Senator Mitch McConnell, Minority Leader, Republican, Kentucky offered an amendment which would allow more drilling for oil. His amendment was rejected by Senator Ken Salazar, Democrat of Colorado. Mitch McConnell responded with a modified amendment which would be triggered on that date when gasoline at the pump reached $4.50/gal. Ken Salazar objected to the amendment to allow drilling. Back and forth it goes with Mitch offering new amendment versions at $5.00, at $7.50, and finally at $10.00/gal. as Ken objects to each attempt to allow oil drilling. The exchange is available here on YouTube.
Some Democrats actually want gasoline to cost $10.00/gal. It will satisfy their radical environmental desires to see mankind suffer an immobile life. Others will be happy to see the lights go out. Still others will be happy to stand by as people die from hypothermia in their homes. After all, people are the problem.
05 August 2008
31 July 2008
The Cost of Government
Doug Bandow's commentary in today's Washington Times compiled many measures of the cost of government. He points out that Tax Freedom Day this year was on 23 April, but that this is a poor measure of the cost of government. First of all, local, state, and federal government may all be running deficits. Secondly, they all have regulations with costs which they do not pay. What was not mentioned and may not be included at all are the requirements to contribute time and effort without charge to keeping tax and employment records and being an unpaid tax and information collector.
Americans for Tax Reform calculates the cost of government based on what they spend and on the cost of regulations. They calculated that 16 July was the day the average American stopped working for the governments. This was 4 days later than last year! Individuals worked 83.7 days this year for the federal government and 50.5 days for state and local governments. Government regulation costs each of us 62.6 days this year! If we nationalize health care or add a cap and trade bill to combat the mythical man-made global warming, these costs will go up dramatically. They are going to go up dramatically in any case because Baby Boomers are about to start retiring in large numbers, which will at once remove many high income earners from higher tax brackets and increase Social Security and Medicare costs.
Federal spending is up 11.4% more than the size of the economy since 2000. So despite the economy growing well over that period and federal taxes rising even faster than the economy did, Congress spent more money than the bonanza they were given in increased tax revenues. If the rate of government spending had been held to the rate of the growth of the economy, the federal deficit would have disappeared in 2006.
Regulation costs this year are 17.2% of the national income. These regulations hurt the economy and its growth in ways whose costs are not included in that figure. Reductions in output, jobs, lower wages, and slowed economic growth are estimated to cost as much as another $1.5 trillion per year.
State and local government expenditures have increased by 19.1% more than the national income since 1999. In Connecticut, the people will work until 31 July before they come even with the cost of government, while in New Jersey the date was 30 July, and in New York it was 29 July. On the other hand, if you lived in Alaska, you were free on 21 June, if in Mississippi on 30 June, and if in Montana and West Virginia on 1 July.
Bandow asks, "What kind of a supposedly free society forces its people to work well more than half the year for the government?"
I join him in that question and ask if the loss of your control over that huge part of your life was worth it in terms of the benefits government provided? For me, the answer is a clear and strong NO!
Americans for Tax Reform calculates the cost of government based on what they spend and on the cost of regulations. They calculated that 16 July was the day the average American stopped working for the governments. This was 4 days later than last year! Individuals worked 83.7 days this year for the federal government and 50.5 days for state and local governments. Government regulation costs each of us 62.6 days this year! If we nationalize health care or add a cap and trade bill to combat the mythical man-made global warming, these costs will go up dramatically. They are going to go up dramatically in any case because Baby Boomers are about to start retiring in large numbers, which will at once remove many high income earners from higher tax brackets and increase Social Security and Medicare costs.
Federal spending is up 11.4% more than the size of the economy since 2000. So despite the economy growing well over that period and federal taxes rising even faster than the economy did, Congress spent more money than the bonanza they were given in increased tax revenues. If the rate of government spending had been held to the rate of the growth of the economy, the federal deficit would have disappeared in 2006.
Regulation costs this year are 17.2% of the national income. These regulations hurt the economy and its growth in ways whose costs are not included in that figure. Reductions in output, jobs, lower wages, and slowed economic growth are estimated to cost as much as another $1.5 trillion per year.
State and local government expenditures have increased by 19.1% more than the national income since 1999. In Connecticut, the people will work until 31 July before they come even with the cost of government, while in New Jersey the date was 30 July, and in New York it was 29 July. On the other hand, if you lived in Alaska, you were free on 21 June, if in Mississippi on 30 June, and if in Montana and West Virginia on 1 July.
Bandow asks, "What kind of a supposedly free society forces its people to work well more than half the year for the government?"
I join him in that question and ask if the loss of your control over that huge part of your life was worth it in terms of the benefits government provided? For me, the answer is a clear and strong NO!
Congress: Do they read anything but their fan mail?
Tuesday night a congressional conference committee voted 40-4 for legislation to reauthorize the Higher Education Act. The House and the Senate were expected to vote on this legislation today. How many members do you suppose will have read the 1,158 pages before voting on it? How many will have carefully considered the consequences of each and every paragraph of that legislation?
Yet this legislation will affect the lives of every American. It will affect the quality of education, the cost of education, taxes, contribute to the power of teacher's labor unions, contribute to the corruption of Congress, interfere with local controls of public schools, and interfere with private school management. So, is it at all responsible for any Congressman to vote for such legislation without having read and very carefully evaluated it?
You will say that of course they do not have time to read and think everything through that they act on. Well, if this is so, and it is, then the powers exercised here should be exercised where such due deliberation will be given and where those who fail to carry out the mission can be readily identified and will be allowed to fail. We need to have an education system where someone will then step up and volunteer to replace the failed education manager. Where but the private market could we ever expect that that might happen? But at least when education was a local government management issue by and large, if a county school system was bad, one could opt to live in another county with a better managed school system. If the state colleges were bad, one could choose to live in another state or go to a private college. Now, the school system problems are more and more going to be nationwide and managed by a Congress with so many irons in the fire that nobody even notices what they do to education, least of all them.
Did you know that the bill requires colleges to have a plan so that students will be able to download music and movies legally? Special financial aid is also included for graduate programs at colleges in areas with large minority populations. But principally the bill will make it easier to borrow more money for college and colleges will find it easier to keep increasing tuitions at rates far above the rate of growth of the economy.
This legislation is also projected to cost another $452 billion. But, it is not necessary to read it before voting for it. Does this have something to do with only 9% of Americans approving of the job Congress is doing? And with 52% believing that Congress is failing to do its job?
Yet this legislation will affect the lives of every American. It will affect the quality of education, the cost of education, taxes, contribute to the power of teacher's labor unions, contribute to the corruption of Congress, interfere with local controls of public schools, and interfere with private school management. So, is it at all responsible for any Congressman to vote for such legislation without having read and very carefully evaluated it?
You will say that of course they do not have time to read and think everything through that they act on. Well, if this is so, and it is, then the powers exercised here should be exercised where such due deliberation will be given and where those who fail to carry out the mission can be readily identified and will be allowed to fail. We need to have an education system where someone will then step up and volunteer to replace the failed education manager. Where but the private market could we ever expect that that might happen? But at least when education was a local government management issue by and large, if a county school system was bad, one could opt to live in another county with a better managed school system. If the state colleges were bad, one could choose to live in another state or go to a private college. Now, the school system problems are more and more going to be nationwide and managed by a Congress with so many irons in the fire that nobody even notices what they do to education, least of all them.
Did you know that the bill requires colleges to have a plan so that students will be able to download music and movies legally? Special financial aid is also included for graduate programs at colleges in areas with large minority populations. But principally the bill will make it easier to borrow more money for college and colleges will find it easier to keep increasing tuitions at rates far above the rate of growth of the economy.
This legislation is also projected to cost another $452 billion. But, it is not necessary to read it before voting for it. Does this have something to do with only 9% of Americans approving of the job Congress is doing? And with 52% believing that Congress is failing to do its job?
30 July 2008
News: An actor opposes Obama
Robert Bidinotto pointed out this op-ed in his blog by the actor Jon Voight. It is news because so few actors or actresses are not madly in love with Obama.
25 July 2008
David Evans - No smoking hot spot
Dr. David Evans, a consultant to the Australian Greenhouse Office from 1999 to 2005, has changed his mind on the hypothesis that man-made production of CO2 is the cause of recent global warming. He tells us why in this commentary, "No smoking hot spot."
He says, "since 1999 new evidence has seriously weakened the case that carbon emissions are the main cause of global warming, and by 2007 the evidence was pretty conclusive that carbon played only a minor role and was not the main cause of the recent global warming. As Lord Keynes famously said, 'When the facts change, I change my mind. What do you do, sir?'"
The reasons for his change of mind:
Evans says that the debate on global warming has "consisted of a simple sleigh of hand: show evidence of global warming, and while the audience is stunned at the implications, simply assert that it is due to carbon emissions. In the minds of the audience, the evidence that global warming has occurred becomes conflated with the alleged cause, and the audience hasn't noticed that the cause was merely asserted, not proved. If there really was any evidence that carbon emissions caused global warming, don't you think we would have heard all about it ad nauseam by now? The world has spent $50 billion on global warming since 1990, and we have not found any actual evidence that carbon emissions cause global warming. Evidence consists of observations made by someone at some time that supports the idea that carbon emissions cause global warming. Computer models and theoretical calculations are not evidence, they are just theory."
I would add to this that the computer models have had a consistent record of predicting larger temperature increases than have actually occurred, even prior to the totally unexplainable recent decrease in temperatures. That is, unexplainable in terms of the carbon emissions computer models. They are more understandable in terms of such things as variations in the solar radiation reaching Earth and other natural phenomena. Indeed, there is a huge hubris at work when people make overblown predictions of man-made global warming being dominant over natural causes when we look at the record of the Earth's temperature over the last 600 million years. In that record, the present temperatures are very unusually low and the carbon dioxide concentrations in the atmosphere are also very low. It is foolish to put much truck in these computer models which are totally unable to predict the past in accordance with the known record.
It is shameful that so many scientists are unable to reason this out. Of course many of them are on university campuses where science is often held hostage to socialism and anti-capitalist causes. When campus politics comes to play a role, objectivity vanishes. Some others work for government agencies, which are commonly eager to expand their powers in a war against some threat or other, which they are often happy to exaggerate or manufacture.
He says, "since 1999 new evidence has seriously weakened the case that carbon emissions are the main cause of global warming, and by 2007 the evidence was pretty conclusive that carbon played only a minor role and was not the main cause of the recent global warming. As Lord Keynes famously said, 'When the facts change, I change my mind. What do you do, sir?'"
The reasons for his change of mind:
- "The greenhouse signature is missing. We have been looking and measuring for years, and cannot find it." The signature of an increased greenhouse effect is a hot spot about 10 km altitude in the atmosphere over the tropics. In 2007, the evidence was conclusive that no such hot spot exists, though hundreds of measurements have been made looking for it.
- There is no evidence to support the hypothesis that carbon dioxide emissions cause significant global warming.
- The satellites that measure the world's temperature say warming ended in 2001. The temperature has since dropped, so that it has returned to that of 1980. Land-based temperature readings are corrupted by the urban heat island effect and cannot be trusted. Only the satellite data is trustworthy and it only goes back to 1979.
- "The new ice cores show that in the past six global warmings over the past half million years, the temperature rises occurred on average 800 years before the accompanying rise in atmospheric carbon. Which says something important about which was cause and which was effect."
Evans says that the debate on global warming has "consisted of a simple sleigh of hand: show evidence of global warming, and while the audience is stunned at the implications, simply assert that it is due to carbon emissions. In the minds of the audience, the evidence that global warming has occurred becomes conflated with the alleged cause, and the audience hasn't noticed that the cause was merely asserted, not proved. If there really was any evidence that carbon emissions caused global warming, don't you think we would have heard all about it ad nauseam by now? The world has spent $50 billion on global warming since 1990, and we have not found any actual evidence that carbon emissions cause global warming. Evidence consists of observations made by someone at some time that supports the idea that carbon emissions cause global warming. Computer models and theoretical calculations are not evidence, they are just theory."
I would add to this that the computer models have had a consistent record of predicting larger temperature increases than have actually occurred, even prior to the totally unexplainable recent decrease in temperatures. That is, unexplainable in terms of the carbon emissions computer models. They are more understandable in terms of such things as variations in the solar radiation reaching Earth and other natural phenomena. Indeed, there is a huge hubris at work when people make overblown predictions of man-made global warming being dominant over natural causes when we look at the record of the Earth's temperature over the last 600 million years. In that record, the present temperatures are very unusually low and the carbon dioxide concentrations in the atmosphere are also very low. It is foolish to put much truck in these computer models which are totally unable to predict the past in accordance with the known record.
It is shameful that so many scientists are unable to reason this out. Of course many of them are on university campuses where science is often held hostage to socialism and anti-capitalist causes. When campus politics comes to play a role, objectivity vanishes. Some others work for government agencies, which are commonly eager to expand their powers in a war against some threat or other, which they are often happy to exaggerate or manufacture.
Carroll - Gore's nutty idea
Al Gore proposed last week that the United States "commit to producing 100 percent of our electricity from renewable energy and truly clean carbon-free sources within 10 years."
This man is truly insane. I shudder to think what would have happened to the United States if he had become President as he so nearly did. No, I am not saying that this man is simply wrong. I am saying that he is in this world, but he is not connected to it. He has no judgment, no wisdom, few powers of observation, and he is much less intelligent than George Bush. One has to wonder at the severe lack of judgment also generally found in those managing our newspapers and television news programs which has kept them from taking Al Gore to task for this nonsense.
Vincent Carroll, editor of the editorial pages of the Rocky Mountain News, has correctly identified Al Gore's call to kill oil, gas, and coal power generating plants as the equivalent of Mao Zedong's Great Leap Forward in this editorial. This effort, he points out, would require utilities to mothball hundreds of existing plants and institute a crash program of building solar energy, wind farm, and new electricity power transmission lines, that would cause a huge increase in electricity costs to individuals and businesses. What is more, both sun and wind are highly subject to natural variations, so they would require something like huge banks of batteries or capacitors to store energy for later use, which would be very expensive and environmentally unfriendly.
I will repeat that it is lunatic to implement such a plan, even if it were true that carbon dioxide emissions were going to be a significant problem affecting the climate in 100 years. In actuality, there is no good reason to think this will be the case anyway. This makes calling for wrenching energy infrastructure destruction programs and crash construction programs of largely untried or incredibly expensive technology an idiot's delight.
This man is truly insane. I shudder to think what would have happened to the United States if he had become President as he so nearly did. No, I am not saying that this man is simply wrong. I am saying that he is in this world, but he is not connected to it. He has no judgment, no wisdom, few powers of observation, and he is much less intelligent than George Bush. One has to wonder at the severe lack of judgment also generally found in those managing our newspapers and television news programs which has kept them from taking Al Gore to task for this nonsense.
Vincent Carroll, editor of the editorial pages of the Rocky Mountain News, has correctly identified Al Gore's call to kill oil, gas, and coal power generating plants as the equivalent of Mao Zedong's Great Leap Forward in this editorial. This effort, he points out, would require utilities to mothball hundreds of existing plants and institute a crash program of building solar energy, wind farm, and new electricity power transmission lines, that would cause a huge increase in electricity costs to individuals and businesses. What is more, both sun and wind are highly subject to natural variations, so they would require something like huge banks of batteries or capacitors to store energy for later use, which would be very expensive and environmentally unfriendly.
I will repeat that it is lunatic to implement such a plan, even if it were true that carbon dioxide emissions were going to be a significant problem affecting the climate in 100 years. In actuality, there is no good reason to think this will be the case anyway. This makes calling for wrenching energy infrastructure destruction programs and crash construction programs of largely untried or incredibly expensive technology an idiot's delight.
23 July 2008
47 Million Uninsured Americans Revisited
Obama recently claimed that he was going to see to it that all 47 million uninsured Americans received health insurance. Anyone who is not completely out of their mind in thinking they are qualified to run for the office of President, should be informed about who these 47 million uninsured people are in the United States. In November 2007, I posted on this issue here.
Dick Morris was giving Obama a hard time about this issue on Fox News earlier today. He pointed out that Obama has both claimed that he will not provide health insurance coverage to illegal aliens and that he will insure all 47 million uninsured in America. The fact that many millions of the uninsured numbered in the 47 million are illegal aliens, was either something he was ignorant of or he was so carried away with taking advantage of the exaggerated implications that 47 million desperate Americans are suffering constant trauma due to having no health insurance, that he never thought of what his commitment really means.
The 47 million uninsured has become a huge selling point for an even more massive socialist takeover of the whole health insurance and health provision industries and the left has fallen in love with this number. But, as I previously pointed out, all of the millions of the Americans who are without health insurance, have access to health care already. Many of them are so wealthy, that they choose to be self-insured. Most of the 47 million who actually are citizens or legal residents in the U. S. can afford health insurance, but they choose to spend their money on other things instead. Some of those who are young and healthy, simply see no reason to spend money on insurance to pay for the health needs of others who are not so healthy. I have at least one nephew whose family has no insurance by choice for this reason.
We often forget how many Americans are millionaires or multi-millionaires. In March of 2006, there were 8.9 million Americans with a net worth exceeding $1 million excluding the value of their primary residence. Surely these 8.9 million Americans cannot be expected to buy health insurance and forcing them to do so, as Obama claims he will, cannot be justified. If $1 million dollars will not buy them enough health care, then few commercial health plans will either. But in any case, they should be free to make this choice as they wish. I suspect that many of these people were able to make so much money in part because they enjoyed good health and yet they had a median age of 58, at which age health insurance tends to become quite expensive. Choosing to be self-insured makes a lot of sense for many of these people. What is more, they were in a position to provide self-insurance support to their entire families. Consequently, many of their children in their household or in separate households may not have a need for health insurance either. With an average of two children with wives and two children in each child's household and given a millionaire household with husband and wife, each millionaire household might easily provide health care self-insurance for 10 people. This could mean we could easily and reasonably have as many as 90 million Americans without health insurance who had no need for health insurance. Excluding the illegal aliens, it is clear we have many fewer than half that number.
Of course, many of the Americans who can afford health insurance and choose not to have it are not backed by a millionaire for their health needs. But, noting how many could be, points out that we surely have a need to examine more closely why many Americans do not have health insurance. We do know that most of those who are uninsured could afford to be insured if they wished to be. We should hesitate to impose the will of others, elitists all, upon them. We should hesitate to use the force of government to make them redefine their values and their assessments of their own lives.
Dick Morris was giving Obama a hard time about this issue on Fox News earlier today. He pointed out that Obama has both claimed that he will not provide health insurance coverage to illegal aliens and that he will insure all 47 million uninsured in America. The fact that many millions of the uninsured numbered in the 47 million are illegal aliens, was either something he was ignorant of or he was so carried away with taking advantage of the exaggerated implications that 47 million desperate Americans are suffering constant trauma due to having no health insurance, that he never thought of what his commitment really means.
The 47 million uninsured has become a huge selling point for an even more massive socialist takeover of the whole health insurance and health provision industries and the left has fallen in love with this number. But, as I previously pointed out, all of the millions of the Americans who are without health insurance, have access to health care already. Many of them are so wealthy, that they choose to be self-insured. Most of the 47 million who actually are citizens or legal residents in the U. S. can afford health insurance, but they choose to spend their money on other things instead. Some of those who are young and healthy, simply see no reason to spend money on insurance to pay for the health needs of others who are not so healthy. I have at least one nephew whose family has no insurance by choice for this reason.
We often forget how many Americans are millionaires or multi-millionaires. In March of 2006, there were 8.9 million Americans with a net worth exceeding $1 million excluding the value of their primary residence. Surely these 8.9 million Americans cannot be expected to buy health insurance and forcing them to do so, as Obama claims he will, cannot be justified. If $1 million dollars will not buy them enough health care, then few commercial health plans will either. But in any case, they should be free to make this choice as they wish. I suspect that many of these people were able to make so much money in part because they enjoyed good health and yet they had a median age of 58, at which age health insurance tends to become quite expensive. Choosing to be self-insured makes a lot of sense for many of these people. What is more, they were in a position to provide self-insurance support to their entire families. Consequently, many of their children in their household or in separate households may not have a need for health insurance either. With an average of two children with wives and two children in each child's household and given a millionaire household with husband and wife, each millionaire household might easily provide health care self-insurance for 10 people. This could mean we could easily and reasonably have as many as 90 million Americans without health insurance who had no need for health insurance. Excluding the illegal aliens, it is clear we have many fewer than half that number.
Of course, many of the Americans who can afford health insurance and choose not to have it are not backed by a millionaire for their health needs. But, noting how many could be, points out that we surely have a need to examine more closely why many Americans do not have health insurance. We do know that most of those who are uninsured could afford to be insured if they wished to be. We should hesitate to impose the will of others, elitists all, upon them. We should hesitate to use the force of government to make them redefine their values and their assessments of their own lives.
Alan Reynolds - Fanny Mae and Freddy Mac
Alan Reynolds has written an assessment of the troubled Fanny Mae and Freddie Mac which seems right on target to me. He describes the special privileges these publicly traded corporations receive. He explains how the effective subsidies that they receive reduces competition in the mortgage business and undermines market discipline. Reynolds says, "Fannie and Freddy may be 'too big to fail,' but that means they are also too big for taxpayer bailouts."
They pay artificially low interest rates on borrowed money because it is assumed they will be protected by the federal government. They have a $2.5 billion line of credit with the U. S. Treasury! Recently, Treasury Secretary Henry Paulson suggested that Fanny and Freddy be given unlimited access to the U.S. Treasury for 18 months. This caused the dollar and U. S. Treasury bonds to go down in value!
Sec. Paulson is also proposing a new regulatory agency to replace the one that is now 16 years old. Every time a politically regulated industry or organization gets in trouble, and this is commonly because of political considerations, it is proposed by politicians that the government regulate more vigorously. Well, Fanny and Freddy have a history of being very generous with their campaign contributions, which has made them very close to many politicians. Reynolds correctly notes that "A new regulator is unlikely to be any better than the old regulator because the whole notion of a government-sponsored business is thoroughly politicized and inherently corrupt."
As Reynolds concludes, Fannie and Freddy "need to be downsized and de-leveraged, relieved of special privileges and loan guarantees, and broken into small pieces agile enough to sink or swim on their own, without taxpayer support." I am wondering why they would need to be "agile enough to sink", but clearly they should be allowed to be independent enough to sink or agile enough to swim.
They pay artificially low interest rates on borrowed money because it is assumed they will be protected by the federal government. They have a $2.5 billion line of credit with the U. S. Treasury! Recently, Treasury Secretary Henry Paulson suggested that Fanny and Freddy be given unlimited access to the U.S. Treasury for 18 months. This caused the dollar and U. S. Treasury bonds to go down in value!
Sec. Paulson is also proposing a new regulatory agency to replace the one that is now 16 years old. Every time a politically regulated industry or organization gets in trouble, and this is commonly because of political considerations, it is proposed by politicians that the government regulate more vigorously. Well, Fanny and Freddy have a history of being very generous with their campaign contributions, which has made them very close to many politicians. Reynolds correctly notes that "A new regulator is unlikely to be any better than the old regulator because the whole notion of a government-sponsored business is thoroughly politicized and inherently corrupt."
As Reynolds concludes, Fannie and Freddy "need to be downsized and de-leveraged, relieved of special privileges and loan guarantees, and broken into small pieces agile enough to sink or swim on their own, without taxpayer support." I am wondering why they would need to be "agile enough to sink", but clearly they should be allowed to be independent enough to sink or agile enough to swim.
Update on the War in Iraq
Michael Yon, who is an independent war correspondent and blogger embedded with U.S. troops in Iraq for a very long time, seems to understand that war better than any other reporter. He has declared the war won and backs that claim up with a very interesting PowerPoint presentation. In addition to the decreased number of deaths due to fighting, the decreased number of attacks against infrastructure is very important. The lifeblood of Iraq is oil and many of the infrastructure attacks have been against oil facilities. This has resulted in a very high unemployment rate in Iraq, which is commonly a cause of great mischief when many have nothing constructive to do with their time and little hope that they are building a better future. Increased oil and gas production is a key to peace within Iraq and will allow the Iraqis to concentrate on rebuilding a country which has gone downhill for decades under Saddam Hussein and suffered so much at the hands of terrorists since he was overthrown. Of course, increased oil and gas production will benefit the rest of the world greatly as well and will help to bring down the very high fuel prices we have seen lately.
The Chairman of the Joint Chiefs of Staff has determined that the time has come to start pulling troops out of Iraq and building our strength in Afghanistan. The surge has done its job and with some care not to withdraw too rapidly from Iraq and to continue supporting the Iraqi government, unlike what the Democrat Congress did with respect to the South Vietnamese government when we pulled troops out of South Vietnam, Iraq should be able to create a nation in the heart of the Middle East which is significantly more civilized than most there.
In evaluating this important victory in Iraq, we should be careful to note who opposed the surge and who approved and recommended it. The problem of Afghanistan must be addressed with renewed vigor and we should be careful in assessing who has the judgment and strength of determination to see that project through. There are also major problems to be addressed with respect to Pakistan and Iran. Who has the experience, backbone, and judgment to deal with those problems?
The Chairman of the Joint Chiefs of Staff has determined that the time has come to start pulling troops out of Iraq and building our strength in Afghanistan. The surge has done its job and with some care not to withdraw too rapidly from Iraq and to continue supporting the Iraqi government, unlike what the Democrat Congress did with respect to the South Vietnamese government when we pulled troops out of South Vietnam, Iraq should be able to create a nation in the heart of the Middle East which is significantly more civilized than most there.
In evaluating this important victory in Iraq, we should be careful to note who opposed the surge and who approved and recommended it. The problem of Afghanistan must be addressed with renewed vigor and we should be careful in assessing who has the judgment and strength of determination to see that project through. There are also major problems to be addressed with respect to Pakistan and Iran. Who has the experience, backbone, and judgment to deal with those problems?
21 July 2008
Obama's Affordable Housing Record
Obama coauthored an Illinois law making new tax credits available to developers for affordable housing. He has labored for federal subsidies for such programs and he advocates an Affordable Housing Trust Fund as presidential candidate. What was his record of associations with affordable housing developers in Chicago? An article published in the Boston Globe by Binyamin Applebaum paints a very grim picture of his developer friends.
Their record of producing shoddy and unlivable housing was remarkable. Many of the buildings renovated deteriated so fast that they were renovated many times, each time with further infusions of tax money. You have probably already heard of Tony Rezko and his shenanigans, but have you heard about Valerie Jarrett, who serves as Obama's senior advisor on the presidential campaign and a member of his finance committee? How about Allison Davis who was a major fund-raiser for his US Senate campaign and a former lead partner at Obama's former law firm? How about Cecil Butler who controlled the Lawndale Restoration, the largest subsidized housing complex in Chicago?
Grove Parc Plaza was opened in 1990 as a redevelopment of an older housing complex. The owner was Woodlawn Preservation, which was headed by Obama associates Brazier and Finney, both local ministers. William Moorehead, who headed a private management firm, was hired to manage Grove Parc Plaza, but was replaced in 2001 and subsequently convicted of embezzling almost $1 million in management fees. He was replaced by Habitat Co. to manage Woodlawn. Its founder, Daniel Levin, headed it and contributed heavily to Obama's campaigns. Valerie Jarrett was executive vice president of Habitat. Grove Parc Plaza deteriorated rapidly under management by both Moorehead and Habitat and was seized from Woodlawn Preservation due to massive building inspection code violations. An even larger subsidized complex in Chicago co-managed by Habitat was seized after Valerie Jarrett became the chief executive of Habitat.
Allison Davis, Obama's former law firm boss, went into the affordable housing development business full-time in 1996, after having participated in the development earlier of Grove Parc Plaza. Over the last 10 years, Davis's companies have renovated or built more than 1500 apartments. Davis partnered with Tony Rezko a number of times, supported in some cases in their efforts to obtain loans by Obama. In 2001, Davis created a partnership to do a $10.7 million renovation of five buildings in a gentrifying neighborhood. Almost $6 million of state and federal subsidies went into the project before it deteriorated so badly that the city sued the owners and a judge imposed a $5,500 fine. Cullen Davis, Allison Davis's son and also an Obama contributor, now manages the firm that manages this project.
Cecil Butler controlled Lawndale Restoration, the largest Chicago subsidized housing complex. It was seized in 2006 after 1,800 building code inspection violations were found.
One would be naive not to be very wary of what Obama is really interested in when he advocates federal subsidies for affordable housing.
Their record of producing shoddy and unlivable housing was remarkable. Many of the buildings renovated deteriated so fast that they were renovated many times, each time with further infusions of tax money. You have probably already heard of Tony Rezko and his shenanigans, but have you heard about Valerie Jarrett, who serves as Obama's senior advisor on the presidential campaign and a member of his finance committee? How about Allison Davis who was a major fund-raiser for his US Senate campaign and a former lead partner at Obama's former law firm? How about Cecil Butler who controlled the Lawndale Restoration, the largest subsidized housing complex in Chicago?
Grove Parc Plaza was opened in 1990 as a redevelopment of an older housing complex. The owner was Woodlawn Preservation, which was headed by Obama associates Brazier and Finney, both local ministers. William Moorehead, who headed a private management firm, was hired to manage Grove Parc Plaza, but was replaced in 2001 and subsequently convicted of embezzling almost $1 million in management fees. He was replaced by Habitat Co. to manage Woodlawn. Its founder, Daniel Levin, headed it and contributed heavily to Obama's campaigns. Valerie Jarrett was executive vice president of Habitat. Grove Parc Plaza deteriorated rapidly under management by both Moorehead and Habitat and was seized from Woodlawn Preservation due to massive building inspection code violations. An even larger subsidized complex in Chicago co-managed by Habitat was seized after Valerie Jarrett became the chief executive of Habitat.
Allison Davis, Obama's former law firm boss, went into the affordable housing development business full-time in 1996, after having participated in the development earlier of Grove Parc Plaza. Over the last 10 years, Davis's companies have renovated or built more than 1500 apartments. Davis partnered with Tony Rezko a number of times, supported in some cases in their efforts to obtain loans by Obama. In 2001, Davis created a partnership to do a $10.7 million renovation of five buildings in a gentrifying neighborhood. Almost $6 million of state and federal subsidies went into the project before it deteriorated so badly that the city sued the owners and a judge imposed a $5,500 fine. Cullen Davis, Allison Davis's son and also an Obama contributor, now manages the firm that manages this project.
Cecil Butler controlled Lawndale Restoration, the largest Chicago subsidized housing complex. It was seized in 2006 after 1,800 building code inspection violations were found.
One would be naive not to be very wary of what Obama is really interested in when he advocates federal subsidies for affordable housing.
20 July 2008
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.
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.
17 July 2008
Benefits versus Wages
Given the last post on the very high marginal tax rates commonly levied on each additional dollar earned by many families, it is not at all surprising that more and more, Americans want their additional work compensation to be in the form of untaxed benefits. This acts to decrease the income of governments and is nothing but a reasonable response to their greed.
James Sherk, the Bradley Fellow in labor policy at the Heritage Foundation, wrote an interesting commentary in the 16 July 2008 Washington Times on this phenomena and its effect on wage earning growth. The article is entitled Forecast for Workers.
Liberals and socialists like to say that worker's wages have not increased over the last eight years. It is true that cash wages have not increased, but one-third of worker's earnings are in the form of benefits. These include paid time off, health insurance, and retirement plans. Over the last 8 years, the average American's total earnings have risen 17%, which is quite a healthy increase! The typical employee earns 20% more paid time off, 33% more in retirement benefits, and 50% more in health benefits per hour worked than in 2000.
Socialists like to claim that worker productivity has increased, but the worker has nothing to show for it. But, when the total worker compensation package is examined and inflation is treated in the same way when comparing compensation as when determining the increase in productivity, then it is seen that worker's compensation has kept pace with productivity. Today, worker's total compensation is about 70% of the total national income, which is the same fraction of income it has maintained for the last 40 years.
James Sherk, the Bradley Fellow in labor policy at the Heritage Foundation, wrote an interesting commentary in the 16 July 2008 Washington Times on this phenomena and its effect on wage earning growth. The article is entitled Forecast for Workers.
Liberals and socialists like to say that worker's wages have not increased over the last eight years. It is true that cash wages have not increased, but one-third of worker's earnings are in the form of benefits. These include paid time off, health insurance, and retirement plans. Over the last 8 years, the average American's total earnings have risen 17%, which is quite a healthy increase! The typical employee earns 20% more paid time off, 33% more in retirement benefits, and 50% more in health benefits per hour worked than in 2000.
Socialists like to claim that worker productivity has increased, but the worker has nothing to show for it. But, when the total worker compensation package is examined and inflation is treated in the same way when comparing compensation as when determining the increase in productivity, then it is seen that worker's compensation has kept pace with productivity. Today, worker's total compensation is about 70% of the total national income, which is the same fraction of income it has maintained for the last 40 years.
Taxes in Montgomery County, Maryland - An Example
The median family income in Montgomery County, Maryland was $103,476 in 2006. Half of the families in the county made more and half made less. This means that such a median family is making much more than the median income in most of the United States. But, it is also true that the cost of living is much higher in Montgomery County and taxes make no adjustment whatsoever for that fact. By the way, median household income in Montgomery County is considerably less, so do not confuse those two sets of numbers, as many commentators do.
Let us assume that this median income family has all of its income from being self-employed. We will discuss the case of income from a separate employer later. This family has approximately the following taxes applied to their income, assuming they are married and filing jointly, have one child younger than 17, and have $15,000 of itemized deductions:
Federal Income Tax Average Rate = 12.00%
Social Security Average Tax Rate = 12.22%
Medicare Average Tax Rate = 2.86%
Maryland Income Tax Average Rate Estimate = 3.73%
Montgomery County Tax Average Rate Estimate = 2.54%
The sum of these average rates on this family's income is 33.35%. More than one-third of their income is going to income taxes! In this calculation, I calculated the social security payment and then found the percent of that relative to the total income of $103,476, which is slightly above the cut-off upper income on which the 12.4% social security tax is levied. For the Medicare tax I did the same thing. The state and county taxes depend further on what part of the itemized deductions are due to state and local taxes, so I made a reasonable typical estimate of that.
Let us look at the case of family income for those not self-employed. The first thing to realize is that the employer figures up the total cost of employing an employee including all taxes paid on the employee, benefits for the employee, facility space for the employee on the job, added insurance costs, added equipment costs, etc. If he did not have to pay 6.2% social security tax and 1.45% Medicare tax on the employee, he would be absolutely as willing to give that money to the employee as to give it to the government. As a result, it is really a fiction that the employer is paying that money rather than the employee. Politicians love this little fraud because it hides, as so many other taxes are hidden, the true cost of taxes from the employee and most voters. This fraud does give the employee one little benefit however. Since the 6.2% + 1.45% = 7.65% of his income never appears in his salary, he does not have to pay federal, state, and local income taxes on that amount, while the self-employed person does. Ain't it a crock. Everyone hates the self-employed!
Suppose the family income earners above are considering whether it is worth their while to work an additional hour or not. If they do, what fraction of the income earned in that hour will go to government instead of to them? This is the same as asking what is the marginal income tax rate for each of the above taxes? Let's assume however that they are still a wee bit below the social security and medicare tax cut-off levels, as very many families will be. Then we have:
Federal Income Tax Marginal Rate = 24.00%
Social Security Tax = 12.40%
Medicare Tax = 2.90%
Maryland Income Tax Marginal Rate = 4.75%
Montgomery County Income Tax Marginal Rate = 3.20%
Thus, the total marginal income tax rate is 47.25%! Just in income taxes alone, $0.4727 out of each additional dollar earned is lost! Or, 28.35 minutes out of each hour worked is stolen! This is a situation a great many productive people are in. They have to really love their work or be really dedicated to achieving a goal requiring additional money to justify working this additional hour. If you wish to increase taxes on such people, are you really sure that you want to so discourage them from working as hard as they do? How many baby boomers might you induce to take early retirement, with the added strain that will put on the social security system and the loss of so much experience? Of course, at such tax rates, it makes a lot of sense for such people to work very hard on trying to earn additional money in ways that will not require them to pay so much in taxes. This tendency for people to work fewer hours as the taxes go up and to work harder to find tax loopholes or even to cheat on taxes, is why increasing tax rates does not always allow the government to collect more in taxes. The economy will grow less and over the years after a tax increase, this results in a large decrease in the taxable income compared to the taxable income which would materialize in those years at lower tax rates.
Of course, these income taxes are not the only taxes paid. You will also pay property taxes on your home and the land it sits on, sales taxes, taxes on utility bills, gasoline taxes, liquor and tobacco product taxes, motel and airport use taxes, fishing license, car registration, car pollution test taxes, dog licenses, marriage licenses, home title registration taxes, and higher costs for all products and services to cover the taxes paid by businesses, and many, many more taxes. So the income you have left after you pay the income taxes, is still going toward paying taxes in many ways. Taking these other taxes into account, the family earning just less than $102,000 will in fact pay out far more than half of each additional dollar of income on average in taxes. How discouraging!
So, stop and think. Are our governments really doing enough for us that we should be willing to give them more than half of all the value we create by working hard? I for one do not think this is anything but a slam dunk question. NO!!!! NO!!!!!!! NO!!!!!!!!!!!!!!!!
Let us assume that this median income family has all of its income from being self-employed. We will discuss the case of income from a separate employer later. This family has approximately the following taxes applied to their income, assuming they are married and filing jointly, have one child younger than 17, and have $15,000 of itemized deductions:
Federal Income Tax Average Rate = 12.00%
Social Security Average Tax Rate = 12.22%
Medicare Average Tax Rate = 2.86%
Maryland Income Tax Average Rate Estimate = 3.73%
Montgomery County Tax Average Rate Estimate = 2.54%
The sum of these average rates on this family's income is 33.35%. More than one-third of their income is going to income taxes! In this calculation, I calculated the social security payment and then found the percent of that relative to the total income of $103,476, which is slightly above the cut-off upper income on which the 12.4% social security tax is levied. For the Medicare tax I did the same thing. The state and county taxes depend further on what part of the itemized deductions are due to state and local taxes, so I made a reasonable typical estimate of that.
Let us look at the case of family income for those not self-employed. The first thing to realize is that the employer figures up the total cost of employing an employee including all taxes paid on the employee, benefits for the employee, facility space for the employee on the job, added insurance costs, added equipment costs, etc. If he did not have to pay 6.2% social security tax and 1.45% Medicare tax on the employee, he would be absolutely as willing to give that money to the employee as to give it to the government. As a result, it is really a fiction that the employer is paying that money rather than the employee. Politicians love this little fraud because it hides, as so many other taxes are hidden, the true cost of taxes from the employee and most voters. This fraud does give the employee one little benefit however. Since the 6.2% + 1.45% = 7.65% of his income never appears in his salary, he does not have to pay federal, state, and local income taxes on that amount, while the self-employed person does. Ain't it a crock. Everyone hates the self-employed!
Suppose the family income earners above are considering whether it is worth their while to work an additional hour or not. If they do, what fraction of the income earned in that hour will go to government instead of to them? This is the same as asking what is the marginal income tax rate for each of the above taxes? Let's assume however that they are still a wee bit below the social security and medicare tax cut-off levels, as very many families will be. Then we have:
Federal Income Tax Marginal Rate = 24.00%
Social Security Tax = 12.40%
Medicare Tax = 2.90%
Maryland Income Tax Marginal Rate = 4.75%
Montgomery County Income Tax Marginal Rate = 3.20%
Thus, the total marginal income tax rate is 47.25%! Just in income taxes alone, $0.4727 out of each additional dollar earned is lost! Or, 28.35 minutes out of each hour worked is stolen! This is a situation a great many productive people are in. They have to really love their work or be really dedicated to achieving a goal requiring additional money to justify working this additional hour. If you wish to increase taxes on such people, are you really sure that you want to so discourage them from working as hard as they do? How many baby boomers might you induce to take early retirement, with the added strain that will put on the social security system and the loss of so much experience? Of course, at such tax rates, it makes a lot of sense for such people to work very hard on trying to earn additional money in ways that will not require them to pay so much in taxes. This tendency for people to work fewer hours as the taxes go up and to work harder to find tax loopholes or even to cheat on taxes, is why increasing tax rates does not always allow the government to collect more in taxes. The economy will grow less and over the years after a tax increase, this results in a large decrease in the taxable income compared to the taxable income which would materialize in those years at lower tax rates.
Of course, these income taxes are not the only taxes paid. You will also pay property taxes on your home and the land it sits on, sales taxes, taxes on utility bills, gasoline taxes, liquor and tobacco product taxes, motel and airport use taxes, fishing license, car registration, car pollution test taxes, dog licenses, marriage licenses, home title registration taxes, and higher costs for all products and services to cover the taxes paid by businesses, and many, many more taxes. So the income you have left after you pay the income taxes, is still going toward paying taxes in many ways. Taking these other taxes into account, the family earning just less than $102,000 will in fact pay out far more than half of each additional dollar of income on average in taxes. How discouraging!
So, stop and think. Are our governments really doing enough for us that we should be willing to give them more than half of all the value we create by working hard? I for one do not think this is anything but a slam dunk question. NO!!!! NO!!!!!!! NO!!!!!!!!!!!!!!!!
16 July 2008
Leon Aron - Back in the USSR?
Leon Aron is the director of Russian studies and a resident scholar at the American Enterprise Institute. On Monday, 14 July, he published a column in the Washington Post providing an interesting update on Russia. He draws a parallel with the USSR under Brezhnev, when the USSR was benefiting from high oil prices in the 1970s. Under Brezhnev, many of the excesses that later helped lead to the fall of the Soviet Union became SOP. Under Putin and his minions, Russia has become increasingly authoritarian, corrupt, and has burdened the economy with ever greater statism.
In the 1970s the Soviets consumed 8 liters of strong alcoholic beverages each, which was more than the people of any other country. As a result, male life expectancy fell from 67 to 62 years between 1964 and 1980. Now, per capita consumption of vodka is 10 liters according to Russian officials, but experts say it is definitely higher than that. In the U.S. consumption of strong alcoholic beverages is 2.57 liters per capita. Life expectancy for Russian men now is 60.6 years or 15 years shorter than in the U.S. and the European Union.
70% of the food in Russian cities is imported. The denationalization of land in the 1990s lead to food surpluses, which the USSR had not had, but the failure to put land property rights on a sound basis has again led to food shortages. Local officials use their continued power over land rights to force entrepreneurs and farmers to share their output and income with them.
Russia is ruled by the United Russia party, which rigs elections. There is no effective opposition to demand that disastrous policies be changed. Putin has achieved stability in the nomenklatura. His followers are given positions free of criticism and without consequences for their failures.
Russia, with China, has been helping the Iranians with their nuclear program. Russia is once again flying planes along the edges of our airspace in practice attack sessions. As the country has come under increasingly dictatorial rule, it has followed the usually increasingly aggressive nature of such regimes. But, the present rulers are also repeating the mistakes of Brezhnev and company and are setting Russia up for another fall when oil prices drop and can no longer support such a rotten structure.
In the 1970s the Soviets consumed 8 liters of strong alcoholic beverages each, which was more than the people of any other country. As a result, male life expectancy fell from 67 to 62 years between 1964 and 1980. Now, per capita consumption of vodka is 10 liters according to Russian officials, but experts say it is definitely higher than that. In the U.S. consumption of strong alcoholic beverages is 2.57 liters per capita. Life expectancy for Russian men now is 60.6 years or 15 years shorter than in the U.S. and the European Union.
70% of the food in Russian cities is imported. The denationalization of land in the 1990s lead to food surpluses, which the USSR had not had, but the failure to put land property rights on a sound basis has again led to food shortages. Local officials use their continued power over land rights to force entrepreneurs and farmers to share their output and income with them.
Russia is ruled by the United Russia party, which rigs elections. There is no effective opposition to demand that disastrous policies be changed. Putin has achieved stability in the nomenklatura. His followers are given positions free of criticism and without consequences for their failures.
Russia, with China, has been helping the Iranians with their nuclear program. Russia is once again flying planes along the edges of our airspace in practice attack sessions. As the country has come under increasingly dictatorial rule, it has followed the usually increasingly aggressive nature of such regimes. But, the present rulers are also repeating the mistakes of Brezhnev and company and are setting Russia up for another fall when oil prices drop and can no longer support such a rotten structure.
State GDPs
In the last post on the G8, I presented the gross domestic products (GDP) of the nations with the 15 largest GDPs. Back in the heyday of the USSR, that country had separate representation of several of its "provinces" in the United Nations. If the United States were to have a similar separate representation of some of its states in the Gn, where n is some integer, California would certainly be represented and if the cut-off is maintained at the level of the GDP of Turkey as I suggested, then so would Texas and New York be represented. The GDPs in 2007 of the top ranked states, according to the United States Bureau of Economic Analysis, are:
1. California $1.813 Trillion
2. Texas $1.142
3. New York $1.103
4. Florida $0.735
5. Illinois $0.610
6. Pennsylvania $0.531
7. Ohio $0.466
8. New Jersey $0.465
9. North Carolina $0.399
10. Georgia $0.397
11. Virginia $0.383
12. Michigan $0.382
13. Massachusetts $0.352
14. Washington $0.311
15. Maryland $0.269
16. Minnesota $0.255
20. Colorado $0.236
29. Oklahoma $0.139
32. Kansas $0.117
50. Vermont $0.025
I have included the top states through Maryland where I live and through Minnesota, where I was born and which is of interest to my mother. Colorado, Oklahoma, and Kansas are included because family members live in those states. Vermont is added best it is the state with the smallest GDP, which may be attributable in part to its real name the Socialist People's Republic of Vermont, once governed by Howard Dean, now chairman of the Democratic National Committee. A note to Barack Obama: There are only 50 states, not something in excess of the 57 states you claim to have campaigned in!
Florida's GDP is a bit smaller than that of Australia or Iran, but a bit bigger than that of Taiwan. The Illinois GDP is a bit smaller than that of Poland, but rather larger than that of Saudi Arabia. Pennsylvania ranks a bit behind Saudi Arabia, but ahead of Argentina. Ohio and New Jersey match of well with South Africa and Pakistan and ahead of Egypt. North Carolina, Georgia, and Virginia are smaller than Egypt in GDP, but bigger than Belgium. Maryland's GDP is smaller than that of Hong Kong and Nigeria, but larger than that of the Czech Republic or Norway. The GDP of Oklahoma exceeds that of Kuwait, or Morocco, or New Zealand. The Vermont GDP is a bit smaller than that of Cambodia or that of Botswana! But even Vermont can take heart, since its GDP is larger than that of Georgia. The nation of Georgia, not the state of Georgia.
1. California $1.813 Trillion
2. Texas $1.142
3. New York $1.103
4. Florida $0.735
5. Illinois $0.610
6. Pennsylvania $0.531
7. Ohio $0.466
8. New Jersey $0.465
9. North Carolina $0.399
10. Georgia $0.397
11. Virginia $0.383
12. Michigan $0.382
13. Massachusetts $0.352
14. Washington $0.311
15. Maryland $0.269
16. Minnesota $0.255
20. Colorado $0.236
29. Oklahoma $0.139
32. Kansas $0.117
50. Vermont $0.025
I have included the top states through Maryland where I live and through Minnesota, where I was born and which is of interest to my mother. Colorado, Oklahoma, and Kansas are included because family members live in those states. Vermont is added best it is the state with the smallest GDP, which may be attributable in part to its real name the Socialist People's Republic of Vermont, once governed by Howard Dean, now chairman of the Democratic National Committee. A note to Barack Obama: There are only 50 states, not something in excess of the 57 states you claim to have campaigned in!
Florida's GDP is a bit smaller than that of Australia or Iran, but a bit bigger than that of Taiwan. The Illinois GDP is a bit smaller than that of Poland, but rather larger than that of Saudi Arabia. Pennsylvania ranks a bit behind Saudi Arabia, but ahead of Argentina. Ohio and New Jersey match of well with South Africa and Pakistan and ahead of Egypt. North Carolina, Georgia, and Virginia are smaller than Egypt in GDP, but bigger than Belgium. Maryland's GDP is smaller than that of Hong Kong and Nigeria, but larger than that of the Czech Republic or Norway. The GDP of Oklahoma exceeds that of Kuwait, or Morocco, or New Zealand. The Vermont GDP is a bit smaller than that of Cambodia or that of Botswana! But even Vermont can take heart, since its GDP is larger than that of Georgia. The nation of Georgia, not the state of Georgia.
09 July 2008
Expanding and Updating the G8
The G8 group of wealthy industrial nations will consider and adopt for a reduction of CO2 greenhouse gas emissions of 50% by the year 2050. It is not clear what it means to consider the reduction if one is also saying one will adopt it. Well, leave it to politicians to utter such nonsense, both in the language and in the possible attempt to make such a devastating and unfounded reduction in perfectly good plant food.
The present members of the G8 are the United States, Japan, Germany, the UK, Russia, France, Italy, and Canada. The 15 countries with the largest GDPs are listed below with the GDP in trillions of dollars in 2007 according to the CIA Factbook:
The United States $13.84
The People's Republic of China $6.991
Japan $4.29
India $2.809
Germany $2.808
The United Kingdom $2.137
Russia $2.088
France $2.047
Brazil $1.836
Italy $1.786
Spain $1.352
Mexico $1.346
Canada $1.266
South Korea $1.201
Turkey $0.888
Examining this list, one might kick Italy and Canada out of the G8 and add China and India, both of whom have a considerable disdain for the advocates of catastrophic anthropomorphic global warming. Or assuming one thinks it too heartless to throw them out, one could change the G8 into the G14 and add China, India, Brazil, Spain, Mexico, and South Korea on the basis that there is a big gap in GDP between South Korea and Turkey, while South Korea is right on the heels of Canada, a present member. This would have the advantage of adding Brazil and Mexico, neither of which is likely to push CO2 reductions to the point of greatly hurting their economies.
Of course, while the countries of Western Europe have a habit of talking about CO2 emission reductions, as we have noted in an earlier post, they keep growing their emissions at a faster rate than has the U.S. Since there has been no warming for a decade now, perhaps everyone will come to their senses before they actually pick up sledgehammers and use them on our economies. Let us hope sanity will prevail then, though insanity prevails now.
The present members of the G8 are the United States, Japan, Germany, the UK, Russia, France, Italy, and Canada. The 15 countries with the largest GDPs are listed below with the GDP in trillions of dollars in 2007 according to the CIA Factbook:
The United States $13.84
The People's Republic of China $6.991
Japan $4.29
India $2.809
Germany $2.808
The United Kingdom $2.137
Russia $2.088
France $2.047
Brazil $1.836
Italy $1.786
Spain $1.352
Mexico $1.346
Canada $1.266
South Korea $1.201
Turkey $0.888
Examining this list, one might kick Italy and Canada out of the G8 and add China and India, both of whom have a considerable disdain for the advocates of catastrophic anthropomorphic global warming. Or assuming one thinks it too heartless to throw them out, one could change the G8 into the G14 and add China, India, Brazil, Spain, Mexico, and South Korea on the basis that there is a big gap in GDP between South Korea and Turkey, while South Korea is right on the heels of Canada, a present member. This would have the advantage of adding Brazil and Mexico, neither of which is likely to push CO2 reductions to the point of greatly hurting their economies.
Of course, while the countries of Western Europe have a habit of talking about CO2 emission reductions, as we have noted in an earlier post, they keep growing their emissions at a faster rate than has the U.S. Since there has been no warming for a decade now, perhaps everyone will come to their senses before they actually pick up sledgehammers and use them on our economies. Let us hope sanity will prevail then, though insanity prevails now.
Subscribe to:
Posts (Atom)
Posts
