American Elephants


You Can Keep Trying to Blame Bush, But the Truth Will Out. by The Elephant's Child

The ironymeter just overheated and burst. According to the invaluable Byron York, eighteen Democrat U.S. Senators have asked to delay the Obamacare medical device tax because raising taxes on manufacturers will cost jobs. Oh ho ho.

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President Obama has admitted — in detailed print with his signature — that the Bush tax cuts worked.

The 2012 Economic Report of the President —the official government document on the economy published by the Obama Administration and signed personally by Obama himself, admits the Bush tax cuts caused government revenue to go up not down. So the President knows perfectly well that all his “tax the rich” rhetoric, his claims are factually untrue:

“We can either settle for a country where a shrinking number of people do very well while a growing number of Americans barely get by, or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.

Some, however, still advocate going back to the same economic policies that stacked the deck against middle-class Americans for way too many years.”

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“So when you put it all together, what you need is a package that keeps taxes where they are for middle-class families; we make some tough spending cuts on things that we don’t need; and then we ask the wealthiest Americans to pay a slightly higher tax rate. And that’s a principle I won’t compromise on, because I’m not going to have a situation where the wealthiest among us, including folks like me, get to keep all our tax breaks, and then we’re asking students to pay higher student loans. Or suddenly, a school doesn’t have schoolbooks because the school district couldn’t afford it. Or some family that has a disabled kid isn’t getting the help that they need through Medicaid.”

This was yesterday at the Daimler Detroit Diesel Plant in Redford, MI.  If taxes are not increased on the wealthy, schools will suddenly be unable to afford schoolbooks (paid for with local taxes) disabled children will be denied Medicaid. (Obama was perfectly happy to cut $110 billion from Medicaid during the fiscal cliff negotiations of 2011.

The federal debt is more than $16.3 trillion and it increases on average by nearly $4 billion every single day. If Obama taxed 100% of the income of the wealthiest, it would pay for about 8 to 10 days of government spending.  Nothing left over for the kids’ schoolbooks. You will notice that Obama variously needs that extra money because it’s “fair,” to lower the deficit, to have a new stimulus for the economy, help the disabled, end the war, and buy those schoolbooks. It’s only politics, and fairly clumsy politics at that.



The Fact Checker Strikes Again! by The Elephant's Child

There he goes again. He’s going to hire more teachers. (this means more members of the teachers’ union, more donations for Obama). Statistically, we have too many teachers.

Obama claims that the Bush tax cuts led to the economic crisis, which is fantasy. And that Romney wants to “double down” on “the same trickle-down policies” that led to the economic crisis in the first place. None other than the Washington Post quickly disposes of that talking point.

Indeed, the official government inquiry, the 631-page final report of the National Commission on the Causes of the Financial and Economic Crisis in the United States, makes no mention of the Bush tax cuts. The report, endorsed by every Democrat on the panel, does cite deregulation, but 30 years of deregulation across multiple administrations — not just deregulation in the Bush years.

Obama campaign deputy press secretary Kara Carscaden defended the president’s remarks and issued this response:

“While Reagan made ‘trickle down’ famous for tax cuts, the theory is that economic growth is driven by the top. Those like Romney who favor repealing Wall Street reform share the same theory — roll back the rules because when a few people at the top do very well, they will somehow pull the rest of us along.

“The tax cuts contributed to the crisis in multiple ways, including by driving up the deficit, crowding out potential investments that could have promoted sustainable, shared economic growth and leaving the economy vulnerable to speculation-fueled bubbles and high middle-class indebtedness. And they made it more difficult for the federal government to respond to a crisis because it was already facing very high deficits.

“The president’s argument — that our country is stronger when we invest in the middle class rather than cut taxes to the top — is the broad, philosophic question facing our country right now.”

The Washington Post awarded Obama Three Pinocchios for this one, and says it’s time for the Obama campaign to retire this talking point, no matter how much it seems to resonate with voters. Read the whole thing.



The President Has a New Campaign Strategy: Just Lie! by The Elephant's Child

The President whose record is so bad that he can’t find anything to run on except attack ads, has found a new strategy. My record isn’t so good, but headwinds, Bush’s fault, do we really want to return to Republican’s disastrous policies that got us into this mess in the first place?

Well, yes. We absolutely do. Republicans policies were not disastrous. It’s called “The Big Lie.” If you tell a big lie and keep repeating it, the people, pretty soon, will start believing it.  Congress voted the other day on Obama’s tax proposal which involves raising the taxes on anyone making more than $200,000 as an individual or $250,000 as a family, and continuing the Bush tax cuts for everyone making less.

The Bush Tax Cuts, which Democrats have tried to portray as just tax cuts for the rich, were across the board tax cuts with the largest cuts for the poor and middle class and the least for highest quintile. The Bush tax cuts are set to expire on January 1, which means that everyone’s taxes would go up.

Republicans are adamant about raising taxes on anyone now. You just don’t raise taxes in the middle of a recession, and we seem to be sinking back. Some say we are in a real depression. In Congress they voted against the proposal that the tax cuts would be extended for everyone but those making more than $200,000 and $250,000 (Obama’s numbers). So Obama can now claim that Republicans voted to raise taxes on the Middle Class.  It’s true in a smarmy way because they did vote against Obama’s quest to raise taxes on “the rich,” because they won’t agree to raise taxes on anyone. Here’s the new line:

You have a choice to make. It’s a choice between two very different plans for our country. Governor Romney’s plan would cut taxes for the folks at the very top. Roll back regulations on big banks. And he says that if we do, our economy will grow and everyone will benefit. But you know what? We tried that top-down approach. It’s what caused the mess in the first place.

The whole thing is a colossal, humungous lie, and shows the presidents contempt for his audience. Extending the Bush tax cuts is not a tax cut. Everyone would pay just what they are paying now. Nothing would change. Cancelling the Bush tax cuts on those reporting $250,000 in income would raise taxes on 1.2 million small businesses who report their business income on their individual returns. These are the growing small businesses that are the engine of employment in the economy. Obama describes the Bush economy as ‘more tax cuts and deregulation’ which he calls the cause of the recession. Another whopper.

The agreed-upon cause of the financial crisis was the collapse of the housing bubble. See Gretchen Morgenson’s Reckless Endangerment, which gets to the heart of the mortgage crisis. And guess what Community Organizer was organizing his charges to demonstrate and protest banks to get them to issue more mortgages to people who couldn’t afford to pay them back. Obama didn’t cause the housing collapse, but he was complicit in the activities that ended up promoting it.

Republican ‘deregulation’ didn’t happen. Bush called 17 times for financial regulation, reforming Fannie Mae and Freddie Mac, the mortgage giants, and Democrats refused each time. What brought the economy down was overregulation of the mortgage industry, forcing subprime loans, through the Community Reinvestment Act. The Bush tax rate cuts of 2003 sparked a 46-consecutive-month boom in small business job gains. Bush said:

In January 2003, I called on Congress to accelerate the tax cuts from 2001, which had not fully taken effect, and to pass further tax cuts that would encourage business investment and job creation.

He was right. The tax cuts took effect in May 2003, and by September the economy was averaging unemployment of 5.3% which is considered full employment.

Economist Glenn Hubbard, dean of Columbia Business School, chairman of the Council of Economic Advisers under President George W. Bush, said in the Wall Street Journal that we can fix our economy’s growth and jobs machine.

The president’s choices cannot be ascribed to a political tug of war with Republicans in Congress. He and Democratic congressional majorities had two years to tackle any priority they chose. They chose not growth and jobs but regulatory expansion. The Patient Protection and Affordable Care Act raised taxes, unleashed significant new spending, and raised hiring costs for workers. The Dodd-Frank Act missed the mark on housing and “too-big-to-fail” financial institutions but raised financing costs for households and small and mid-size businesses.

It didn’t have to be this way. The Romney Plan for economic reform, Glenn Hubbard says, can create 12 million new jobs in his first term alone. That’s 1 million more than I said we needed to get back to where we were in December 2007. The President is convinced that he can lie his way into a second term. It’s not an attractive position.



There Are No Tax-Cuts On the Table! by The Elephant's Child
December 2, 2010, 4:04 pm
Filed under: Capitalism, Economy, Freedom, Taxes | Tags: , ,

The Hoopla in the House of Representatives has many people confused.  The subject is the Bush Tax Cuts from 2001 and 2003.  George W. Bush was able to get tax cuts for all Americans passed.  Democrats cried “Tax Cuts for the Rich”, but “the rich” got the smallest percentage tax cut of all, and the bottom 40% of taxpayers had to pay no income tax at all.  To get the bill passed, the tax cuts came with an expiration date, which is December 31,2010. Which means that if they are not extended, your taxes will go up — a lot.

Most sentient human beings know that it is supposed to be a very bad idea to raise taxes during a recession, when the economy is struggling to recover. It’s a bad idea politically to raise taxes on the middle class — they don’t like it, and there are a whole lot of them.  But to the leftist mind, “the rich” are very bad people, which is odd, because a great many of them are very rich indeed.  So we have to assume that they believe that disparaging the rich helps them politically.

A recent poll showed that 78% of all those queried said that they would like the tax cuts for households earning under $250,000 to be extended either permanently or for a few years or until the economy fully recovers.  Democrats agreed by 73%.  What about “the rich?” A solid majority (56%) said they wanted tax cuts extended for households with more than $250,000 in income.  Only 39% wanted the rich to pay more.Support for letting the tax cuts be made permanent for the rich is overwhelming for both Republicans and Independents at 63%.  Democrats oppose this by 55%.  Democrats hate tax cuts.

President Obama has claimed that Republicans want to give “the rich” another tax cut, which will cost the Treasury $700 billion which they will have to borrow from other countries.  This is patently false.  Republicans are trying to keep the Democrats from raising your taxes.  Refusing to extend the Bush tax cuts means that taxes would go up for everybody. Capital gains taxes would rise from 15% to 20%.  Estate taxes which are zero right now, would climb to 55% — or over half of anything over $1 million.  To claim that leaving tax rates for the rich right where they are would cost $700 billion simply means that Obama is counting his chickens before they hatch.  He expects $700 billion to come in from increased taxes on the rich — but the rich are perfectly capable of rearranging their finances to they don’t have to pay more.

There are no tax-cuts on the table.

Estimates from the respected Heritage Center for Data Analysis show that over 10 years, letting the bush cuts expire would slash $1.1 trillion from GDP, kill 6.9 million jobs, reduce overall business investment by $330 billion and lower Americans’ disposable income by $726 billion.  A real disaster.

The Twentieth Amendment intended that there would be no such thing as a “Lame Duck Session.”  The amendment was ratified on January 23, 1933, when travel was a lot slower, and no one considered that members of Congress could dash back to the Capitol for another session after the election had been determined.  When a business fires anyone, their things are packed up and they are escorted off the premises immediately, with the undercurrent that they might commit an act of sabotage if they were allowed to linger.  A goodly percentage of the members of Congress have been fired, but they are back in he Capitol building committing what political sabotage they can manage.

This chart from the Heritage Foundation shows that tax receipts as a percentage of GDP remain relatively constant no matter what the top individual tax rate.  (Click to enlarge).



Taxes, Spending, Revenue and Other Confusing Problems. by The Elephant's Child

Republicans are completely opposed to administration efforts to raise taxes when the economy is so fragile. For when President Obama wants to cancel the Bush tax cuts for “the rich” — those married couples with income over $250,000 and singles with income over $200,000 — he is talking about raising taxes.

Democrats have a spending problem.  Economist Donald Marron notes that in 2009, the federal government spent $3.4 trillion and took in $2.1 trillion in revenue. The $1.4 trillion that they had to borrow to make up the difference represented 40% of federal spending and 10% of the nation’s economic output.  And that’s just in 2009.

The Obama administration forecasts continuing deficits that average more than $1 trillion annually for the next ten years, even with optimistic assumptions about economic recovery.  By 2020 the United States would owe more than $20 trillion, the equivalent of  about 85% of GDP.

So of course President Obama wants to raise taxes on the wealthy. (When he talks about letting the Bush tax cuts ‘expire,’ he is raising taxes).  The ‘wealthy’ already pay most of the taxes.  The wealthy also have the most options.  People can invest without receiving dividends, and they can choose when to take capital gains, and they can choose where to invest their money. They can invest in other countries.

But won’t raising taxes on the wealthy help to compensate for all that spending?  To quote economist Alan Reynolds, writing today:

“Raising taxes on the top 2% of households, as Mr. Obama proposes, would bring in $34 billion next year: enough to cover nine days’ worth of the deficit,” notes The Economist. So that is what all the political fuss about extending the Bush tax cuts for another year is all about. Does this make any sense? After all, errors in estimating next year’s revenues are typically much larger than $34 billion.

The arithmetic is even more absurd than it appears, because the alleged $34 billion of extra revenue is a static estimate. That means the number assumes higher tax rates do literally no damage at all to the affected taxpayers, and therefore no damage to consumer spending, business investment, employment, stock prices, housing prices, new car sales, etc.
(emphasis added)

He goes on to say that the $34 billion is a wildly optimistic figure, and if there was the slightest ill effect from the tax hike, it could turn into a big revenue loss.  31 nervous Democrats wrote to Pelosi and Steny Hoyer asking them to extend the Bush tax cuts, so Pelosi would have to once again resort to bullying, bribing and arm-twisting.

The Treasury department divides the American population into 5 divisions according to the information from the IRS.  This gives the government some statistics to estimate how people are doing.  That’s as far as it should go.  America has never been a class-conscious country in spite of all efforts to promote class (wealth) envy for political purposes.

America has the world’s most progressive tax system.  Those who make $200,000 a year are 3% of all taxpayers but pay 53% of all income tax revenue.  Total revenues for the period 2003 to 2007 were about $350 billion higher than the Joint Tax and the Congressional Budget Office predicted when the 2003 tax cuts were enacted, and the wealthiest taxpayers paid a larger share of all income taxes.  In 2003 those with incomes above $200,000 paid $313 billion, but by 2007 they paid $610 billion.

It always sounds so simple.  You raise tax rates, you get more money.  But things are never that easy.  And you can figure, even without a calculator,  that spending $3.4 trillion and only taking in $2.1 trillion is a heck of a way to run a government.  If those were my bills and my checkbook, there would be some rapid changes to the family budget.  Oh wait.  That’s what we’ve been asking President Obama to do.



Small Business Doesn’t Much Like ObamaCare Either! by The Elephant's Child

Democrats are debating the expiration of the Bush tax cuts.  They particularly want to end any tax cuts that went to “the rich,” for they have been yapping about “tax cuts for the rich” for the last ten years.

This theme sounds good, and is a favorite populist sound bite.  What Democrats refuse to grasp, because they need that sound bite,  is that many of those who are defined as “the rich” are small business owners who file as individuals. If you own a business, even though you may employ many people, there are advantages to filing as an individual rather than incorporating.

Democrats are anxious to blame the Bush tax cuts, and the War in Iraq for the financial crisis.  “The Bush tax cuts substantially reduced 2006 revenues and expanded the budget deficit,” they say. ” Capital gains tax cuts do not pay for themselves,” they say.  “Raising taxes is the best way to raise revenue,” they say.  “The Bush tax cuts are to blame for the projected long-term budget deficits,” they say. No!  No!  Sorry! And just plain wrong!

The economy usually responds strongly to tax cuts.  Capital gains tax revenues doubled following the 2003 tax cut.  Higher tax revenues correlate with economic growth, not tax rates.  Pro-growth tax cuts support incentives for productive behavior.

Obama has already put in place all sorts of taxes and mandates that will make doing business harder, especially for small businesses, whether in ObamaCare or the Financial Reform bill or in new energy requirements and costs.  The uncertainty about what taxes will be raised, how new government bills will affect them when applied, and what rules will make their activities more difficult has business sitting on their hands and not hiring.  Obama has no one to blame but himself for the dismal unemployment scene, but he continues to blame Bush, and thus solves nothing, nothing at all.




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