American Elephants

Your Taxes Are Going Up, And That’s Only The Beginning. by The Elephant's Child

I wish you a Happy New Year in spite of an upcoming year that is not promising.

We dropped over the fiscal cliff at Midnight, and then the Senate passed their 157 page fiscal cliff bill which everybody passed without reading it. Didn’t anyone learn a lesson about passing unread bills? Obama is triumphal because he accomplished his two main goals. He stuck it to the Republicans and can now call it ‘a tax cut’ that he delivered to the middle class (Don’t fall for that pathetic meme), and he forced Republicans to forgo their insistence on not raising taxes.

Republicans want to keep taxes low for everyone, because low taxes will help the economy to grow. New layoffs have been coming at a furious rate as more small businesses let workers go, or shift more of their workforce to part-time to avoid the massive fines imposed by ObamaCare on those companies who have more than 50 workers. People and businesses respond to incentives. The rich will rearrange their finances, or move to a location more friendly to capital. Businesses will invest in more labor-saving devices — more telephone trees, robotic voices, more automated check-out stands, more factory innovations that save the cost of labor and it’s benefits. And although taxes will go up, the revenue will not yield as much as expected.

Republicans recognize government jobs as just another expense that will require increased taxes from the public, and yes, the middle class. They believe in smaller, less complicated government that regards its tasks as those enumerated in the Constitution, rather than one that feels it’s role is regulating our showers, our lightbulbs, our appliances. (Did you know there are new regulations for dishwashers that reduce energy and reduce the amount of water used from 6.5 gallons down to 5 gallons. This will, of course dramatically raise the cost of a dishwasher, and you will not have it long enough to realize any savings in either water or electricity).

Republicans don’t believe that it is the government’s task to control health care, nor to tell the healthcare industry just what care they may give to a patient. Republicans believe a lot of stuff that is very hard to explain in short slogans or clever bumper stickers. They think deeply about their philosophy, the meaning of the Constitution, and the maintenance of liberty.

Democrats believe in the maintenance of power. Theirs. They want to win.

Their fondest desire is to end the Republican party and all its influences. Including the U.S. Constitution, singularly restrictive on what powers are granted to the government by the American people. Democrats don’t like those restrictions that Republicans are always nattering about.

Obama has not the slightest intention of cutting back on spending in any way. He doesn’t see any reason for doing so. Economist Alan Reynolds remarked that “Barack Obama does not understand economics and refuses to listen to anyone who does.”

The nonpartisan Congressional Budget Office puts it this way:

“With the population aging and health care costs per person likely to keep growing faster than the economy (gross domestic product), the United States cannot sustain the federal spending programs that are now in place with the federal taxes (as a share of GDP) that it has been accustomed to paying.” $1 in spending cuts ($15 billion) for every $41 billion in tax increases ($620 billion).

The compliant (suck-up) media has accepted the Obama narrative that it it’s only Republican rigidity that makes negotiations so difficult and leads to deadlock, because Republicans want to protect the rich. This means that there is even less incentive for Obama and Congressional Democrats to engage in genuine bargaining. But the media has not performed their job as government watchdog for many years.

We are not getting a genuine debate that we deserve. The president is lying about having cut a trillion dollars from the budget. He increased it by a trillion. The President is playing ugly Chicago politics in the national arena. And Chicago, the murder capital of the country, is the nation’s most dysfunctional city. Obama’s already overbearing arrogance will swell even more. No leadership. No understanding.

You can’t have Big Government and low taxes. Doesn’t work. The president will have to come after the middle class, because that’s where the money is. The payroll tax returns. They’re already talking about your 401-ks as a source of revenue. More to come.

Oh Fiscal Cliff, Fiscal Cliff, Fiscal Cliff! by The Elephant's Child
December 30, 2012, 8:42 pm
Filed under: Capitalism, Economy, Law, Taxes | Tags: , ,

Twenty-Six Years Ago: President Ronald Reagan passed significant tax reforms that lowered the individual income tax rate, limited deductions, and brought equality to tax rates at all levels. Previously, there had been 15 different marginal rates that reached as high as 50 percent for those in the top brackets. By the time Reagan left office, the number of tax brackets had been reduced to two: 15 percent and 28 percent.

In 1993: President William J. Clinton raised the top two income rates to 36 percent and 39.6 percent while also raising the corporate tax rate, increasing the taxable portion of Social Security benefits and increasing the amount of income taxable for Medicare. This has become known as the “Clinton tax rates.”

In 2001: President George W. Bush reduced the tax rate from 39.6 percent to 35 percent, lowered the capital gains rate and the dividend income rates and expanded credits and deductions such as the Child Tax Credit and the Earned Income Tax Credit.

Smoke, mirrors and time and energy is being spent advancing the myth that raising taxes is the best way to avoid falling off the “fiscal-cliff.”

If you raise taxes as President Obama wants, you would generate maybe $1 trillion over a period of ten years. President Obama’s spending has resulted in trillion-dollar deficits in each of the previous four years. At this rate in ten years we would be looking at $10 trillion in new debt. Under no proposed scenario does raising taxes limit or eliminate the deficit and return us to a balanced budget. The problem is government spending.

The Democrat-run Senate under Majority Leader Harry Reid (D-NV) has refused to produce a budget since April 27, 2009. Refused. They are required by law to produce a budget each year.

There is nothing in any proposal that will satisfy President Obama’s obsessive desire to spend. He’s still talking about “roads and bridges”— the same roads and bridges that he’s been promising to fix since 2008, that turned out not to be “shovel ready.” He wants a new batch of offshore wind farms all along the East Coast. He wants more solar arrays, wind farms, Solyndras, in the name of green energy though even the IPCC has determined that global warming is not anthropogenic, not caused by CO2 or greenhouse gasses, but caused by the action of the sun and cloud formation. The globe has been cooling for 16 years, not warming. And to top it all off, Obama wants another stimulus. The previous stimulus was wasted— all $825 billion of it, and another one would be similarly wasted.

The money is not going to come from raising the rates on the rich. They don’t have enough money, and there aren’t enough of them. So it boils down to this. Either he cuts way back on spending, or he raises taxes big time on the middle class. There are solutions, but no real interest.

Or ask yourself this: Why would a president who has any sense of the American people, the American economy as it is, the 24 million people who are out of work,  feel that this is the right time to end the pay freeze on federal employees who are already vastly overpaid compared to their counterparts in the private sector, and do vastly less work? And why would he choose this moment in time to give Vice President Joe Biden a $6,370 raise?  Members of Congress only got $900 bucks a year raise.

What The Hell Is This “Fiscal Cliff?” by The Elephant's Child


Obama Is Not Serious About the Fiscal Cliff. by The Elephant's Child

To listen to the media, you would think this “fiscal cliff” stuff is all about the Republicans being stubborn and refusing to negotiate. The media rhetoric has already lost sight of what the term “fiscal cliff” describes, as Peter Ferrara said.  They talk as if the fiscal cliff is all about the deficit and the point is a tax-increasing budget deal to close the deficit.  But the fiscal cliff refers to the economy falling off the cliff due to the fiscal policies of comprehensive tax rate increases and spending cuts already enacted into law — to go into effect on January 1.

The election was a mere 22 days ago, and Obama is so emboldened by his win, that he’s turning negotiations over to Tim Geithner and going out to campaign some more. We thought that perhaps he was reelected to show some leadership, but he enjoys campaigning more.

Here is the threat: Going into effect on January i are increases in the tax rates for virtually every major federal tax. The tax increases of ObamaCare go into effect. The Bush tax cuts expire which mean huge tax increases. Obama refuses to renew the Bush tax cuts for the nation’s job creators, investors and successful small businesses.

Obama has talked a lot about the rich not paying their fair share. The Occupy crowd of layabouts yammered on about the 99% and the 1%, and the evil corporations. But the Bush tax cuts were smaller for the rich than for the rest, yet even at that, with lower taxes the richest 1% ended up paying $84 billion more in taxes in 2007 than they had paid in 2000 — a 23% increase. Their share of all taxes paid climbed from 37% in 2000 to 40% in 2007.

Millions dropped from the tax rolls entirely. Bush doubled the per-child tax credit to $1,000 and lowered the bottom rate to 10%. Going over the fiscal cliff would reduce the child tax credit back to $500, and tax rates for the middle class and poor would climb.

The GOP says the President is insisting on about $1 trillion in new tax revenues immediately by raising tax rates, plus another $600 billion in net new revenue as part of tax reform next year.  Besides that, he wants $150 billion in new public works “stimulus” spending, $50 billion of it next year, and another extension in unemployment benefits which runs at $30 billion a year. And oh yes, he wants the debt ceiling permanently removed so we can just o on borrowing, assuming that anyone would want to loan money to such a profligate administration.

In return, Mr. Obama will blithely promise some $400 billion in entitlement savings next year — details to come later. Probably cutting Medicare again, or counting the $800 billion he has already taken out of Medicare to pay for ObamaCare as a saving.  Add that up.  This is supposed to reduce the deficit. This is not serious, and is almost insulting.

Obama wants to tax the rich some more, which everybody who isn’t rich supports. And he claims that this will pay down the deficit and the nation al debt., which has now soared past $16 trillion. Obama has admitted to being bad at math, but there is no excuse for being this bad. Mark Thiessen has listed the top ten things Obama’s $82 billion tax hike on the rich would buy:

  1. 8.5 days of federal spending ($3,504 billion annual budget)
  2. Food Stamps for one year ($81 billion)
  3. The budget of the U.S. Postal Service for just over a year ($70.5 billion budget)
  4. The U.S. Intelligence budget for about 1 year ($75.4 billion budget)
  5. The cost of Hurricane Sandy in NY & NJ (current est. $71 billion++)
  6. Just 4 months interest on the debt ($258 billion annual budget)
  7. Just under one-tenth of the 2009 “stimulus ($830 billion)
  8. 6.6% of Social Security/ Medicare costs in 2012 ($1,231 billion)
  9. 7.5% of the deficit ($1.1 trillion) or 1 month of borrowing per year
  10. One-third of annual cost of ObamaCare coverage expansion (about $240 billion annually by the end of the decade.

The problems of the fiscal cliff cannot be solved by taxing the rich. It is not even a down payment. We must rein in the spending. Obama has shown no restraint whatsoever in spending, and wants to continue picking winners and losers among the new businesses he likes like electric cars, rewarding the cronies who supported his campaign, and spending lavishly on new employees, Czars, and new ideas. ObamaCare, when fully implemented will have over one hundred new offices and agencies and bureaus. Mr. Obama can’t even show restraint in his private life, planning a $4 million, 17 day vacation in Hawaii.

Mr. Obama is not serious about the fiscal cliff. He believes he can rouse up enough public clamor to put pressure on the recalcitrant Republicans to force them to give in to his demands, with the force of his personality. I don’t know. Even Warren Buffett is turning against him. Though you must remember that Mr. Buffett is an investor, not an economist, and is currently battling with the IRS over unpaid taxes.

In Britain, former Prime Minister Gordon Brown raised taxes on the rich to a 50% rate, and guess what? Two-thirds of British millionaires have left the country. In the 2009-2010 tax year, more than 16,000 people declared an annual income of more than £1  million to HM Revenue and Customs. After Mr. Brown introduced the new 50% top rate, that number fell to 6.000 people. It is believed that the rest either moved abroad, or reduced their taxable incomes to avoid the new levy.


What Does Barack Obama Want? by The Elephant's Child

Everywhere the talk is about The Fiscal Cliff, and the negotiations. Everyone wants to know what Obama wants. He wants to tax the rich, and Jay Carney has assured us that he will veto any bill that does not tax the rich. Obama is apparently going to go out campaigning to rouse the nation to lobby for the bill he wants passed, his way.

I’ve pointed out that Alan Reynolds said that “Obama doesn’t understand economics and apparently won’t listen to anyone who does.” He also doesn’t understand negotiations. His idea of negotiations is to force you to agree with him. He hates disagreement.

An odd trend has taken place in the United States. The two political parties have grown more distinctly separate, more dramatically opposed to each other. I don’t know why I’m surprised any more, but after the election, there was an outpouring of really angry Democrats, calling conservative talk shows, tweeting, attacking Romney signs or bumper stickers. They won, and we weren’t humble enough, defeated enough, subservient enough. I’ll admit I was really disappointed in the election, but they won, and what was that all about? Why were they so angry about winning? We are not supposed to disagree.

It’s not just that. There are Republican ideas and there are Democrat ideas, and never the twain shall meet. Republican ideas are wrong, lies, false, stupid, and, of course — racist. Republicans like Fox News because it is indeed more fair and balanced. Obama would prefer not to have any representative of Fox in the press corps, or on the plane.  Democrats hate Fox: wrong, lies, false, stupid, and, of course— racist.

Democrats believe in Keynesian economics, that a downturn results from a lack of demand, and to fix it you have to create demand, so they keep trying to pump money into the economy in one way or another, in hopes that people will spend the money and thus jump-start something or other. Doesn’t work, has never worked, but hope springs eternal.

Indeed, Obama’s $800 billion neo-Keynesian stimulus package actually impeded economic recovery. According to John B. Taylor, a Stanford University economist who carried out an in-depth study of the stimulus, the government’s spending did not result in growth and jobs.

“Individuals and families largely saved the transfers and tax rates,” Taylor wrote.”The federal government increased purchases but by only an immaterial amount. State and local governments used the stimulus grants to reduce their net borrowing…rather than to increase expenditures, and they shifted expenditures away from purchases toward transfers. Some argue that the economy would have been worse off without these stimulus packages, but the results do not support that view.*”

“Obama’s own views about what he has, and has not, learned during his four years in the White House say a lot about why he has been a failure as president.*”

The area in my presidency where I think my management and understanding of the presidency evolved most,” Obama has said,”and where I think we made the most mistakes, was less on the policy front and more on the communications front.

You mean he didn’t make enough speeches? The greatest communicator since Ronald Reagan had — a failure to communicate? Well, that’s why he’s going out to rouse the compliant.

Obama’s proposal to raise taxes on the rich would reduce the deficit from $1.1 trillion to $1.02 trillion, maybe. The rich have lots of options, and can rearrange their affairs to pay less in taxes. The rich are moving out of high tax states and taking their businesses with them. They can move their money around too.

The owners of 990,000 small businesses, defined as those with 50 or more employees, report their income on their 1040 tax returns. In response to the new costs of ObamaCare, many are reducing their employees to 49 or less.

President Obama does not believe that small businesses number among “the rich” as Republicans claim. Small businesses are the neighborhood barber, the shoe shop, and the little bookstore. He even made a point of visiting a small bookstore in the capitol, to celebrate small business, this weekend.

So what does President Obama want? He wants to make speeches, because that’s where he’s comfortable. He wants to tax the rich because he believes in redistribution of wealth and believes he has a mandate to do so. He wants more revenue to spend. He wants people to stop disagreeing with him. And he doesn’t think there are any consequences from raising taxes, so as soon as he’s inaugurated for his next term, he’ll slap on a carbon tax, because that’s what his green supporters want. Redistribution of wealth usually turns out to be redistributed to the ruling class, and the poor are just poorer than ever.

Time for Walter Wriston again:

Capital will go where it is wanted and stay where it is well treated. It will flee from manipulation or onerous regulation of its value or use and no government power can restrain it for long.

*Edward Klein: The Amateur

The Edge Of A Fiscal Cliff? How Did We Get Here? by The Elephant's Child

The Phrase “The Fiscal Cliff” has entered the public dialogue, but it is uncertain that very many have any understanding of what it is. Just something scary that might happen because the Republicans are blocking whatever President Obama wants to do, or something like that. According to a new CNN/ORC  poll, 45% say that they would blame Congressional Republicans, while just 34% would blame the President.

You probably remember when the economy took a terrible fall in 2008, when the “Financial Crisis” hit. The financial crisis was the collapse of the housing bubble. It was not caused by the Iraq war, nor by the Bush Tax Cuts, nor even by the Drug program for Seniors.

The Community Housing Act  in the Carter Administration attempted to get more poor minorities into their own homes. It was believed that  people who owned their own homes took more pride in their neighborhoods, and worked for improvements in society like better schools, better community regulations and laws — that sort of thing. Statistics seemed to prove it.

Democrat efforts to provide housing for the poor had often ended up in crime-ridden ghettos — the projects. So they increased pressure to get more poor minorities into their own homes. The Clinton administration gave that a big boost, and  Barney Frank and Christopher Dodd signed on. They put pressure on banks to grant more loans. Banks cited the rules of prudent banking. You can look at household income and expenditures and the payments needed to service a loan, and tell who can and who cannot pay back their loans. Democrats pushed banks, suggesting that they were “redlining” and discriminating against black Americans.

That’s a favorite trick of Democrats — to accuse anyone who disagrees with being “racist.” Community organizers encouraged their people to protest and picket banks.  And yes, that’s what our well known community organizer was doing, but nobody mentions that.

These questionable loans were sold to mortgage giants Fannie Mae and Freddie Mac, who sold them in bundles to Investment Banks, who further bundled them and sold them as investments all over the world. Fannie and Freddie had sorta/kinda guaranteed them as good investments, but nobody knew which parts were good and which bad.  Because mortgages were easy to get and home prices were climbing so fast, many people saw a dandy get-rich-quick scheme and bought up quantities of houses for little down, expecting to flip them for a quick profit. Overblown bubbles collapse, and houses aren’t worth as much any more.

That put the economy in the tank. General Motors was about to collapse, they were almost out of cash. Chrysler was not in much better shape, nor was Ford. George W. Bush, at the advice of his economic experts, signed a check for TARP (Troubled Asset Relief Program) which allowed the Treasury to purchase “troubled assets,” allowing the institutions to stabilize—the institutions had to pay the money back. This was October, 2008, after Obama was elected, but before he took office.

That, of course, did not keep Obama from blaming the financial crisis on Bush. He continued to do in every speech for the next four years. You repeat anything often enough, and at least some  people will believe it. Thus freed of any responsibility for the financial crisis, but free to take full credit for “saving GM,” Obama took over the auto industry, put his own people in charge, ordered up the all-electric Volt, shafted the legally entitled bondholders, fired dealers and their workers, and gave the unions full benefits and seats on the board.

That disposed of, Obama got a huge “stimulus” bill passed by the Democrat-controlled Congress. A stimulus seldom works to rescue an economy, yet this Keynesian remedy is a favorite of the Left. The funds were wasted, and most of it went to cronies. That taken care of, Obama embarked on health care, which he turned over to Congress to put together in back rooms, and turned his attention to doing fun things like picking favored industries to support and selecting the environmentalists’ favorite kinds of energy to support.

There is no such thing as “government money” there is only taxpayer money. And when that doesn’t seem to be enough, you borrow from China. Mr. Obama has had a wonderful time spending. It’s great fun. You get to throw fancy dinners in elaborate tents on the White House lawn ($4,000+ a plate), support $100,000 Fiskars electric sports cars, reward all your bundlers from the campaign, and go around to the factories making interesting new stuff, for photo-ops. No benefit for the taxpayers whose money supported this nonsense.

And when you rack up $1,000,000,000,000 every year added to the national debt, the debt ‘unexpectedly‘ gets very large. Business is not hiring, too much uncertainty and new regulation. The debt is downgraded. The rolls of the people who have dropped out of the labor market are soaring. The numbers on food stamps now exceed the population of 24 states. Poverty is increasing.

With an economy in such a really dreadful state, Mr. Obama wants to raise taxes on “the rich”— those with incomes of $250,000 or more. But some of those same people are Americas’ small businesses. Over 900,000 businesses with more than 50 employees, whose owners file their taxes as individuals, have been soaked with rising energy costs, drastically increased regulation, and all the new costs coming January 1, from ObamaCare. Small business is not hiring, as the rolls of the unemployed attest. President Obama wants to make it worse so that he will have more revenue to “redistribute.” He believes in a big active government and what an active government does is spend money.

Republicans fear that the President is initiating a second, deeper recession, if not collapse. On November 17, Treasury Secretary Tim Geithner told Bloomberg that “we ought to just eliminate the debt ceiling.”The debt ceiling is the only thing even vaguely resembling a control on the runaway government. On November 17, the national debt was $16.28 trillion, only $113 billion short of the national credit limit. But eliminate the debt ceiling as a restraint on Presidential Spending sounds — um, unwise.

Will Congress and the President act to avert disaster and another recession? After much posturing, there will probably be a deal of some kind. Obama is determined to tax the rich, because he has talked about that for months. It’s because of “fairness.” If he succeeds in increasing taxes on the rich,  it will do essentially nothing to reduce the deficit, and do a lot of damage to the economy, but it isn’t about reducing the deficit nor about increasing revenue. It is about “fairness” so the President can say to the poor — see, I took more money away from the rich to redistribute to you—and then he’ll spend it on a some useless new green project.

That’s just what you voted for, isn’t it?

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