FT119: “To save American jobs the Left tries to keep out low-priced Mexican imports but does little to keep out low-priced Mexican labor.” -Old Pithy

Posted by PITHOCRATES - May 25th, 2012

Fundamental Truth

The Left opposes Cheap Mexican Labor in Mexico but they like having it in the U.S.

One of the more interesting things about the political left is their inconsistency about their opposition to free trade.  They opposed the North American Free Trade Agreement (NAFTA) because they said all the good manufacturing jobs would go south of the border.  They said Mexicans work too cheap.  And that was unfair to the American worker.  For the American’s generous wage and benefit packages could never compete with the Mexicans who are willing to work for so much less.  With NAFTA rich American capitalists would just screw their American employees and move their operations to Mexico.  Where they would exploit the poor hapless Mexican workers.  Forcing them to work at a fraction of the American wage and benefit package.

Of course that’s not the way the poor hapless Mexican workers see it.  They loved those manufacturing jobs.  Because those jobs had some of the most generous wage and benefit packages available in Mexico.  They flooded those factories.  And the lucky few to get those jobs did quality work.  The things they made in these Mexican plants were as good as anything in the U.S.  And they cost less.  Allowing the American consumer to buy more.  Which raised the standard of living for everyone.  The American consumer.  And the Mexican consumer.  The only ones who lost were the few working in those U.S. plants that closed.  Who became bitter.  And demanded the government impose tariffs on those low-cost imports.  To save American jobs.  While lowering the standard of living for the American consumer.  And the Mexican consumer.

So the Left opposes this cheap Mexican labor.  In Mexico.  They don’t seem to mind it so much, on the other hand, when it’s in the U.S.  The Left opposes building a wall on the border.  They oppose asking for proof of citizenship from anyone who looks Mexican in a region with a high concentration of illegal aliens.  They oppose requiring a photo I.D. to vote.  They oppose deportations of illegal aliens who’ve been living and working in the U.S.  While they are in favor of blanket amnesty for those here illegally.  And providing them a fast-track to U.S. citizenship.  Which is rather odd considering the way the Left feels about that cheap Mexican labor.  So why are they opposed to imports manufactured by low-cost labor while they are in favor of bringing that low-cost labor into the United States.  For either way it will displace a higher-paid U.S. worker from a job.

The Lost Tax Revenue from Abortion and Birth Control comes to about $155 Billion per Year 

 Yes, that is a good question, isn’t it?  Some, I’m sure, will say once those illegals become legals they’ll join unions.  Which would make them no longer cheap labor.  Perhaps.  But with the decline in U.S manufacturing there aren’t a lot of union jobs anymore.  It is more likely that they will go to where there are good manufacturing jobs.  In the nonunion South.  So it is likely they would add further pressure on those high union wages and benefits.  So why, then, would the Left want to grant citizenship to those here illegally while at the same time opposing cheap Mexican labor?  Two reasons.  Abortions.  And birth control. 

As it is in most things in life it’s about the money.  The Left likes to tax and spend.  Well, not so much like but love.  It’s what they live for.  They want to spend money to provide pensions.  Health care in retirement.  And now health care before retirement.  They want to spend money to end poverty.  They want to spend money to give everyone a college education.  They want to spend money to subsidize green energy.  They want to spend money for school lunches, childcare, art, public television/radio, birth control, abortions, etc.  If it’s something they can spend money on they want to spend money on it.  Of course to spend all of this money you need what?  That’s right.  Money.  And two of the Left’s defining issues have actually reduced the available money to spend.  Birth control and abortion.

According to Public Agenda the number of abortions increased during the Seventies until they totaled approximately 1,300,000 by the end of the decade.  They stayed at or above this level for a little over a decade and then started falling in the late Nineties.  Let’s take one year of these numbers and crunch some numbers.  If 1.3 million abortions didn’t happen and the women carried these babies to term and they earned the median income of $46,000 (and paid $7,530 in federal income taxes) today that would have come to an additional $8.4 billion in tax revenue per year.

According to the Guttmacher Institute there were 62 million U.S. women in their childbearing years (15-44) in 2010.  Approximately 62% of these women were currently using birth control.  Bringing the number of women using birth control in 2010 to 38,440,000.  If birth control was unavailable let’s assume 50% of these women would have stopped having sex.  And let’s assume the women who continued to have sex became pregnant and carried their pregnancy to term.  Bringing in 19,220,000 new babies into the world.  Based on the median salary of $46,000 they would have contributed another $145 billion in tax revenue.  Added to the lost tax revenue from abortion that comes to a grand total of $155 billion in lost tax revenue per year.  Over a decade that comes to $1.5 trillion.

Granting Amnesty to Millions of Illegal Aliens can make up for Lost Tax Revenue due to Birth Control and Abortion 

During the Obamacare debates the Congressional Budget Office (CBO) projected the cost of Obamacare over a 10-year period at $940 billion.  They have since revised that up to $1.76 trillion.  The opponents of Obamacare say it is too costly.  With a national debt of already $15.7 trillion we simply can’t afford to pay for Obamacare.  The proponents of Obamacare have been using questionable accounting practices to get that number down.  Such as collecting new taxes before paying any benefits in some of those years in that 10-year projection.  But the interesting thing to note here is that these discussions would be moot had it not been for birth control and abortion.  Which has cost the nation in tax revenue what Obamacare will cost.

These numbers are only crude calculations.  A more detailed mathematical analysis would have produced a far greater number in lost tax revenue.  Because the population would have also been expanding.  So the numbers used as constants in the 10-year projections above would have been growing larger in each year of that 10-year projection.  And producing larger amounts of tax revenue in each of those 10 years.  This is why Social Security worked so well for the first few decades.  There was a growing population.  And there was always far more new workers entering the workforce than leaving it.  What changed that was birth control and abortion.  And people choosing to have smaller families.  Not a bad thing in itself.  But this decision to have smaller families has doomed Social Security and Medicaid.  For they created those programs based on larger population growth rates.  That simply no longer exist.  And the only way to fix that is by having a lot more babies quickly.  Or for the baby boomers to die off quicker.  Which critics of Obamacare say Obamacare will help do via death panels.

Or you could try something else.  You can jumpstart the population growth rate by granting amnesty to millions of illegal aliens.  To make up for lost tax revenue due to birth control and abortion.  And what makes the illegals from Mexico so attractive to the Left is that many of them are devout Catholics.  Thanks to the Catholic Spanish Empire who brought their language, culture and religion to the New World.  And Catholics frown upon the use of abortion and birth control.  But this can be a risky bet for those on the Left.  Yes, they could really boost the population growth rate.  And they may get these new citizens’ votes in the early years out of gratitude.  But eventually the Left’s attacks on religion may eventually make these people vote Republican.  So they may get a large increase in tax revenue to spend.  Just as they lose power in Washington.

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LESSONS LEARNED #53: “The essence of politics is taking from the many and giving to the few.” -Old Pithy

Posted by PITHOCRATES - February 17th, 2011

Good Times Turned into Chronic Deficits and Punishing Debt

Two things have historically made government good at filling its coffers.  The power to tax.  And a growing population.  It’s a simple mathematical equation.  And each year it totals more.  As long as you have a growing population to tax you can sustain government spending for a long time.  All the while putting a little of those taxes aside to take care of you and yours.

Businesses call it economies of scale.  Sell more of a thing and the cost per thing goes down.  If you have $1 million in total costs and sell only 4 things, then each thing will have to sell for $250,000 just to break even.  If you sell 5 million things, then you only have to sell each thing for a nickel to break even.  If you sell more things you can charge less for each thing.  It’s sort of like that with taxes, too.  If you have a growing population (with an expanding birthrate), each succeeding generation will have a lot more tax payers than the previous one.  So a small tax rate on a growing population will continue to increase the amount of tax dollars flowing into the government’s coffers.  And a good time will be had by all.

But right now, the federal government, some states and some cities are struggling to balance their budgets.  Something happened.  What others would have described as the perfect Ponzi scheme became like a real one.  The money paying current benefits became larger than the current contributions.  And good times turned into chronic deficits and punishing debt.  So what happened?

Government Employees Grew 280% from 1946 to 2010

Well, to begin with, some people just got greedy.  They spent a lot of money.  Grew the size of government.  Put more and more people onto the public dole.  At all levels of government.  City.  State.  And federal.  And they based all of this growth on the most hopeful of economic assumptions.  That revenue (i.e., tax receipts) then would continue to grow at the same rate forever and ever.   So they grew government.  Gave themselves very generous pay and benefits.  Pension plans that they could never sustain in the private sector.  Job security.  And other good stuff those in the private sector just don’t get (more holidays, more paid vacation, better healthcare, etc.).  And why not?  They had the power to tax.  And an increasing population.  I mean, what could go wrong?

Well, things change.  Even in government.  In 1946 (about when FDR gave us Social Security), there was approximately 6 million government employees (federal, state and city).  Fast forward to 2010 and that number grew to 23 million.  That’s an increase of 280%.  That’s a huge transfer from the private sector to the public sector.  Which required an enormous amount of additional tax revenue.

Of course, if the population grew at a corresponding rate, then perhaps that growth can be justified.  Maybe they just hired more people to administer a growing population.  It’s either that.  Or they were just expanding the role of government into our lives.  Perhaps a look at some population data will answer that question.

Population Grew 118% and the Birthrate fell 31% from 1946 to 2010

The population in 1946 exceeded 141 million.  In 2010 it exceeded 308 million.  That’s an increase of approximately 118%.  Less than half of the growth rate in government jobs.  So, no, government hasn’t grown larger to keep pace with a growing population.  It has grown larger to expand its role into our lives.

The birthrate in 1946 was 20.4 births per thousand of population.  In 2010 the birthrate fell to 14 births per thousand of population.  That’s a decrease of 31%.  So while the population grew at 118% between 1946 and 2010, the number of births only increased approximately 50% (from 2.8 million to 4.3 million).  In other words, our current birth rate accounts for less than half of our population growth. 

So we have a public sector growing more than twice our population growth.  And we have a birthrate that is less than half of our population growth.  You put these two facts together and what does it tell you?  The growth of taxpayers to fund the public sector is decreasing while the public sector is increasing.  And this can mean only one thing.  Tax rates on the individual have to increase so fewer taxpayers can support more tax consumers (i.e., the public sector).

Payroll Taxes (Social Security and Medicare) Grew 665% from 1946 to 2010

To simplify the discussion, let’s look only at Social Security and Medicare.  In 1946 there was only Social Security.  And the payroll tax was 1%.  In 2010 we have both Social Security and Medicare.  The total payroll tax for these two is 7.65%.  That’s an increase of 665%.  If you earn $30,000 that comes to $2,295 today.  If the tax rate was at the 1946 level it would only be $300.  Giving you an additional $1,995 to spend.  (If you make $65,000, the numbers are $4,972.50, $650 and $4,322.50, respectively.)  Could you use another $1,995?  If you don’t think that’s a lot consider this.  We pay a lot more taxes than just Social Security and Medicare.  You add all of them up and it totals the price of a decent car.  A care that you pay for but never get to drive.

These numbers increased because costs went up at a greater rate than the number of new taxpayers.  Therefore, each individual taxpayer had to pay more.  This is a problem repeated at every level of government.  Government grew and expanded its role.  And its payrolls.  Based on population models used before birth control and abortion.  But then birthrates declined.  In the second half of the 20th century, new babies made up less than half of our new population.  Which explains the government’s earnest desire for blanket amnesty for all illegals in the country.  To make up for that declining birthrate.  And restore the population growth rate to the numbers the actuaries used in all their calculations to fund all that Big Government spending.

As noted, we pay more taxes than just Social Security and Medicare.  And they’re all going up.  For the same reasons.  Government overstepped its bounds.  Spent money under the most ideal assumptions.  And the moment a little reality entered into the economy their house of cards came tumbling down.  The big states and the big cities are all drowning under their public sector obligations.  They have pension obligations that are pushing them towards bankruptcy.  And the federal government has its own problems with Social Security and Medicare.

It’s Spending Cuts or Bust

It was a simple plan.  Tax a little from everyone.  Give generous benefits to the few you need to vote for you.  Live happily ever after.  But they overreached.  Grew government too big.  Just as the population growth rate took a nosedive.  They have raised taxes on the remaining taxpayers in the private sector about as high as they can go.  If they raise them anymore the greatest recession since the Great Depression may very well turn into another Great Depression.  So what to do?

Well, based on that simple mathematical equation, we have but two choices.  Increase the growth rate of the taxpaying population.  Or cut spending.  If we started today raising families of 10 plus kids, it would still take about 20 years (or more) before these new taxpayers start paying taxes.  But we may not have 20 years.  So that leaves the spending cuts.  Even blanket amnesty for illegals won’t help.  Because government spending is a function of the birthrate.  And sustained spending requires a sustained birthrate.  Amnesty won’t give you that.  So it’s spending cuts or bust.  Literally.

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Obama: Too Liberal for the Country; not Liberal enough for his Base

Posted by PITHOCRATES - December 10th, 2010

Obama the Bridge Burner

In business, and in life in general, it is wise not to burn your bridges.  It pays to hold your tongue.  Unleashing a verbal tirade may feel good at the moment but it doesn’t make you look good.  It makes it difficult to salvage anything good out of a bad situation.  And more times than not burning a bridge will come back to haunt you.  For today’s enemy may be tomorrow’s ally.

President Obama is a smart man.  He may be pompous and arrogant, but he understands politics.  And when it comes to bridges, one would expect that he’d be prudent.  During the recent debate over extending the Bush tax cuts, however, he hasn’t.  Instead, his approach has been to basically say ‘flame on’ to friend and foe alike (see From Audacity to Animosity by Peggy Noonan posted 12/9/2010 on The Wall Street Journal).

President Obama was supposed to be announcing an important compromise, as he put it, on tax policy. Normally a president, having agreed with the opposition on something big, would go through certain expected motions. He would laud the specific virtues of the plan, show graciousness toward the negotiators on the other side—graciousness implies that you won—and refer respectfully to potential critics as people who’ll surely come around once they are fully exposed to the deep merits of the plan.

Instead Mr. Obama said, essentially, that he hates the deal he just agreed to, hates the people he made the deal with, and hates even more the people who’ll criticize it. His statement was startling in the breadth of its animosity. Republicans are “hostage takers” who worship a “holy grail” of “tax cuts for the wealthy.” “That seems to be their central economic doctrine.”

As for the left, they ignore his accomplishments and are always looking for “weakness and compromise.” They are “sanctimonious,” “purist,” and just want to “feel good about” themselves. In a difficult world, they cling to their “ideal positions” and constant charges of “betrayals.”

Waaa!  Waaa!  Waaa!  I hate you.  I hate you all.  I’m taking my legislation and going home.

The leader of the free world has spoken.

Dropping the ‘F’ Bomb on the President

And just how angry are those in his base?  Pretty darn angry (see Profanity, Anger Spill Over in House Democratic Caucus Meeting by Anna Palmer posted 12/9/2010 on Roll Call).

The frustration with President Barack Obama over his tax cut compromise was palpable and even profane at Thursday’s House Democratic Caucus meeting.

One unidentified lawmaker went so far as to mutter “f— the president” while Rep. Shelley Berkley was defending the package the president negotiated with Republicans. Berkley confirmed the incident, although she declined to name the specific lawmaker.

Not quite the ‘You lie‘ uttered by South Carolina Rep. Joe Wilson during Obama’s 2009 health care speech to the House.  Actually, “f— the president” seems a bit worse.  That’s some pretty strong language.  In fact, it would probably be harder to find stronger language. 

Dropping the ‘f’ bomb on the president.  I doubt a Republican ever said that about Ronald Reagan.  Then again, members of Reagan’s party respected him.

Closing Gitmo was a Slam Dunk

This is the problem when you try to govern to the wishes of 20% of the population.  Pleasing this 20% just pisses off the other 80%.  And then the 80% votes against you at the midterm election.

Poor 20%.  And things don’t look like they’re going to get better any time soon (see House acts to block closing of Gitmo by Stephen Dinan posted 12/8/2010 on The Washington Times).

Congress on Wednesday signaled it won’t close the prison at Guantanamo Bay or allow any of its suspected terrorist detainees to be transferred to the U.S., dealing what is likely the final blow to President Obama’s campaign pledge to shutter the facility in Cuba.

Closing Gitmo was a slam dunk.  So what happened? 

Well, no nations wanted to take the prisoners.  The American people weren’t all that keen on trying them in the U.S. legal system.  And releasing them wasn’t a good idea because many just became terrorists again (see Gitmo Recidivism Rate Soars by Thomas Joscelyn posted 12/7/2010 on The Weekly Standard).  It turns out that Gitmo was a pretty darn good place to leave these bad guys after all.  Obama no doubt rues that campaign promise.

Obama Fails to Deliver Amnesty for Illegal Aliens, Too.

But that ain’t his only failed campaign promise.  There was going to be immigration reform.  Or, rather, amnesty for illegal aliens to increase Democrat voter turnout.  But this appears to be stalling, too.  And this in a lame duck congress that his party still controls (see Democrats delay action on young immigrants bill by Julie Hirschfeld Davis, Associated Press, posted 12/9/2010 on Yahoo! News).

The Senate moved Thursday to delay a politically charged showdown vote on legislation carving out a path to legal status for foreign-born youngsters brought to this country illegally, putting off but probably not preventing the measure’s demise.

Facing GOP objections, Democrats put aside the so-called Dream Act and said they’d try again to advance it before year’s end. They’re short of the 60 votes needed to do so, however, and critics in both parties quickly said they won’t change their minds in the waning days of the Democratic-controlled Congress.

Some days it’s just not good to be a liberal Democrat trying to govern against the will of the American people.

Damned if he Does; Damned if he Doesn’t

And some days it’s just not good to be stuck with a Barack Obama (from Noonan above).

The Democrats’ problem is that most of them know that the person who would emerge, who would challenge Mr. Obama from the left, would never, could never, win the 2012 general election. He’d lose badly and take the party with him. Democratic professionals know the mood of the country. Challenging Mr. Obama from the left would mean definitely losing the presidency, as opposed to probably losing the presidency.

That’s the problem with lying to win elections.  The truth eventually comes out.  And it has.  The moderates and independents have long since learned that Obama is no moderate.  But if he wants to remain president, he’ll have to learn how to become one pretty darn fast.  And lose what’s left of his liberal base in the process.

Talk about being stuck between a rock and a hard place.

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LESSONS LEARNED #40: “Big Government is more efficient when old people die sooner.” -Old Pithy

Posted by PITHOCRATES - November 18th, 2010

Big Government is a Ponzi Scheme

When it comes to government funding, birthrates and death rates are key.  Think of government as a great Ponzi scheme.  Ponzi schemes work when more people pay into the scam than collect from the scam.  Like in a pyramid scheme.  Those collecting benefits are the few at the top.  Those paying in are the many at the base.

An increasing birthrate means more taxpayers for each successive generation.  This keeps the base of the pyramid growing.  A steady or increasing death rate keeps the top of the pyramid smaller than the base.  A declining death rate, on the other hand, will flip the pyramid upside down.  Because the population at the top will grow larger than the population at the bottom.

Big Government tries to keep as many people as possible dependent on government.  Lots of different programs attach lots of different people to the welfare state.  But when it comes to big numbers, old people can’t be beat.  The lion’s share of government assistance goes to them via Social Security and Medicare.  And they are the most politically active.  That means they vote.  And when they vote, they vote to keep their benefits.

Of course, this is a dual-edged sword.  Yes, old people can provide a loyal voting base to sustain Big Government.  But on the other hand, the cost of their benefits is growing so large that it is undermining the very foundations of Big Government.  How?  By the double whammy of a falling birthrate and a declining death rate.  For various reasons, fewer people are being born.  And old people are living longer.  This has flipped the pyramid in the great Ponzi scheme upside down.  The growth rate of those collecting benefits is greater than the growth rate of those paying into the scheme.

An Increasing Life Expectancy is Bankrupting Social Security

FDR signed Social Security into law in 1935.  The average life expectancy in 1930 was approximately 59 years.  The retirement age in the Social Security Act of 1935?  65.  That’s right, the average American would have been dead for 6 years before qualifying for Social Security retirement benefits.  That’s a 6 year cost cushion.  But not everyone died at 59, though.  So a lot of people lived to receive those benefits.  But one thing the actuaries were sure about then, this Ponzi scheme was going to be a big winner.  For Big Government.

The average life expectancy increased to approximately 70 years in 1960.  In other words, people were living approximately 11 years longer.  That 6 year cost cushion just became a 5 year cost exposure.  That’s a swing of 11 years.  The actuaries in 1930 never saw this coming.

Social Security had its first crisis in 1975.  To save the program, they increased payroll taxes and decreased benefits.  Another crisis came in 1983.  Now they started taxing some Social Security benefits.  Even taxed federal employees (who previously didn’t pay these payroll taxes).   And they would increase the retirement age for later retirees.

By 2000, the average life expectancy increased to approximately 77 years.  That’s another 7 years.  That’s a swing of 18 years from 1930.  A huge actuarial miscalculation.  The population was getting far older then the FDR administration ever guessed.  And, to make matters worse, the birthrate was declining.

A Declining Birthrate is Bankrupting Social Security

The birthrate (per thousand of population) had been declining from 1910 (30.1) to 1920 (27.1) to 1930 (21.3).  That’s about a 10% decline from 1910 to 1920.  And a 20% decline from 1920 to 1930.    Perhaps that’s the reason for the 6-year cost cushion they gave themselves.  They saw fewer babies being born.  Which meant fewer taxpayers would be paying for later retirees.

The birthrate fell to 19.4 in 1940.  Though it was falling, it wasn’t falling as much.  Only 9% from 1930 to 1940.  Then came the baby boom generation.  The birthrate in 1950 shot up to 24.1, a 24% increase from 1940.  More babies meant more taxpayers.  This birthrate held pretty steady in 1960.  No doubt the LBJ administration felt optimistic. 

LBJ exploded federal spending.  He added Medicare and Medicaid.  Made Social Security more generous.  And why not?  Things were looking up.  Birthrate-wise.

But it was short-lived.  The birthrate went from 23.7 in 1960 to 18.4 in 1970.  That’s a 22% decline.  The birthrate was 15.9 in 1980.  That was a 14% decline from 1970.  Or a 33% decline from 1960.  Birth control and abortion were taking their toll on the U.S. birthrate.  Fewer babies meant fewer future taxpayers.  And fewer taxpayers could pay for less government, not more.  The LBJ administration was wrong to feel optimistic.

The Selfish Baby Boomers Invert the Ponzi Scheme Pyramid

The baby boom generation has really thrown a wrench in the works.  The government used their spike in the birth rate as a baseline for future government spending.  But they screwed the government in the end.  Instead of being good little taxpayers by making even more little taxpayers, they stopped having babies.  They didn’t stop having sex.  They just stopped having babies.  It was the era of free love.  And ‘free love’ had no room for babies.

And it’s these baby boomers that are working themselves up to the top of the pyramid.  But being the selfish ingrates that they are, they’ve left no one to follow behind them to keep the Ponzi scheme going.  And to make matters worse, they’ll be living longer in retirement than anyone ever guessed.

It’s a perfect storm of sorts.  A declining death rate.  An even more declining birthrate.  And a huge chunk of the population about to go on the public dole.  But it gets even worse.  The boomers will be living longer in retirement because of huge outlays in Medicare spending to keep them alive.  In other words, the government is spending a fortune to make their financial problems worse.

Amnesty, Catholics and Dead Retirees May Save Social Security

They’re trying to fix things on the taxpayer side.  The Big Government legislators are desperate to give illegal aliens amnesty and citizenship.  To them it’s simple math.  More people equal more taxpayers.  And these taxpayers will be Catholic.  Catholics don’t use birth control and abortion like Americans currently do.  Their birthrate is less likely to decline.  (Approximately 1 in 5 of young children in the United States is Hispanic already.  They project that to increase to 1 in 4 within a few decades.)

On the benefit side, they’ve already raised the retirement age to 67.  And there’s talk about raising it to 69.  If more people die before they’re eligible to collect retirement, that’s a lot of benefits the government doesn’t have to pay.  They’re also talking about cutting the Medicare budget.  The less they spend, the more may die.  And dead people don’t consume Medicare benefits.

There’s no getting around the fact that old people are a huge drain on government.  Though they worked hard to get these people dependent on government, their continued living is becoming more of a burden than a benefit.  An increasing lifespan is anathema to Big Government.  Old retirees take more than they give.  Young workers, on the other hand, give more than they take.  The government needs more young workers.  And fewer old retirees.

(Social Security + Medicare) Spending = 2 X Defense Spending

To be efficient government has to minimize costs in relation to revenue (i.e., taxes).  And there’s an 800 pound gorilla in the room.  Old people.  Nothing can impact the budget more.  Even war.  Social Security and Medicare combined make up approximately 40% of the federal budget.  Defense spending is approximately 20%.  A blind man can see the gorilla.  Government needs these old people to hurry up and die.

And now add Obamacare to the equation.  Which will cover more people than Social Security.  The costs will be astronomical.  Social Security, Medicare and Obamacare will easily eclipse 60% of the total federal budget.  That kind of spending cannot be sustained.  Greece, France and Great Britain have proven this in the 21st century.

That’s some serious cost to contain.  And how do you contain that kind of cost?  You do what the Left says the private health insurers do.  Deny coverage to sick people.  And they will.  They’ll have to.  And with the power of life and death literally in their hands (i.e., death panels), they’ll be able to.  They’ll be able to maximize the number of young workers (by treating them).  Minimize the number of old retirees (by not treating them).  As well as minimize the number of undesirables who take more than they give (by not treating them).  Or even take more serious measures with those seriously ill or impaired (euthanasia).

Don’t think it can happen?  It’s happened in other Big Government states.  In fact, the Progressives even talked about the scientific benefits of eugenics and euthanasia here in the United States in the early 20th century.  To deal with undesirables.  So, yes, it could happen here.  Because it almost once did.

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FUNDAMENTAL TRUTH #40: “Big Government is more efficient when old people die sooner.” -Old Pithy

Posted by PITHOCRATES - November 16th, 2010

Revenues Must be Greater than Costs in Both Private Business and Government

Private business must make a profit.  That means the costs of their business can NOT exceed their revenues.  There may be times when costs do exceed revenue.  Such as during a recession.  Or when another business offers the same goods or services for less.  If these periods last too long, a business must act.  Find ways to increase their revenues.  Or cut costs.

Apple continues to innovate and create new products that people want.  This keeps their revenues greater than their costs.  GM, on the other hand, has not.  Their costs have exceeded their revenues.  So they have cut back on production.  And laid off people.  But, in the end, they still needed a government bailout to survive.

Government can tax and print money.  And run perpetual deficits.  So they don’t hold themselves to the same standards as private business.  But if they tax too much or print too much money, it can push the economy into recession and/or inflation.  So they try to make their revenues (taxes) cover as much of their costs (government spending) as possible. 

A Growing Population Can Fund Social Security and Big Government

If you go back 100 years, there was no Social Security.  No Medicare.  No big federal government.  That’s the way the Founding Fathers wanted it.  They minimized the money and reach of the federal government.  Because they were students of history.  They knew governments tended to oppress their people when they had money and power.

In the first century or so of our nation, it was easier to keep the size of government small.  Our population was small.  A big federal budget would require huge per capita taxes.  But that changed as the population grew.  Soon, it was possible to have big federal budgets from modest federal taxes.

We saw the growth of Big Government beginning around the turn of the 20th century.  First it was Woodrow Wilson and the Progressives.  Then came FDR.  He gave us Social Security.  Which was basically a Ponzi Scheme.  It worked at first as all Ponzi Schemes do.  As long as more people are entering into the scheme than collecting benefits, Social Security was sound as a pound.

Population Growth Rate and Big Government Peak and Crash in the 1970s

A growing population means a growing tax base.  The more babies are born, the more future taxpayers there will be.  And when FDR gave us Social Security, it wasn’t uncommon for a family to have 10 or more children.  That’s a lot of future federal taxes they could count on.

Then came LBJ.  He saw what FDR did.  Liked it.  Then tried to outdo him.  He gave us his Great Society (to end poverty and racial injustice).  And Medicare (health care for those 65 and older).  And other stuff.  But these programs were very, very expensive.  So he raised taxes.  A lot.

Then it all crashed in the 1970s.  The increase in taxes to pay for all that government spending stalled the economy.  When they tried to stimulate it with monetary policy, they unleashed inflation.  The U.S. dollar was convertible to gold then.  Which is a bad thing when you’re printing money.  For when you depreciate your currency, you increase the value of gold as measured by your currency; it takes a lot more devalued dollars to buy the same amount of gold.

Well, foreign governments exchanged their dollars for gold.  So much so that Nixon suspended the convertibility of dollars into gold in 1971.   Without the gold restraint on printing money, they printed even more.  We had both recession and inflation.  Stagflation.   Double digit inflation, interest rates and unemployment.  This malaise made Carter a one-term president.

Birth Control and Abortion – The Death Knell of Big Government

So what happened?  Where did it go all wrong?  It goes back to the number of taxpayers.  Something happened between FDR and the 1970s.  We weren’t having as many babies.

Instead of 10 or more children in families, many families were having only 2 or 3 kids.  Widespread use of birth control and abortion drastically reduced the population growth rate of the country.  Fewer taxpayers were being born than before.  Which meant that more people would be entering retirement than there would be new taxpayers entering the work force to pay for these retirees.

This is how Ponzi Schemes fail.  When there are more people drawing benefits than paying into the scheme, the whole house of cards collapses.  And this is a big problem for government.  To support their massive spending, they need more, not fewer, people entering the work force.

How can Government Save Social Security and Medicare?  Old People Just Need to Hurry Up and Die.

Well, there’s a couple of ways to address this problem.  First there’s the revenue side.  They can increase the taxes they collect.  By raising tax rates on individuals.  Or by simply creating more individuals to tax.  Such as amnesty for illegal aliens.  But both of these options are difficult to do without hurting your chances at getting reelected.

Then there’s the cost side.  They can cut benefits.  Increase the Social Security retirement age.  But these, too, have political consequences.  Because these old coots tend to vote more than any other demographic.  Which can make them a real pain in the behind.

Of course, if they would jut die before reaching retirement age, the government doesn’t have to pay them or their survivors.  And if they’re dead, they won’t be consuming any Medicare benefits.  You see, not only are they the most vocal group at election time, but they are also the most costly when it comes to government benefits.  The government could kill two birds with one stone if these old codgers would just hurry up and die.

One Way for Big Government to Cut Health Care Costs:  Death Panels

The government doesn’t see your mother or grandmother.  They’re looking at numbers in columns.  They are having trouble increasing the numbers in one column (tax revenue).  And are having trouble keeping the numbers in the other column from growing (benefits).  Because of old people.  Who don’t work anymore.  Or pay much in income taxes.  But they consume the lion’s share of the benefits.  They’re the biggest thorn in the government’s side.  If it wasn’t for them, their programs wouldn’t forever be facing bankruptcy.  You can see why they aren’t the government’s favorite people.

So they increase the retirement age.  In hopes more will die before reaching retirement.  And those who do reach retirement age, well, they’ll have fewer years left to enjoy their benefits.  And they make cuts in the Medicare program.  Disallow some reimbursements.  Maybe prod a few seniors to an earlier death.  Why?  Because these kinds of cost savings are the only cost savings that will have any impact in a government-managed system.

Then there’s the holy grail of Big Government.  Government-managed universal health care.  Obamacare, in its latest manifestation.  And, of course, it will end up just like Social Security and Medicare.  For the same reasons Social Security and Medicare ended up the way they did.  But Obamacare will have a new twist.

Government panels will determine who gets medical treatment.  And who doesn’t.  Based on a ‘return on investment’ analysis used to manage and optimize health care costs.  Will medical treatment result in more taxpaying years for the patient?  If yes, treatment approved.  If not, treatment not approved.  If anything, the government’s death panels will be a model of efficiency.  On paper.

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Oppressed Migrant Workers are Good for Democrats

Posted by PITHOCRATES - September 26th, 2010

Farm Labor is Hard

Ever drive through the Midwest during a harvest season?  See the acres of wheat, corn and soybeans?  And the migrant workers to harvest those crops?  Well, no.  You don’t.  What you typically see is a mechanical harvester (such as a combine that cuts, threshes and cleans grain) and a mechanical collection bin (like a dump truck).  Instead of an army of migrant workers, you typically see two pieces of equipment and two drivers.

We call it advancement.  Modern farmers invest capital into machinery to mechanize their farms.  Sure, some don’t like it.  Modernization.  It reminds me of an anecdote an old friend of mine told me once.  He was operating a ditch-digging machine (like a big chain saw with wide blades that slices a narrow trench into the ground).  He was working at a municipal facility.  An older union employee was watching him with disgust.  Eventually, he spoke up.  He said, “You know how many men you and that machine are putting out of work?”

You ever dig a ditch?  It’s back-breaking work.  Manual ditch diggers would agree.  They would join a union for higher pay to do something no man should have to do.  And when we free men everywhere from doing something no man should do, a disgruntled union employee will go and cut your hydraulic lines.

Congress Gets Serious about Migrant Workers…with a Comedian

Comedian Stephen Colbert recently testified before Congress.  In character.  (You can read about it and see some highlights -or lowlights, depending on how you feel about a comedian taking his shtick to Capitol Hill- in Rachel Rose Hartman’s Stephen Colbert draws attention to self, then farmworkers during Hill appearance on The Upshot, a Yahoo! News Blog.)  So he could testify about migrant workers in California.  He did a skit on Comedy Central’s The Colbert Report about migrant workers in California.  He spent a day trying to work like they did.  Alongside other migrant workers.  Many who were there illegally (and are the subject of ‘comprehensive’ immigration reform).  Colbert said it was back-breaking work in unbearably hot weather.  He hated it.  He then closed on a serious note saying we exploit these illegal aliens.  As being in the country illegally doesn’t really give them the full protection of the law.

My question is, why aren’t these farmers mechanizing their farms?  Wheat, corn and soybeans are NOT the only crops harvested mechanically.  There are mechanical harvesters for oranges, grapes, cucumbers, peppers.  Even tomatoes.  And, of course, green beans, which Colbert was picking.  So why are there still so many migrant pickers crossing our borders?

The Economics of Farming

Generally, there is as tradeoff between capital and labor costs.  When labor costs are high, we invest capital into machinery.  When capital costs are high, we invest in labor.  It would appear the California farmers are using labor instead of machinery because illegal aliens are cheap and plentiful.  But they’re not indispensable.  If they were not so plentiful, labor costs would go up (basic economic rule of supply and demand).  Which would lead these farmers to make capital investments into machinery.  Problem solved.  No more illegal immigration.  No more exploitation of illegal aliens.  And no more back-breaking labor.  The kind a person shouldn’t have to do.

But they’re still there.  Because our border is so porous.  Why?  Are we reluctant to take a job away from an oppressed migrant worker?  Afraid he may become disgruntled and…cut a hydraulic line?  It makes you scratch your head.  Why won’t we seal that border?  Make the illegal immigrants less plentiful and more expensive.  So farmers use machinery instead.  I mean, sure, the illegal aliens have friends in Washington who care about their plight.  But they don’t have a labor union protecting their low-paying, god-awful jobs by lobbying against the mechanization of those farms.  It would appear that the rich farmers are not the only ones exploiting these migrant workers.

The Democrats Need Voters

The government could seal that border.  But they won’t.  And the government makes repeated attempts to grant amnesty.  (And downplay the horrific drug violence near the border.)  A shortcut to citizenship for these illegal aliens.  You put these together and it means only one thing.  The government wants these illegal aliens there.  And they want those farmers to exploit them.  Because that makes good political fodder.  To help them pass amnesty.  And get a boatload of grateful new citizens who will remember them in the voting booth.

As the electorate continually rejects the Democrats and their policies, they are constantly looking to add new voters to the rolls who haven’t rejected them yet.  They ‘get out the vote’ to as many young (and naive) voters as possible once they reach voting age.  They get as many people as possible dependent on government and tell them those benefits will be cut by Republicans if given the chance.  And now, the greatest Democrat voter-registration drive of all time.  Granting citizenship to millions of illegal aliens.  And the Democrats will probably tell them that the Republicans will revoke that citizenship if given the chance.  Fear does work well for them.

Of course, the Left has to depend on deceit.  Because no one knowingly votes for higher taxes, a weakened economy and a more dangerous world.

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FUNDAMENTAL TRUTH #23: “Those who seek a third party cede the election to the opposition.” -Old Pithy

Posted by PITHOCRATES - July 20th, 2010

THIRD PARTY CANDIDATES are often election spoilers.  Dissatisfied with the direction of their party, they leave that party to form a new party.  This, of course, will split the party they left.  Some may follow.  Most will probably not.

Third party candidates have small followings.  They typically have a single issue that pushes them to leave their party.  That single issue, though, may not be as important to those they leave behind.  And this one issue may be anathema to the opposition.  Guaranteeing very few, if any, will follow that candidate into a third party.

The Green Party, for example, is an environmental party.  Environmental issues, then, dominate their political agenda.  Environmental policies typically do not result in jobs or economic prosperity.  They will draw some people from the Democratic Party.  But only those with extreme environmental views.  They will draw no one from the Republican Party which is more associated with jobs and economic issues than environmental issues.  They, then, would have little impact on the party they oppose.  But they may have a negative impact on the party that they would have otherwise supported.

And then you have your core voters.  They have and always will vote for their party.  Populist movements rarely change the way they vote.  Populist movements may be single-issue.  They may be more of a subset of an existing political party.  Or they may be vague on details completely.  They may be many things but the paramount thing they are is popular.  And they pander to the people that are demanding something.  And whatever that is, they say they will give it to them.  Populist trends, though, don’t sway core voters.

SO WHO ARE in the two core parties?  The liberals?  And the conservatives?

Liberals are pseudo-intellectuals who want to tell others how to live.  Because they are ‘smarter’ than everyone else.  Most have never held a real job.  They inherited their money or made it big in Hollywood or in some other entertainment genre (the guilty rich), are college professors, sponged off of government (the self-proclaimed political aristocracy) or are in the mainstream media. 

Conservatives typically have jobs.

Few people agree with liberals so they have to offer special privileges in exchange for votes and political power.  They get the support of the poor because they get the poor dependent on their charity.  They get the entertainment elite by stroking their intellectual vanity.  They get the various minorities and single-issue groups by throwing a few bones to them (i.e., by buying their votes).  They get Big Business with crony capitalism.  They get the unions in exchange for anti-business legislation.  They get the young by being weak on drugs and morality.  They get a lot of women because of their abortion stance.  They get the illegal immigration community because they dangle citizenship in front of them while getting as many as they can addicted to welfare (so when they do become citizens they will become good Democrats.  Of course, with the majority of illegal immigrants in question being Hispanic, it will be interesting to see how that loyalty will play out.  A lot of Hispanics are practicing Catholics.  Will they continue to support the party that attacks their religion and religious values?  After all, they’re leaving a corrupt nation where only the ruling elite live well.  They come here for a better life for themselves and their families.  And many work hard for it.  With their religious values being a strong part of their lives.  Will the liberals tempt them with their welfare state after citizenship?  Time will tell).

Many agree with conservatives because they, too, just want to work and provide for their families.  And they would like their children’s future to be a good one.  (Again, the Hispanic question is interesting.  For they have conservative values, too.  Amnesty for illegals may be a Faustian bargain, but wouldn’t be ironic if it’s the Democrats who are selling their souls?  I mean, this large bloc of Catholics could very well vote for the religious right after citizenship.)

So liberals must appeal to their base during the primary election to get their party’s nomination.  Once they have that, they then must start lying about who they really are during the general election.  Because their views and opinions are minority views and opinions. 

The conservatives just need to be themselves.  When Ronald Reagan did just that, he won in a landslide.  Twice.

LET’S CRUNCH SOME numbers.  Some simple numbers.  Let’s say there are only 11 voters.  America is a center-right country based on honest polling.  So let’s say that 4 voters are conservative and 3 voters are liberals.  The 4 in the middle are independents and moderates.  So what happens at an election?

If all of the independents and moderates do not vote, conservatives win (4-3). 

Liberals cannot win unless some moderates and independents do vote.  So liberals must encourage the moderates and independents to vote.  And, of course, to vote for them.  While making sure their base votes (‘vote early and often’ is their mantra).  As well as some criminals.  And some dead who haven’t been purged from the election rolls.

Independents and moderates, therefore, determine elections.  And the general election is all about getting these votes.  Both sides turn down the volume on the ‘extremist’ positions they held during the primaries.  Conservatives talk about bipartisanship and reaching across the aisle.  Liberals campaign as conservatives.  (Bill Clinton ran as a new kind of Democrat with some very conservative planks in his platform.  When he won, though, he moved so far back to the left that he lost the House and Senate at the midterm elections, proving once again America is a center-right country.)

So back to our little example.  If the conservatives get 2 of the 4 independent and moderate votes, they win (6-5).  Liberals need 3 of their votes for the same winning margin.  Advantage, conservatives.

Now let’s look at a rift in the conservative party.  Two leave and form a third party.  And take 2 votes with them.  For the sake of argument, let’s say these two call themselves the Anti-Abortion Party.  It is doubtful that any liberals will leave their party to join them.  And it is doubtful that independents and moderates would make overturning a Supreme Court decision a key voting issue.  They tend to tack to a centrist course through the prevailing political winds.

So the Anti-Abortion Party candidate will only get 2 votes.  This candidate will not win.  That leaves only 9 votes in play.  Which means getting only 5 votes will win the election (less than a majority of the total 11).  All the third party candidate did was to make it easier for the liberals to win.  They only need 2 of the 4 of the independent and moderate votes.  Conservatives now need 3.  The third party took the conservative advantage (only needing 2 additional votes to win) and gave it to the liberals.

THE MORAL OF the story here is that a vote for a third party candidate is a vote for the opposition.  The lesser of two evils may still be evil, but it is still ‘less’ evil.  You should never lose sight of that.  If a political statement is only going to result in the greater evil, it is better to be more pragmatic than idealistic when voting in a general election. 

The energy of a third party or third party-like movements (such as the new Tea Party) should be marshaled during the primary election.  To get good candidates who can win general elections.  And who will remember that they are the people’s representative, not a member of a privileged, ruling elite.

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