Tag Archives: Taxes

Obama’s Spending Cut Bluff

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During the debt limit debates last week, Obama famously stormed out of the meetings and told Eric Cantor, “don’t call my bluff.”

What bluff was The One speaking of? His sudden attraction to spending cuts.

The President has made a big stink lately about how we can no longer “kick the can down the road” in regards to spending and the deficit. Lately, he’s sounded more like Paul Ryan than Paul Krugman. Unfortunately for Obama, budget proposals speak louder than words, and the only budget that the President has released to the public screams increased deficits and debt.

…The only budget proposal President Obama’s has publicly revealed in 2011 would, according to the Congressional Budget Office, increase the deficit by $26 billion this year, $83 billion next year, and $2.7 trillion over the next decade.

Nothing historically speaking would give any indication that Obama wants to make serious cuts in spending. He is in campaign mode, and when campaign mode is turned on, anything goes. Or, should I say, whatever the American people want, they will hear.

According to a new Gallup poll, 55% of Americans are worried that the government will raise the debt ceiling with no major cuts to future spending. Only 35% are worried that no compromise is met and an economic crisis occurs. So when the President tells the American people they’re “sold” on raising the debt ceiling, he’s only half right. The American people are sold…if it includes major cuts in future spending.

Hence why Obama is all of a sudden the poster child for spending cuts.

But again, policy speaks louder than words.

The House Rules Committee is expected to take up the measure Monday, and it is likely to receive a floor vote on Tuesday. The measure would cut spending in fiscal 2012 by $111 billion, cap future spending at 19.9 percent of gross domestic product and allow for the debt ceiling to be increased if a balanced-budget amendment is approved by Congress and sent to the states.

Sounds like a good plan to me. The cap on spending as a percent of GDP is actually pretty low when comparing to historic averages, it’s usually around 18.5% of GDP. And a balanced budget amendment would force Congress to actually care about what they spend our money on. Currently, there’s no accountability and they spend as if there’s no limit on the country’s credit card.

However, there’s one prominent politician that doesn’t seem to like this proposal. Barack Obama.

Gee, I thought he was the newly crowned champion of fiscal responsibility, oh well.

“Neither setting arbitrary spending levels nor amending the Constitution is necessary to restore fiscal responsibility,” the White House said in its statement. “Increasing the federal debt limit, which is needed to avoid a federal government default on its obligations and a severe blow to the economy, should not be conditioned on taking these actions. Instead of pursuing an empty political statement and unrealistic policy goals, it is necessary to move beyond politics as usual and find bipartisan common ground.”

What in the history of this country makes you think that fiscal responsibility can be restored without setting some arbitrary spending levels? We’ve had a spending problem for decades, we’ve known about it for decades, and nothing’s been done. If set a spending limit and make it law, we’ll suddenly be forced to spend within our means.

We’ve raised the debt ceiling 60 times before, we’re about to make it 61, and unless it’s tied to a balanced budget amendment or some hard and fast rules on spending, we’re going to have to raise it a 62nd, 63rd, and 64th time, and likely much more than that. Congress has given us no proof that they can spend responsible, none.

The administration also called the proposal, “extreme, radical [and] unprecedented.”

Good. Clearly the “status quo” isn’t working, so I’d say we need something “unprecedented.”

However, the key is that the republicans have a plan. That’s 1,000% more than the democrats or the White House can say. They talk about fiscal responsibility and spending wisely, yet they have no plan to execute that. Their plan seems to be, “well, we’ve learned our lesson, trust us, in the future, we’ll spending responsibly.”

Uh, no you won’t.

Don’t get me wrong, the republicans don’t exactly have a crystal clear record of fiscal sanity either, but at least their offering up proposals to restore sanity. While the republicans actually work to solve this problem, the democrats have been picking their nose and itching their butts.

Eric Cantor did call Obama’s bluff. He was holding a pair of twos and was going all in. He’s a great actor; pretending that he cares about spending, but everything we have on the record about Obama proves he’s more concerned with increasing the debt than decreasing it.

And despite what Obama thinks, the American people see through that, and know he’s pulling their leg.

–jb

The Current #188 – Debt Limit Limbo

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The Current #188 – Debt Limit Limbo
Sunday July 17, 2011
Hosts: Jacob Bodnar and Jared Weseman

Presented by Budget Rent-a-Car
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STORIES
Debt Limit Compromise still not achieved
Obama walks out on talks, “takes it to the American people”
Obama Gaffe #1 – Claims 80% of Americans want tax hikes in the deal
Polls suggest not quite that high
Obama Gaffe #2 – Not sure if social security checks will go out if US defaults
Obama Budget Director: We don’t have a priority list for spending if default happens
Shelia Jackson Lee says Obama doesn’t get respect because he’s black
Senator Barack Obama circa 2006 explains why he voted against debt limit increase
Harry Reid explains his no vote in 2006 as well
2012 Presidential Election
Gingrich in deep debt, mostly on private plane travel
Bachmann only raises $4 million in second quarter
Ron Paul releases first TV ad
Rudy Giuliani seriously eyeing presidential run
Rick Perry almost certainly running
“Generic Republican” extends lead over Obama
Everything Else
Obama doesn’t know his own birthday
Woman gropes TSA agent
Nanny State Update: Government shuts down another lemonade stand

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Out of Touch

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In his third press conference in 17 days, President Obama stood in front of the American people and told them what they were thinking.

He told the American people that they were “sold.” He told the American people that he was listening to them, and that republicans were more concerned with ideology and playing the Washington way.

Then he preceded to lie about what the American people believe.

Obama made the claim that 80% of the American people support raising revenues (fancy talk for tax increases) as a way to come to an agreement on the debt limit.

At best, the number is somewhere around 43%, according to a Gallup poll. A Rasmussen poll shows that “just 34% think a tax hike should be included in any legislation to raise the debt ceiling.”

Well, there goes the argument that you understand the American people better than the Republicans.

There’s no doubt that everyone in this debate is in re-election mode. The 2012 election will be here before you know it, and it looks as though the debt limit talks are going to sway a lot of people one way or the other. Mitch McConnell has already stated that if the country does default it will have catastrophic results for the republicans electorally.

However, we have to remember, Obama has launched a re-election campaign, he’s in campaign mode as well. Is it any surprise that before this 17 day marathon of press conferences, Obama hadn’t held one since March? Of course not, the campaign wasn’t in full swing back then. Now, the debt limit is a major topic, and a major election issue, Obama needs to capitalize on it.

But he’s doing a rather poor job. He is the president, a deal should go through him. But instead Obama sat on the sideline until about four weeks ago. And now that he’s in the debate…well, it hasn’t gotten much better. It seemed a deal was close, then entitlements somehow got taken off the table and tax increases became a center piece. Instead of bringing people together, which was a campaign promise of his, it seems the sides are growing further apart.

Gosh, I thought Obama was the guy who would unite us and bring us together. We were tired of the bickering, that’s why we voted for him (well, I didn’t, but other people did). Has he come through on that promise at all? Or any of his promises outside of health care?

That’s a big, fat, no.

The administration is claiming that a deal will get done and the government won’t default, yet Obama himself opposes a short term solution that buys more time to argue the cuts. Wait, I thought default would send the world into a financial fireball, the likes of which won’t be seen for another fives years when global warming kills us all.

This is all politics, for both sides. They’re both stubborn, someone needs to step up, bring a real compromise to the table, and avert the crisis. Where are the real leaders at?

–jb

Facebook Debate: Are the Rich Getting Richer?

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I engage in quite a few Facebook debates about politics, I love the debating, but I hate doing it on Facebook. I can only type so many words and I can’t insert awesome graphs and charts. So I’ve decided from now on, if the situation warrants it, I’m going to respond to all Facebook debates on my blog. That way everyone else can take part in the discussion and I can insert geeky charts and graphs.

The article in question is “The Rich Aren’t Getting Richer” from the National Review.

In the article, the author uses information from a Treasury department study on income mobility from 1996 to 2005. That document can be viewed here, and unless otherwise noted my quotes will come from that study.

The person on Facebook takes issue with the following statement from the article…

Of those who were in the poorest fifth in 1979, 85.8 percent had moved to a higher bracket by 1988, and 14.7 percent of them moved to the top bracket — which is to say, the poor of 1979 were more likely to be the rich of 1988 than to be the poor of 1988.

That information comes directly from page five of the Treasury Department study, which states…

The Treasury data showed that 86 percent of taxpayers in the lowest income quintile in 1979 had moved to a higher quintile by 1988 and 15 percent of them had moved all the way to
the top quintile. Among those who were in the top quintile in 1979, 65 percent remained in the top quintile in 1988, and only 1 percent had dropped to the lowest quintile.

So, that is verified by the Treasury Department. However, I will admit to one slight issue with that statement. It includes taxpayers under the age of 25, so when you limit it only to taxpayers age 25-64, you get the following…

When the sample was limited to taxpayers age 25 to 64 and compared to taxpayers in the panel, rather than to all taxpayers aged 25 to 64, the Treasury study showed that 50 percent of the lowest income quintile had moved to a higher quintile after 10 years.

So, still half of the lowest earners age 25-64 made it out of the lowest bracket in a ten year span, which is probably more than most people would have assumed. The Treasury study claims that economic mobility is about 50%, which is to say in any given decade about 50% of individuals are in a different income quintile.

This claim is backed up by a prior Treasury Study as well as a study by Sawhill & Condon (1992) which the Treasury study claims…

Using a measure of relative mobility that compares households within their sample, they found that over 60 percent of individuals were in a different family income quintile a decade later. Among individuals initially in the lowest income quintile, 44 percent moved to a higher quintile between 1967 and 1976.

So it seems that most people have about a 50% chance of moving out of their quintile in a given decade. And the study also showed that downward mobility from the top quintile is about the same percent (47-50%). Which is to say, once you’ve reached the top quintile, that doesn’t guarantee your safety in it, you have about a 50% chance of moving down out of it. Which is weird considering we’re told we give special treatment to the wealthy to make sure they stay wealthy.

The following graph can be seen on page seven of the Treasury Department study (click the image to view a larger size)…

This is interesting data. For starters unlike the previous Treasury study that I mentioned earlier, this data is only individuals over the age of 25. But it shows that if you were in the lower quintile in 1996 you had a better chance of moving upward than staying in the same quintile. In fact you had a slightly better chance at moving into one of the top three quintiles than moving up only one quintile (28.6% to 29.1%).

Furthermore those in the second quintile had a better chance of moving up as well (33.3% to 49.7%). The other important item to notice is the mobility within the highest quintile. Those in the top 1% had a greater chance of moving downward, only 42% of them stayed in the top 1%. We can characterize these people as the “super-rich” and they are almost just as mobile as any other income group. It’s also important to note that the middle class had a better chance of moving up as well (33.3% to 42.1%).

However, I want to focus in on the top 1% again. The Treasury study concludes that…

Put differently, more than half of the households in the top 1 percent in 2005 were not there nine years earlier. Thus, while the share of income of the top 1 percent is higher than in prior years, it is not a fixed group of households receiving this larger share of income

That’s an important analysis to note. We always talk about share of the wealth in terms of income group, where the top 1% owns about 34% of all wealth in the country (also note the difference between wealth and income). For starters that share has remained relatively the same for the last 24 years. It dipped to about 19% in 1976, but that’s the lowest it’s ever gotten, and it quickly bounced back up.

However, the treasury study seems to prove that the income group is owning the wealth, not necessarily the same people. If over half of the people in the top 1% of income earners actually went downward between 1996 and 2005, one of the most booming economic times in recent memory, than it shows that the same people aren’t owning that money, they’re just being replaced by other people, who might move out of that group and are replaced by other people. That is to say, the stability of earners in that group is no more stable than earners in any other group.

So while the top 1% might continue to own the same income, it’s not the same people controlling that wealth.

Let’s look at another table from the Treasury study, this can be found on page 10 (again, click for a larger image)…

This shows the change in income between these groups, and the biggest losers are actually the very wealthy.

In terms of mean income (or in other words average income), the top 1% saw their income increase by 12%, the lowest of any group surveyed. The lowest, in terms of quintiles, after the highest quintile was the fourth quintile at 28%. The winners were the lowest quintile occupants, who saw their mean income rise by an astonishing 235% over the ten year period. In terms of median income the top 1% saw their income go down 25%, whereas the lowest quintile saw an increase of 90%.

The study then breaks it down even further, to the top .01%, who only had a 25% stability rate (that is to say only 25% of them stayed in that group of income earners by 2005). It then breaks it down by mean and median income within the microscopic income group. The study finds that the top .01% saw a decrease in both measures. The mean income dropped 17.8% ($17.5 million to $14.3 million), the median income dropped 64.6% ($11.5 million to $4.1 million). So the “super-rich” did not get super richer from 1996 to 2005, they actually lost money.

Reasons for this decline? Probably quite a few, but I would venture to say these income earners invested a lot of money in the dot com business and lost money when the bubble burst in the early 2000′s. And also note that it’s not uncommon, the super-rich tend to lose money through economic downturns just as easily as any other income bracket.

But let’s look at the crux of this issue, the idea that the rich are getting richer. I want to look at this from an individual standpoint, not a tax bracket standpoint. We can sit here and say the top 1% own this much of wealth (again, remember that number has stayed relatively the same for the last 24 years), but I want to see the fluctuation in the number of millionaires over the last ten years. If the number has stayed the same, we can make the argument that the rich are getting richer. Essentially what we want to look for to prove that point is a decreasing number of people reporting between $1 million and $1.5 million, and an increase in the number of people reporting $10 million or more, all while the total number of people reporting $1 million or more stays the same.

The data I used came from the IRS, particularly this site, from the first set of tables on that site, “All Returns: Selected Income and Tax Items.” Inside each document it breaks down the number of returns by income group. I simply added the number of returns from 1998 to 2008 from earners making over $1 million. The compiled statistics can be found here.

Here’s what was found. In 1998 there were 171,000 people that reported an income over one million dollars. In 2008 that number was 321,000. The number peaked in 2007 at around 392,000, and it was below the 300,000 mark until 2005. The most important thing to note is that the number fluctuated, it did not stay the same throughout the ten years, and the number grew every year between 2002 and 2007. It’s also important to note that the number of people making over $10 million never eclipsed the 18,500 mark, and that it was the most fluid of all the income groups looked at (it had a tendency to change the most).

What does this mean? Well it suggests that instead of the same people accumulating more money and leaving everyone else in their dust, more people are becoming millionaires. So are the rich getting richer or are just more people getting rich? I would argue more people are just getting rich. All of the information that I have seen that claims the rich are getting richer isolate it simply by tax bracket, and doesn’t break it down by the actual individual, like this study does.

Furthermore if we use the Treasury study and say that around 50% of taxpayers find themselves in a different quintile in a ten year span, and that most of the people in the top 1% move downward instead of staying in the top 1%, it’s safe to assume that people swiftly move in and out of the highest quintile and that they are replaced by members of other quintiles, in fact the Treasury study proves just that.

Also, looking at the number of people making over $1 million shows a variation of nearly 200,000 over a ten year span, meaning that the same people aren’t just making more money, there’s more people making that level of money.

I’m not going to say that this alone proves the rich aren’t getting richer, but I think it certainly throws a monkey wrench in the common argument from the left that they are. Income mobility is more fluid than we think and it is just as fluid in the top brackets as it is in the lower bracket. Which proves that while the rich still control a large chunk of the wealth, it’s not the same people controlling that wealth.

–jb

4,000 Words, Not a Single Solution

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In a 4,000+ word speech today, Obama manged to outline no new proposals for cutting the deficit, said that everything should be on the table in bipartisan discussions, then talked about why the republicans were wrong and said Medicaid and Medicare shouldn’t be on the table.

The speech was so long and so boring it appeared to put Vice President Joe Biden to sleep for a solid 30 seconds. Note to Joe: you’re the flippin’ vice president, they’re going to have a camera on you, is it going to take until year four to figure that out?

Obama’s plan didn’t need 4,000 words, I can explain it in just a few: some cuts, raise taxes, don’t touch Medicaid, Medicare or Social Security (after all it’s an election year.)

So, with the being said, let’s get into the meat and potatoes of Obama’s speech.

Claim #1

But after Democrats and Republicans committed to fiscal discipline during the 1990s, we lost our way in the decade that followed. We increased spending dramatically for two wars and an expensive prescription drug program – but we didn’t pay for any of this new spending. Instead, we made the problem worse with trillions of dollars in unpaid-for tax cuts – tax cuts that went to every millionaire and billionaire in the country; tax cuts that will force us to borrow an average of $500 billion every year over the next decade.

For starters, the spending problem goes back a lot further than the 1990′s, or even the 1980′s. This thing traces back to the 1930′s. We never seemed to have consistent debt problems until FDR’s New Deal. That’s not a coincidence.

Furthermore, it certainly wasn’t the wars and the prescription drug program that drove us into this fiscal crisis. We certainly didn’t do ourselves any favors from 2001 to today, but on January 20, 2001 the national debt was still at $5 trillion. So we had a problem long before Bush came to Washington. Even going back to January 20, 1993 the national debt was still at $4 trillion.

The idea that the Bush tax cuts made the problem worse is a fabrication. Fact is from 2003 to 2006 federal revenues grew by about $625 billion according to the CBO.

And the idea that the tax cuts went to “every millionaire and billionaire” in the country is extraordinarily misleading. The Bush tax cuts, for the 15,000th time, went to EVERYBODY. And the largest rate reduction went to the lowest earners, who went from a 15% rate to a 10% rate. The tax rates in 2001 were: 15%, 27.5%, 30.5%, 35.5%, 39.1%.

The rates in 2003 were, and still are today: 10%, 15%, 25%, 28%, 33%, 35%. The lowest earners got a 5% rate reduction, while the wealthy got a 4.1% reduction.

Also, Obama actually makes a very good point here…well, he does in theory. He says we added millions in spending early on last decade with no way of paying for it. Which is partially correct, after all tax revenues did increase. However, he begins to spell out the fundamental problem with tax increases in this statement. Just because you increase revenues does not mean that politicians will begin spending within the constraints of those new revenues.

For instance, you raise revenues by $1 trillion. What’s more likely to happen, the government runs a surplus and begins paying off the debt, or the government finds more things to spend money on to the tune of $1 trillion? It’s clearly the latter. We’ve raised revenues in the past and it never seems to fix the problem, that’s because there’s a good number of politicians who just turn around and start spending that money, instead of putting it towards paying down the debt.

Claim #2

So here’s the truth. Around two-thirds of our budget is spent on Medicare, Medicaid, Social Security, and national security. Programs like unemployment insurance, student loans, veterans’ benefits, and tax credits for working families take up another 20%. What’s left, after interest on the debt, is just 12 percent for everything else. That’s 12 percent for all of our other national priorities like education and clean energy; medical research and transportation; food safety and keeping our air and water clean.

This is all very true, so why not do something about entitlements? To this point Obama has been mum about cuts to Medicaid, Medicare and Social Security. I’m sorry, he hasn’t been entirely mum about Social Security, he claims it’s not in a crisis, despite the fact that it will go bankrupt this year.

By the way, all those college kids that voted enthusiastically for Obama, I want you to look Obama in the face when he inevitably comes to your campus, and ask him if you’ll be getting a social security check when you retire. Because he’ll say yes and be lying to you. Ask him why he thinks the program isn’t in a crisis when, if we don’t do anything about it, our generation won’t be getting social security because it will bankrupt the government.

So after Obama explicitly said that we cannot just focus on the 12% in discretionary spending, that we have to put everything on the table, he then attacks the GOP’s proposal to…well, put everything on the table. He claims that the GOP’s budget and it’s reform of Medicaid and Medicare will “lead to a fundamentally different America than the one we’ve known throughout most of our history.”

Really Obama? Medicaid and Medicare have been around since 1965, that’s a total of 46 years. We’ve been a country since 1776, or 235 years. Which means we’ve had Medicaid and Medicare for about 20% of this country’s history. So no, reforming Medicaid and Medicare would not lead to a fundamentally different America than we’ve known throughout most of our history because throughout most of our history we haven’t even had Medicaid and Medicare.

He goes on to paint a little bit of a fearful image, “It’s a vision that says if our roads crumble and our bridges collapse, we can’t afford to fix them.”

But, gee, I only thought Glenn Beck was a fear mongerer. Look, the idea behind cutting the deficit is so we can repair our bridges and our roads. The idea to not having a $1.6 trillion deficit (like Obama’s last budget had) is so we can address those issues.

He goes on for about another three stanzas whining and crying about how this vision is an America where we have no health insurance and no car insurance and no butterflies and no candy, no apples, no automobiles, no sunny days, no clowns, no balloons, and we all live in a cloudy world where it rains 23 hours out of the day and we have to drag ourselves out of bed in the morning because the republicans took away any reason for us to ever want to leave the house again.

This speech was a campaign speech. It was not a policy speech, it was not a let’s fix this speech. It was pretend. He extended an arm across the isle for about five seconds until he quickly yanked it away and said, “gotcha!” He claimed he wanted everything on the table, and then quickly took off Medicaid and Medicare and didn’t even mention Social Security. There was no new proposals or policies, he again avoided any mention of policies from the debt commission, which he put together. And his only solution seems to be higher taxes, despite the fact that we’re still recovering from an economic collapse.

At least the Republicans put together a specific proposal that would cut the deficit. Obama has no specifics, he has broad ideas, but nothing solid.

Let’s be honest, if Republicans weren’t putting pressure on him to cut spending, he wouldn’t. This speech would have never happened and we would be continuing down a path of amazingly outrageous debt and high taxes. That’s the Obama way.

He’s serious about one thing, and one thing only. Getting re-elected and gaining more power. Let’s make sure he doesn’t get his wish.

–jb

Some People Just Hate the Rich

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In a highly publicized appearance, at least it was around here, Glenn Beck spoke at the Michigan Chamber of Commerce Future Forum, he was the keynote speaker at the dinner. The Chamber doesn’t just pull speakers from the right side of the aisle either, Mark Brewer, the head of the Michigan Democratic Party, was last year’s keynote speaker.

The Michigan State College Democrats decided to protest Beck. Why? I’m not quite sure. They say it was because of his comment calling Obama a “racist” but then I have to imagine they didn’t hear Beck’s defense and actually listen to Beck explain himself.

I have no problem with people protesting someone, I’ve done it before, but when I show up to a protest (especially when it’s against an individual) I make damn sure that I know why I’m there. I make damn sure that I know what that person has said and what that person has done to make me drive to where ever they are and hold up a sign.

The College Democrats apparently don’t share my same work ethic.

They kinda went because, well, Glenn Beck’s a conservative, and they’re not. Mitchell Rivard, the president of the College Democrats (and for the record a huge Obama hack), couldn’t resist saying that Glenn Beck spreads “republican lies.”

Oh really? I’m going to go out on a limb here and say that Rivard has never watched or listened to Beck’s program. After all, if he did he would certainly pick up on Beck’s pattern of saying the problem in Washington is corruption on both sides of the aisle. If he did listen to Beck’s program he would have heard Beck speak out against Bush’s commutation of Scooter Libby. If he would have listened to Beck’s program he would have hard him scream at the republicans over their handling of illegal immigration.

Glenn Beck is not a political hack. There are some people that blindly follow the two parties in this country. Those are the people we can blame for the situation we are in. Mitchell Rivard is a perfect example of that type of person, he can’t generate a political thought for himself unless it’s fed to him from the democratic party.

I think what was most disturbing about the protest was the hate that was displayed for the well off in this country. There was a group of protesters “dressed up” as stereotypical rich people and saying things that “stereotypical” rich people would say. Here’s a video clip:

Boy, nothing like stereotyping a whole class of people. What other group in this country could you stereotype and poke fun of like that? Would it be okay if I got a group of people together to protest someone and we all dressed in rags with aluminum cups tied to our forearms and played musical instruments for money? I’m thinkin’ that would be frowned upon.

These people hate the rich, and they’ve been groomed to believe that all rich people are snotty self serving scumbags that don’t care about anyone outside of their 10,000 square foot homes. You can thank the media and Hollywood for that stereotype.

Because of this perverted view of the affluent, the democrats feel the need to “penalize” them by taking their money and giving it to those they have “hurt.” While they steal money from the wealthy they also get to make fun of them, dressing up like them and saying things that they supposedly say.

Aren’t these the people that love everyone? Isn’t this the party of bipartisanship and change? What happened to that? Oh yeah, it was a load of crap.

What the left doesn’t seem to realize is how much our government relies on the wealthy. The top 1% of earners pay 40% of all income taxes, if they just disappeared Uncle Sam would be out billions of dollars.

When the left wants a new social program where do they go? The wealthy. What happens if the wealthy aren’t there? If you eliminate the wealthy do the underprivileged suddenly obtain health insurance? No. So who’s going to pay for it?

Instead of mocking the rich the left should be praising them. If there were no wealthy people who would be giving to charities? Who would be paying 50% of all taxes? Who would providing capital for a new business? Without the wealthy the government would simply crumble.

And I can’t forget the massive hypocrisy of these protesters. After all, it’s the liberals who make more than conservatives. That’s a pesky little fact the left can’t stand. And oh yeah, that government the liberals love so much, there’s a reason the Senate is often described as a “Millionaires Club.”

One final point to address. In the clip the protesters jokingly call for the privatization of police, fire departments and schools. With the exception of schools, that’s absurd. It’s clearly outlined in the constitution that government is tasked with protecting the people (that would be fire departments and police departments), no where does it say they are tasked with the health of the nation. The argument is not about straight up socialism and doing away with anything that might come close to it, the argument is about what the role of government is. And the role of government is not to provide health care for all.

–jb

The Current #137

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The Current #137
Hosts: Jacob Bodnar and Logan Sparrow

Topics (bolded topics are available as separate audio segments below): Obama/Cheney spar on torture and Gitmo, Pentagon report shows 1 in 7 Gitmo detainees went back to terrorism, Pelosi stonewalls question on CIA comments, lawmakers divided on whether Pelosi knew or not, 12 of 16 Congressmen under investigation are democrats, US close to losing AAA rating, Obama says we’re running out of money, GM to head into bankruptcy, Obama’s new fuel standards, Republicans happier than Democrats, Gaffama of the week, Paid Vacation act introduced, and Woman hand cuffed and fined for not holding escalator rail.

The word of the week is Torture…and Gitmo
Barack Obama and former Vice President Dick Cheney had competing speeches this week about torture and Guantanamo Bay. Both speeches were opposite of each other. Obama said that torture didn’t work and we need to shut down Gitmo, Cheney said torture worked and Gitmo needs to remain open. What specifically did each have to say, and who’s right?

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We’re out of Money but don’t worry I’m Spending More
It was released this week that the United States is dangerously close to losing it’s AAA rating. Secretary of Treasury Timothy Geithner has correctly said we need to lower the deficit, but he didn’t mention spending cuts just “policies” that need to be adjusted. Could he be talking tax increases? Probably. Also, Obama said this week we’ve run out of money and then tried to defend spending billions more on health care. Listen to how he’s trying to deceive the public about our debt.

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The Real Criminals
Ya know the handrails on escalators, who really uses those? Well apparently if you’re in Montreal, Canada and you don’t use them you can be fined upwards of $100. Just ask Bela Kosoian, she wasn’t just fined $100 she was placed in a “small holding cell” as well. All for not holding the rail.

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You’ll hear all those topic and much more in the full episode.

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Tax Compeition: Why the U.S. is Losing

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On the campaign trail, Obama was very sneaky about his tax plan for corporations.

He shouted in the streets that he was going to lower taxes for 95% of Americans, but when the issue of corporate tax came up his words were very calculated.

He was asked flat out in a debate about the United State’s corporate income tax rate, which is the second highest in the world. He shrugged off the question saying that while the percent was high, corporations usually used tax loopholes to avoid paying the full rate.

I guess he doesn’t realize that when you close these loopholes you are effectively raising the rate. If closing the supposed “loopholes” was met with a lowering of the rate, it would at least make sense.

But as we’ve realized in his first 100 days in office, common sense isn’t really Obama’s strong point. He proved that Monday by unveiling plans to tax profits on company’s foreign subsidiaries at the full 35% rate. I warned about this during the campaign, and it’s coming to fruition.

Much of Mr. Obama’s plan aims to limit what the president considers the tax avoidance of multinational corporations who use subsidiaries and foreign branches to exploit tax code loopholes.

The White House argued that 83 of the 100 largest U.S. corporations have subsidiaries in tax havens, citing a government report, and that in 2004 the largest corporations paid about $16 billion, or a tax rate of about 2.3 percent, on $700 billion in profits.

The White House makes it sound as if corporations having subsidiaries in tax haves (an area with low taxes) is somehow a crime. It’s simply smart business on the company’s part. They want to keep as much money as possible, why wouldn’t they setup shop in a tax heaven, that’s common sense.

If anything that report shows that we’re losing the tax competition. The government has to realize that we’re operating in a global economy, and the invention of countless technologies makes it easier and cheaper to move a business from one country to another.

When it comes to taxes the government acts as if we’re still in the industrial and agricultural years, where companies couldn’t move business either because it was too expense or because their industry wasn’t available in another country. However, we’re living in the digital age, where business is more about information and less about industry or agriculture. Not only is it cheaper to move a business around the world, the advent of business built around information has eliminated ties between businesses and countries (such as natural or human resources).

Because those ties are broken, countries are on a more level playing field. Corporations are basing their location on where it will be cheapest to operate. The government doesn’t understand this. They don’t grasp the idea that a corporation can pack up and leave at anytime. Even a corporation that uses natural resources (such as Exxon) could move their world headquarters somewhere else quite easily.

The reason U.S. based corporations have subsidiaries in tax havens is not because they want to stiff the government, it’s because it’s cheaper to operate there. Country’s with low corporate taxes understand that most corporations are built around information and thus can operate in virtually any country with electricity and an internet connection. The U.S. has failed to realize this simple fact.

Let me give you the gist of Obama’s plan. He wants to tax all of the profit made from foreign subsidiaries of U.S. based businesses at the corporate income tax rate of 35%. Currently that profit is only taxed at that rate if the money is brought back to the United States. If a company decides they’d like to keep that money in the foreign subsidiary they can do so but they will be subject to the foreign country’s tax rate.

The current system provides a massive disincentive to reinvest money in the United States. After all, we have the second highest corporate tax rate in the world, unless the foreign subsidiary is based in Japan, that company would face less taxes keeping it outside of the United States.

We obviously want that money to come back to the U.S. and be reinvested in American jobs. But when a company is faced with the decision to be taxed at 35% or something lower, they usually go with the lower value.

The solution is simple, and it’s already been test.

In 2004 we ran a trial on a new tax rate for foreign subsidiary money brought back to the States. Instead of taxing it at 35% we taxed it 5.25%. The results were staggering. An estimated $362 billion flooded back from U.S. based businesses, and the federal government saw tax revenues of $18 billion from the new tax.

If we lower the rate for foreign subsidiary money, business will bring the money back to the States, that’s already been proven. But Obama has gone the opposite route, he wants to tax that money regardless of if it comes back or not. The idea is absurd and it will only put another tax burden on corporations that employ millions of Americans.

If our government doesn’t wake up to the realities of the digital age, we are bound to lose the tax competition.

–jb

Task Force Fever

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I’ve mentioned several times that Obama is becoming not only a “teleprompter president,” but also a “task force president.” This is also known as a “committee president.”

Surely presidents need to bring the best minds on topics together to solve problems. But it has gotten to a point where he is simply delegating his responsibilities to a bunch of unelected groups of people, forcing them to develop the difficult, and possibly wrong, solutions and not him.

Today Obama announced yet another task force, I believe this is number five or six. This time it’s about taxes.

President Barack Obama is putting former Federal Reserve Chairman Paul Volcker in charge of a tax- code review aimed at closing loopholes, streamlining the law and generating revenue, budget director Peter Orszag said.

Hmmm…what might this group recommend if one of their goals is “generating revenue?” There are two ways the government can “generate” more revenue from taxes (besides lowering them), that’s raising them, and increasing the tax base. Considering the government can’t magically create more people, “generating revenue” must mean that someone’s taxes are going up.

Orszag said the review, given a deadline of Dec. 4, is being ordered to make recommendations on steps to simplify the code, built over the last 96 years, in ways that would reduce tax evasion and what he called “corporate welfare.”

The only way you’re going to simplify the tax code is by instituting an entirely new system, such as the fair tax. But something tells me this task force won’t be reporting that as a solution.

And am I the only one that thinks December 4 is a long time to for this task force to review the tax code? I mean I understand that it’s long and cumbersome and very, very confusing, but come on, they can hash it out by at least September. Not to mention any recommendations they may report wouldn’t be available to the taxpayer until 2011.

Here’s what Obama, and apparently Orszag, don’t understand about their vision of corporate taxes. Orszag is speaking of “corporate welfare” in a country that has the second highest corporate tax rate in the world. On the campaign trail McCain spoke of lowering the corporate tax rate to 25%. Obama brushed off lowering the rate and said we have to worry about “closing the loopholes” first. What he didn’t realize, or doesn’t care about, is that closing any corporate tax loopholes would in effect be a tax increase. So if you’re going to “close the loopholes” you have to lower the rate to stay competitive.

The other tax issue Obama, Orszag, and Volcker seem unclear about is who actually pays taxes.

“There are hundreds of billions of dollars in uncollected taxes each year,” Orszag said in a conference call. The Volcker board “will be examining ways of being even more aggressive on reducing the tax gap.”

So this task force will also look at “reducing the tax gap.” According to Orszag, at least based on the context of this sentence, corporations get off scott free on taxes, while poor lower class Americans have to pay up the nose. Obama believes that the rich and corporations don’t pay enough taxes, and the lower class pays too much taxes.

For starters I believe everyone pays too much taxes. But Obama’s view on the tax system is backwards. 40% of Americans don’t pay taxes, and that 40% is not from the top, it’s the people who pay taxes, and then get it all back in rebates. It’s the top 1% of Americans that pay 39% of all taxes. If Obama was truly concerned about “reducing the tax gap” he’d make sure those “billions of dollars in uncollected taxes” were coming from the people who don’t pay any, not corporations through various “loopholes.”

But again, I have a feeling this task force won’t be coming up with that solution.

Oh well, maybe in a few months he’ll create another one to tackle that problem.

–jb

Bailout Brouhaha UPDATE: Positive News

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I’m running out of alliterations for the bailout, but I’ll see what I can continue to come up with.

I want to take a quick walk down memory lane and listen to the words of Nancy Pelosi from October 2. This was after the Senate version of the bailout bill was passed by the House. Pelosi touts the protection the bill includes for taxpayers by enforcing strict oversight on the process.

Well so much for that.

In the six weeks since lawmakers approved the Treasury’s massive bailout of financial firms, the government has poured money into the country’s largest banks, recruited smaller banks into the program and repeatedly widened its scope to cover yet other types of businesses, from insurers to consumer lenders.

Along the way, the Bush administration has committed $290 billion of the $700 billion rescue package.

Yet for all this activity, no formal action has been taken to fill the independent oversight posts established by Congress when it approved the bailout to prevent corruption and government waste. Nor has the first monitoring report required by lawmakers been completed, though the initial deadline has passed.

So not only have the positions on the oversight board not been filled, but the deadline for the first monitoring report has gone and past. Yet Pelosi was adamant about the strict oversight the government would have on this process.

So where was Pelosi yesterday, when Henry Paulson announced that he didn’t like the idea of buying trouble assets, he wanted to buy actual stock in banks. Of course that move went completely against the intentions of the bill, after all it was titled the Troubled Assets Relief Program, however Paulson was permitted to make that move because of the wiggle room included.

So where was Pelosi’s statement? The top story on her website is a picture of her snuggling with students from the San Francisco Life Learning Academy during their recent visit to D.C.

On the same note, where was the republican outcry. This was a bill that they supposedly reluctantly passed because this was an “urgent” crisis. Why aren’t they outraged by the bait and switch Paulson has pulled on the American people?

The White House isn’t in the clear either. The Bush Administration was suppose to appoint a special inspector general to watch over the process. It’s been six weeks since the bill has passed, where’s this inspector at? Is the Bush White House interviewing people now? What’s taking so long?

This is why the whole idea of spending $700 billion was a dumb plan. Forget the fact that we don’t have the money, the sheer volume of such a blank check to the Treasury makes it extraordinarily difficult, if not impossible, to impose necessary oversight.

So you ask, “alight Jacob stop whining and give me some solutions!” Okay, okay, calm down. I’ve written about some ideas before but bear in mind, I am no economist. I’m a college freshman, I don’t claim to know much about the economy and how to fix it, but from listening to smart people and applying some simple common sense, I’ve come up with a few ideas.

1.) Lower the Corporate Tax Rate to 25% or lower – This one is a no brainer. Corporations pay too much tax in this country. Let’s take a quick look at ten countries with the lowest corporate taxes, in order they are; Vanuatu, Maldives, Qatar, UAE, Kuwait, Saudi Arabia, Bahrain, Zambia, West Bank Gaza, and Botswana.

Omitting West Bank, because their economy is the worst in the world which is completely out of step with the other nine, the average GDP growth of those countries is 5.91%, nearly three times higher than the GDP growth of the United States (when comparing numbers from 2007 to 2008).

The seven fastest growing economies in the world (in order, based on GDP growth); Azerbaijan, Bhutan, Timor-Leste, Angola, Armenia, Equatorial Guinea, and Georgia, all have a lower statutory corporate tax rate than the United States.

Now obviously the tax rate in these countries isn’t the only factor for their economic boom. Most of these countries rely on only a few exports as their economic engine. But the sheer fact that a country like Azerbaijan, which I doubt any of you have heard of, has a lower tax rate than the United States and has a GDP growth of 23%, is embarrassing.

2.) Lower the foreign profits tax (I made up the name, but the tax exists) – When a U.S. based company owns a foreign subsidiary they have two options when allocating the profit. One, leave it in the foreign country and be subject to their corporate income tax. Or two, bring it back to the United States and be subject to our corporate income tax. Seeing as how the United States has the second highest corporate tax rate in the world, most companies opt to leave it in the originating country.

This is a problem. U.S. based companies are investing in foreign countries rather than the United States. So in 2004 we experimented, and lowered the tax rate on foreign profits to 5.25%. The result was over $390 billion of cash being brought to the States and somewhere in the neighborhood of $14 billion in tax revenue for the government.

We need to go back to the 5.25% rate. Its success was wild, and with many auto makers owning foreign subsidiary companies, they would begin to bring some of that profit back here, and reinvest it in America.

3.) Lower the capital gains tax – History has proven that when the capital gains tax is low, the government makes more in tax revenue. When the capital gains tax is high…well…you get the picture. This goes back to giving money to the people who know how to spend it best, the ones who earned it.

4.) Cut spending – If we’re going to lower all these taxes it will more than likely decrease tax revenues, if for no other reason than people aren’t making many capital gains currently and businesses have less money to bring over to the states. We need to cut government spending and it starts with the entitlement programs (after all that makes up 34% of the budget). Then we need to freeze spending, take a good long look in the mirror, and find programs and salaries and jobs in the government we can cut. It won’t be easy but it’ll have a domino effect on the economy.

So there’s my very simplified fix to this crisis. Obviously more can be done, and needs to be done, but hey, that’s a start.

UPDATE: I mentioned the muteness from Capitol Hill on Paulson’s bait and switch on the American people. Well, there’s at least three Senators who have voiced concern over the change. Tom Coburn, Richard Burr, and David Vitter have sent a letter to Paulson voicing their dissent to his decision. Michelle Malkin has the letter.

–jb