The High Cost of Living in Toronto forces Both Parents to work and forces their Children into Daycare

Posted by PITHOCRATES - November 24th, 2013

Week in Review

Once upon a time we worked so we could raise our families.  Now we find someone to raise our children so we can work (see Daycare in Toronto: ‘Parent summit’ participants tell of vastly different experiences by Marco Chown Oved posted 11/22/2013 on the star).

Diana Tarango is worried. Her 4-year-old daughter is in all-day kindergarten, but because she can’t find before- and after-school care, she can’t go back to work.

Perry Wong and Nalini Nankoo are frustrated. They have been looking for a daycare space for their 2-year-old son and have put down non-refundable deposits to get on the waiting list at a half-dozen daycares. They can’t afford to keep wasting money, and their son still doesn’t have a space.

Cynthia Zhu and Kenny Ji couldn’t be happier. They’ve been in Canada for less than a year and they’ve got both their kids in subsidized daycare spots near their home.

These stories show how ineffective our patchwork daycare system is, said Councillor Shelley Carroll.

“Child care is an issue that affects us all in different ways,” she said. “That’s why we need these meetings and why we need to get people talking across generations, too.”

Parents, grandparents and even childless adults are all affected by the high cost of daycare, said Carroll, and a better system won’t just be better for families with young children, it will be good for the economy as well.

There are 57,000 daycare spaces in Toronto, only enough for 21 per cent of the city’s children under 12. The city subsidizes 24,264 of those spaces, which only covers about 28 per cent of children in low-income families.

Making matters worse, the wait-list for a subsidized spot is more than 18,500 people long…

Tarango, newly arrived from Hungary, looked into putting her younger son into daycare, but can’t believe how much it would cost.

“I was amazed when I asked the price: $1,500 per kid (per month)!” she said. “In Hungary, after one and a half years, everything is free. The daycare even provides food free, too.”

If 21% of the total number of children under 12 equals 57,000 then the total number of children under 12 in Toronto equals 271,429 (57,000/0.21).  The total number of children who need daycare is 75,500 (57,000+18,500).   Subtracting this number from the total number of children under 12 equals 195,929 (271,429-75,500).  So the percentage of children under 12 who are raised in Toronto without daycare equals 72.2% (195,929/271,429).  In other words, the vast majority of children of daycare age DON’T use daycare.  Which is a good thing.  And one would hope that’s because they have a stay-at-home parent raising their child in a loving household.  Instead of dumping these inconvenient pains in the ass at daycare so they can do something more rewarding than parenting.

There may be many reasons why parents need daycare for their children.  Single mothers may need daycare so they can work.  There could be a married parent that prizes a career over raising children and prefers to work instead of being a stay-at-home parent.  But perhaps the greatest reason is that parents can’t raise a family on a single income because of high taxes.  Some of which are going to subsidize daycare at $1,500 per child per month.  Which creates a death spiral for daycare.

Daycare isn’t cheap.  So it takes a lot of tax dollars to subsidize.  The high unmet demand for daycare spaces requires more tax dollars to subsidize.  Which require higher tax rates.  Leaving people with less take-home pay.  Making it more difficult for parents to raise a family on a single income.  Requiring more two-income households.  And a greater demand for daycare.  Requiring more tax dollars.  And higher tax rates.  Leaving families with less take-home pay.  And so on.

The best way to provide for these children?  Tax cuts.  Allowing families to keep more of their take-home pay.  So much that they can raise a family on a single income.  Like they used to do.  Before the welfare state.  That provided cradle-to–grave benefits.  Which, ironically, leaves working people with less.  And forces their children to spend more time growing up with strangers.  And less time with their parents.


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Defying Economic Sense the 1% now support Higher Tax Rates on their Income

Posted by PITHOCRATES - December 29th, 2012

Week in Review

Now everyone is ganging up on the Republicans.  In the fiscal cliff showdown.  The Republicans want some deficit reduction coming from spending cuts.  They have modified their position to allow some higher tax rates.  But they want those spending cuts.  Which the Democrats simply refuse.  They want all deficit reduction to come from higher tax rates.  Now even the 1% are saying to tax them more.  At least, according to a new poll (see Majority of Rich Want Themselves Taxed More: Poll by Robert Frank, CNBC, posted 12/24/2012 on Yahoo! Finance).

American Express Publishing and The Harrison Group found that 67 percent of the top one percent of American earners support higher income taxes. Their support has grown since the election. This summer, 62 percent of them supported higher taxes.

Some might say the rich are hoping to tax people richer – or poorer — than themselves. The top one percent consist of people making more than $450,000 a year. But the survey clearly shows most One Percenters favor taxing themselves. More than half say that they support taxing those making $500,000 or more…

“There is an absolute willingness for the vast majority of the One Percent to take a tax increase,” said Jim Taylor, Vice Chairman Harrison Group. “What the Republicans think is not necessarily what their constituents think.”

Ask yourself this.  Why are super rich movie, television and music stars staunch supporters of the Democrat Party?  Is it because in their music studies they minored in economics?  No.  I don’t think so.  I would even go so far as to posit that they cannot differentiate between classical economics, the Austrian school of economics, the Chicago school of economics and the Keynesian school of economics.  Though they are staunch supporters of the last one.  Because the Democrats embrace Keynesian economics as it enables big government spending.  So why are super rich movie, television and music stars staunch supporters of the Democrat Party?   So they can escape the bitter attacks on wealth business owners face.

These superstars live lives like Roman Emperors.  All without having a real job.  So they have no understanding of economic fundamentals.  Or the first thing about scraping the cash together to make a payroll.  But they do know that if they support and campaign for Democrat candidates they can enjoy their obscene wealth without someone attacking them for living like Roman Emperors.  Could it be the reason why the superrich 1% are coming out in favor of higher tax rates on themselves?  Perhaps.  For there is no good economic reason to do so.

Raising taxes on them will not make a dent in the deficit.  In fact, if you added all the federal income taxes those earning $200,000 or more paid in 2010 (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) it comes to approximately $489 billion.  If you divide that number by the highest marginal tax rate (at high income levels most income is taxed at the highest marginal tax rate) that comes to about $1.397 trillion.  Which is just over the average Obama annual deficit of $1.324 trillion.  So if you confiscated 100% of all earning from those earning $200,000 or more it will pay for one year’s deficit.  So taxing the rich a few more percentage points will do NOTHING to reduce the deficit.  The deficit is just too big.  And there are just too few rich people.  No, the only way to reduce the deficit by higher taxes only is to hit the middle class with a huge tax increase.  Or you could cut spending.  Which would require no new middle class tax.  Like the Republicans want.


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Jobs and Unemployment, Taxpayers and Tax Consumers

Posted by PITHOCRATES - March 19th, 2012

Economics 101

The Privileged Class enjoys the Good Life Today by Buying Votes with Government Benefits

Jobs are everything.  They pay your bills.  They pay the government’s bills.  And they pay for all those government benefits.  Especially those government benefits.  Which are little more than a pyramid scheme.  Where the few collecting those benefits are at the top of the pyramid.  And those with the jobs paying the taxes to fund those benefits are at the bottom.  And every good pyramid scheme needs to do one thing.  To keep the base growing at a greater rate than the top grows.

Why do politicians do this?  Give out so many benefits?  Simple.  For votes.  Specifically, to buy votes.  We’ve come a long way from the Founding Fathers’ America.  Adam Smith’s invisible hand and free market capitalism.  Representative government.  The things that let all people enjoy life.  Not just the noble class.  This change began in England.  Ironically with the noble class.  Who presented Magna Carta (1215) to King John.  Saying they paid the taxes.  So they were going to have a say in how the king spent those taxes.  As well as protect their privileges and liberties.  And Parliament was born.  Changing England forever.  The American Founding Fathers built on this.  And improved on England’s form of government.  The constitutional monarchy.  By getting rid of it.  Along with heredity power.  And the nobility.  The Founding Fathers had put an end to privilege.  Pity it didn’t last.

There has always been a privileged class.  And there will always be one.  There will always be a small elite group trying to live a privileged life.  Once we called them the aristocratic landowners.  Today we call them politicians and government workers.  Who are a little craftier than their landowning forbears.  For they just can’t have the right last name.  Or marry a good last name.  Because, technically, there is no aristocracy these days.  No.  They need the taxpayers to vote them this good life.  And fund it.  By paying higher taxes.  Which means the taxpayers will live less of a good life to give the politicians and government workers their privileged life.  Hence the government benefits.  And the buying of votes.  Because no taxpayer in their right mind will sacrifice their good life to support a privileged class.  The nobility wouldn’t do it for King John in 1215.  And taxpayers won’t do it now.  So the privileged class buys votes with these benefits.  Particularly from those who don’t pay taxes.

Jobs Matter because the Taxes of the Taxpayers have to balance the Consumption of the Tax Consumers

There are two types of people in the world.  Those who like high taxes.  And those who don’t.  Those who like them are the politicians and government workers who live a privileged life.  And, of course, those who don’t pay taxes but receive government benefits (another steadily growing group).  These are the tax consumers.  Then you have those who don’t like high taxes.  Those with real jobs in the private sector.  The taxpayers.  As government grew from our Founding so did the number of tax consumers.  Which, of course, required more taxes.  And higher tax rates.  On the shrinking group of people with jobs paying the taxes.  To support the growing group of politicians, government workers and recipients of those government benefits consuming those taxes.

This complicates the pyramid scheme.  As you have fewer people supporting more people each taxpayer has to pay a larger and larger share of the tax burden to support the tax consumers.  Meaning you have to increase tax rates further.  Which isn’t easy to do.  Worse, as workers pay more in taxes they have less to spend in the economy.  Thus reducing economic activity.  Businesses hire fewer workers.  As more businesses go through this the unemployment rate begins to rise.  Which means, of course, the number of taxpayers begins to fall.  Making it harder to provide the taxes for the tax consumers.  A group that continues to grow even when the unemployment rate rises.  Because government is like a bacteria.  It takes on a life of its own and grows simply by splitting and creating new bureaucracies.  A growth that never stops.  And soon the rate of that growth overtakes the growth rate of the taxpayers.  Violating the one cardinal rule of pyramid schemes.  Keeping the base growing at a greater rate than the top grows.

This is why jobs matter.  For everyone.  The taxpayers.  And tax consumers.  Because the taxes of the taxpayers have to balance the consumption of the tax consumers.  A fact lost on many voters.  Who don’t understand (or don’t care) that the freer their ride the less free the life of the taxpayer.  Who believe these government benefits can keep coming no matter how many people are working.  They are perfectly all right with the unemployment rate going to 100%.  And having the government provide everything free of charge.  But government can’t do this.  Even with the power of the printing press to print money and give it away.  Because if no one works who is going to build the houses we buy with that free government money? 

Taxpayers voting on How the Government Spends their Money ensures Responsible Government Spending

Someone has to work.  Because houses (and the other things we buy) don’t spontaneously appear.  So who will build them?  Would you labor to build something when the government gives you money?  Even if you don’t have to work?  Probably not.  The only reason we work is for a paycheck to buy the things we want.  The more things we want the harder we work.  That’s incentive.  Take it away and no one will work.  Just as if you tax someone too much you’ll take away their incentive to work harder.  And to vote to raise taxes.  Which is why jobs matter.  Because they pay the bills.  They pay your bills.  They pay the government’s bills.  And they pay the bill for all those government benefits.

Politicians can buy votes by giving away more government benefits.  Converting taxpayers into tax consumers.  Preserving their privileged life.  However, there is a limit to this.  Because as you convert taxpayers into tax consumers you reduce the tax revenue to pay for those benefits.  Especially during periods of high unemployment.  And if they raise tax rates to make up for the reduction in taxpayers this will increase both the rate and duration of unemployment.  By increasing the cost of doing business.  And leaving workers with less money to spend.  Both of which reduce sales revenue.  And the need for workers.  Over time this combination of high spending obligations and low tax revenue can have dire consequences.  And can bankrupt cities.  States.  Even countries.

This is why the nobles met King John on the field of Runnymede.  And presented him Magna Carta.  The nobles were paying a lot of taxes for the king’s wars on the Continent.  If the king continued he could have bankrupted them.  So by making the king apply his Great Seal to Magna Carta they were forcing him to, among other things, spend responsibly.  As they, the taxpayers, now had a say in how the king spent their taxes.  The only way to ensure responsible government spending.  And when politicians and government workers maintain their privilege by having those who don’t pay taxes vote to raise taxes on those who do it removes all responsibility from government spending.  So they spend.  And they tax.  To pay for that spending.  Hurting job creation in the process.  Which is a very big problem.  For jobs are everything.


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LESSONS LEARNED #83: “Those who don’t pay taxes will always approve higher tax rates on those who do.” -Old Pithy

Posted by PITHOCRATES - September 15th, 2011

To win Elections using Class Warfare you need lots and lots of Poor People

The Democrats want to tax the rich. To make them pay their fair share.  As determined by them.  And they accuse Republicans of cutting taxes for the rich.  Giving them tax breaks.  Credits.  And loopholes.  All paid for by the poor.  Or so they say.  The Republicans deny this, of course.  They want lower tax rates across the board.  For they believe lower tax rates create jobs.  By removing uncertainty for business.  Giving them confidence to invest.  And grow their businesses.  Thus creating those jobs.  The Democrats counter that lower tax rates just make more rich people.

We call this class warfare.  Getting the poor people to hate the rich people.  Blaming the rich for their poorness.  And making the poor understand that if it weren’t for the taxes the poor pay the rich couldn’t have their mansions.  Or their private jets.  Because the poor subsidize the rich in America.  As least according to the Democrats.  As nonsensical as this is.  For mansions and private jets are expensive.  So expensive that the poor can’t afford them.  Yet their taxes can buy them for the rich.  Silly argument, yes.  Then again, class warfare isn’t based on logic.  Or common sense.  It’s based on pure, raw emotion.  Feelings.  The rich are rich.  The poor are not.  And that’s all the poor need to know.

This is how Democrats win elections.  By promising to raise taxes.  Normally, anyone who says they will take more of your money will find it difficult to win elections.  But when you promise to take more of someone else’s money, well, that’s a different story.  You just need one thing.  Lots and lots of poor people.  Who you can make feel good by taxing the rich.  By punishing the rich.  Making sure the rich get their just deserts.  And I don’t mean some hoity-toity crème brûlée.  Which, incidentally, is delicious.  No.  We’re talking about a good ole fiscal smack-down.  A swift kick to the financial bonbons.  The wallet.  It won’t change your life.  If you’re poor.  But it’ll make you feel good.  And that’s what class warfare is all about.  Feelings.

Using the IRS Numbers to see who has been Paying the Bulk of our Federal Taxes

You get tired hearing the same old lies.  No doubt you agree with me.  Regardless of what side of the aisle you hail from.  Some of you are absolutely sure the Democrats are lying.  And some of you are absolutely sure the Republicans are lying.  Can’t be both.  Well, it can be both, I guess.  But one side has to be more truthful than the other.  Considering how diametrically opposed the two sides are.  So let’s ignore the arguments.  Let’s find our own truth.  Let’s go to the numbers.

The IRS breaks downs tax revenue in numerous ways.  One of which is by income groups.  So we looked at these breakdowns.  For the years 1995 – 2008.  This takes us from the midpoint in Bill Clinton‘s presidency.  Through George Bush‘s.  The IRS breaks down incomes across many income groups.  We’ve added some of them together to reduce their numbers down to four groups.  As shown here:

The percent of returns is from 2007.  This is the percentage of total federal income tax returns filed with the IRS.  We picked this year to show where income had trended to before the subprime mortgage crisis.  So, without further adieu, let’s see who has been paying the bulk of our federal taxes.  The rich.  The poor.  Or somewhere in between.

The Rich and Middle Class pay over 90% of all Federal Taxes

We’ve broken these numbers down into the four income groups.  Then we calculated the percentage each group paid of the total tax revenue.  And graphed the results.  As shown here:

(Source:  SOI Tax Stats – Individual Income Tax Rates and Tax Shares)

We can glean a couple of things from these numbers and this chart.  First of all, the middle class still makes up about half of all taxpayers.  And there are very few ‘rich’ people.  Only about 16% in 2007.  And that counts anyone earning $100,000 or more as rich.  Based on how few rich there are and the amount of federal taxes they pay, it’s hard to say that they aren’t paying their fair share.

People earning less than $14,000 virtually pay no taxes.  They hardly paid anything during the Clinton presidency.  And paid even less through the Bush presidency.  If we call these people poor, then the poor aren’t paying for the rich.  They’re not even paying their own way.

The next income group also shows a continuous decline.  Those who start to earn some serious money for the first time in their lives pay little in federal taxes.  Less than 10% for the last fifteen years.  And less and less as the years go by.  So, clearly, those earning less than $30,000 per year are hardly paying any federal taxes at all.  And are not subsidizing the rich in any shape, manner or form.  If anyone is being subsidized, it is those earning less than $30,000.  Some 33% of all taxpayers.  And who’s paying their way?  The rich and middle class.

So who’s paying the most in taxes?  The rich and middle class.  In that order.  In fact, they are paying about 90% of all federal taxes.  And have been for the last 15 years.  (Or more.)  During Clinton.  And Bush.  In fact, the rich paid a larger percent of all taxes under Bush (the Republican) than they did under Clinton (the Democrat).  Not exactly what you’d expect based on the political rhetoric.  And the middle class paid less under Bush than they did under Clinton.  In further fact, everyone except the rich paid less in taxes under Bush than they did under Clinton.  So whoever says the ‘rich’ aren’t paying their fair share are either lying.  Or grossly misinformed.

The more Rich People there are the Bigger Percent of Total Tax Dollars they Pay

Notice the top two graphs.  They’re almost mirror images of each other.  As the rich pay more in taxes, the middle class pay less.  This is a good thing, yes?  Transferring more and more of the tax burden to the rich?  It’s what the Democrats say they want.  So it’s interesting to see when the rich pay more in taxes.  During good economic times.  When policies are favorable to business.  And there are lower tax rates.  Never was more of the tax burden transferred to the rich than it was than after the Bush tax cuts.

There are a couple of things happening here.  During recessions (early 2000s and late 2000s), tax revenue from the rich fell.  Because businesses revenue fell.  So business profits were down.  As were income taxes.  On businesses.  And highly paid employees these businesses laid off.  So overall tax revenue was down.  Which made the middle class’ portion of tax revenue a greater percentage of the total.  Not because they were paying more.  But because the rich were paying less.  Which explains the mirror image of these two graphs.

But there’s something else happening, too.  Remember when the Democrats said tax cuts don’t create jobs?  They just create more rich people?  Well, they were partially right.  As the economy expands so does wealth.  Employees leave their companies and start their own businesses.  People advance in their careers and make a lot more money.  Entrepreneurs strike it rich with new innovation.  And you know what all of this means?  People leave the middle class.  And join the rich.  Where they pay more taxes than they ever did before.  Transferring more and more of the tax burden from the middle class to the rich.  Which also explains the mirror image of these two graphs.

The more rich people there are the bigger percent of total tax dollars they pay.  So if the Democrats were true to their word they wouldn’t punish the rich.  Instead, they would focus their energy on making more rich people.  To help the poor and middle class.

The Democrats sacrifice the Poor for Votes

Now it’s interesting how the different political parties interpret these graphs.  Republicans are interested in the top two.  They would like to make business friendly policies to grow business.  And create jobs.  Make as many rich people as possible.  So more and more of the tax burden can be transferred to them.  Not by high tax rates.  But by robust economic activity.

The Democrats, on the other hand, are interested in the bottom two graphs.  Those making $30,000 or less.  They want to see these graphs falling to zero.  And they want to increase the total number of people earning $30,000 or less.  Because those who don’t pay taxes will always vote for you if you promise to raise tax rates on the rich.  And the more poor there are the more political power the Democrats have.  I mean, that 33% who pays virtually no income taxes?  Who do you think they’re going to vote for?  That’s right.  Whoever promises to punish the rich.  And punish they will.  For they want to transfer as much of the tax burden to the rich as possible.  Not by robust economic activity.  But buy punitive tax rates.

This is class warfare.  Based on raw emotion.  Feelings.  Not logic.  Or common sense.  They get the poor angry.  And blame the rich for their poorness.  This is how they win elections.  They lie.  The Democrats.  And say they are punishing the rich.  When they are in fact punishing the poor.  And the middle class.


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FUNDAMENTAL TRUTH #83: “Those who don’t pay taxes will always approve higher tax rates on those who do.” -Old Pithy

Posted by PITHOCRATES - September 13th, 2011

The Allies were Commanded by an American because they had the Greatest Skin in the Game

During World War II, SHAEF stood for the Supreme Headquarters, Allied Expeditionary Forces. This was the top command of the Allies fighting on the Western Front during World War II. In the European Theater of Operations (ETO). The Soviet Union fought on the Eastern Front. Neither front was subordinate to the other in the command structure.

The supreme allied commander of SHAEF was General Eisenhower. An American. Why? Well the Nazis conquered France early in the war. Thanks to blitzkrieg. Which the Allies weren’t ready yet to battle. So the SHAEF commander wasn’t French. But the British were in the war from the beginning. They and their commonwealth put some 11 million into the field of battle. And suffered about a million killed and wounded. But the SHAEF commander wasn’t British either. Even though we couldn’t have defeated Nazi Germany without the British.

No, the SHAEF commander was an American because they put some 16 million into the field of battle. So excluding the Soviets, the Americans had the greatest skin in the game. Literally. And figuratively. It was the American Arsenal of Democracy that furnished the implements of war. Financed by the American taxpayer. Via bonds. Rationing. And inflation.

Those who Risk their Wealth should have a Say in How it is Risked

There were a lot of service flags hanging in American windows during World War II. And far too many of them had gold stars on them. One gold star represented the loss of a son or daughter in the war. There were about 417,000 gold stars in American windows. Not quite as many as the approximately 580,000 British dead. And a long way from the approximately 8,600,000 Soviet dead. But as America entered the war, the sheer numbers of man and material America provided made it America’s war. Which is why there was an American commanding SHAEF. Because even though Nazi Germany didn’t attack America, it was her blood and treasure leading the war against Nazi Germany.

So an American general would lead the Allies. Because the Americans had the most skin in the game. They were now bearing the greatest costs for the war. So they had the ultimate say in how the Allies waged war. I mean, no one would expect a Belgian general to command those 16 million Americans. No offense to the Belgians. I mean, I like their waffles and all. It’s just that Belgium wasn’t America. They didn’t have the resources. Nor the distance from the Third Reich.

Risk and wealth. Those who risk their wealth should have a say in how it is risked. Because it takes wealth (blood and treasure) to wage war. And this goes back to the birth of limited government. The Magna Carta. When the feudal barons of England met King John on the fields of Runnymede. And said, “Look, yeah you’re king and all but that doesn’t give you the right to do as you bloody well please.” I’m paraphrasing, of course. You see, the king was being rather oppressive. And fighting a lot of wars. Costly wars. And the funny thing about kings? They don’t have wealth. They get it from the landowners. The landed aristocracy. Those feudal barons. The men and material to fight wars, and the money to pay for them, came from them. So these barons were saying, “In the future, you clear things with us first, okay?” And constitutional monarchy was born.

Thanks to the Magna Carta those Paying the Taxes would have a Say in How the King Spent those Taxes

In the days of feudalism we defined wealth by land holdings. Because back then the most important industry was growing food. To prevent famine. And you needed land to grow food. So wealth concentrated to the land owners. The landed aristocracy. Who provided the food for the realm. Soldiers. And taxes.

Thanks to the Magna Carta, things changed. Those paying the taxes would have a say in how the king spent those taxes. He couldn’t wage endless war anymore. Or spend it all on royal accouterments. No. From then on, spending would have to be responsible. We take it for granted in the West today. And call it taxation with representation. But it was a BIG deal back then. And mostly only in England. France had an absolute monarchy. And the king did whatever he bloody well pleased. And you see how well that turned out for King Louis XVI. Ask Marie Antoinette. Of course you can’t. Because they were both executed by the people during the French Revolution.

The British took their representative government to the New World. And after the American Revolution, that was one of the British things the Americans kept. At the heart of the American populace was a hatred of taxation. And arbitrary rule. So they kept a tight grip on the government. And their wealth. There were no kings in the new United States of America. But there was still government. And a strong distrust of government power. So they were going to write their constitutions very carefully. And restrict the vote only to those who had skin in the game. Land owners. Who were paying the taxes.

Figuring out how to Amass Power despite the Inconvenience of Elections

Of course this changed over time. Nowadays, people who pay no taxes whatsoever can vote. We’ve come a long way from Runnymede. And returned a lot of power to government. In America, about half of all people pay no federal income tax. Yet they can vote. And they do. For the party that promises them more free stuff. By taxing ‘the rich’ to pay for it. And you know what these non-taxpayers say? “Raise tax rates? Absolutely. I mean, what do I care? It’s not like I’m paying them.” I’m paraphrasing, of course. But you can see the problem.

They have no skin in the game. And the only reason they don’t is because ‘the rich’ have been keeping them down. At least that’s what they believe. Because those in power told them this. So they can keep raising taxes. And keep increasing the power of government.

It’s nothing new. There are those who just want power. Kings often took power by force. When it was clear that the rich barons were more important to the king than the king was to them, though, things changed. There were limits on absolute power. So those who coveted power had to be creative. And figure out how to amass power despite the inconvenience of elections.

Politics Today: Buy Votes with State Benefits and scare the Bejesus out of Old People

The answer was the welfare state. And class warfare. Buy votes. And demonize ‘the rich’. Get the people dependent on government. And anytime there is political opposition, tell the people that the opposition wants to cut your state benefits. To scare the people into voting for you.

We call Social Security and Medicare third-rail issues in America. Because if you threaten to cut them (i.e., touch them), you will die politically. As you would die if you touched the electrified third rail in the subway. Because the recipients of those programs live in fear of losing their benefits. And will always vote for the candidate who promises not to cut them.

And this is how you amass power when saddled with the inconvenience of elections. Buy votes with state benefits. And scare the bejesus out of old people. Telling them the political opposition wants to take your benefits away. Attack the rich. And tax them. To pay for the ever bloating welfare state.

And if at least half of the people pay no taxes, you’re golden. Because when that many people have no skin in the game, you can get away with just about anything you want.


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LESSONS LEARNED #44: “Liberal Democrats have to lie because there are more taxpayers than tax consumers.” -Old Pithy

Posted by PITHOCRATES - December 16th, 2010

Lying to Make Future Liberal Democrat Voters

Ask anyone some questions about the Great Depression and they’ll probably get them wrong.  Why?  Because their history teachers revised history to make government look better.  Government wore the white hats.  And business wore the black hats.  Because their teachers were public school teachers.  And the teacher unions are one of the strongest unions in the country.  The government takes care of them.  And, in return, the public school teachers takes care of government.  By turning out as many future liberal Democrat voters as they can.

So what did our teachers teach us about the Great Depression?  Evil rich people caused it.  By speculating in the stock market.  And it was their speculation that caused the Great Crash which caused the Great Depression.  Rich business people bad.

Then Franklin Delano Roosevelt (FDR) rode into Washington and saved the day.  FDR expanded federal power and went to work to fix things.  He punished the rich (raised taxes).  Created a huge federal bureaucracy to manage the economy.  And spent money like there was no tomorrow.  Public works programs.  Even gave us Social Security.  He made everything better.  Big hearted government people good.

That’s the history in our history books.  The only problem is that it’s wrong.

Tax Cuts and the Roaring Twenties

This is the story told because it favors those who favor expanding government.  Big Government wants to tell us what’s best for us.  And our public schools want to shield our children from their parents.  Because they (and Big Government) are smarter than parents.  So they revise history.  And lie to our kids.

Really?  Come on, they’re not really lying to our kids.  I mean, what reason could they possibly have to lie to our kids?  Just look at the demographics.  The far Left, those in government who like to spend money and tell us how to live our lives, are about 20% of the population.  The other 80% have real jobs and pay taxes.  And this is a problem.  How do you convince 80% of the people (who pay taxes) to pay more taxes so the government can spend it against their wishes?  All the while having the government telling these taxpayers how they should live their lives?  Easy.  You lie.  And you lie to their kids.

There was an economic boom before the Great Depression.  The economy was roaring so strong that they called it the Roaring Twenties.  And it had nothing to do with speculation.  We were building automobiles.  Electrifying the country.  Selling electrical appliances.  And building radios.  This was no speculative bubble.  It was real and strong economic growth.  And guess what kicked it off?  Tax cuts.

Higher Tax Rates Shelter Wealth instead of Creating Jobs

They don’t talk about this in the history books.  Because no public school teacher or government bureaucrat likes tax cuts.  Because economic growth created by tax cuts sends a very simple yet powerful message.  We don’t need Big Government.

Following World War I, government was a bureaucratic behemoth.  With a huge federal debt.  Fighting world wars can do that.  The Progressives, who gave us Prohibition and other nanny-state-like things, liked that big bureaucracy.  They liked activist government.  But even they knew that a high debt was not good.  And being the zero-sum economists they were, they knew only one way to reduce that debt.  Higher taxes.  And their candidate for the 1920 election, James M. Cox, promised to do just that.  And he lost the election.  Proving that Progressives don’t understand economics.  Or the American people.  Those Americans who have jobs, at least.

Warren G. Harding won that election.  And his secretary of the treasury, Andrew Mellon, understood economics.  To find a better secretary of the treasury you have to go all the way back to our first one.  Alexander Hamilton.  Mellon understood business.  And understood rich people.  High tax rates did not bring in more tax money.  Why?  Because rich people know how to shelter their wealth.  But give them a lower tax rate where they can make and keep what they earn, they’ll invest that money and create jobs.  They’ll pay more in taxes (even at a lower tax rate) because they’re not sheltering their wealth.  Their employees will pay more in taxes because they’ll have jobs.  And this is what happened during the Roaring Twenties.  People were working.  Making durable goods (cars, electrical appliances, radios, etc.).  Times were good.  Very good indeed.

Government Activism Gives us the Great Depression

The United States became an economic juggernaut during the 1920s.  The Americans were eclipsing the Europeans.  We were not a superpower yet.  But the Europeans saw the writing on the wall.  They wanted to form their own union of European states to compete against the economic powerhouse that was the United States.  We were kicking ass and taking names.  And no one could hold a candle to us.  We were unstoppable.

Then Herbert Hoover became president.  He was a progressive republican.  He liked activist government.  Hoover was a Big Government Keynesian and wanted to use the powers of government to end the business cycle.  He believed high wages meant high prosperity.  And in parity between farm and nonfarm prices.  He was everything FDR would become.  In fact, the Hoover administration started a lot of the FDR New Deal programs.

Farmers had mechanized their farms.  They plowed more fields than ever.  And grew more than ever.  With bumper crops prices fell.  Normally not a problem.  You just sold more.  But the war was over.  European farmers were farming again.  Not only did they not need our crops, they slapped tariffs on our exports to protect their farm prices.  So farmers couldn’t sell enough to make a profit at the lower prices.  Farmers went bankrupt.  Farm loans went unpaid.  Farm banks failed.  The Federal Reserve failed to provide liquidity to help other farm banks in trouble.  More failed.  This rippled into the nonfarm banks.  Which contracted the money supply.  Business started to hoard their cash because of the tight credit market.  They cut back on production.  Laid people off.  Then the Smoot-Hawley Tariff went to committee in Congress.  Business responded, knowing that that higher tariffs on imported goods they used would increase their cost of production.   They hoarded more cash.  Cut back on production.  Congress passed the Smoot-Hawley Tariff.  Other nations respond by imposing their own tariffs.  This resulted in a trade war.  Business sales fell.  Production fell.  More banks failed.  Hello Great Depression.

Tax Cuts Stimulate Economic Activity

This is the part they don’t teach you in history class.  It was government involvement that killed one of the strongest bull markets in history.  And would prolong the Great Depression.  The growth of government and the anti-business climate created great uncertainty.  And that didn’t go away until World War II.  When James Byrnes (head of the Office of War Mobilization) allowed business to make fat profits if they could deliver the vast quantity of war material needed to defeat Hitler, Mussolini and Tojo.  And they did.  The Arsenal of Democracy won World War II.  Private business doing what they do best.  Business.

But liberals like to spend money.  Our money.  And tell us what’s best for us.  To do that, though, they need us to vote for them.  And telling us that they want to take more of our money while telling us what’s best for us won’t make us vote for them.  It didn’t help Cox to tell the truth in 1920.  And no other presidential candidate since.  Because the 20% of the population that agrees with them isn’t enough to win an election.  You need some of the 80% who have jobs and pay taxes.

History has shown tax cuts stimulate economic activity.  They did when Warren Harding cut taxes.  When JFK cut taxes.  And when Ronald Reagan cut taxes.  This truth doesn’t make a good argument for raising taxes, though.  So our public schools and Big Government revise that part of history.  And lie to our kids.  Until they bleat “Business bad.  Government good.”  Like good future liberal Democrat voters.


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