American Elephants

How to Think Clearly About the Issue of Taxes. by The Elephant's Child

Keith Hennessey made an important point about taxes last week. “The government doesn’t give tax cuts, it takes more or less taxes.” The president spoke to a number of college crowds in favor of raising taxes on the rich to subsidize low interest rates on student loans. The President said:

How can we want to maintain tax cuts for the wealthiest Americans who don’t need them and weren’t even asking for them? I don’t need one. I needed help back when I was your age.  I don’t need help now. (Applause) I don’t need an extra thousand dollars or a few thousand dollars.  You do.

“Let’s assume,” Hennessey says “that you agree with the President — that a college student has a greater need for an extra thousand dollars than a rich person. By itself that judgment does not mean that raising taxes on the rich to further subsidize student loans is good policy.  To make a balanced decision you also need to incorporate the harm done by taking money from someone, a factor the President’s quote ignores because it treats tax cuts as given rather than taxes as taken.” (emphasis added)

The language the President uses assumes that it is the government’s money in the first place and the government can decide whether to give it to college graduates to pay for their student loans or to give it to rich people. If we agree with this logic, then because the new graduates have greater need, government should give them the money.  In this assumption, the money belongs to the government, so the government should distribute those funds  according to need — then the government gives tax cuts to people only when government officials decide that these people need them.

What is ignored here is that the government only gets their government money by taking it from someone. And taking has consequences. It harms the person from whom the government took the money, and it weakens incentives to work and invest. The President’s vocabulary is full on “giving tax cuts” or “give tax cuts”.” Hennessey queried for that terminology and turned up 248 hits.

The President’s language puts us on a slippery slope. If we treat all tax revenues as if they originate within the government, then we create a moral parity between giving tax cuts and increasing government spending. That means we trust government officials to reallocate society’s resources to those whom they decide have the most need while ignoring the harm done by the taking. By ignoring the harm done by taking we set no limiting principle on the government’s ability to take that which we earn and own and give it to others. We make the rich pay more because they have greater ability to pay and less need. Sound familiar?

“From each according to his ability, to each according to his needs.”
(Karl Marx (Critique of the Gotha Program 1875)

 A mark of successful and efficient government is not how much they spend, but how little they take of their citizens’ money. It isn’t the government’s money.

The government has not been successful nor efficient. The government caused an enormous loss of the wealth of their citizens. Instead of creating a  business climate that made it easier for businesses to invest and hire, they did a lot more taking. And they invested their takings in brand new programs that the people didn’t want.

The Life of Julia’s Son Zachary. by The Elephant's Child

The Obama campaign came up with “The Life of Julia” to extoll all the wonderful things that Obama was doing for an ordinary woman throughout her life, by making her completely dependent on the government.

Republicans had a wonderful time mocking this scenario that was so ripe for  parody and ridicule. Google has 2,700.000 entries just for the last 4 days.

One of the best was The Life of Zachary, her son, compiled by Nicole Gelinas of City Journalimagining how the next generation will fare in the Obama administration’s scenario. Enjoy.

Spending Isn’t the Answer. by The Elephant's Child

The Obama administration has been convinced that spending “government money” is the answer to our economic problems. Their economists were sure that injecting large sums of money into the economy were just what was needed to cure “the worst economy since the Great Depression.” But the “worst economy” was created by government.  And some even have the nerve to suggest that the problem was that the stimulus wasn’t big enough.

Perhaps if the bad economy was created by too much government — misguided thinking, bad ideas, excessive regulation, too many “experts,”perhaps the solution is to be found in clear thinking, paying attention to the history of what works, good ideas, repealing regulation, getting rid of experts and reducing the size of government. Couldn’t hurt. What we’re doing sure isn’t working.

A Bleak and Foreboding Economy And How to Fix It. by The Elephant's Child

The Obama campaign continues the mantra of “26 months of job growth.” That sounds like the economy is improving, doesn’t it? What they are not mentioning is that more people are dropping out of the job market. Their statement is true, but wrong in that it gives a false picture of what is happening.

The Wall Street Journal reported:

The economy turned in another lackluster month for job creation in April, with 115,000 net new jobs, 130,000 in private business (less 15,000 fewer in government). The unemployment rate fell a tick to 8.1%, albeit mainly because the labor force shrank by 342,000. This relates to what is arguably the most troubling trend in the April jobs report, which is the continuing decline in the share of working-age Americans who are in the labor force.

The civilian labor participation rate, as it’s known, fell again in April to 53.6%. That’s the second decline in a row and the lowest rate since December 1981.  That’s right— more than 30 years ago, longer than Mark Zuckerberg has been alive.  The nearby chart shows the disturbing round trip the workforce participation rate has taken since 1980 and the precipitous drop in the last three years.

Normally as we come out of a recession, hiring picks up, and as Americans see job opportunities they jump back into the labor force. That’s what happened after the sharp recession of 1981-1982 when the participation in the labor force last hit 64.6%.

Average weekly earnings are up 2.1% but inflation has climbed by 3%. With real wages climbing so slowly, work is less attractive.

Government has rapidly expanded government transfer payments during this recession.  It creates a disincentive for low skilled workers because in some high-benefit states they would need to earn more than $30,000 to make up for the benefits they would lose.

The tragedy is that the Obama administration has put their policy of social welfare ahead of the policies that would create a strong, durable economic expansion. President Obama has been on a tour of college campuses to sell his proposal to lower student loan interest rates. But what students most need are jobs when they graduate, and this administration has no idea how to encourage job growth.

I think that the administration holds conservatives in such contempt that they reject any and all Republican ideas for creating jobs or encouraging growth. The president has sneered at suggestions celebrating individualism and suggesting that people do not need an all-powerful government to direct their lives. The president rejects any idea that there is too much regulation and claims that Republicans don’t care about clean air, clean water or sick children.  Callous, that’s us.  The complaints of businesses about over-regulation fall on deaf ears.

Victor Davis Hanson captured it:

Much of the answer is found in the collective psyche of those Americans who traditionally hire, purchase, or invest capital. An economy is simply the aggregate of millions of private agendas, of people sensing and reacting to a commonly perceived landscape. Yet since January 2009, that landscape has been bleak and foreboding.

Take the debt. The problem is not just that Obama has borrowed $5 trillion in less than four years, but also that he has offered few plans to reduce the ongoing borrowing and none at all to pay down the debt. Instead, he has demonized as heartless anyone who opposes his serial $1 trillion annual deficits. That demoralizes the public, who privately know that they cannot buy everything they might wish, and who expect that government will not, either. In the business community, there is the unspoken assumption that, at some point very soon, either taxes will have to rise, the currency will have to inflate radically, or debts will have to be renounced — all equally foreboding for those with capital. Some even believe that Obama is not a haphazardly profligate spender but a deliberate one who welcomes the radical measures on the horizon to stave off bankruptcy as laudable in themselves.

Obama’s obsession with “clean energy” and attempt to end our reliance on fossil fuels are a direct attack on the economy. The mandates of the EPA are strangling business. ObamaCare is a mess of mandates, escalating costs and misguided interference in the free market. Liberals always think that big or bigger government will perform better than the free market — which is just the aggregate, as Mr. Hanson says, of  “millions of private agendas. people reacting to a commonly perceived landscape.” Liberals are sure that their “experts” can do better. but there are no experts there — only ordinary people with bad ideas. They must be voted out of office.

Victor Davis Hanson added:

The net result is that those with capital, even if they are small businesses, do not believe that the Obama administration likes them. They feel that regulations will increase, that taxes will increase, that energy costs will increase, and that as they pay more to government and keep less, government will nevertheless become even more arrogant and inefficient — and they will become even more demonized. When people pay over 50 percent in payroll, federal, state, and local taxes and are still caricatured as “not paying their fair share,” a sort of collective shrug follows and bodes ill for the economy at large. One need not be liked to make money, but the constant presidential harangues finally take their toll in insidious ways.

Do read the whole essay. It is well worth your time.

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