Democrats Seek to Increase the Debt Ceiling, Republicans Prefer Spending Cuts

Posted by PITHOCRATES - January 2nd, 2011

Obamacare Push the Deficit Higher than Reagan’s and Bush’s Combined

Ronald Reagan had deficits of $200 billion.  The Left said that was reckless and irresponsible.  George W. Bush averaged $800 billion deficits.  The Left said that was reckless and irresponsible.  Now Obama’s deficits approach $1,500 billion.  And the Left says, “Let’s raise the debt ceiling.”

It’s a reckless and irresponsible game Obama, Pelosi and Reid have been playing.  During the worst recession since the Great Depression they have gone on a spending orgy.  Hoping to pass as much as possible in as short of time as possible.  The goal being simple.  Get as many people as possible addicted to this new government spending.  Make it political suicide for the opposition to repeal.  Thereby giving the Democrats yet more things to frighten voters about should Republicans win elections.  That those rascally Republicans will take away those benefits they fought so hard to give them.

But they have increased spending to levels impossible to sustain.  Medicaid is bankrupting the states.  Medicare and Social Security are bankrupting the nation.  Despite this, Obama, Pelosi and Reid passed Obamacare.  This on top of stimulus spending that stimulated nothing but unions and Democratic loyalists.  They’re selling bonds and printing money to feed this orgy of spending.  In the process mortgaging our future.  And making the United States credit worthiness on par with a subprime mortgage.

The Best Way to Stop a Spending Crisis is to Stop Spending

The Left is now concerned.  They see spending is unsustainable.  With the current debt ceiling.  So they want to raise the debt ceiling (see Obama aide: Debt limit fight could be “catastrophic” by Caren Bohan posted 1/2/2011 on Reuters).

White House economic adviser Austan Goolsbee accused Republicans of “playing chicken” with the nation’s financial credibility.

“This is not a game. You know, the debt ceiling … is not something to toy with,” Goolsbee told the ABC News program “This Week.” “If we hit the debt ceiling, that’s … essentially defaulting on our obligations, which is totally unprecedented in American history.”

“The impact on the economy would be catastrophic. I mean, that would be a worse financial economic crisis than anything we saw in 2008,” he said.

Interesting.  When we get ourselves in trouble by maxing out our credit cards, what do debt counselors tell us?  To solve our problem by getting another credit card so we can keep spending?  Or do they tell us to cut all of our credit cards and sell everything we own to pay our bills?

When spending gets you in trouble you stop spending.  You don’t keep spending.  It’s what we the people do.  And it’s what our government should do.  Because the nation, the states and even our cities are all having spending and debt problems.

Big Government Spending Destroys Some of our Biggest Cities

Big Government at every level is failing.  Destroying great cities in its wake (see American Cities That Are Running Out Of People by Michael B. Sauter posted 1/1/2011 on Yahoo! Finance).

New Orleans has lost more than a quarter of its population in the past 10 years as the result of Hurricane Katrina. The rest of the cities that have lost major parts of their population have seen their flagship industries, which include coal, steel, oil, and auto-related manufacturing, fall off or completely collapse.

The big losers?  Flint, Michigan.  Cleveland, Ohio.  Buffalo, N.Y.  Dayton, Ohio.  Pittsburgh, Pennsylvania.  Rochester, N.Y.  Big, blue cities.   Big labor unions.  And big public sectors.  Is there any surprise that these cities are dying?

Targeted Tax Cuts and Incentives Don’t Stimulate

The evidence is all around us.  Government spending may get you votes in November, but it is bankrupting the nation, the states and the cities.  And you don’t fix that problem with more taxing.  And more spending.  Even liberal Democrats know this (see Goolsbee: Obama to Make ‘Tough Choices’ on Budget by Mary Lu Carnevale posted 1/2/2011 on The Wall Street Journal).

Mr. Goolsbee, chairman of the White House Council of Economic Advisers, said on ABC’s “This Week” that the administration is focusing on spurring investment and improving U.S. exports and innovation to boost economic growth. And he said that steps already taken, such as cutting payroll taxes by two percentage points and giving small businesses new tax incentives, should soon provide some economic fuel.

They know that cutting taxes stimulates the economy.  They admit as much by cutting payroll taxes.  And by offering tax incentives.  But they target everything.  It’s never across the board.  Because across the board tax cuts don’t offer tit for tat.  And what good is a tax cut to a politician if it doesn’t get you something in return?

Repeal Obamacare, Forget about Raising the Debt Ceiling

Cutting taxes will stimulate the economy.  It worked for Harding.  For Kennedy.  For Reagan.  And for Bush.  Reagan doubled tax receipts with his cuts.  But he still had $200 billion deficits.  Why?  Because the Democratic Congress spent the money faster than it came in.  And they reneged on their promised spending cuts.  Lesson learned?  You have to cut spending.

There’s hope.  Thanks to the Republican ascendancy at the 2010 midterm elections.  The Republicans have the power of the purse.  And a lot of Democrats lost their seats for voting for Obamacare.  You add this up, and you can take tough words about repealing Obamacare seriously (see House to vote early on health care repeal by Jake Sherman posted 1/2/2011 on Politico Live).

Incoming House Energy and Commerce Chairman Fred Upton (R-Mich.) says the new Republican-controlled House will look to repeal Democratic health care overhaul legislation before President Barack Obama delivers his State of the Union address later this month.

“We have 242 Republicans,” Upton said on “Fox News Sunday.” “There will be a significant number of Democrats, I think, that will join us.”

Upton, whose committee will key in the GOP’s effort to roll back the law, said that he believes the House may be near the two-thirds majority required to override a presidential veto. Short of repeal, Upton said the House will “go after this bill piece by piece.”

Social Security, Medicare and Medicaid are political third rails.  Too many people are dependent on them for significant reform.  But Obamacare is a no brainer.  No one is dependent on it now.  Repealing that will be pain free.   Other than a bruised ego.  But Obama can get over that.  When he retires in 2012.

You repeal Obamacare and our debt crisis all of a sudden gets a whole lot easier to manage.  So let’s cut that credit card.  Before we build up a balance that we’ll never be able to pay off.

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LESSONS LEARNED #36: “Politicians oppose across the board tax cuts because they are not politically expedient.” -Old Pithy

Posted by PITHOCRATES - October 21st, 2010

No King Ever Ruled Without the Consent of Money

There were kings.  And there were wealthy landowners.  Kings may have been sovereign.  But the wealth lies with, as you may guess, the wealthy landowners.  Kings needed money.  Because doing king ‘things’ got expensive.  War, armies, navies, festivals, feasts, castles, palaces, churches, etc., were very expensive.  So kings taxed their subjects to raise the money they needed to be king.  And when it came to money, the vast majority (i.e., the peasants) had little.  It was the peasants’ landlords who had the money.  And it was they who paid the bulk of the taxes.

But it was a two-way street.  Because it was their money, they, the wealthy landowners, had a say in how the king spent that money.  This was a restraint on the king’s power.  There were laws to protect the property rights of these landlords.  Now.  And in the future.  Property owners could pass their property on to their heirs.  As well as their political standing with the king.  Thus the rich and landed aristocracy passed on both their property and their nobility through inheritance.  Thus kings and Nobility lived by the consent of the other.  And they each lived by the consent of money.

The Roman emperors spent so much money near the end of the Roman Empire that they brought their advanced civilization to an end.  The landed aristocracy survived, though.  They just served a different sovereign.  The masses (i.e., the poor peasants) still worked the land.  The landlords still held the wealth.  Kings would come and go but this way of life (feudalism) remained.  Kings ruled as long as the landed aristocracy didn’t object too much.  Which they did in England in 1215.  The landed aristocracy met King John on the field of Runnymede.  Seeing his power was not absolute, the king reluctantly set his seal to the Magna Charter.  Constitutional monarchy would reign in England.  And England would reign supreme in the Old World.  And in the New World.

No Taxation Without Representation

The constitutional monarchy that developed consisted of the Crown and a bicameral Parliament.  The two houses of Parliament represented the needs of the few (the House of Lords) and the many (the House of Commons).  Thus the needs of the one (the sovereign), the few (the rich) and the many (the not rich) were balanced against each other.  It was a pretty good system.  The best in its time.  An English citizen had a better and more comfortable life with greater liberty than citizens of most other countries.

This liberalism unleashed a flurry of economic activity.  It created an empire.  International trade exploded.  England became a leader in farming and agriculture.  This knowhow spread throughout her empire.  As did her representative government.  Which they established in their North American colonies.  Perhaps a bit too firmly.  With the costs of world war came the need for higher taxes.  The British had just defeated the French and took possession of all their possessions in North America.  Her English subjects there were now free from French aggression.  And Parliament wanted these subjects to pick up a large part of that war tab.

Well, this didn’t go over well in the colonies.  For they had no representation in Parliament.  They had their own representative governing bodies in the colonies.  But they were subject to royal governors appointed by Parliament.  Without a vote in Parliament, they had no say in matters of taxation.  This was very un-English.  For the English nobility consented to taxation in exchange for having a say in how the king would spend those taxes.  As the landed aristocracy protested in 1215, the Americans protested this taxation without representation.  Eight war years later and America left the mother country.  Another few years later they ratified the Constitution and created the United States of America.  Which came to be because a governing body violated the sacred covenant between a king and his subjects.  A king may only rule as those who pay the kingdom’s taxes approve.

Universal Suffrage Increases Our Suffering

Because the new American government taxed property owners, property ownership was a requirement to vote.  In other words, those with the most to lose (those paying the taxes) had a say in how the government spent their taxes.  It kept the government honest.   By limiting the vote to those who had ‘skin in the game’ it made it hard for government to build palaces for themselves.  Because there was a direct connection between the source of funding and what that funding was used for.  The government may persuade the tax-paying voter for the need for a national postal system.  But a palatial palace was a much harder sell to the one footing the bill.  Especially when that person would never enjoy its benefit.

Such a system led to responsible government.  It minimized political corruption.  And if there is anything a politician doesn’t like it’s this.  They like corruption.  They thrive on it.  It’s their raison d’être.  And this responsibility thing just didn’t cut it.  They need people to vote who have no skin in the game.  People they can buy.  So they can live the good life.  Like in days of old.  Enter universal suffrage.  Where a politician can promise people other people’s money.

Wait a minute, you mean I can have a say in how other people spend their money?  Sweet.  Gimme gimme gimme.  I me mine.  Tax the rich.  Health care is an entitlement.  I mean, as long as someone else is paying, I’m for sale.  Promise me whatever I want and I will vote for you.  And forget what Benjamin Franklin warned us about: 

When the people find they can vote themselves money, that will herald the end of the republic.

Money Talks; Egalitarianism Walks

It probably started with Martin Van Buren.  Creator of the Democrat Party.  He created the party machine.  Patronage.  Payoffs.  And buying votes.  Dirty, filthy politics began with him.  And the Democrat Party.  Beginning with the campaign for Andrew Jackson, politics have gotten worse ever since.

It’s about the money now more than ever.  With the power to tax, government has a near unlimited source of money.  And with it they can get power.  By promising money to people that don’t have money.  Lots of it.  Thanks to universal suffrage, they can bus as many poor, indigent and government-depended people to the polls as possible.  And the more of them the better.  For they will vote for whoever promises to give them the most free stuff.  And why not?  They have no skin in the game.

And by voting themselves a permanent entitlement, they will make themselves a permanent underclass.  Where they will remain poor, indigent and government-depended.  As government spending continues to grow unchecked, it will push people down the economic ladder until the middle class disappears.  There will be only the rich (the government and the government-connected).  And the poor.  Just like in days of old.  Which is the goal of our tax policy.  You see, across the board tax cuts do not enhance the dependency-power relationship.  But targeted tax cuts do.  That’s why Big Government favors a complicated tax code.  It enhances the dependency-power relationship.  That empowers Big Government.  Throws egalitarianism out the window.  And makes life good for the ruling elite.

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FUNDAMENTAL TRUTH #36: “Politicians oppose across the board tax cuts because they are not politically expedient.” -Old Pithy

Posted by PITHOCRATES - October 19th, 2010

Pay Raise or Christmas Bonus – Which is Better?

If times are tough and the boss has to cut costs, which would you rather see cut?  The annual pay raise?  Or the Christmas bonus?  You, the employee, should pick to cut the Christmas bonus.  You, the employer, should pick to cut the pay raise.  The reason is the same for both.  A bonus is a onetime thing.  A pay raise is forever.

If you chose a Christmas bonus this year over a pay raise there is a very good chance you will take a pay cut the following year.  For if you got a $1,000 bonus this year but get nothing the following year, your annual earnings next year will be $1,000 less than they were this year.  However, if you chose the pay raise over the Christmas bonus this year and you get neither a pay raise nor a bonus the following year, you’ll at least make the same amount next year as you did this year.  Because that pay raise is still there.

The allure of a big check, though, is tough to beat.  Getting a 4-figure bonus check for the holidays may make the difference between a truly merry holiday and a not so merry holiday.  That’s why some people have more income tax withheld from their paychecks.  They want to get a big, sexy check after the holidays to help pay off their holiday debt.  Another $20 or $30 in a weekly paycheck just isn’t as sexy.  But it’ll do a whole lot more for you.  Perhaps even being just enough additional income to get you approved for that mortgage.

The Mortgage Interest Deduction

Big Government likes to spend money.  Their money.  When it comes to spending, they operate under the premise that it’s all their money.  Your net pay is only the portion of their money that they let you keep.  For you to spend as it pleases them. 

Affordable housing is important on both sides of the aisle.  The Left likes it primarily for putting people into houses who can’t afford to buy houses.  This makes for grateful voters at election time.  The Right likes it primarily for the economic dividend.  New housing drives a host of other economic activity to furnish those new houses.

Now Big Government is not very generous with their money.  Hence their pervasive taxes.  They don’t want to lower taxes too much.  If they did, we would be able to keep more of their money.  And they just won’t have that.  But on the other hand, they want us to buy houses.  So they came up with the mortgage interest deduction (MID).  If we buy what they want us to buy, they’ll let us keep a little more of their money via this income tax deduction.  Their little way of saying thank you for going into debt up to our eyeballs.  Of course, if they would just cut our taxes we could probably buy those houses without the MID.  But we must remember whose money it is.  It’s not about us enjoying our life as much as we can.  It’s about them giving us as little of their money as possible.

What Have You Done for Me Lately?

They give us (for the time being, at least) the mortgage interest deduction because they get something for it.  Housing sales.  Which gives the Left more grateful voters.  And the Right a more bustling economy.  In other words, Big Government received a sufficient payment on this gift of money they gave us.  This to them is a sensible tax cut.  It’s not general.  It’s not across the board.  It’s specific and targeted to the people they want something from.

This is how they measure the value of any projected tax cut.  They ask themselves how will this tax cut benefit us, Big Government.  And if that benefit is sufficient, that they will gain real value for it, then they grant us this sensible tax cut.  It’s basic accounting fundamentals, matching the costs to the benefits. Which is why they really eschew across the board tax cuts.  With those there’s no matching of costs to benefits.  Sure, everyone may win, but that ‘everyone’ doesn’t include them the way they see it.

They’ll provide a tax credit to buy a ‘green’ car because they can match the cost to the benefit.  They get campaign contributions (and votes) from the Left for promoting ‘green’ technology.  And they get kickbacks from ‘green’ industries the more green technology is used.  They can match the costs of these ‘green’ tax credits to the benefits they receive in exchange.  These tax credits make sense to them.  Across the board tax cuts, on the other hand, don’t.  It’s a lot of money thrown away without anything specific to show for it.  Sure the economy may be better off, but what demographic did it buy?  What specific graft can they count on?  Big Government operates on props.  And if they don’t feel the love (and the money), you better watch your back.

A Crisis is a Terrible Thing to Waste

Pay raises and Christmas bonuses.  Targeted tax cuts and across the board tax cuts.  They have something in common.   Two of them benefit us in the short term (bonuses and targeted tax cuts).  Two of them benefit us in the long term (raises and across the board tax cuts).  Tax credits and the MID are nice, but you have to spend a lot of money to get them.  And they’re short lived.  A pay raise and an across the board tax cut, though, gives you more money to spend with every paycheck.  And the more money you have, the less you have to borrow.  The less interest you will pay on your credit cards.  And the smaller your mortgage will be (and the less interest you will pay on that mortgage).

But, of course, letting us keep more of our money doesn’t help them.  Big Government.  It won’t help reelect them.  And it won’t help them get rich.  (And who hasn’t left Washington rich?)  And that’s what it’s all about.  At least, based on history.    And so what if they crash our economy in the process?  A bad economy is good for them.  A bad economy calls for stimulus spending.  It calls for reform.  It calls for Big Government to step in and do something.  Anything.  Because the people are desperate.  And a crisis is a terrible thing to waste.

And the people will willingly suffer for a couple of years.  They’ll make their sacrifices.  Suffer unemployment.  To help build a better tomorrow.  But when that tomorrow never comes, they will grow impatient.  They’ll stop giving them their props.  They will stop loving them.  Believing in them.  Which may back Big Government into a corner.  Where they will either move to the center and govern according to the will of the people.  Or rule by executive order against the will of the people.  Should they choose the former, we better all watch our backs.

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