Tuesday, April 26, 2011

Government’s fiscal malfeasance should be
grounds for impeachment

Did you know that the United States paid $413 billion in interest on the national debt in 2010, and that was more than we spent running a dozen federal departments and agencies (Health and Human Services, Transportation, Energy, Veterans Affairs, Housing and Urban Development, Justice, Homeland Security, Agriculture, Commerce, Treasury, Labor, and the Small Business Administration) combined?

The US spending addiction is so bad that since 1988 we have spent $8 trillion on interest payments alone. According to, that’s enough to buy every taxpayer – more than 140 million of us – a really expensive Lotus sports car. The debt is so enormous, the Web site asserts, that if we started today paying $100 million a day against the debt, it would take 389 years to pay it down.

The Congressional Budget Office estimates that at the rate we are going, by 2021 we will spend $1.1 trillion on interest annually, and by 2046, the CBO says all tax revenue collected will be required just to pay the interest on the national debt.

Even at that point you may rest assured that big government types will want to borrow even more money, and will whine and stomp their feet over suggestions that they cut spending to match tax collections. We’ll be treated to the same pathetic efforts they use today to demonize those who advocate fiscal responsibility, such as charging that fiscal conservatives are mean and cruel, and spouting absurdities such as cutting spending will deny children health care, put poor people out on the street and kill old people, or at least make them eat dog food. That’s what passes for honest debate these days, and it is intended to scare the public away from responsible fiscal policies. Then the demagogues can keep giving handouts to their supportive constituencies, and if that bankrupts the country, well, that’s the price we have to pay.

But, as they say in certain parts of the US where common sense is not an alien concept, “That dog won’t hunt.” Last week the Associated Press reported that Standard & Poor's Ratings Service “downgraded its outlook on U.S. government debt, expressing unprecedented doubts (emphasis added) over the ability of Washington to bring the massive federal budget deficits under control,” lowering the long-term outlook to “Negative” from “Stable,” “saying there is a one in three chance the United States could lose its top investment rating on its debt in the next two years.”

Will that message get through to spending-addicted Washington?

Then we have the debt ceiling, a device designed to prevent the very thing that has occurred: runaway debt. Currently, the debt ceiling is $14.3 trillion, a limit the US will tear through this summer unless the ceiling is raised yet again, or, better yet, unless more sensible action is taken to reduce spending and pay down the debt. Failing to raise the debt ceiling is now being portrayed by our spending-addicted politicos as a calamity greater even than a Barack Obama presidency. But it’s just more fear-mongering; another ploy to scare the masses.

However, Andrew Moylan of the National Taxpayers Union told The Daily Caller that “failing to raise the debt ceiling would merely trigger a 10-12 week period where ‘extraordinary measures’ could be taken by the Treasury Department to ‘shift things around.’” Maybe that includes furloughing “non-essential” government employees. Why does government have “non-essential” employees?

While failing to raise the debt ceiling isn’t the looming catastrophe that we are being told it is, raising it likely will have the same effect that it has had the five times it has been raised since 2002: it will do nothing more than allow the government to postpone behaving responsibly.

There are legitimate reasons to increase a credit limit, but they are rare, and increasing the limit on borrowed money five times in nine years reflects something altogether different than emergency circumstances: it indicates a strong and irresponsible compulsion to spend, spend, spend, rather than live within our means.

The good news is that we common folk out here in fly-over country realize what Washington’s ruling elite either doesn’t realize, or ignores. A recent poll by CBS News and The New York Times shows that by a margin of 63 percent to 27 percent, participants oppose raising the debt limit, including 83 percent of Republicans, 64 percent of independents, and nearly half of the Democrats (48 percent). And 70 percent of those opposed hold to that position even if it means that interest rates will go up.

Yet President Barack Obama hasn’t gotten the message. As reported by MSNBC: he “sent Congress a $3.73 trillion budget Monday that holds out the prospect of eventually bringing deficits under control through spending cuts and tax increases. But the fiscal blueprint largely ignores his own deficit commission's view that the nation is imperiled unless huge entitlement programs like Social Security and Medicare are slashed,” and includes yet another huge $1.1 trillion budget deficit.

Taxpayers are being disserved by most of their elected federal officials, who refuse to do their job. If you or a co-worker behaved this way, you or they would be fired.

This process should commence immediately.

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Tuesday, April 19, 2011

Our tax system is broken, ridiculously complex,
and horribly costly

“The fundamental principles of economics are not hard to understand,” writes Hoover Institute fellow and economist Dr. Thomas Sowell, “but they are easy to forget, especially amid the heady rhetoric of politics and the media.” Perhaps that helps to explain why so many Americans seem to think a $14 trillion national debt and annual deficits of $1.5 trillion aren’t really a problem.

Misunderstanding or misapplying sensible economic principles is easily observed in the US government, the governments of several of the United States, as well as the socialist governments of several European countries (that our leaders for some odd reason seem to think we should emulate). There is ample evidence illustrating that the path we are on leads over a very steep cliff, but many of our elected public servants seem undisturbed by this.

Current “progressive” reasoning holds that everyone should be financially equal. There should not be rich, poor and middle class; everyone should be middle class. Despite the fact that achieving this fairy tale is not possible, many in government attempt to equalize financial circumstances, but they do so by treating people unequally, which seems to be a logical inconsistency of that flawed philosophy. Logical inconsistency and hypocritical processes are apparently okay when you are trying to impose equality on people who are legitimately and inherently unequal.

In order to make Peter, a physician earning $250,000 a year, and Paul, a high school dropout who can’t hold a job, equal, the American government has been tailored to take money from Peter through a high income tax rate and give it to Paul in the form of government support like welfare or unemployment payments. Socialist playwright George Bernard Shaw explained this concept thusly: “A government which robs Peter to pay Paul, can always count on the support of Paul.”

This viewpoint has produced one of the most progressive tax systems in the world, according to Cato Institute senior fellow Richard Rahn, one that has become much more progressive in the past 30 years.

A “progressive” tax system is one in which higher income earners pay higher tax rates than lower income earners, never mind that wealthier individuals pay more dollars in taxes than those earning less, even if they aren’t targeted with a higher tax rate.

Not only does our tax system depend upon unequal treatment to make everyone equal, its complexity robs the economy of billions of dollars. Economist Arthur Laffer notes that taxpayers pay an amount approximately equal to 30 percent of total collected income tax to comply with and administer the US tax code, about $431 billion. Of that amount the Internal Revenue Service requires $12.4 billion in administrative costs, and racks up another $9.3 billion in costs for comprehensive audits.

And so, Mr. Rahn writes in The Washington Times, whereas the top one percent of taxpayers earns just 20 percent of total income, it pays 38 percent of all income taxes; the top 10 percent earns 46 percent of total income, but pays 70 percent of income taxes; and the bottom 50 percent earns 13 percent of total income, but pays less than three percent of income taxes. At some earnings level people do not make enough to warrant taxing them, but currently 47 percent of American households pay no income taxes. Is that right and fair? What stake do the non-payers have in how their government works?

Those who foment class warfare look foolish when they screech about the rich not paying enough: they already pay far more than anyone else; 38 times their proportion among taxpayers.

Mr. Rahn says that when a relatively small minority of taxpayers pays the bulk of the taxes and most Americans pay little or no income tax, there’s an increasing disconnect between benefits from government and what most citizens pay for. “One result is a greater polarization in the political realm where a majority of citizens increasingly demand (sic) more government benefits for which they want others to pay,” he wrote.

Furthermore, “the Swedes were on this same destructive path, but they reversed course over the last couple of decades and made their tax system far less progressive …,” he noted. “The result has been a tempering of demand for new government services as people at all income levels realize they will be the ones paying for those services and not some mythical ‘rich’ person. The side benefit is that Sweden, as a result of tax and other reforms, now has one of the highest economic growth rates in the world.”

President Obama, who was against extending the Bush tax cuts for all taxpayers before he took credit for extending them, now has a "debt reduction" plan of his own that would supposedly cut $4 trillion from the national debt. If this sounds strange coming from someone who had to be dragged kicking and screaming to acknowledge that spending had to be brought under control, don’t think a transformation has occurred. His plan relies on tax increases, including ending the Bush tax cuts for everyone and increasing taxes on those making more than $200,000 a year, not spending cuts, the opposite of what worked for Sweden.

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Tuesday, April 12, 2011

Democrats behaving badly: Hysteria on display
over spending cuts

As last week progressed the prospect of a government shutdown loomed, and some Americans had a hissy-fit. Demagogues did their level best to make it seem as if the world would end if the government was shut down, although not long ago a snowstorm in DC shut things down for a couple of days, and no one seemed to notice.

The Heritage Foundation provided some insight on just what a government shutdown really means: “During the last shutdowns, only 20 percent of Washington-area federal contracts were suspended, as were visa and passport applications, bankruptcy cases, and firearm applications. About 368 national parks closed. But the Department of Defense, power grid maintenance, border patrol, Coast Guard, air traffic controllers, inpatient and emergency outpatient medical care, and other vital services continued.”

Not so bad, really. The world didn’t stop spinning. Some inconveniences, to be sure, but you know what? Sometimes stuff happens, and we have to behave like adults when it does.

Still, even though our government is grossly inefficient, wastes tons of taxpayer money, and needs a major overhaul, there is something unseemly about having it “shut down.”

Customarily, government operates year-to-year on revenue/spending plan, a budget, the process for which is guided by a set of procedures laid out in the Congressional Budget Act of 1974, beginning with the President’s annual budget request, then action by Congress.

But not for FY2011.

Ask Congressional Democrats why no budget was enacted. At the time it should have been proposed, debated and approved they held a solid majority in both houses of Congress. They must have been busy doing other things.

So, dereliction of duty by the Congressional majority means the government has kept running through a series of short-term Continuing Resolutions that fund government functions, essential and non-essential alike, and whether we can afford them or not. Along the way many members of the Democrat majorities were replaced in the November election by new faces that ran on fiscal irresponsibility, because voters understand that we must dramatically cut spending, and said so loudly on Election Day.

Congressional Democrats, however, still haven’t gotten the message and would prefer not to make any cuts. When pressed they grudgingly agreed to cut spending by $38 billion, which sounds like a lot. But this year we will spend $1.65 trillion more than we collect, and a cut of $38 billion is comparable to cutting 38 cents off of a $165 invoice.

And for some reason, everyone is celebrating.

And after having created this crisis by not passing a budget, Congressional Democrats like DC Rep. Eleanor Holmes Norton, and New York Rep. Louise Slaughter adopted hysteria and hyperbole as their mode of response to Republican efforts to tie spending cuts to the Continuing Resolution to keep the government running. Rep. Norton shrieked, “We are absolutely outraged. This is the functional equivalent of bombing innocent civilians.” And Rep. Slaughter: “In 1994, people were elected simply to come here to kill the National Endowment for the Arts, now they’re here to kill women,” she ranted. (Reports that they held their breath and stomped their feet could not be confirmed.)

Did alien beings take control of these two women? In response to these absurd performances, a corps (not corpse!) of psychiatrists has been dispatched to the Nation’s Capital to try to calm down the frenzied pair, or failing that, find a couple of spare beds for them in the nervous hospital.

Such gross exaggerations are out of bounds and likely reflect the disdain with which these elected public servants regard their bosses’ demand for spending cuts.

What we see today is the predictable, perhaps unavoidable result of government giving money to segments of the private sector, a situation where government largesse has reached an unsustainable level, and must be stopped. And the reaction of the recipients of that largesse and their government enablers is loud, angry and, as illustrated above, sometimes irrational. It would have been better to not have given these hand-outs in the first place than to have to stop giving them because they are not economically feasible.

And that would have been the constitutionally appropriate course. Government should not subsidize private sector entities; not oil companies, green energy companies, farmers, Planned Parenthood, banks, public broadcasting, or anything else. That’s what is wrong here, and such imprudence was not contemplated by the Founders, who figured future Americans would be smarter than we have turned out to be.

However, Democrats and Republicans were able to find a funding plan that was mutually acceptable and ward off a shutdown for a few days, leaving the details of funding the government through September 30 for this week. Unfortunately, the spending cuts agreed to are far too modest to make a noticeable dent in the deficit.

No sensible person believes we can continue spending billions more than we take in. We have to stop that, and immediately begin to reduce spending to a sensible level, like 18 percent of GDP. That would produce a budget of $2.63 trillion, and if we can’t run a constitutionally proper and efficient government on that amount, we ought to ask Great Britain to take us back.

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Tuesday, April 05, 2011

Just when you think you’ve heard
the craziest comments ever …

Speaking to public sector workers in Madison, Wisconsin last week liberal film maker Michael Moore made this statement: “America is not broke. Not by a long shot. The country is awash in wealth and cash.”

Michael Moore is an interesting study in contradiction. He’s made a career of trashing his country, and made a fortune doing so under the same capitalistic economic system he so bitterly criticizes and tries so hard to discredit. Question: Does a successful capitalist have any credibility at all trashing capitalism?

Normally, no, but that doesn’t stop Mr. Moore, who is upset that the country’s wealth and cash is controlled by those to whom it belongs. He believes that all money, assets, and resources should belong to the government, and that it should be run by liberal elites, who know better than everyone else how things should be done.

However, even those who suffer grand delusions like Michael Moore stumble into a truth once in a while. After about two minutes of fantasizing, he said something that is absolutely true: “I have nothing more than a high school degree,” he said. “But back when I was in school, every student had to take one semester of economics in order to graduate. And here's what I learned: Money doesn't grow on trees. It grows when we make things.”

Aside from the incorrect assertion that completing high school gives one a degree, he is correct about one thing: in this country people who make things, design things, sell things, fix things and indulge in other productive activities earn money for their work and use that money to buy things they need and want. It’s the American way, and Michael Moore is a pretty good example of how an individual can succeed in the capitalistic economy of the US by providing people something that they want.

However, after stating that one economic truth, he veered away from sound economic theory into a diatribe that might have been written by Karl Marx, Vladimir Lenin or Fidel Castro. Maybe another semester or two of economics would have helped.

Mr. Moore’s ideas are fundamentally un-American. Not only does he believe that the money Americans earn by going to work every day ought to belong to government, not to the individual that earned it, but he also believes that if the government actually did control all the wealth in America, we could spend as much as we want to and our $3.7 trillion budget really wouldn’t be a problem, because the country has the assets to cover it.

Clearly, contrary to what he told the government workers in Madison, Michael Moore really does believe money grows on trees.

But some have their feet on the ground. On his Website, “iowahawke,” David Burge dissects the US economy in an article titled “Feed Your Family on $10 Billion a Day,” which is roughly what you get when you divide our $3.7 trillion budget by 365 days a year.

Mr. Burge looks into the economy to find enough wealth and cash to pay for the insane level of spending in modern budgets. He immediately takes the profits of the two largest corporations in the United States, ExxonMobile and Wal-Mart, $34 billion, which doesn’t go very far. He then takes the profits from the other 498 companies of the Fortune 500, adding another $357 billion, which together with the previously confiscated $34 billion is enough money to get us all the way to … 2:00 a.m. on February 9th.

Continuing through the year, he confiscates billions more from such sources as Star Wars movies and products, professional athletes and sporting events, funding for the Iraq and Afghanistan wars, foreign aid payments, billionaires and everyone else making $250,000 a year or more. After confiscating all of the profits, salaries and assets … all of the wealth in America, he manages to find enough money to cover all the spending by midnight on December 31st.


Ah, but then we come to 2012, when President Barack Obama proposes to spend another $3.6 trillion, and all the wealth and cash that could offset that gargantuan fiscal irresponsibility has already been confiscated by the government and used to pay for last year’s spending; it no longer exists. We are broke.

Mr. Moore’s idea of economics is fantasy.

Michael Moore is among those who truly believe the earnings of all who participate in the capitalistic economic system of the United States should belong to the government. Fine. They need to become good role models and show us the way by turning over their wealth to the Treasury Department where they believe it rightfully belongs. Put up, or shut up.

Neither of those things is likely to occur, of course, because as is so readily evident, folks like Michael Moore think that they are not only smarter than everyone else, but also think they don’t have to play by the same rules they expect everyone else to play by. And they will never stop telling the rest of us that they know better than we how we should live our lives.

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