American Elephants

Dan Mitchell Explains Keynesian Economics by The Elephant's Child

Doesn’t work. Never has. Here’s why.

Rich and Poor and In-Between, and The Damage the Government Does. by The Elephant's Child

As long as “the poor” are described as the bottom 20% of the income pile, we will always have poor people. This truism often gets lost when we talk about the poor. The poverty line or poverty threshold is the minimum level of income deemed adequate in a given country, and is considerably higher in developed countries than in developing countries.

Determining the poverty line is usually done by finding the total cost of the essential resources that an average human adult consumes in one year.  Absolute poverty is defined in terms of the minimal requirements necessary to afford minimal standards of food, clothing, health care and shelter. So you’ve got, definitionally: poverty, statistical poverty, relative poverty , absolute poverty or extreme poverty. Wikipedia goes on at great length with definitions. Anti-poverty programs, housing assistance, Medicaid, school lunches do not count as income, so in spite of all the emphasis on changing poverty with special welfare programs they don’t count towards changing the definition of poverty.

Poverty in rural areas is usually less onerous that in cities. If you have a  little bit of land, you can plant a garden, and if you have a gun, a fishing pole, and some twine for snares, you can partially, at least,  live off the land. Where I grew up, hunting season was when you filled up your freezer for the winter months.

When it comes to politics, people may talk about poverty, but they are really speaking of “income inequality,” something that leftists consider as being of great importance. President Obama said in his Osawatomie, Kansas speech:

In the last few decades, the average income of the top 1 percent has gone up by more than 250 percent to $1.2 million per year,” Obama said. “Now, this kind of inequality — a level that we haven’t seen since the Great Depression — hurts us all.

The current question is — Do higher taxes on the rich reduce income inequality? Not, says Conn Carol in the Washington Examiner, according to  a quick comparison of state inequality data and their corresponding tax codes.

According to the Center on Budget and Policy Priorities, the states with the highest levels of income inequality are: 1) Arizona, 2) New Mexico,  3) California, 4) Georgia and 5) New York. The CBPP report identifies a “more progressive tax code” as one way states can battle inequality, but it doesn’t identify the states with the most progressive tax systems.

California and New York have two of the most progressive tax systems in the country, and the highest State income taxes — only New Jersey and Vermont have a higher rate. Many on the left believe that stronger unions help to reduce income inequality, but there is no evidence that this is so. And take a look at the inequality between Union officials and the members. California, New York and New Mexico are all forced-unionization states. The three states with the least income inequality 1) Iowa, 2) Utah and 3) Wyoming are all right-to-work states.

The biggest difference is that states with the highest income inequality are the states with the highest illegal immigrant populations, a fact that Liberals are not about to mention. But it is a fact that needs to be part of the discussion. If you cannot talk about a subject honestly, you cannot arrive at successful solutions.

The discussions of income-inequality assume that people stay put in their income classifications, which they don’t. There is tremendous income mobility in America  — including among the rich. If you follow the Forbes annual list of America’s richest people, folks drop off the list with great regularity. The normal life encompasses all of the wealth divisions. First jobs are mostly poorly paid, people get promoted, take better jobs, marry, have kids, buy houses, save, retire and often get poor again.

When you have an amateur in the White House, intent on raising taxes on “the rich.” pretending that will decrease income inequality, we’re in trouble. Increasing taxes on the rich will bring in less revenue, drive up unemployment, and to increase income inequality — the revenue would have to be directed to “the poor,” but this is not the case. The revenue is not even to be directed to reducing the deficit. It is to be directed to useless Keynesian stimulus, and more useless energy projects. That’s the real problem.

OMG! I Can’t Believe I Did This, and It’s 48 Point Type! by The Elephant's Child

Everyone who has ever worked in advertising or journalism fears making a mistake in print, especially in a major headline or even worse— on a billboard. But despite competent proofreaders, it still happens. Freakonomics has a wonderful collection. Some are so profoundly stupid that you cannot believe that a proofreader didn’t notice, but there you are. We are fallible humans.


This is one of the milder mistakes. The rest are here. Careers have been ruined, proofreaders have been fired or demoted. Stupidity has been displayed in really big black type for everyone to see.  Enjoy.

Crony Capitalism, Chicago Style. by The Elephant's Child

President Obama has been trying for four years to promote the claim that the financial crisis was caused by the hated Bush tax cuts for “the rich.” Democrats always hate tax cuts, because they believe in BIG government, and  you can’t have BIG government without lots of tax revenue.

Democrats also believe in “fairness” which means that income should be redistributed from those who earned income to those who didn’t earn any or enough. It just isn’t fair that some people should work harder or have more expertise or be luckier than others who don’t work hard or have any expertise and just aren’t lucky. Although “luck” isn’t always as lucky as people think. Statistically, the people who win lotteries usually turn out to be less lucky than they were in the first place.

Bill Clinton left a recession for George W. Bush. The “booming” Clinton economy was booming largely because of the “dot-com bubble” when everybody with a computer thought they were going to make their fortunes online. President Obama wants to go back to the Clinton tax rates because the rich paid more then, but he wants to pretend that Bill Clinton’s much lower spending didn’t exist, didn’t happen, spending is good, don’t even suggest that I should cut back on spending. Did you know we have 54 Christmas trees in the White House? Although we’ll be in Hawaii for most of the Christmas season. Out of touch.

The Problem Is Spending, Not The Bush Tax Cuts, Mr. President. by The Elephant's Child

Democrats hate tax cuts. They like having all lots of revenue to spend on doing nice things for people who then will vote for them. So, naturally when the Clinton administration ended, and there was a recession left for George W. Bush to deal with, they talked about the surplus, and did not mention the recession at all.

Tax rates were much higher during the Clinton administration, but the economy was in the middle of the boom, when everyone thought they had the perfect online business that would make them rich. Such enthusiasm often turns into a bubble, and so it did. The bubble burst,  and a recession was the result.

To deal with the recession, George W. Bush wanted to cut taxes. Democrats hate tax cuts, but Bush got them through in 2001 and 2003, barely, but only by making them temporary. The Democrats and their compliant, dishonest major media institutions spent the next ten years raging about the “Bush tax cuts for the rich,” attempting to create the impression that Republican nature was to do favors for the rich while ignoring ordinary folk. Curious, because everybody got a tax cut, and the lower and middle income taxpayers got a bigger tax cut than the rich did.

The top tax rate was cut by only 13%, while the lowest rate was cut by one-third, 33%. The result was that the top 1% of income earners paid $84 billion more in taxes in 2007 than in 2000 before the tax cuts were passed. The share of total federal income taxes paid by the top 1% rose from 37% in 2000 to 40% in 2007, after the tax cuts took effect. Didn’t stop the Democrats. The Big Lie technique usually works. Repeat something often enough and people probably believe it.

That wasn’t all, though. The tax cuts also included a doubling of the child tax credit from $500 per child to $1000 per child. Because of that, and the 33% cut in the bottom tax rate, nearly 8 million more people dropped off the federal income tax rolls entirely, paying no federal income taxes at all.

The Bush tax cuts did not explode the deficit either, as Obama has claimed. By 2007, the deficit was down to $160 billion, less than 15% of Obama’s deficits today. Bush did increase federal spending as a percent of GDP by one-seventh, erasing the federal spending cuts enacted by the Republican Congressional majorities in the 1990s.

Even with that, deficits during the Bush years averaged just 2% of GDP, one-third less than the average over the prior 50 years. President Obama’s deficits have averaged 5 times as much, at 9.1% of GDP.

Business investment spending, which had declined for 9 straight quarters, reversed and increased by 6.7% per quarter, producing 8 million new jobs. Because of the increased investment, labor productivity soared by 2.5% annually, higher than the averages of the 1970s, 1980s and 1990s. Real after-tax income per capita increased by more than 11%.

Manufacturing output soared to its highest level in 20 years. The stock market revived, creating almost $7 trillion in new shareholder wealth. From 2003 to 2007, the S&P 500 almost doubled. From 2000 to 2007, real GDP grew by more than 17%. Not exactly what President Obama has been claiming, is it?

The boost the Bush tax cuts had given the economy was ended by the collapse of the housing bubble which was created by the excessive overregulation of Democrat’s promotion of home ownership which created the subprime mortgage market, increased by the ill-advised work of community organizers who fought for more loans to less qualified people. Obama’s dishonest claim that the Bush tax cuts caused the financial crisis should have disqualified him from office.

If Congress imposed a 100% tax , taking all earnings over $250,000 per year, it would bring in about $1.9 trillion. That would keep Washington running for 190 days.  And it would leave 175 more days to be paid for with …?

The profits of the Fortune 500 richest companies in America come to about $400 billion. That would keep the government running for another 40 days, to mid July. If Congress fleeced America’s 400 billionaires with a combined net worth of $1.3 trillion of their assets, stocks, bonds, yachts, airplanes, mansions and jewelery, it would get us to late fall. “Making the rich pay their fair share” (they already do) isn’t going to solve our budget problems. The rich receive about 50% of the nation’s income, yet they already pay 70% of all taxes. The problem is not revenue.  The problem is spending.

Obama cannot envision cutting spending. His incomprehension is aptly illustrated by a White House decorated this year with 54 Christmas trees, and a coming $4 million Hawaiian Christmas vacation, when 540,000 American have become so despairing that they are no longer even looking for a job. Now that the election is over, the economy is no longer recovering. So Obama wants $1.6 trillion in new taxes on “the rich,”— including $50  billion for roads, $30 billion in extended unemployment benefits and some short-term tax breaks.

Mr. Obama wants to become a “transformational” president and change the historic trajectory of America’s domestic and foreign policy. He intends to bring the Israelis and Palestinians to the negotiating table and create a permanent peace in the Middle East. He wants to open a “constructive dialogue” with Iran and North Korea, and through his powers of persuasion, help them see the error of their ways.  He has passed and will continue to support legislation to revolutionize the country’s health care system and the country’s energy policy. And he will inject the regulatory hand of the federal government into the American economy in an effort to create”a more just and equitable society.” *

If Obama gets his way, there will be more spending, more unemployment, more debt and a second recession. Obama is still trying to play political gotcha games with Republicans. He will not negotiate seriously, and he clearly doesn’t understand the predicament the country is in. Too much fun being the imperial president. It’s very frightening.

*See The Amateur by Edward Klein

%d bloggers like this: