the past year has been rapid inflation of producer prices and a simultaneous slowdown in the growth of the private economy. Consumer price inflation also accelerated to 5.2% in the first quarter and 4.1% in the second, from just 1.4% in the third quarter of 2010.

He notes that industrial supplies and materials account for 34.5% of our imported goods so far this year and capital equipment and parts add another 23% of imports.  Because of the second quantitative easing (QE2) which began in November 2010 and ended in June of 2011, the value of the dollar fell about 15% relative to the Euro.  The Economist's commodity-price index went up 50.9% in a year in dollars, but 22.8% in Euros.  Our import prices rose by a 15.1% annual rate and our export prices rose by an annual 11.4% over the last three quarters under QE2.  These effects reduced the growth of real GDP.

Alan Reynolds notes that

The net effect was to reduce the profitability of manufacturing and distributing products in the United States, and therefore to shift such activities (and jobs) to other countries which were less handicapped by the dollar's weakness.

Fortunately for the S&P 500 companies, 46% for their sales came from other countries!  As a result, their operating earnings per share rose from $20.40 a year earlier to $24.86 by June 2011.  Thanks to our government's policy of printing money, this did most Americans little good.

One of the commodities whose price was driven up by QE2 with important and devastating consequences was that of oil.  As I have pointed out many times (thanks to reading Alan Reynolds), every postwar recession except that of 1960 has been triggered by a sudden increase in the price of oil. From August 2007 to July 2008 we had such an oil price spike as the value of the dollar fell and oil prices doubled.  We had another large oil price increase due to the dollar losing value from late August 2010 when Bernanke announced QE2 until the end of April 2011.  The price of oil increased from $72.91 to $112.30, an increase of 54%.  Just the price of oil increasing suddenly has a very negative impact on our economy.  This is aggravated by our refusal to allow reasonable increases in domestic production, which makes us more vulnerable to fluctuations in the value of the dollar relative to other currencies.

Both the Stimulus and the Quantitative Easing efforts have depressed the growth of the GDP and resulted in giving companies every incentive to hire aboard and every disincentive for hiring at home.  Meanwhile, the regulatory, tax, anti-business, promotion of labor cost increases, and anti-energy policies and rhetoric of the Obama cabal has been added to the wrongheaded policies of the Federal Reserve to put us into a never-ending recession.

Sometimes it gets a little crazy in Africa

Zimbabwe issued the highest denomination currency ever and in 2009 it would not buy a bus ticket in its own capital.  These bills are no longer in use as currency in Zimbabwe.  Zimbabwe gave up on adding more zeroes to its currency before 2009 was over, but the bills are now worth something to currency collectors.  The bills are selling on the Internet for more than 15 times what they were worth in circulation.  They are now worth about $5 American as a collector's item.

Since the Democrats will not cut back on their spending and taxation will never provide them as much as they want to spend, I wonder when the American highest denomination bills will hit $100,000, then $1,000,000, then $10,000,000?  Look at the growth of our money supply since 2000 compared to its growth in prior times in the plot below:

The rate of expansion of the M2 money supply from 2000 to 2010 was at a rate of about $380 billion per year.  M2 was very nearly twice as large at the end of 2010 as it was in 2000.  As long as most of M2 is held abroad by people and countries who think the American dollar is reasonably sound, this may be less than totally catastrophic.  But, but, but, if those holding these dollars lose confidence in the dollar and start dumping it in panic, the jig is up.  We may then see that $100,000 bill, with a $1,000,000 bill fast on its heels.

The Hypocrisy of Democrat Caring - Inflation, Another of Many Examples

The Democrats always claim to care for the well-being of the poor and the middle class.  When we examine this claim critically, all we see is hypocrisy and the maneuverings of flim-flam artists in most cases.  Let us consider another such case.

When faced with a recession brought on by a spike in oil prices which then burst the housing and credit bubbles, the Democrats produced a huge porkulus bill to funnel more than $800 billion preferentially to their political followers, mostly overblown state and local governments, crony big business merchantilists, labor unions, trial lawyers, environmentalists, and community organizers.  This was a huge transfer of money from the productive private sector to the non-productive government sector and away from the jobs-producing small businesses of the free market.  The Democrats further restricted the free market with ObamaCare, so-called financial reform favoring big Wall Street firms over banks and financial companies of a smaller scale, threatened and real tax increases, cutbacks in coal mining and oil and gas extraction, and increased regulation burdens, especially by the EPA.  Job loss was quick to follow.  In December 2008, we lacked 15,287,000 jobs and by February 2011 we lack 23,108,000 jobs.  The Democrat control of the House, Senate, and White House quickly added a loss of 7,821,000 jobs, which was added to the 4,254,000 jobs lost in the second year they controlled the House and Senate in 2008.  The under-educated and low-skilled people the Democrats always claim as their own and to be so close to their hearts, were preferentially found among those now without a job.  The Democrats could not have done a better job of targeting them for grief and deprivation.

Also in keeping with Keynesian economic theory, long known to be balderdash, but much beloved by governments always looking for reasons to spend more money, the Democrats increased the money supply hugely.  Once that is done, avoiding a future bout of price increases is very nearly impossible.  Cutting back on the growth rate of the money supply, once the economy begins to respond to having increased cash, but decreased saving and investment values due to dilution, becomes painful to many.  Among the many who cannot cut back are the governments themselves.  To spend so much, they create huge new debt and that debt has to be financed.  Presently, the Federal Reserve Bank is buying 70% of U.S. Treasury notes!  Without a fundamental change in spending policies by the government, which it is clearly loathe to do given the unwillingness to reduce spending by even $60 billion in the face of a deficit for 2011 of about $1,600 billion, the Federal Reserve Bank will be the only buyer of U.S. Treasury notes for a long time.  They will lighten that obligation by causing inflation, so the debt becomes less burdensome over time.  This is a favorite way for governments to effectively tax the people, without having to pass a tax increase.

This has further consequences for those who are poor, out of a job, on fixed income, or are in the middle class.  Let us examine the consumer price index trends we are now seeing clearly:

Since July 2010, there have been only increases in consumer costs.  These increases are given in terms of annual rates so that adding the last 12 months given adds to 2.0%, but round-off loses 0.1% of the total 2.1% increase over the last 12 months.  The alarming message is that zeroes and negative numbers have been replaced since July with large numbers.  The average monthly increase since July has been 0.2875.  Projecting that alone forward would give us a consumer price index (CPI) increase from July 2010 through June 2011 of 3.45%.  Still more alarming is the fact that the trend is actually upward over that time.  It is more realistic to project at least a 4% increase in the CPI for this period.  Such an increase generates further uncertainty which will make businesses more reluctant to add employees.

 

These increases have been led by increased food costs and fuel costs.  Food and fuel costs are particularly difficult for the poor, those on fixed incomes, and even middle class families to bear.  As we know, medical costs continue their high rate increases, accelerated by ObamaCare. The hardship is increased when many more people are unemployed.  In 2009, the median U.S. inflation-adjusted household income fell 0.7% from 2008.  It is estimated that the median inflation-adjusted household income in 2010 was down by 1.0% compared to 2008.  Income has been going down and now prices, especially unavoidable ones such as food and fuel prices, are going up at a great clip.

Democrats, this is really the way to show how much you care for the poor and the middle class!  Your slip is definitely showing.  No, that would be much too nice.  That can happen to anyone, or at least any woman.  No, you are clearly revealed for the con artists you are.  You cannot put this flim-flam game over on the American people for long.  Surely they will catch on.  A 5% decrease in the ability to purchase goods and services (4% CPI increase, 1% income decrease) is hardly likely to go unnoticed.  Your snake oil is not working and sick Americans are going to notice they are becoming sicker.  You had better hightail it out of town, you flim-flam Democrat con men and women!  This is pure shades of Jimmy Carter replayed and the hopey-changey misdirection magic is not working anymore.

Missing Jobs Increase Again in November 2010

Continuing the trend since July, the number of missing jobs in the United States increased again in November 2010.  As usual, I will present the jobs statistics using those without the seasonal adjustments from the Bureau of Labor Statistics and add in the data from the November Unemployment Report.  I calculate the number of missing jobs based upon the percentage of Americans who were or wanted to be in the workforce in January 2000, near the end of a period of several years in which that percentage had been high and fairly constant.  I do not believe that Americans are yet lazier than they were then, though the easy availability of long-term unemployment insurance might be changing Americans into more dependent people.  But the overriding assumption here is that if the economy were healthy, it would produce enough jobs of high enough quality that 67.49% of Americans would want to work now, as they did in January 2000.

The number of employed Americans fell by 334,000, while the working age population grew by 185,000 people, of whom about 67.49% or about 125,000 would be expected to want jobs.  As a consequence, the number of missing jobs grew by 459,000 in a single month.  This is approaching a half-million more missing jobs in one month.  This is another human disaster.  The real unemployment rate is 13.47%, not the commonly touted 9.8%.  Despite this, the Wall Street Journal of 4-5 December 2010 has a top front page graphic showing that 39,000 jobs were added in November.  Their number was only for the non-farm payrolls.

Despite the early elation of many small business owners that the outcome of the mid-term election would ultimately work to diminish the anti-business climate in the halls of the Federal Government, the uncertainties about next year's tax rates, the escalating awareness of the costs and overhead of ObamaCare, worries about the EPA's rulings on CO2 emissions, increased costs and paperwork coming due to the new FDA regulations just passed through the lame duck Congress, continued worries about the sustainability of the federal debt and that of many state and local governments, and fears of inflation due to the massive printing of money are among the many factors keeping businesses from hiring.  Large businesses have many of the same worries and face a world of competitors in which they will pay the highest corporate taxes in the world this next year.

A Measure of the Government Wealth-Taking

In May 2008, M2, a measure of the money supply, stood at $7,733.5 billion.  In April 2010 it was up to $8,595.5 billion.  The government had added $862 billion to the M2 money supply.  This is an 11.15% increase in about 2 years.  One consequence of this is that everything you own, when given a dollar value, was devalued by 11.15%.  This does not mean that the dollar value as given dropped, but it does mean that other things being equal, your assets lost 11.15% of their value.  Measuring their value in terms of other currencies than the dollar may not indicate this, since most other currencies have also been similarly inflated during this time.  But, when measured against a holdable and valuable commodity such as gold, platinum, and silver, it is only reasonable that this would mean that your asset lost value in terms of those valuable commodities.

The stock market in this period fell from 1409.34 on 1 May 2008 to 1186.69 on 30 April 2010.  This was a drop of 15.80%.  Of course other things are not equal, so a drop of 11.15% was exceeded.  Among other unequal factors, the U.S. GDP fell by 2.33% from 2008 to 2009, so that might simply be added to the 11.15% drop to create a drop of 13.48%.  Of course, if productivity is increasing fast enough, an increase in M2 may not result in a drop of stock prices, but during the recession with more money chasing few goods, it is not surprising that our stock market investments have lost value.  For the many Baby Boomers approaching normal retirement ages, this has been a disaster.  We can largely thank the federal government for this and attribute it to its influence on Fanny Mae, Freddy Mac, AIG, the Federal Reserve, and its many efforts to push financial institutions to provide sub-prime mortgages to people who could not afford them.

Taxes and Depression

Arthur B. Laffer wrote an excellent opinion piece for The Wall Street Journal on 22 September, which I have been meaning to summarize for some time now. He discusses some of the important causes of the Great Depression. He concentrates on the large tax increases that contributed so much to the depression and I want this as background for several other entries I will be making here. I have previously noted other important causes of the Great Depression, such as the terrible uncertainties the FDR anti-business and anti-capitalism regime caused for businesses with price controls, anti-trust, limits on production, fostering union violence, and regulations. I have also discussed the tax increases, though Laffer's account on taxes is more thorough.

He notes that the policy of the Federal Reserve played a role in the Great Depression, but it was a secondary role. The following tax increases were most important.

• Smoot-Hawley tariff of June 1930, the largest tax increase on trade in peacetime
  
• In 1930-31, slight increase in tax rates on personal income in lowest and highest brackets and the corporate tax rate was increased from 11% to 12%
• In 1932, the personal income tax lowest rate was raised from less than 0.5% to 4% and the highest rate was raised from 25% to 63%, the corporate rate was raised to 13.75%
• Also in 1932, many, many excise taxes were increased, the highest death tax rate was increased from 20% to 45%, and the gift tax was brought back with the highest rate set at 33.5%
• In 1934, the highest death tax was raised from 45% to 60% and the highest gift tax rate was raised from 33.5% to 45%
• In 1935, the highest death tax was raised from 60% to 70% and the highest gift tax rate was raised from 45% to 52.5%
• In 1936, the highest corporate tax rate was increased to 15% and a surtax of up to 27% was placed on undistributed profits; the highest personal income rate was raised from 63% to 79% (a 216% increase in just 4 years)
• In 1937, a 1% employer and a 1% employee tax was instituted on all wages up to $3,000.

State and local taxes were also greatly increased. In 1929, they summed to 7.2% of GDP, but from there they went up each year. In 1930, state and local taxes were 8.5% of GDP, in 1931 they were 9.7%, and in 1932 they were 12.3%. This was a walloping 71% increase in 4 years!

The federal government also forced everyone to sell them their gold at $20.67 an ounce, but then set the price of gold at $35 per ounce in Jaunary 1934 about a year after requiring everyone to turn in their gold. This was a devaluation of the dollar by 59%, which was a huge tax, though in the evilly cunning way of government, it was not called a tax.

Laffer then points out that this 1933-1934 devaluation of the dollar resulted in a 60% increase in the money supply from April 1933 to March 1937. The monetary base grew by more than 35% and adjusted reserves by about 100%. Despite very high unemployment, the consumer price index increased by 15% from early 1933 through mid-1937.

Now in light of this, we must give some thought to the many tax increases Obama has made or is planning to make. Of course many of these tax increases are also not identified as taxes, for Obama is no less cunningly evil than was FDR. We should also think about the many tax increases others will say we must make in order to pay down the huge deficits we already have and those which are coming. The main issue is the growth of the government sector and the stranglehold on the private sector, then and now.

Tax Monies Making Some Farmers Rich

"Oh, come on Charles, now you are going to claim that the farm subsidy program, which is meant to keep the family farm in existence, is just another government mistake or a fraud! Heck, we sent the Senators and Representatives we want to Congress and they, in their wisdom, believe the farmers need this help. This is fine, because there is something reassuring and comforting in knowing that many Americans families are still able to stay close to the soil."

Two-thirds of American farmers do not receive Federal subsidies. There are no guaranteed prices or protection for the production of cherries, melons, almonds, potatoes, pears, grapes, blueberries, apples, pistachios, lettuce, celery, cabbage, cauliflower, beef, and poultry. Despite this, these foods are farmed profitably and represent two-thirds of the value of the agricultural market. Corn, soybeans, cotton, rice, wheat, milk, sugar, peanuts, tobacco, and cotton are subsidized. The first five, corn through wheat, receive more than 90% of all farm payments. In 2004, government support for farm production provided 18% of all farm income. Did this subsidy money go largely to small family farmers?

NO. In 2003, the top 10% in subsidy payments received were paid 68% of the Federal farm support funds. The top 5% were paid 55%! Riceland Foods of Stuttgart, Arkansas received $68.9 million as the largest single recipient. Producers Rice Mill of the same town received the second largest payment of $51.4 million. In more recent years, the top 10% have edged upward to getting about 72% of the payment amount. Fortune 500 companies on farm welfare include Archer Daniels Midland, International Paper, Westvaco, John Hancock Insurance, Chevron, Electronic Data Systems, and Caterpillar. Multi-multi-millionaires such as Ted Turner, Edgar Bronfman, and David Rockefeller are on the farm dole. Many of the politicians who vote for these farm supports in the Congress are also on the dole, including Representative John Salazar (Colorado Democrat) and Charles Grassley (Iowa Republican). These are certainly not the small family farmers most Americans seem to think are the ones being helped by the farm subsidy programs.

But to look on the bright side, the program does raise the dead! The Senate Finance Committee asked the GAO to perform an audit of the subsidies and they found that from 1999 to 2005, the Agriculture Department sent out payments totaling $1.1 billion to more than 170,000 dead people. 40% of the dead had been dead more than 3 years and 19% had been dead more than 7 years. How happy their relatives must have been to have such consolation from the Dept. of Agriculture! Overall improper payments were found to be over $500 million per year. Democrat Senator Harkin said, "Given the extremely tight budget restraints it is no longer tolerable to permit billions of farm bill payments to go to individuals who in instances don't even farm or are no longer alive." Aren't we all very reassured that he is on the job and watching over our tax money with such enthusiasm and vigor now that the budgets are restrained for the first time? Hmm....you and I have always been aware that our budgets were restrained, how is it that he has just become aware that his budget is restrained?

If we look at average farm household income in 2005, we find it was $79,965 or 26% higher than the average household income of all Americans. This was not a fluke year. In 2006, it was $81,420, or 29% above the national average. Agricultural prices are high and farm property values have risen greatly. Corn prices were up 41% for the 12 months prior to 25 March. Soybeans were up 74% and wheat prices were up 126%. The soybean and wheat prices were up even more than corn prices because subsidies for corn and for ethanol drove farmers to convert some land from growing soybeans and wheat to growing corn. The lessened supply of soybeans and wheat caused their prices to go up. Net farm income grew 48% from 2006 to 2007. In 2002, farm profits were $40.1 billion and in 2007 they were $87.5 billion. Farm land prices have risen 78.5% since 2002.

Between 2003 and 2006, the total of the net farm profits in those four years was $279 billion, which was the highest 4-year total ever. Despite these profits, the Senate Agriculture Committee, under Chairman Tom Harkin, Democrat of Iowa, approved a new farm subsidy program totaling $288 billion over the five-year life of the new farm bill. The Senate version and the House versions had some differences and they have been unable to resolve them, so the government is operating under an extension of the 2002 Farm Bill which was supposed to be revised and reapproved in 2007. A major difference is that the Senate wanted to put an upper limit on how much money could go to an individual and how much could go to a husband and wife, while the House refused to do so.

Aside from being soaked as taxpayers, we are also being soaked as food consumers. Between March of 2007 and March of 2008, the price of a dozen eggs went up 40%, milk went up 26%, and bread has gone up 11%. Beef prices have gone up about 20% since 2006. The sugar protective tariff program guarantees a price of $0.229 per pound for beet sugar and $0.18/pound for cane sugar. The world price is only about $0.10/pound for sugar. The U.S. International Trade Commission found that between 2000 and 2002 the average domestic price of nonfat milk was 23% higher than the world price, cheese was 37% higher, and butter was more than double the world price. Trade policy also increased the price of cotton, beef, peanuts, orange juice, and canned tuna. The mounting concerns about inflation are being fueled largely by energy costs going up and by rising food costs. The government drives up fuel costs by denying drilling for oil in the U.S., by holding the oil shale and tar sand lands in the West, and with its ethanol policy. They drive up food costs with their subsidies, their tariffs on imported foods, and their ethanol mandates.

These higher costs for food and food inputs hurt the restaurant business and it hurts the food industry dependent upon food product exports. This results in less investment in those industries, fewer employees, lower payscales, and hurts our overall export value. Food production is a major American business strength, but with our tariffs and our subsidies, we discourage greater productivity and decrease innovations in these industries. Their contribution to the balance of trade is then reduced. The number of sugar refineries in the last 20 years has dropped from 23 to 8. The confectionary industry, once very big in Chicago, has been bleeding badly. Farm subsidy reform is also required as part of the World Trade Organization talks to reduce tariff barriers to trade. Lacking that, we are reducing the exports of many other industries as well. The World Bank estimates that the removal of world trade barriers to farm products would result in world farm exports becoming 74% higher in 2015 than without this reform. U.S. exports would be up $88 billion, while our imports would rise by $28 billion, giving us a surplus in trade of $60 billion.

For about 100 years the amount of land being farmed has been dropping in the U.S. This has led to the regrowth of huge acreage of forested land. The current drive to use huge amounts of farmland to grow corn for ethanol and the fact that farm crop subsidies encourage land to be used in general for the purpose of receiving as much subsidy money as possible, is likely to cause an increase in the amount of land farmed. This also means that more marginal, less suitable land will be farmed. Plowed land produces more silt in rivers and lakes. The use of more fertilizer and insecticides results in more pollutants in our rivers, lakes, and bays. The EPA says that 72% of our rivers and 56% of our lakes suffer from agriculturally caused pollution. Agricultural water subsidies cost $2 billion per year and encourage the growing of cotton in Arizona, where that water could and should be put to better uses. The sugar supports cause farmers to grow sugar cane in Central Florida, where they have taken large amounts of water from the Everglades. The damage that has done to the Everglades allowed Congress to spend billions more tax dollars to provide a bit of mitigation to the problems caused.

The fact that we do not import more foods from abroad hurts the small farmers in many underdeveloped countries around the world. In many cases, our subsidy-induced overproduction drives world prices for some farm commodities down and makes it difficult for them to compete. It rightfully causes many of them to resent us, despite the fact that most developed countries have higher protective tariff barriers for their agricultural industries than we do. In 2004, the European Union provided 33% of farm income through subsidies, while the U.S. provided 18%. Japan provides 56%, Canada 21%, South Korea 63%, Turkey 27%, Switzerland 68%, and Mexico 17%. The good guys here are Australia at 4% and New Zealand at 3%! In terms of an equivalent tariff, the U.S. support for agriculture is 19.9%, while the European Union provides support at a 46.4% rate and Japan at an 82.0% rate. So, there are worse actors in the world, but we are nonetheless hurting ourselves and many of the poor in less developed areas of the world. This harm is not compensated by our foreign aid programs.

So, why are our elite rulers, our elected politicians who know what is best for us peon citizens, shoving these stupid programs with their baleful consequences down our throats? Apparently because we are either too uninformed to notice the problems or we simply do not have enough incentive to spend our time fighting them. There are special interests out there who have a lot to gain from these foolish programs for farm supports and they do fight hard for them. Hard enough to get the programs passed through Congress and signed by a President over and over since the Great Depression. We taxpayers and food consumers just keep taking it on the jaw and do nothing. We do not protest loudly that this is all clearly unconstitutional. We do not get angry at our tax bill. We do not mind paying much more for food. And we certainly do not care that the U.S. exports less, employs fewer people, and we earn less, all as consequences of these stupid programs.

The U.S. farm support programs fit the pattern of unconstitutional government programs, which clearly hurt the General Welfare and do not lie within the enumerated powers of Congress, and yet they proliferate. They do serve unethical and unprincipled Congressmen and the recipients of the major welfare payments. If the farm support program does not hurt most of us enough to get up off our rear ends and fight for our individual rights, then one would hope that the sum of these many deleterious programs would give us sufficient incentive. This problem is repeated over and over at all levels of government. We must learn to fight it by standing on our principles and never letting up in our fight for the rights of the individual against all such intrusions and all such little enslavements. The sum of the enslavements is no minor thing. The only pragmatic way to fight them is to stand on our principles and demand that our elected officials and all special interests give way to those principles. When government makes it its duty to protect the rights of the individual to life, liberty, and the pursuit of happiness, then it justifies its existence in the only way it can do so. Otherwise, it does evil to most of us and evil to future generations.