Abortion and Birth Control are Bankrupting Social Security and Medicare

Posted by PITHOCRATES - January 20th, 2013

Week in Review

For the first time in history a credit reporting agency (Standard and Poor’s) downgraded the U.S bond rating in 2011.  Why?  The agency said they needed to see $4 trillion in spending cuts over 10 years.  The best Congress could do was $917 billion in spending cuts over 10 years.  And the creation of a super-committee to find another $1.5 trillion.  For a total of $2.417 trillion in spending cuts.  At least, on paper.  That never happened.  After winning reelection the president held out for and got increases in tax rates.  So he could increase spending.

So how did the U.S. get to where they needed to cut $4 trillion in spending?  Well, a large part of it has to do with abortion (see 55,772,015 Abortions in America Since Roe vs. Wade in 1973 by Steven Ertelt posted 1/18/2013 on LifeNews.com).

The United States marks 40 years of legalized abortion in all fifty states at any time for any reason throughout pregnancy on January 22nd, the anniversary of the Roe v. Wade Supreme Court decision. Since that time, there have been approximately 55,772,015 abortions that have destroyed the lives of unborn children.

Taxpayers pay taxes.  And how do we get taxpayers?  By having babies.  So when we aborted over 55 million babies the effect on tax revenue was profound.  We can see how by making some assumptions.  And doing a little math.

First of all, 55,772,015 abortions over 39 years come to on average 1,430,052 abortions a year.  Dividing this number by two to pair off couples for baby-making that comes to 715,026 couples.  Without abortion available we’ll assume about 80% of these couples will have children.

The first babies of the 715,026 enter the workforce 20 years later.  So in that year the number of additional workers paying taxes equals 2,002,072 (1,430,052 + (0.8 X 715,026)).  The following year the second child of this couple enters the workforce while another couple’s first child enters the workforce.  This brings the additional workers paying taxes equal 3,146,114.  And so on until each couple brings in three new taxpayers into the workforce. Over a decade the number of new workers paying taxes equals 110,685,999.

Assuming a median income of $50,000 these 110,685,999 taxpayers earn a total of $5.5 trillion over ten years.  Assuming an effective federal income tax rate of 18% the total federal income tax these people would have paid equals approximately $996 billion.

Using the 12.4% Social Security tax rate (both employer and employee) the amount of Social Security taxes these people would have provided over 10 years equals approximately $686 billion.

Using the 2.9% Medicare tax rate the amount of Medicare taxes these people would have provided over 10 years equals approximately $160 billion.

Adding these taxes together (Social Security and Medicare) they add up to $847 billion.  Adding this to the amount of federal income taxes brings the amount of taxes these people would have provided over ten years to about $1.8 trillion.

When they wrote Social Security and Medicare into law the average family size had fallen from around 5 to about 3.5 over a decade or so.  If you take that $1.8 trillion and adjust it for 3.5 children (1.8/3 X 3.5) the lost tax revenue equals $2.15 trillion.  At 4 children that lost tax revenue comes to $2.5 trillion.  At 5 children that lost tax revenue comes to $3.1 trillion.  At 6 children it’s $3.7 trillion.

Today’s seniors entered child-bearing age long before women’s liberation, birth control and abortion.  So most women got married and had children.  It is not uncommon for today’s seniors to come from families of 10 children or more.  This is significant because when the actuaries set up Social Security and Medicare they assumed these trends would continue.  But they didn’t.  The birth rate (and the population growth rate) declined since Social Security and Medicare became law.  Causing the population to age.  More people are now leaving the workforce and collecting Social Security and Medicare benefits than there are workers entering the workforce to pay for them.

Abortion has been a part of this decline.  In a current 10-year projection we are seeing anywhere from $1.8 trillion to $3.7 trillion in lost tax revenue due to abortion.  If Roe v. Wade didn’t legalize abortion and the Left didn’t assault the family (encouraging women NOT to get married or have children) during the Seventies as radical feminism took off there would have been a lot more births.  Perhaps as many as those actuaries thought there would be when they calculated the costs of Social Security and Medicare.

If normal family patterns had continued not only would these abortions not have happened families may have had more children.  Producing more taxpayers.  There were 3,136,965 live births in 1973.  The average family size then was about 2.5.  If you divide the number of births by average family size you get about 1,254,786 families having children.  If each of these families had one additional child that additional 1,254,786 children would be approximately 87.7% of the average number of abortions.  If these children grew up to have three children of their own we can calculate this additional tax revenue the same way we did for the loss revenue from abortion.  Or we can multiply the loss revenue from abortion ($1.8 trillion) by 87.7% to approximate what those additional children in 1973 would contribute in a ten-year projection today.  Approximately $1.9 trillion.  Adding the losses from abortion and families having one less child brings the total of loss tax revenue to $4.04 trillion.  Which equals the $4 trillion S&P was looking for in spending cuts.

So what is the cause for America’s deficits?   Is it because the rich aren’t paying their fair share in taxes?  No.  It’s because of abortion and birth control.  And radical feminism.  That attacked the family and encouraged women to do anything but get married and have children.  Something FDR and his New Dealers never designed Social Security and Medicare to take into account.  For FDR and his New Dealers were sexists.  As are Social Security and Medicare.  These programs require women to marry and have children to stay solvent.

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FT150: “The Left wants to extend tax hikes down to those earning $250,000 because there are just too few rich people to tax.” —Old Pithy

Posted by PITHOCRATES - December 29th, 2012

Fundamental Truth

If you Confiscated ALL Income from those Earning a Million+ it would be Less than HALF of the Average Obama Deficit

The fiscal cliff yadda yadda yadda the Democrats want to raise taxes and the Republicans’ mothers are whores.  That about summarizes the fiscal cliff negotiations.  The Democrats want to raise taxes.  The Republicans don’t because there is nothing that will kill off an economic recovery quicker than raising taxes.  And the Democrats are mean.  Calling the Republicans a lot of names.  And saying things about them that aren’t very nice.  So once again let’s look at the numbers to see what they say about federal income taxes.  The following numbers come from the IRS (see Table 3.  Number of Individual Income Tax Returns, Income, Exemptions and Deductions, Tax, and Average Tax, by Size of Adjusted Gross Income, Tax Years 2001-2010).

The Democrats keep saying that the Republicans want tax cuts for the rich paid for by the poor.  But according to these numbers that’s just not happening.  People who earned $15,000 or less paid 0.0% of all federal income taxes.  People who earned $30,000 or less paid less than 1% of all federal income taxes.  It’s the meaty center that paid the taxes.  Those who earned from $75,000 to $1 million submitted approximately 20.5% of all federal tax returns while they paid approximately 62.9% of all federal income taxes.

Now how about those rich people?  Those earning $1 million or more submitted approximately 0.19% of all tax returns.  Less than a quarter of one percent.  And yet they paid approximately 21.9% of all income taxes.  Is that fair?  At these high levels of income people pay basically the top marginal tax rate as only a very small fraction of their earnings falls outside this top rate.  So if we divide the total taxes paid by this 0.18% ($207 billion) by 0.35 (the 2010 top marginal tax rate) you get a total income of $590 billion.  So if you confiscated ALL of their earnings it would be less than HALF of the average Obama deficit ($1.324 trillion).  Meaning that it is IMPOSSIBLE to reduce the deficit with any tax rate on those earning $1 million or more.

The Rich may be paying Lower Tax Rates but they’re paying Far More Tax Dollars than most of Us

All right, so it won’t reduce the deficit.  But the Democrats say we must do this to be fair.  Meaning those earning more should pay more even if it’s only symbolic.  To punish success.  As if they’re not being punished already for their success.  We’ve all heard about Warren Buffet’s secretary paying a larger tax rate than he pays.  But talking percentages isn’t the same as talking dollars.  Because a small percentage on a much larger earnings amount will produce more tax revenue than a higher tax rate on a smaller earnings amount.  So let’s look at dollar amounts to see if the rich are paying their fair share.  Or whether we’re punishing them enough for their success.

The rich paid a smaller percentage of their earnings in taxes but paid far more in actual dollar amounts.  Which is the only thing that allows government to pay for things.  Dollars.  Let’s assume Warren Buffet’s secretary falls into the income range $50,000 to $75,000.  Who paid on average $4,310.92 in federal income taxes.  Now compare this to what rich people paid in income taxes.  Those earning from $1 million to $1.5 million paid on average $306,779 in federal income taxes.  Or more than 71 times what someone earning $50,000 to $75,000 paid.  Those earning $1,500,000 to $2,000,000 paid 102 times more than that lower income earner.  Those earning $2,000,000 to $5,000,000 paid 179 times more than that lower income earner.  Those earning $5,000,000 to $10,000,000 paid 407 times more than that lower income earner.  Those earning $10 million or more paid 1,389 times more than that lower income earner.

The rich may be paying lower tax rates but they’re paying far more tax dollars than most of us.  An inordinate amount.  If you look at it in terms of government services people consume (which is what taxes pay for) are those earning $10 million or more consuming 1,389 times the government services those earning $50,000 to $75,000 consume?  No.  If anything, they consume far less government services than most people.  Because they live the good life.  The good life their high earnings provide.  Being that the rich are paying far more than their fair share you can only conclude then that these excessive taxes are punitive.  To punish their success.

The only way to Achieve Real Deficit Reduction is to Increase Taxes on the Middle Class or Cut Spending

So what can we conclude?  The rich are paying more than their fair share of taxes.  The amount of tax dollars they’re paying could even qualify as being punitive.  As they are so great any further increase in rates on the rich is not likely to increase tax revenue.  First of all as they are already paying so much they will take every tax shelter advantage they can to minimize the further confiscation of their earnings.  But more important than that is that there are just so few rich people.  Even though the rich pay on average hundreds of times more in federal income taxes than that meaty center it’s the meaty center where most of the tax revenue comes from.  Because there are so many more people in the meaty center.  And by graphing the number of tax returns from each income bracket and the amount of tax revenue they pay we can understand why the Democrats are so adamant to raise taxes on those earning as little as $250,000.

The blue line (Series 1) is the number of tax returns filed in thousands of people for each income bracket (the left vertical axis).  The red line (Series 2) is the total tax revenue in millions of dollars each income bracket produces (the right vertical axis).  You can see the meaty center of tax revenue (from those earning $75,000 to $1 million).  And you can see the meaty center of those filing tax returns (form those earning $30,000 to $200,000).  As you can see the meaty center of tax filers and tax payers are not the same.  As the tax code shifts the tax burden onto the higher income earners.  And in this chart we can see why the Democrats want to increase tax rates on those earning $250,000 and more.

The drawback to progressive tax rates is that it shifts the tax burden onto fewer people.  Who must pay more in taxes than is their fair share.  And that worked for awhile until government grew so large.  But as our aging population has increased the costs of Medicare and Social Security (and soon Obamacare) there just aren’t enough rich people to tax to pay these soaring costs.  And they will have no choice but to shift the tax revenue graph to lower income people.  So they can capture more people (and incomes) under this graph.  Yes, they want to tax the rich more.  But only for the symbolism.  For once they’ve punished them by forcing them to pay their ‘fair’ share then they can raise tax rates on everyone else.  Which is the only way they have a snowball’s chance in hell of achieving real deficit reduction.  Increasing taxes on the middle class.  Well, that, or cutting spending.  Which could provide serious deficit reduction.  By shrinking the size of government. The very cause of those massive deficits.  And accumulated debt.  But shrinking government is, of course, crazy talk for those on the Left.  Who would rather let the country sink into insolvency before agreeing to that.

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2012 Endorsements: John Adams

Posted by PITHOCRATES - October 24th, 2012

2012 Election

John Adams was descended from the Puritans who landed at Plymouth Rock

John Adams was the Rodney Dangerfield of the Founding Fathers.  He got no respect.  However deserving he was of respect.  The man was brilliant.  Well read.  Honest.  Virtuous.  But irascible.  And vain.  He knew he was right when he was right.  And was more than eager to argue with anyone that was wrong.  Which was most of the time.  Tending to make most people not love him.  A lot.  Earning him monikers like His Rotundity.  Because he was portly.  Irascible.  And not really loved.  Which bothered Adams.  For he was one of the greatest of the Founding Fathers.  But others got all the love.  Such as Thomas Jefferson.  The junior Congressman they delegated the writing of the Declaration of Independence to after Adams did all the heavy lifting in Congressional debate to lead the nation to declare their independence.  While Jefferson sat through all those heated debates silently.  For, unlike Adams, Jefferson did not like public confrontations.  He preferred stabbing people in the back through surrogates.  Or in the press.  As Adams would learn firsthand during the 1800 presidential election.

Adams was a very religious man.  His family descended from the Puritans who landed at Plymouth Rock.  Who stressed filling your day with hard work and going to church.  And if you had any time left in the day you might get a little eating or sleeping in.  Adams was a farmer.  And had the hands of a working man.  But he was also a lawyer.  A very good lawyer.  Who had as much reverence for the law as he did for his religion.  So much so that he represented the British soldiers involved in the Boston Massacre.  After the Stamp Act (1765) things were getting a little heated in Boston.  Adams then wrote the Braintree Instructions in response to the Stamp Act.  Stating that there should be no taxation without representation.  Calling for trial by jury.  And an independent judiciary.  Things the British denied the good people in the American colonies.  But things Adams insisted that the Americans shouldn’t deny to the British soldiers who shot those Americans in Boston.  So he represented the British on trial when no one else would take the case.  And he got a jury of Bostonians to acquit all but two who they found guilty of manslaughter.

Just about every Bostonian wanted the British soldiers found guilty of murder and hung.  Bu the rule of law prevailed.  As Adams convinced  the jury that the British did not just open fire on innocent bystanders.  There was a mob harassing the British.  Throwing snowballs and chunks of ice.  And other projectiles.  Someone knocked a British soldier to the ground.  While the mob grew in size.  And in intensity.  Provoking the British to discharge their weapons.  As much as the British killing these Americans bothered Adams so did an unruly mob.  His religious teachings emphasized hard work and prayer.  Not drunkenness and mob violence.  However, Boston had always had drunken, unruly mobs.  But they didn’t always get shot by British redcoats.  So why did they this time?  Because British redcoats were quartered within the city of Boston.  This was the kindling that led to the mob action.  Which was yet another British violation of the good people of Boston.

A Strong enough Naval Force acts like an Impregnable Fortress Wall to any Hostile Power

When the British marched to Lexington and Concord to seize some weapons in 1775 and exchanged shots with the Americans a state of war existed.  The Revolutionary War had started even though their declaration of independence was another year away.  Up to this time most of the trouble with the British was in Massachusetts.  And some states wanted to leave it in Massachusetts.  Which was a problem for Massachusetts.  For they couldn’t take on the British Empire by themselves.  But if the states united together they had a chance.  Adams understood this.  So when it came time to choose a commander for the Continental Army he looked to a Virginian.  George Washington.  After they voted to declare their independence he looked at another Virginian to write the Declaration of Independence.  Thomas Jefferson.  Understanding that they had to make this an American Revolution.  Not just a Massachusetts one.  For only a union of their several states could withstand the mightiest military power on the planet.  But not just any union.  One that would release all the latent energies of the several states.  A republican union.

After declaring their independence the first order of business for the states was to replace the British governing structure.  And that started with the writing of new constitutions.  To make those new state governments.  That could join in a republican union.  Something Adams had given much thought and study to.  He believed in the separation of powers between the executive, the judicial and the legislative branches.  To provide checks and balances.  And a bicameral legislature.  A lower house to represent the common people.  And an upper house to represent the rich people.  With an executive to represent the state.  Such that the interests of the many, the few and the one were all represented.  Similar to Great Britain’s two houses of Parliament (House of Commons and House of Lords) and the king.  Though, of course, having versions of these that weren’t corrupt.  Thus not allowing one group of people (or person) to dictate policy to the other group of people (or person).  Thereby avoiding a pure democracy and mob rule.  A characteristic of a single-house legislature.  As France would demonstrate during their French Revolution.

After delegating the busy work of writing the Declaration of Independence to the junior member from Virginia, Thomas Jefferson, Adams dove into the work of building a navy.  What he liked to call ‘wooden walls’.  For a strong enough naval force acted like an impregnable fortress wall to any hostile power.  The British Empire ruled the world because the Royal Navy was the most powerful navy in the world.  She could protect her coasts.  Prevent the landing of armies.  Keep foreign warships out of canon range of her cities.  And even protect her trade routes.  In a day of competing mercantile empires dependent on their shipping lanes having a navy to protect those shipping lanes made the difference between empire and former empire.  As few picked fights with the nations with the big navies.  Adams understood this.  And he believed in it.  Peace through strength.  For a strong navy was a deterrent to aggressive nations.

If John Adams were Alive Today he would Likely Endorse the Republican Candidates Mitt Romney and Paul Ryan

But Adams was no warmonger.  During his presidency Napoleon came to power in France and was waging war across Europe.  And against American shipping.  Once again Adams fought to build up the navy.  To erect those wooden walls.  To be able to protect American shipping on the open seas as France and Great Britain returned to war.  President Washington maintained a policy of neutrality in their latest war.  Adams continued that policy.  Which infuriated the French.  And the American people.  As the French had helped the Americans win their revolution the French and the American people believed the Americans should help the French win theirs.  So the French seized American shipping.  And demanded tribute from the American ambassadors in France before beginning any peace discussions.  When news of this leaked out to the American people (known as the XYZ Affair) the public sentiment on France changed.  And soon everyone was demanding a declaration of war on France.  Adams tried one more peace commission while at the same time the growing American navy fought back against French naval aggression in an undeclared war.  The Quasi-War.  Eventually peace came.  Through strength.

Adams was pretty much everywhere in the making of the American nation.  From the Braintree Instructions to supporting George Washington to winning the debate for independence to the writing of states’ constitutions to building a republican union.  He helped build American naval power.  And he avoided war with France when just about everybody wanted war with France.  But one place he was not was in Philadelphia in 1787.  Even though his constitution writing skills were second to none he did not help draft the U.S. Constitution.  For he was busy in Holland.  Getting the first foreign power (the Netherlands) to recognize the United States following their victory in the Revolutionary War.  He negotiated a Dutch loan.  Negotiated a treaty of amity and commerce with the Dutch.  And established the first American-owned embassy on foreign soil.

If Adams were alive today he probably would not be a fan of the Democrat Party.  And their constant use of class warfare.  Especially when the top 10% of earners pay about 70% of all federal income taxes.  While about 50% of the population pays no federal income taxes.  This does not represent the interests of the many, the few and the one.  The few pay the majority of tax revenue and have the least say in how that money is spent.  Taking the nation closer to a pure democracy.  And mob rule.  While at the same time the Democrats use the courts to write unpopular legislation they want but can’t pass in Congress.  Where a few judges can write law through court opinions.  A great offense to a pure jurist like Adams.  And transforming ‘the one’ into a leviathan of special interests and cronyism.  Knowing how hard it was to secure loans to pay the nation’s war debt in his day he would be appalled at the size of the annual deficits and the accumulated debt today.  And the constant refrain that the rich need to pay their fair share even though about 10% of all Americans are already paying approximately 70% of the tax bill.  The character assassination of Mitt Romney by the Obama Campaign would be too reminiscent of the abuse he suffered through in the 1800 election.  And as a firm believer in the policy of peace through strength he would not like the massive cuts in defense spending.  Which will only encourage more attacks like the one on the American embassy in Benghazi.  An obvious sign that our enemies don’t fear us.  And are not deterred by our strength.  No, if John Adams were alive today he would likely endorse the Republican candidates Mitt Romney and Paul Ryan.

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FT131: “If liberals say sin taxes hit low-income and young adults disproportionally they must know they have photo IDs.” -Old Pithy

Posted by PITHOCRATES - August 17th, 2012

Fundamental Truth

Liberals want to Tax the Poor while Looking Like they’re not Taxing the Poor

A sin tax is an excise tax.  An excise tax is a flat tax.  Everyone pays the same amount.  Which liberals/progressives find unfair.  As these taxes hit low-income people disproportionately.  Whether it’s someone living on low wages.  Or on limited government support.  They live on a small amount of money each week.  And if they buy alcohol or cigarettes those sin taxes consume a large proportion of their weekly spending money.  By greatly increasing the price for alcohol and cigarettes.  When you hear things like ‘placing a bulls-eye on Joe Six-Pack’s back’ it refers to a low-income guy that enjoys drinking beer.  But drinking beer is difficult for him to do because the current tax structure favors the rich.  Who can more easily afford excise taxes.

And it’s the same for cigarette smokers.  There has been a war on tobacco.  And it’s been so successful that a lot of college-educated people don’t smoke these days.  For it is politically incorrect to smoke today.  They’ve banned it from restaurants.  From the office.  Even outside in some places.  Some are even trying to ban it in people’s homes if they have children.  Progressives hate smoking so much that they have placed enormous sin taxes on cigarettes.  Making it very difficult for Joe Six-Pack to buy his cigarettes.  And it is the low-income and those without college educations who tend to smoke these days.  So the people who can least afford to pay these high sin taxes pay most of them.

Progressives want to raise tax rates on the rich.  Because they have more money and therefore should pay more in taxes.  According to them.  So they can transfer the cost of government away from the low-income to the high-income.  And they’ve succeeded.  Today almost half of all taxpayers pay no federal income taxes.  While the top 10% of earners pay approximately 70% of all federal income taxes.  Yet despite this huge transfer of wealth from the rich to the poor sin taxes have continued to rise.  Meaning the liberals want to tax the rich.  And they want to tax the poor.  While looking like they’re not taxing the poor.  By ascending their self-righteous soapboxes.  For they know better than we.  Sin taxes, they say, are for our own good.  They discourage bad behavior.  And encourage good behavior.  Behavior that they approve of.  And it’s only coincidental that they these taxes fall disproportionately on Joe Six-Pack.  Then they try to take the little income remaining from poor Joe by selling him lottery tickets.  Something else more lower income people buy than rich people.  For rich people are already rich.

Obamacare combines the Joy of a Colonoscopy with the Fear and Loathing of an IRS Audit

Most people would rather have a colonoscopy than sit through an IRS audit.  Why?  Because a colonoscopy is more enjoyable.  It only takes a couple of hours as an outpatient in the hospital.  Your odds are better for getting good news after a colonoscopy than after an IRS audit.  And doctors are happy to give good news to their patients.  While IRS agents are happy when they can take your money.  The more of it they can take the happier they are.  And with today’s tax code they can always find money to take from you.  Especially if you’re a business owner.  Or a movie star.  Where you can lose your pension, your children’s college fund and your house if you made a mistake or trusted an untrustworthy accountant.  So given the choice people would choose a colonoscopy over an IRS audit almost any day.  Even without the anesthetic.

And speaking of health care and the IRS, how about that Obamacare?  The liberals’ solution to ‘fix’ health care.  Even though it wasn’t broken.  Americans have long opposed any form of national health care.  They opposed it when Hillary Clinton tried to put a plan together behind closed doors.  And they still oppose it.  Based on that majority of the population that wants to repeal Obamacare.  Which they passed into law thanks to some backroom deals.  And fun with numbers.  The big selling point was to keep the cost of it below what the wars in Iraq and Afghanistan cost.  If the liberals could keep the price tag below a trillion dollars over a ten year period they could say it wouldn’t cost Americans an extra dime to give ‘free’ health care to everyone.  Because they would just transfer all of that war spending to health care spending.  Despite those trillion dollar deficits.  A debt approaching $16 trillion.  And an economy wallowing in the Great Recession.

So how did they do it?  Keep the cost under a trillion dollars?  By being devious.  The data they submitted to the Congressional Budget Office (CBO) included ten years of expenditures but only 6 years of benefits.  Because 6 years of benefits cost about a trillion dollars.  Well, almost.  They also stole about $700 billion from Medicare.  So the real cost of Obamacare over a ten year period is closer to $3 trillion.  Or about three times the cost of the wars in Iraq and Afghanistan.  How’s that for free health care?  So Obamacare is really, really expensive.  Which is why Obamacare forces all Americans to buy health insurance.  Even the young and healthy who would rather put that money into a house payment while they are young and healthy.  And how are they going to enforce this?  By combining the joy of a colonoscopy with the fear and loathing of an IRS audit.

Getting a Photo ID is too Costly, too Complex or just too Time Consuming unless you’re a 16-Year-Old Anxious to Drive

Because of Obamacare everyone will have to prove to the IRS that they have bought health insurance.  Which means if you want health care you better file your federal income taxes.  Have a Social Security number.  And have proven to your employer that you are a legal citizen.  With two pieces of documentation.  Like a Social Security card.  And a photo ID.  Pretty intense requirements.  And much more stringent than it used to be when anyone could go to the emergency room and receive treatment.  Today if you’re sick you better hope dotted your ‘i’s and crossed your ‘t’s.  Because in Obamacare before you can get a colonoscopy you have to first answer to the IRS.

And Joe Six-Pack?  We love you.  Because you’re just an average Joe.  The backbone of America.  Working hard and raising your family.  So who are we to begrudge you a cold beer after a hard day’s work?  Or a smoke?  We won’t judge you for enjoying those things.  Because a lot of us enjoy those things, too.  Even if it’s not politically correct.  Or in our best interests.  Or behavior those ‘better than us’ would approve of.  Just make sure you have your photo ID before you buy your beer.  Or your pack of smokes.  Because unless you look old you aren’t buying either without one.  Even if you’re a grizzled war veteran.  And been to hell and back in Iraq or Afghanistan.  Because even a Purple Heart won’t get you beer or a pack of cigarettes without a photo ID.

The liberals have made it harder for you to get health care.  Or to smoke.  And they’re not making it any easier to drink adult beverages.  If you want to do any of these things you better suck it up and get a photo ID.  Because proving who you are, how old you are and whether you are a legal citizen are very important to liberals.  Unless, that is, you want to vote.  Then they don’t give a damn.  They even say asking for a photo ID to vote is only a way to disenfranchise the low-income and young adults.  So they can’t vote.  Because getting a photo ID is too costly, too complex or just too time consuming.  (Except for all those 16-year-olds anxious to drive.)  Yet these are the very same people who acknowledge that the low income and young adults pay a disproportionate share of sin taxes.  Which they pay on those things you can only buy with a photo ID.

So why this bizarre and inconsistent behavior on the part of liberals?  Well, it must have something to do with the vote.  And based on their devious behavior in passing legislation people don’t want, one can only assume that their lax attitude is for one reason.  Making it easier for them to win elections when they pursue policies that the people don’t want.  Like Obamacare.  Which is why when it comes to the vote they want anyone to be able to walk in off the street and say they’re whoever they say they are and vote.  Unlike the ‘hell’ people have to go through to buy a beer, a pack of cigarettes, getting a job or collecting their lottery winnings.  Yes, if you win the big one you’ll need a photo ID to claim your money.  But you don’t need it to vote.  Because voting just isn’t as important as these other things.

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FT126: “Class warfare is the lie that the 10% who pay 70% of all taxes aren’t paying their fair share.” -Old Pithy

Posted by PITHOCRATES - July 13th, 2012

Fundamental Truth

The Democrats like to Tax and Spend but their own Job-Killing Policies make this Hard to Do

The key of the Democrat Party platform is ignorance.  If it wasn’t for ignorance they couldn’t win elections today.  For their policies have been failures.  We’ve debunked Keynesian economics stimulus spending in the Seventies.  Their spending did not stimulate economic activity.  They only added high inflation onto high unemployment.  Creating the stagflation of the Seventies and the high misery index (inflation rate added to the unemployment rate). 

And their high marginal tax rates did not produce more tax revenue.  Because high tax rates have never encouraged economic activity.  Even those on the Left admit raising taxes during a recession is not a good thing.  And high tax rates don’t generate any new tax revenue when they cause overall economic activity to decline.  For we need both a tax rate and economic activity to generate tax revenue.  And having one without the other just isn’t going to do the job.

The Democrats like to tax and spend.  But their own policies make this hard to do.  Because their policies kill jobs.  And because they kill jobs they reduce tax revenue.  Fewer jobs and fewer people paying taxes (the unemployed don’t pay taxes) create a problem for tax and spend Democrats.  So they turn to increasing tax rates on the fewer remaining people who pay taxes.  Which is a difficult thing to do when you have to win elections.  Unless you lie.

The Top 10% of Income Earners Consistently Pay about 70% of all Federal Income Taxes

To win elections when your policies hurt the economy you need to transform the country.  You need to get a large percentage of the people dependent on government benefits.  While at the same time you need to change the tax code so these same people don’t pay any income taxes.  You do this and you make a very loyal constituency.  Who will always vote to raise other people’s taxes to increase their own benefits.  Of course, raising tax rates is not always easy.  So they have to add one more thing to the mix.  Class warfare.

Class warfare demonizes anyone who opposes these tax and spend policies.  By perpetuating a lie.  That the ‘rich’ don’t pay their fair share of taxes.  But when you look at the actual numbers, you find it is those who are NOT ‘rich’ that don’t pay their fair share (source:  National Taxpayers Union).

 

 The top 10% of income earners consistently pay about 70% of all federal income taxes.  While the bottom 50% pay less than 5% of all federal income taxes.  Falling as low as 2.25% of the tax total in 2009.  In 2009 those in the top 10% included everyone who earned $112,124 or more.  Which is interesting as we consider the rich to be like those movie stars earning on average of $30 million a year.  Not small business owners whose business earnings fall directly to their personal income tax returns.  Not everyone in this 10% are small business owners.  For it also includes those super rich movie stars.  But most small business owners fall in the top 10%.  And they as a group hire more people than any other business.  This is why higher taxes kill jobs. 

Public Education is in the Shape it is because it is Easier to Lie to the Ignorant

Assume a small business owner earns $200,000 in his or her business.  Putting them in the top 10%.  Based on the 2012 federal tax rates for a married couple filing jointly the federal income tax due is about $42,060.  Assuming state and city income taxes equal this federal tax amount leaves $115,881 after taxes for the small business owner to support his or her family.  And to invest in their business.  If this couple lives on $80,000 (which is only 0.267% of the income of the super rich movie star) this leaves only about $35,881 to invest into the business.  Which won’t even cover the cost of one new full-time employee’s wages, benefits and taxes.  Increasing taxes on this ‘rich’ 10% will leave even less money for small business owners to hire new employees.  Which is why increasing taxes on this 10% kills jobs.

This is, of course, why small business owners typically vote Republican.  Because the tax and spend policies of the Democrats hurt them very much.  Preventing them from hiring new employees.  And expanding their businesses.  Which is why the Democrats try to get as many people as possible collecting government benefits while paying no federal income taxes.  Because their policies have lost them the small business owners’ vote.  As well as those who work hard and don’t collect government benefits.  For if you work hard and pay taxes you’re not likely to vote to increase your own taxes.  However if you don’t pay taxes you probably will have no problem voting to raise taxes on those who do.

So this is why Democrats resort to class warfare.  And lie.  It’s all they have.  Which explains why public education is in the shape it is.  Because it is easier to lie to the ignorant.  Which is why public education emphasizes the evils of capitalism and the horrors of global warming.  Because teaching our students history and economics makes the lie harder to tell.  So they don’t.  Instead they teach them to become good Democrat voters.  Who believe the lie of class warfare.  That the top 10% of income earners who consistently pay about 70% of all federal income taxes don’t pay their fair share.

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Sixteenth Amendment, Revenue Act of 1913, Progressive Tax, Marginal Tax Rate, Tax Shelter, Tax Cuts and Decade of Greed

Posted by PITHOCRATES - July 10th, 2012

History 101

Americans find Taxes Repugnant and have a Long History of Making this Repugnance Known

American independence began with a tax revolt.  The ratification of the U.S. Constitution happened only with safeguards against the new federal government from growing too powerful.  And great efforts went to limiting the amount of money it could spend.  For a long time all federal tax revenue came from import tariffs.  Then from sales of federal lands as the population moved west.  It took a civil war for us to impose an income tax.  Our first income tax was 3% on incomes over $800 (or about $20,000 today).  The first income tax was a flat tax.  They passed this income tax to pay for the war.  They repealed the income tax following the war.  Americans wouldn’t see another federal income tax until 1913 when we ratified the Sixteenth Amendment.  And President Woodrow Wilson signed into law the Revenue Act of 1913.

Woodrow Wilson was a progressive.  The precursor to today’s liberals.  Who thought beyond the limited government of our Founding Fathers.  They wanted to expand government.  To make it a part of our everyday life.  Where the brilliant progressive politicians would make better decisions for us than we ever could.  And their changing of society included the funding of the federal government.  For their income tax was a progressive tax.  Everyone paid a flat tax of 1% on income of $3,000 or more.  About $66,100 today.  Then the progressive taxes came into play.   Adding another percentage to the income tax rate for increasing amounts of income.  The thresholds for these increases were as follows: $20,000 (roughly $440,400 today), $50,000 ($1,101,000 today), $75,000 ($1,651,600), $100,000 ($2,202,100), $250,000 ($5,505,300) and $500,000 ($11,010,700).  The top marginal tax rate on the super rich (earning $11,010,700) was 7%.

Our second income tax was quite controversial.  A lot of people hated it.  For Americans find taxes repugnant.  And have a long history of making this repugnance well known.  But thanks to the American Civil War a generation of men was lost.  And a generation of boys grew up without fathers.  Tended on by doting mothers.  Smothering them with love and affection.  And these boys grew up without knowing the manly hardships of life.  And they entered politics.  Becoming those early progressives.  Who wanted to change the government into a great doting mother.  And now they could.  For they had their income tax.

Few paid the Confiscatory Tax Rates of the Seventies by Hiding their Income in Tax Shelters

The rich paid our first federal income taxes after the Revenue Act of 1913.  And these were very small percentages we had them pay.  Back then the top marginal tax rate was lower than our lowest income tax rate today.  Think about that.  The richest of the rich paid only 7% of their income ($11,010,700 or more today) in federal income taxes.  While today single people earning the lowest bracket of taxable income (from $0 to $8,700) pay 10% of their income in federal income taxes.  Clearly the growth of government exploded thanks to the Sixteenth Amendment.  Much as our Founding Fathers feared it would if they had too much money to spend.

Of course, this is ancient history.  Few know about this today.  For few could even tell you why we fought for our independence.  Or even who we fought for our independence from.  (We fought for our independence from Great Britain because of their policies to tax us despite our having no representation in Parliament.  That’s where the phrase taxation without representation came from).  Today high taxes are sadly just an accepted part of life.  In fact, we have referred to our paychecks as take-home pay.  Our net pay.  Because gross pay is a myth.  No one sees their gross pay.  About a third or more of that disappears in withholding taxes.  So gross pay is a meaningless expression for us today.  (It wasn’t before the Sixteenth Amendment or before the progressives came to power).  Something that we sadly accept.  And we now fund our lives on the take-home pay the government allows us to keep.  All the while accepting these high tax rates.

Government spending took off in the Sixties and the Seventies.  As did our taxes.  If we had once thought that a 7% tax on incomes of $11,010,700 or more was an outrage, we didn’t see anything yet.  In 1978 the top marginal tax rate was 70% on incomes of $351,712 or more.  And there were 25 marginal tax rates.  As shown here adjusted for inflation (sources: Tax Rates, Tax Receipts, and Celebrity Incomes).

 In this example we calculated the average of some top celebrities.  And the top celebrities on average earned about $30,000,000 in 2010.  Using the 1978 tax brackets they would have owed $20,936,506 in federal income taxes.  Or approximately 69.8% of their total income.  Which is pretty much equal to the top marginal tax rate.  Of course, few paid these confiscatory tax rates.  They hid their income as best as they could in the Seventies.  In tax shelters.  And you know they did because despite these confiscatory tax rates the federal government still ran budget deficits.  Having to print money to pay for their explosion in government spending. 

The Low Tax Rates of the Eighties created so much Economic Activity the Opposition called it the Decade of Greed

The heyday of Keynesian economics was in the Seventies.  After Richard Nixon decoupled the dollar from gold the Keynesians were free to print money to stimulate the economy.  Which was their answer to ending a recession.  Stimulus spending.  Have the government print money to create economic activity that wasn’t happening in the private sector.  Their policy tool to end a recession was inflation.  By pouring money into the economy people would borrow it and buy cars and houses and furniture.  And everything else under the sun.  Creating a surge of economic activity.  And creating jobs in the process as businesses must hire new workers to meet that government stimulated demand.  With the dollar decoupled from the ‘cross of gold’ the Keynesians were finally able to prove their mettle.  And solve all the country’s economic problems.  It was the dawn of a brave new world.

And that world sucked.  For the implementation of Keynesian economic policy proved those policies did not work.  Instead of replacing high unemployment with inflation they just added high inflation to the high unemployment.  Something that was impossible to happen in Keynesian textbooks.  But it happened.  Stagnant economic activity.  And inflation.  What we called stagflation.  We added the unemployment rate to the inflation rate to come up with a new economic indicator.  The misery index.  The economy was so miserable during Jimmy Carter’s 4 years in office that he lost in a landslide to Ronald Reagan.  Who was a proponent not of Keynesian economics but of the Austrian school.  Or supply side economics.   And the Austrians believed in low tax rates.  For low tax rates would stimulate economic activity.  And the greater amount of economic activity would generate a greater amount of tax revenue even at lower tax rates.  Let’s look at that same celebrity paying taxes a decade later under Ronald Reagan.

 Much simpler.  And more in keeping with the Founding Fathers.  Instead of paying 70% of their earnings in federal income taxes they will only pay 28% (again, equal to the top marginal tax rate.  Which is pretty much the only tax rate the rich pay).  That’s still a lot of money to give to the federal government.  But it’s so much smaller that in many cases it was cheaper and easier to pay Uncle Sam than trying to hide that income.  So economic activity took off in the Eighties.  It was so great that the opposition called it the Decade of Greed.  Out of sour grapes because their policies could never produce anything like it.  But what about tax revenue?  Those on the Left say this economic activity came at a price.  Exploding deficits.  Well, the deficits did grow.  But it wasn’t because of the cuts in the tax rates.

Higher Tax Rates do not Necessarily Increase Tax Revenue 

In 1978 total tax revenue was $1,113.6 billion.  In 1988 total tax revenue was $1,421.1 billion.  So Reagan’s cuts in the tax rates produced $307.5 billion more in tax revenue.  An increase of about 27.6%.  Dropping the top marginal tax rate from 70% to 28% actually increased tax revenue.  So the cut in tax rates did not cause the deficits.  It wasn’t a revenue problem.  Revenue went up.  Spending just increased more.  And it was this excessive government spending that caused the deficits.  Not the tax cuts. 

The lesson here is that higher tax rates do not necessarily increase tax revenue.  Because changes in tax rates changes behavior.  Higher tax rates discourage people from investing in businesses.  They discourage businesses from expanding.  Or hiring new workers.  Higher tax rates may decrease the opportunity costs for hiding income.  The cost and inconvenience of hiding income in tax shelters and offshore accounts may become less that the cost of paying higher taxes.  Like it was during the Seventies.  Where despite confiscatory tax rates the government could not generate enough tax revenue to meet their spending obligations.

Income tax rates grew from a very small percentage on only the largest of incomes to high tax rates on very modest incomes.  And yet our deficits have never been larger.  Proving that our tax rates are either too high and dampen economic activity (as well as encouraging people to avoid paying their taxes).  Or that government spending has just grown too large.  More than likely it’s a combination of the two.  A fact that would shock and dismay the Founding Fathers were they alive to see what we did with the republic they gave us.

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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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Even Democrats are Complaining about the High Cost of Government Workers Bankrupting their Cities and States

Posted by PITHOCRATES - April 29th, 2012

Week in Review

So who isn’t paying their fair share?  I know who you’re probably thinking.  And if you are you’re wrong.  For here it is direct from a Democrat mayor’s mouth (see Steven Malanga: How Retirement Benefits May Sink the States by STEVEN MALANGA posted 4/27/2012 on The Wall Street Journal).

Chicago Mayor Rahm Emanuel recently offered a stark assessment of the threat to his state’s future that is posed by mounting pension and retiree health-care bills for government workers. Unless Illinois enacts reform quickly, he said, the costs of these programs will force taxes so high that, “You won’t recruit a business, you won’t recruit a family to live here.”

We’re likely to hear more such worries in coming years. That’s because state and local governments across the country have accumulated several trillion dollars in unfunded retirement promises to public-sector workers, the costs of which will increasingly force taxes higher and crowd out other spending. Already businesses and residents are slowly starting to sit up and notice…

Government retiree costs are likely to play an increasing role in the competition among states for business and people, because these liabilities are not evenly distributed. Some states have enormous retiree obligations that they will somehow have to pay; others have enacted significant reforms, or never made lofty promises to their workers in the first place.

Indiana’s debt for unfunded retiree health-care benefits, for example, amounts to just $81 per person. Neighboring Illinois’s accumulated obligations for the same benefit average $3,399 per person…

Back in Illinois, Dana Levenson, Chicago’s former chief financial officer, has projected that the average city homeowner paying $3,000 in annual property taxes could see his tax bill rise within five years as much as $1,400. The reason: A 2010 Illinois law requires municipalities to raise the funding levels in their pension systems using property tax revenues but no additional contributions from government employees. The legislation prompted former Chicago Mayor Richard Daley in December to warn residents that the increases might be so high, “you won’t be able to sell your house.”

What was that about the 1%?  Just who is it living off of the generosity of the 99%?  Who isn’t paying their fair share?  And is asking others to pay far more than their fair share?  Who is it that has pension and retiree health care plans worth several trillions of dollars?  All funded by tax dollars from the 99%?  As well as the 1%?  Our government workers.  That’s who.  Those people who have made themselves more equal than the 99%.  Even though they claim to be a part of the 99%.  While living more like the 1%.  But one thing you can say about the 1%.  They’re not bankrupting their cities and states like these government workers are.  Or destroying our lives to pay for their lives.

You want to talk class warfare?  Let’s talk class warfare.  The richest 1% pay approximately 30% of all federal income taxes.  The richest 10% pay approximately 70% of all federal income taxes.  And we don’t pay any of these rich people with our taxes.  They get it however they get it.  But they don’t get it from us.  The taxpayers.  So they providing a huge net good for us.  Paying the lion’s share of taxes.  And not taking our money from us.  And yet these are the people that we vilify.  While those who are harming us the most get a free pass.  Now that’s some clever class warfare.  Making it sound like it’s the rich who are oppressing the middle class.  While it is the wealthy government class oppressing the middle class.  And they do it very well.  You’ll hear people everywhere say that the government should stick it to the rich.  But they never say a word about these government workers who live a better life than they do.  Even though they are paying for that better life.  Through ever higher taxes.

So when your property taxes go up think about your retirement plans.  And though you may not have much be comforted in the fact that your government workers do.  Thanks to you.  So even though you may not be able to travel the world in your retirement you’ll know that somewhere a retired government worker is.  Because that’s only fair.  And being fair is important.  Fair share sacrifice.  That’s all they want.  As long as, of course, your share of sacrifice is greater than theirs.  The wealthy government class.

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Tax Cuts, Gold Standard, Roaring Twenties, Great Depression, New Deal, Great Society, Stagflation, Ronald Reagan and Class Warfare

Posted by PITHOCRATES - February 28th, 2012

History 101

The Twenties saw one of the Greatest Explosions in Economic Growth in History despite being on a Gold Standard 

There is a duality in economics.  There is Keynesian economics.  And the Austrian School.  The Keynesians believe in central banking.  Forcing interest rates below market rates.  Purposely creating a permanent but ‘manageable’ inflation rate.  And other government interventions into markets.  The Austrians believe in a strong currency.  Even bringing back the gold standard.  Letting the markets set interest rates.  Are against purposely creating inflation.  And oppose government intervention into markets.  So these two schools are sort of the Yin and Yang of economics.  The dark and the light.  The wrong and the right.  The Keynesian and the Austrian.

So it’s not surprising to see periods of history where these two schools bump up against each other.  As we transition from good economic times to bad economic times.  And vice versa.  When politicians change policies for political reasons.  Or when politicians change policies for economic reasons.  When the Keynesians are out of power and want to get back into power.  Or the Keynesians are in power, have destroyed the economy and the electorate wants to throw them out.  Starting shortly after World War I.  When John Maynard Keynes’ ideas came to light.  Economic policies that used smart people and an active, benevolent government.  Exactly what Woodward Wilson and his progressives were looking for.  Who wanted to quantify human behavior and improve it.  With an activist and scientific government.  To bless the United States with their brilliance again now that the war was over.  And return to the new enlightened way.  Helping people everywhere to be better citizens.  And fixing all the ‘faults’ of free market capitalism.

But the progressives lost the 1920 election.  The voters favoring Warren Harding’s message to return to normalcy.  And rejecting the progressives and their new scientific ways of government.  They wanted jobs.  And that’s what Harding gave them.  By cutting taxes.  Thanks to the advice of his brilliant treasury secretary.  Andrew Mellon.  And getting out of the way of businesses.  When he died Calvin Coolidge continued his policies.  And the Twenties roared.  It was one of the greatest explosions in economic growth in history.  Where credit was plentiful.  Despite being on a gold standard.  As the United States electrified.  And modernized.  Electric power.  Telephones.  Radio.  Electric appliances.  Movies.  Even on the farm.  Where mechanization provided bountiful harvests and inexpensive food.  The Roaring Twenties were great times for consumers.  The average American.  Thanks to minimal governmental interference into the free market.  And capitalism.  But, alas, that wouldn’t last.

Ronald Reagan won in a Landslide based on an Economic Platform that was Austrian to the Core 

It was the mechanization of the farm that began the process that lead to the Great Depression.  The average American benefited greatly from those low food prices.  But not the farmers who went into debt to mechanize their farms.  And when those European World War I soldiers traded their rifles for plows the American farmers lost some valuable export markets.  Farmers were struggling with low prices.  And heavy debt.  Some defaulted on their debt.  Causing bank failures in the farming regions.  Which soon spread throughout the banking system.  And when president Hoover came to office he was going to help the farmers.  For Hoover, though a Republican, was a progressive.  He brought back activist government.  He interfered with the free market.  To fix these problems.  Price supports for farmers to import tariffs.  Raising costs for businesses.  And prices for consumers.  Then the Smoot-Hawley Tariff launched an all out trade war.  Crashing the economy.  And giving us the Great Depression.

The 1930s was a lost decade.  FDR’s New Deal policies increased the size of government.  And their reach into the free market.  Which prolonged the Great Depression.  But nothing they tried worked.  Despite trying their progressive brilliance for some ten years.  It took World War II to pull the United States out of the Depression.  When the government at last allowed businesses to pursue profits again.  And got out of their way.  This surge in economic activity continued after the war and through the Fifties.  And into the Sixties.  With none other than JFK cutting taxes in a very Austrian way.  Yes, Kennedy was an adherent to the Austrian school.  But LBJ wasn’t.  And when he took over things changed.  The progressives were back.  Calling themselves liberals now.  And instead of the New Deal they gave us the Great Society.  Which grew the government even larger than the New Deal did.  And the Great Society spent the money.  Along with putting a man on the moon and the Vietnam War, government spending exploded.  The Keynesians were hitting their prime.  For once they could do all of the great things they always said they could.  And in the process fix a ‘broken’ free market system.  Finally having brilliant people in all the right places in government.  Making brilliant policies to help people live better lives.

And then came the Seventies.  The government was spending so much that they turned to the printing presses.  Because they could.  Thanks to central banking.  Even if it was hamstrung by gold.  You see, at that time the dollar was convertible into gold.  And with the Americans printing so much money and depreciating the dollar countries holding U.S. dollars said, “Screw that.”  And converted their dollars into gold.  That great sucking sound they heard in the Seventies was the sound of U.S. gold reserves getting sucked out of the country.  Well, even though the Keynesians hated gold they didn’t want to see all their gold reserves disappearing.  So Nixon did something very Keynesian.  And decoupled the dollar from gold.  Freeing the government at last to spend as irresponsibly as the Keynesians wanted.  And spend they did.  Turning the printing presses on high.  Depreciating the dollar ever more and causing double digit inflation.  Worse, all that Keynesian spending did nothing for the economy.  There was high unemployment as well as inflation.  An unusual phenomenon as you typically had one or the other.  Not both.  But this was stagflation.  A Keynesian phenomenon.  And you measured how bad it was by adding the unemployment rate to the inflation rate.  Giving you the misery index.  And the misery was pretty high during the Keynesian Seventies.  It was so miserable that they joked about it on Saturday Night Live.  With Dan Aykroyd impersonating Jimmy Carter.  Joking about high nice it would be to own a $400 suit.  And how nice it was just to make a phone call to get the printing presses to print more money.  The people thought Aykroyd’s Carter was funny.  But they didn’t care for the real one all that much.  And made him a one term president.  As Ronald Reagan won in a landslide.  Based on an economic platform that was Austrian to the core.  Including a promise to return responsibility to government spending by reinstating a gold standard.  (Which was a political ‘bridge too far’.)

The Electorate paying Federal Income Taxes fell from 80% when Reagan was in Office to about 50% by 2009 

The Eighties were so prosperous that the Keynesians, liberals and progressives derisively call them the decade of greed.  They tried everything within their power to rewrite history.  Calling the exploding economic activity ‘trickle down’ economics.  But the figures don’t lie.  Despite the liars figuring.  The inflation rate fell.  Interest rates fell.  The unemployment rate fell.  And despite the cuts in tax rates the government was never richer.  Tax revenue collected under the reduced rates nearly doubled.  But there was little cutting in government spending.  Flush with all that cash they kept spending.  In part to rebuild the military to win the Cold War.  Which Reagan won.  But all the social spending continued, too.  Which led to some record deficits.  Not the trillion dollar deficits of the Obama administration.  But large nevertheless.  Which provided the meme to explain away the prosperity of the Eighties.  “But at what cost?” being the common refrain.  They talk about the deficits.  But very conveniently leave out that part of how tax revenues doubled at the reduced tax rates.

Well, as time passed the Keynesians got back into government.  In the late Nineties as they kept interest rates low again to stimulate the economy.  Creating the dot-com bubble.  And the early 2000s recession.  George W. Bush cut taxes.  Brought the economy out of recession.  But then the Keynesians went back to playing with those interest rates.  Kept them artificially low.  Creating a great housing bubble.  And the Subprime Mortgage Crisis.

Keynesian economics have failed throughout the last century of trying.  And taxpayers clearly saw this along the way.  Voting for Austrian policies every time economic policy mattered.  Especially after another failure of Keynesian policy.  Every time their policies failed, though, the Keynesians had an excuse.  Supply shocks.  Liquidity traps.  Something.  It was always something that caused their policies to fail.  But it was never the policies themselves.  Despite Mellon, Harding, Coolidge, Kennedy and Reagan proving otherwise.  So they had to try something else.  And they did.  Class warfare.  They transferred the tax burden to the wealthier.  Reduced the number of people paying federal income taxes.  And gave ever more generous government benefits.  This took the failed ideology out of the equation.  Making it easier to win elections.  For when Reagan was in office more than 80% of the electorate were taxpayers.  And Austrian economics won at the polls.  The Nineties ended with only about 65% of the electorate paying federal income taxes.  By 2009 that number shrunk to about only half of the electorate.  Which gave the tax and spend Keynesians an edge over responsible-governing Austrians.  Because people who don’t pay income taxes will vote for policies to increase taxes on those who do.  Not because of concern over economic policy.  But just to get free stuff.  Something Keynesians learned well.  When at first you fail just buy votes.  And then you can continue your failed policies to your heart’s content.

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FT89: “Liars lie.” -Old Pithy

Posted by PITHOCRATES - October 28th, 2011

Fundamental Truth

Keynesian Tax and Spend Big Government Liberals don’t Win Elections

No one shops at the store with the highest prices.  Not if we can buy the same for less elsewhere.  That’s why stores can’t just raise their prices to make their owners rich.  Because most stores sell something that can be bought elsewhere.  We call it competition.  It’s what keeps prices fair.  And the ‘fair’ price is exactly what both buyer and seller agree on.  Too high and the buyer won’t buy.  Too low and the seller won’t sell.  Just right and buyer and seller happily make the sales transaction.

So people don’t willingly choose to pay higher prices.  Because they want to keep their hard-earned money.  And rightly so.  Because they earned it.  And the same goes for paying taxes.  Just as they don’t willingly choose to pay higher prices they don’t willingly choose to pay more taxes.  Which presents quite the quandary for the tax and spend liberal.  Because to tax and spend you must first tax.  And telling the people that you want to raise their taxes doesn’t really go over well at election time.

So they lie.  Because that’s what liars do.  Liberals never run as Keynesian tax and spend Big Government liberals.   Because they’ve learned from experience that Keynesian tax and spend Big Government liberals don’t win elections.  (Unless you’re Nancy Pelosi in uber liberal San Francisco.  But that’s a whole other story.)  So they lie and run as conservatives.  Reagan Democrats.  New Democrats.  Or they just launch withering personal attacks on their opponents.

About 40% of the Electorate are Limited-Government Conservatives

Of course, not everyone is against higher taxes.  Those who don’t pay taxes rarely oppose higher taxes.  Or those with generous pay and benefit packages courtesy of the taxpayer.  They’re always in favor of new taxes.  Because more taxes means more free stuff.  And better salary and benefit packages.

These two groups of people are rather large.  Nearly half of the electorate doesn’t pay any federal income taxes.  And there are a lot of people in the public sector.  Because government keeps growing.  So these are a lot of people to vote for Keynesian tax and spend Big Government liberals.   But it’s not enough.  About 40% of the electorate are limited-government conservatives.  And about 40% are moderates.  Who can swing either way.  And that’s a lot of votes.  If only 10% of the moderates vote conservative, government will have a lot of trouble growing.

The problem with that moderate 40% is that they have jobs.  They pay taxes.  And are none too keen on paying any more.  So what is a liberal to do?  Well, lie, of course.  Liberals don’t want to raise taxes to go on a spending orgy to buy more votes.  No.  They want to make the rich pay their fair share.  Which has a nice sound to it at election time.  Because most people don’t consider themselves rich.  But when nearly half of the electorate doesn’t pay federal income taxes, guess what?  A lot of people are richer than they thought.  Because ‘taxes on the rich’ will ultimately include anyone with a job.  Because half of the people aren’t paying them now.  And that pilloried 1% just doesn’t earn enough to pay all of the taxes.  Even if we take all of their earnings.

Liberals lie because Voters don’t Willingly Vote for Candidates who say they will Raise your Taxes

When liberals are talking you can be certain of one thing.  They’re lying.  Because that’s what they do.  Liars lie.  Because if they told you they were going to raise your taxes and pass job-killing regulations, chances are that you wouldn’t vote for them.  Unless you’re part of that 50% that doesn’t pay any federal income taxes.  Or collect your pay from the private sector taxpayer.  In which case you’ll say, “Tax on!  Tax those private sector tax-paying suckers.  Just give me more free stuff.”

They may not say it in these exact same words.  But you get the gist.

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