When it comes to Foreign Policy we need more Team America and Less President Obama

Posted by PITHOCRATES - March 20th, 2014

Politics 101

Thanks to President Obama the United States is now the Rodney Dangerfield of Superpowers

The American public is consumed with the missing Malaysian Airlines Flight 370.  They can’t get enough of the news coverage that is anything but news.  With cable news delivering 24/7 coverage of nothing but speculation.  Even the networks are giving the speculation expansive coverage.  They’d never give Obamacare, Benghazi, the IRS targeting conservative groups, etc., this kind of coverage.  But they will give Malaysian Airlines Flight 370 this kind of coverage.  For apart from the insufferable despair of the families who lost their loved ones it’s a great mystery people want to see unfold.  And be the one to solve it.  But while that is going on the world is becoming a less safe place.  Thanks to Vladimir Putin.

President Obama’s ‘please like us’ foreign policy has failed.  The reset with Russia has not improved our relations.  In fact, they are about as bad as they were during the Cold War.  With Putin doing some Cold War chess playing.  Completely unimpressed with President Obama he’s making bold moves.  And when he does all he gets from the United States is talk.  He annexed Crimea without any real opposition from the Western Powers.  Especially the United States.  And he is probably looking at the Baltic States now.  Seeing no reason yet to stop in his quest to put the Soviet Union back together.  This is what the American people are missing.  For the networks are barely covering it.  And the people are blissfully ignorant of how the United States is now the Rodney Dangerfield of superpowers.  We get no respect from our enemies.  So our enemies make bold moves.  Because that’s who they are.  The creators of South Park made a movie called Team America: World Police (2004).  This followed 9/11 and the beginning of the wars in Afghanistan and Iraq.  When the United States began its fight in the global war on terror.  Though a comedy the writers seem to have a better grasp on the real world than the Obama administration or the mainstream media.  Who think in the 21st century that war no longer exists because world leaders now discuss their differences like rational and civilized adults according to international law.  And honor their agreements.  But what they don’t understand is something that’s been true since the dawn of civilization.  There are three types of people in the world.  As a drunk in Team America: World Police explains crudely but succinctly.  (WARNING: The following video is for mature audiences only.  For it’s pretty rude and crude and completely inappropriate for the workplace.)

If you’ve watched the video you’ll understand what the three types are.  We’ll call them D, P and A (both singular and plural).  In the context of this movie America was a D.  And Kim Jong Il was an A.  As were the Islamist terrorists.  While the leftist ‘give peace a chance’ Hollywood liberals in the movie (who belonged to the Film Actors’ Guild) were P.  As was the United Nations who sent Hans Blix to inspect Kim Jong Il’s regime to make sure he didn’t have any weapons of mass destruction (WMD).  —SPOILER ALERT—  Team America, the world police, go tear-assing around the world, blowing up parts of countries as they hunt and kill terrorists.  Making the world a safer place.  While Kim Jong Il plots to set off WMDs, using the Islamist terrorists to plant his WMDs.  The F.A.G. actors publicly denounce Team America for their wanton destruction and call corporations the real enemy.  Even going to North Korea to attend a peace conference that Kim Jong Il was hosting.  Believing Kim Jong Il was a man of peace.  And were willing to kill Team America to help Kim Jong Il go forward with his peace plans.  Which was actually blowing up countries all around the world into third-world status.

Hitler promised the Naïve Chamberlain that the Sudetenland would be his last Territorial Acquisition

The movie showed the futility of diplomacy when you’re dealing with A.  Because they will lie and say anything you want to hear to shut you up and make you go away.  And when you do they’re just going to crap all over you and the world.  Because that’s what A do.  The P don’t understand that.  They think they can negotiate and arrive at an agreement with people who lie.  History is full of treaties that A have broken.  Because they don’t respect anything but strength.  And if all you got are words an A just isn’t going to respect you.  And will crap on you the first chance he gets.  Especially if you’re a P.  The Russian people understand this.  During the Sochi Olympics the Daily Show‘s Jason Jones interviewed Russians during the Sochi Games.  And a woman told him they have a saying in Russia.  Don’t be a P.  Which is why they love Vladimir Putin.  He’s not a P.  He’s an A.

Communists are A.  They just want to crap all over everyone.  During the Korean War every time they were losing on the battlefield they called for a ceasefire to negotiate a peace treaty.  Using the cessation in hostilities to reinforce their weakened positions.  Proving you just cannot trust an A.  Or negotiate with an A.  Yet the leftist ‘give peace a chance’ liberals think you can.  And that all George W. Bush did by being an A was make the world hate the United States.  Even though Muammar Gaddafi, who was a first class A, respected George W. Bush when he invaded Iraq.  Saw that strength.  Respected that strength.  And did not want to get his ass kicked by that strength.  So he gave up his WMDs willingly.  And joined the Americans in the fight against al Qaeda (Libya is a far less safe place today than it was under Muammar Gaddafi after the Iraqi invasion).  This is what A understand.  Strength.  It’s the one thing that makes them act.  Not words.  As this funny scene in Team America: World Police illustrates so poignantly.  (WARNING: The following video is for mature audiences only.  For it’s pretty rude and crude and completely inappropriate for the workplace.)

We ended the war in Iraq with a ceasefire.  Part of the terms that Saddam Hussein agreed to was to destroy his WMDs and document their destruction.  He never did.  In part because he didn’t have them anymore.  Having sent them over the border into Syria (most likely) on trucks and in two converted Iraqi Airways Boeings before the invasion.  Adolf Hitler promised the naïve Prime Minister Neville Chamberlain that the Czechoslovakian Sudetenland would be his last territorial acquisition.  Chamberlain returned to Britain with a treaty signed by Herr Hitler promising “peace in our time.”  Shortly thereafter Hitler launched World War II (the bloodiest and costliest war of all time) and removed Poland from the map.  Because Hitler was an A.  And you just can’t negotiate with an A.  Especially if you’re a P who believes we can settle all our differences if we only communicate with each other.  No.  An A sees anyone who wants to ‘open a dialogue’ as a P.  And they will laugh at how gullible they are.  Getting a lot of concessions by making promises they have no intention of keeping.  A love P.  Because they are so easy to crap all over.

The Russians like President Obama in Office because he is the Anti-Ronald Reagan

The Obama administration confuses being liked with being respected.  They think if people like America they will respect America.  Nothing could be further from the truth.  People respect people they hate.  At least, if they fear people they hate.  A key distinction.  For Vladimir Putin has no love for President Obama.  Who looks at him as a P.  Which Russians just don’t respect.  They even have a saying.  Don’t be a P.  So Putin has no respect whatsoever for President Obama.  Because he does not fear President Obama.  The recent sanctions President Obama issued by executive order only amused the Russians.  They thought they were nothing more than a joke.  Even replied with in-kind sanctions of their own.  Oh they had a good laugh at President Obama trying to act tough.  But they just don’t respect him.  But you know who they did respect?  Ronald Reagan.

During a radio check President Reagan was testing the sound levels before a radio address.  And he made a joke.  He said into the microphone, “My fellow Americans, I’m pleased to tell you today that I’ve signed legislation that will outlaw Russia forever.  We begin bombing in five minutes.”  This joke leaked out.  And made it to the Soviet Union.  And what do you think they did?  Did they have a good laugh like they did when President Obama tried to act tough?  No.  They didn’t.  They put their Soviet Far East Army on alert.  For they did not like Ronald Reagan.  But they sure as hell respected that crazy son of a bitch.  And feared him.  As well as the awesome military power of the United States.  Which they knew President Reagan had no problem using.  Unlike the current occupant of the White House.  Who wants to shrink the size of the military to pre-World War I levels.  Something only a P would do in the eyes of an A like Vladimir Putin.  No.  President Obama is more of an apologetic president for America’s greatness.  While President Reagan made no apologies.  He believed in American Exceptionalism.  And was damn proud of it.  The shiny city on the hill.  The beacon of liberty.  Defender of freedom.  And he would broadcast the Team America theme song proudly at our enemies.  Unlike the apologist now occupying the White House (WARNING: The following video is for mature audiences only.  For it’s pretty rude and crude and completely inappropriate for the workplace.)

America may have its faults but it is still the best country in the world.  Proven by the flow of immigrants (legal and illegal) to our shores.  We may be arrogant but that’s only because we have a right to be.  Because we are the best m-f’ing country in the world.  F*** yeah.  We’ve made the world a better place.  And the world knows this.  Which is why our enemies love having our country run by people who are ashamed of America’s greatness.  Because they can crap all over the world and get away with it.  Like Putin did by annexing Crimea.  Because they know there is no crazy son of a bitch in the White House that will use the awesome power of the United States to stop them.  Just a bunch of leftist ‘give peace a chance’ liberals who will wag their finger at them.  And if they don’t quake with fear they will wag their finger at them again.  Or write a letter.  The Russians couldn’t be happier.  And lament that if there were only people like the current administration running the United States in the Eighties the Soviets never would have lost the Cold War.  But now Vladimir Putin, former KGB officer in the Soviet Union, sees his chance.  He can put the Soviet Union together again.  As they have the anti-Ronald Reagan in office now.  And can do whatever the hell they want to.  Because they aren’t P.  They’re A.

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President Obama gets no Respect from Iran

Posted by PITHOCRATES - March 8th, 2014

Week in Review

President Reagan made a joke once during a sound check before a radio address.  He said, “My fellow Americans, I’m pleased to tell you today that I’ve signed legislation that will outlaw Russia forever.  We begin bombing in five minutes.”  News of this joke leaked out.  And reached the Soviet Union.  And the Soviets did not find it amusing.  Instead, they put the Soviet Far East Army on alert.  You see, our enemies did not think much of Reagan’s comedic abilities.  For with him they did not know when he was joking.  Unlike President Obama (see Iranian general: Obama’s threats are ‘the joke of the year’ by Marissa Newman posted 3/4/2014 on The Times of Israel).

“The low-IQ US president and his country’s Secretary of State John Kerry speak of the effectiveness of ‘the US options on the table’ on Iran while this phrase is mocked at and has become a joke among the Iranian nation, especially the children,” General Masoud Jazayeri said, according to the semi-official Fars News Agency.

Jazayeri was responding to the US president’s interview in Bloomberg on Sunday, in which Obama maintained that the Iranian leadership should take his “all options on the table” stance — including the warning of a potential military strike — seriously…

The Iranian news agency Tuesday published a political cartoon mocking the US president, calling it: “All Options on Table.” This Time for Russia.” In a jab at US non-intervention in Ukraine, the cartoon portrays Obama peering forlornly into an empty paint can with the label “Red Line” while Russian President Vladimir Putin walks away saying, “I think you used it all on Syria…”

Under an interim deal clinched in November, Iran agreed to curb parts of its nuclear program for six months in exchange for limited sanctions relief. The agreement came into effect on January 20.

“The (nuclear) negotiations are going well … I’m hoping by the first deadline (July 20) we will reach an agreement,” Foreign Minister Mohammad Javad Zarif told reporters on the sidelines of an event in New Delhi on February 28…

“I can tell you that Iran’s nuclear program will remain intact. We will not close any program,” he said, according to Reuters.

President Obama is raking up the honors.  A Nobel Peace Prize in 2009.  The Lie of the Year in 2013.  And now the Joke of the Year in 2014.  Pity he hasn’t won some of the awards most Americans want him to win.  The Best Economy of the Year award.  And the Most Respected World Leader of the Year award.  Two awards President Reagan did win.  His outlawing Russia joke was really funny, though, and he should have won Joke of the Year, too.  But here President Obama has him beat.

The Iranians will not close any nuclear program?  If not why then did we lift those sanctions?  It makes no sense.  Unless President Obama is going after yet another award.  The Most Naïve World Leader of the Year award.  Where he’s been a perennial favorite to win every year since 2009.

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Peace through Strength

Posted by PITHOCRATES - March 6th, 2014

Politics 101

Bad Guys won’t open their Can of Whoop-Ass if there is a Chance they’ll get their Ass Kicked

Bullies generally pick on smaller and weaker people.  Smaller and weaker people don’t pick on tough guys.  They don’t walk up to a bully and give him a wedgie.  They’d like to.  But they don’t.  Why?  Because if a small and weak person did they’d get their ass kicked.  That’s why.  And people don’t like getting their ass kicked.  But sometimes it’s the tough guys that save the day.

In the opening scene of V for Vendetta Evey was about to get raped by some government thugs.  Then tough guy V came along and kicked their asses.  Saving Eve from a brutal rape.  In Die Hard the evil Hans Gruber was going to kill everyone in that building until tough guy John McClane happened on the scene.  And started killing the bad guys.  Saving the day.  In the movie Patton everyone wanted him thrown out of the Army after he slapped that crying soldier.  But when the Allies’ drive stalled in the Normandy hedgerow country who did they turn to?  That’s right.  Tough guy General Patton.  Who started kicking Nazi ass big time.  Breaking through their lines and advancing in every compass direction while British General Bernard Montgomery was still struggling o take his D-Day objective.  Caen.

People don’t like getting their ass kicked.  But if they are in danger of a good ass-kicking they’d want someone on their side who can kick ass as good as the next guy.  For even bad guys don’t want to get their ass kicked.  And if there is a chance of that happening they’re going to think long and hard before opening their can of whoop-ass.  Especially when someone else’s can of whoop-ass is bigger.

Only the Military Might of the United States could contain Soviet Expansion

The Roman Empire had one mighty can of whoop-ass.  Something her potential enemies understood.  And feared.  So they didn’t cause any trouble.  Because they didn’t want to get their ass kicked.  Which is why from approximately 27 BC to 180 AD there was relative peace in the world.  Pax Romana.  For the Romans had the mightiest military force in the world.  And if you went up against them you were most likely going to lose.  So they didn’t.  Instead, choosing to live in peace.

The British Empire was even larger than the Roman Empire.  And had an even larger can of whoop-ass.  Not only did they have armies throughout their empire which was so large that the sun never set on it.  The Royal Navy ruled the seas.  Which meant if you caused any trouble in the world you could expect an ass-kicking.  Either from her mighty military power.  Or her aid to a smaller and weaker country under threat from an aggressive neighbor.  The bad guys learned.  It wasn’t worth it.  If you tried to break the peace you were going to get your ass kicked.  Which is why from 1815 through 1914 when the British Empire ruled the world there was relative peace.  Pax Britannica.

The United States of America had come of age during the 20th century.  Growing even bigger and stronger than the empire that sired her.  The British Empire.  Who went into decline during the 20th century.  But just as Pax Britannica drew to a close and the world became a more dangerous place the United States stepped in.  Allowing the Allies to defeat Nazi Germany.  And Imperial Japan.  She grew to have the biggest can of whoop-ass in history.  And became the world’s policeman.  Pushing back against Soviet expansion.  In Europe.  The Balkans.  The Middle East.  And Southeast Asia.  The Soviets wanted to conquer the world.  And would have if not for America’s mighty military to counter their threat.  Leading to a period of relative peace following World War II.  Pax Americana.  As only the military might of the United States could contain Soviet expansion.

Vladimir Putin feels that he can put the old Soviet Union back together during the Obama Administration

During a sound check before a radio address President Reagan made a joke.  He said, “My fellow Americans, I’m pleased to tell you today that I’ve signed legislation that will outlaw Russia forever.  We begin bombing in five minutes.”  Reagan had a sense of humor and those present laughed.  The joke leaked.  The Soviets heard it.  And they put their Soviet Far East Army on alert.  You see, they had great respect for the awesome military power of the United States.  And they respected Reagan.  They did not like him.  But they respected him.  And if he said he was going to open a can of whoop-ass on them they got nervous.  For President Reagan may have spoken softly.  But he was not afraid to kick ass.

The Soviets had no such respect for Reagan’s predecessor.  Jimmy Carter.  In fact, they had so little respect for him that they developed a nuclear first-strike plan.  For Carter was gutting the military.  And wasn’t a tough guy when it came to foreign policy.  He was a president who wanted to focus on domestic policy.  A sign of weakness the Soviets could smell.   Anyone who gutted the military to pay for more domestic spending would never pull the nuclear trigger.  At least that’s what the Soviets thought.  Which is why they prepared a nuclear first-strike plan during the Carter administration.  Sure they could win a nuclear war against him.  The Soviets thought no such thing during the Reagan administration.  So instead of a nuclear war (which may have happened in a Carter second term) we had peace.  Because of our strength.

Peace through strength.  If you’re a bad-ass people will leave you alone.  Because no one wants to get their ass kicked.  If you’re hell-bent on beating the crap out of your neighbor so you can take her resources and there is a bad-ass in the world that can bring a world of hurt down on you it will make you think.  And pause.  This is why there was a Pax Romana.  A Pax Britannica.  And a Pax Americana.  Because people respect a bad-ass.  And will not incite it.  They may hate the bad-ass.  But they will respect it.  And not piss it off.

President Obama has a strong domestic agenda.  Like Jimmy Carter.  He doesn’t want to deal with foreign policy.  Like Jimmy Carter.  And he is not respected or feared by the world’s bad guys.  Like Jimmy Carter.  Who is far more inclined to make a speech and threaten action.  But is far less likely to open a can of whoop-ass.  Like Ronald Reagan.  Which is why Vladimir Putin feels that he can put the old Soviet Union back together during the Obama administration.  Because he doesn’t fear the wrath of President Obama.  As no one does.  For he is all bark and no bite.  At least, so far.  Apart from killing a bunch of people that can’t fight back.  Drone strikes.  Bombing Libya (that was no threat to American interests).  And killing Osama bin Laden with a SEAL team.  More of an imperial use of force than acting as the world’s policeman to safeguard liberty and democracy.  So Vladimir Putin has little to worry about during an Obama presidency.  Unlike conservatives in America.

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Progressive and Regressive Taxes and Marginal Tax rates

Posted by PITHOCRATES - January 6th, 2014

Economics 101

(Originally published July 9th, 2012)

The Beatles fled Britain to Escape a Confiscatory Top Marginal Tax Rate of 95%

George Harrison wrote Taxman.  The song appeared on the 1966 Beatles album Revolver.  It was an angry protest song.  For George Harrison was furious when he learned what exactly the progressive tax system was in Britain.  In the song the British taxman is laying down the tax law.

Let me tell you how it will be
There’s one for you, nineteen for me
‘Cause I’m the taxman, yeah, I’m the taxman

Should five per cent appear too small
Be thankful I don’t take it all
‘Cause I’m the taxman, yeah I’m the taxman

That’s one for you, Mr. Harrison.  And nineteen for us.  The government.  Meaning that for every £20 the Beatles earned they got to keep only £1.  This is a 95% top marginal tax rate.  A supertax on the super rich imposed by Harold Wilson’s Labour government.  So if the Beatles earned £1 million because of their incredible talent and hard work touring in concert, working on new albums in the studio and making movies, of that £1 million they got to keep only about £50,000.  While the government got £950,000.  If they earned £10 million they got to keep about £500,000.  While the government got £9,500,000.  As you can see 5% is a very small percentage.  Which is why George Harrison got so angry.  The harder they worked the less of their earnings they were able to keep.

Is this fair?  George didn’t think so.  Nor did his fellow Beatles.  For they fled Britain.  Moved to another country.  Becoming tax exiles.  For they were little more than court minstrels.  Who the government forced to entertain them.  Earning a lot of money so they could take it away.  To help pay for an explosion in social spending Harold Wilson unleashed on Britain.  Socializing the UK like never before.  And all those social benefits required a lot of taxes.  Hence the progressive tax system.  And marginal tax rates.  Where the super rich, like the Beatles, paid confiscatory tax rates of 95%.

The Top Marginal Tax Rate was around 70% under President Carter and around 28% under President Reagan

As social spending took off in the Sixties and Seventies governments thought they could just increase tax rates to generate greater amounts of tax revenue.  For governments looked at the economy as being static.  That whatever they did would result in their desired outcome without influencing the behavior of those paying these higher tax rates.  But the economy is not static.  It’s dynamic.  And changes in the tax rates do influence taxpayer behavior.  Just ask the Beatles.  And every other tax exile escaping the confiscatory tax rates of their government.  Because of this dynamic behavior of the taxpayers excessively high tax rates rarely brings in the tax revenue governments expect them to.

Even when it comes to sin taxes government still believes that the economy is static.  Even though they publicly state that taxes on alcohol and tobacco are to dissuade people from consuming alcohol and tobacco.  (The U.S. funded children’s health care with cigarette taxes clearly showing the government did not believe these taxes would stop people from smoking).  Perhaps some in government look at sin taxes as a way to discourage harmful habits.  But the taxman sees something altogether different when they look at sin taxes.  Addiction.  Knowing that few people will give up these items no matter how much they tax them.  And that means tax revenue.  But unlike the progressive income tax this tax is a regressive tax.  Those who can least afford to pay higher taxes pay a higher percentage of their income to pay these taxes.  For sin taxes increase prices.  And higher prices make smaller paychecks buy less.  Leaving less money for groceries and other essentials.

Most income taxes, on the other hand, are progressive.  Your income is broken up into brackets.  The lowest bracket has the lowest income tax rate.  Often times the lowest income bracket pays no income taxes.  The next bracket up has a small income tax rate.  The next bracket up has a larger income tax rate.  And so on.  Until you get to the high income threshold.  Where all income at and above this rate has the highest income tax rate.  This top marginal tax rate was around 70% under President Carter.  Around 28% under President Reagan.  And 95% under Harold Wilson’s Labour government in Britain.  An exceptionally high rate that led to great efforts to avoid paying income taxes.  Or simply encouraged people to renounce their citizenship and move to a more tax-friendly country.

When the Critical Mass of People turn from Taxpayers to Benefit Recipients it will Herald the End of the Republic

Progressive taxes are supposed to be fair.  By transferring the tax burden onto those who can most afford to pay these taxes.  But the more progressive the tax rates are the less tax revenue they generate.  What typically happens is you have a growing amount of low-income earners paying no income taxes but consuming the lion’s share of government benefits.  The super rich shelter their higher incomes and pay far less in taxes than those high marginal tax rates call for.  They still pay a lot, paying the majority of income taxes.  But it’s still not enough.  So the middle class gets soaked, too.  They pay less than the rich but the tax bite out of their paychecks hurts a lot more than it does for the rich.  Because the middle class has to make sacrifices in their lives whenever their tax rates go up.

As social spending increases governments will use class warfare to increase taxes on the rich.  And they will redefine the rich to include parts of the middle class.  To make ‘the rich’ pay their ‘fair’ share.  And they will increase their tax rates.  But it won’t generate much tax revenue.  For no matter how much they tax the rich governments with high levels of spending on social programs all run deficits.  Because there just aren’t enough rich people to tax.  Which is why the government taxes everything under the sun to help pay for their excessive spending.

If you drive a car, I’ll tax the street,
If you try to sit, I’ll tax your seat.
If you get too cold, I’ll tax the heat,
If you take a walk, I’ll tax your feet.

Don’t ask me what I want it for
If you don’t want to pay some more
‘Cause I’m the taxman, yeah, I’m the taxman

Now my advice for those who die
Declare the pennies on your eyes
‘Cause I’m the taxman, yeah, I’m the taxman
And you’re working for no one but me.

This is where excessive government spending leads to.  Excessive taxation.  And confiscatory tax rates.  Taking as much from the wealth creators as possible to fund the welfare state.  And as progressive tax systems fail to generate the desired tax revenue they will turn to every other tax they can.  Until there is no more wealth to tax.  Or to confiscate.  When the wealth creators finally say enough is enough.  And refuse to create any more wealth for the government to tax or to confiscate.  Leaving the government unable to meet their spending obligations.  As the critical mass of people turn from taxpayers to benefit recipients.  Heralding the end of the republic.

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Debt, Jobs and Criticism—Carter, Reagan, Clinton, Bush and Obama

Posted by PITHOCRATES - November 19th, 2013

History 101

The Democrats used the Power of the Purse to oppose the Reagan Agenda wherever they Could

The left hated President Reagan.  They called him just a “B” movie actor.  With many references to Bedtime for Bonzo.   With the implication that Reagan was a chimpanzee.  He was called stupid.  Senile.  And they said he hated the poor.  The usual stuff when it comes to Democrats calling the opposition names.  But as about as demeaning as it gets.  For the Democrats hated Ronald Reagan with a passion.  They may have hated him even more than George W. Bush.  Another president they called stupid.  Even making similar chimpanzee references.

They fought Reagan tooth and nail.  The Democrats held the House and they used the power of the purse to oppose the Reagan agenda wherever they could.  So Reagan had to compromise on some things.  Especially tax hikes.  But for the most part he kept his word to the American people.  And maintained high approval ratings.  Making it harder for the Democrats to block all of the Reagan agenda.  Which just made the left hate him more.

It’s funny the short memories Democrats have.  For any criticism of President Obama is met with charges of racism.  And because of that few criticize him.  Because no one wants to be called a racist.  Giving President Obama a free pass for most if his presidency.  Something neither George W. Bush nor Ronald Reagan ever enjoyed.  Yet the left says the right says the most vile things about President Obama.  Unprecedented things.  Like calling him a liar when he lied during the State of the Union Address.  Which must be different from saying ‘Bush lied people died’ over and over again.

President Obama is on Pace to add more Debt than Ronald Reagan

Among the terrible things the left said Ronald Reagan was doing was running up the debt to unsustainable levels.  And he did run up the debt.  About 99.4% during his 8 years.  Or about 12.4% a year.  Much of that spending, though, was to reverse the damage Jimmy Carter did to national defense.  He had gutted defense spending so much (cancelling bombers and missile programs) that the Soviet Union thought for the first time that they could win a nuclear war against the United States.  At least with Jimmy Carter as president.  They actually started drafting nuclear first-strike plans to replace the deterrence of mutually assured destruction (MAD).  Anyway, that spending led to the collapse of the Soviet Union.  Allowing the U.S. to win the Cold War.  Giving Bill Clinton a huge peace dividend during his presidency.

Bill Clinton wanted to nationalize health care.  And it didn’t go over well.  His big spending liberal agenda got neutered at the midterm elections.  As he angered the people so much the Republicans won both the House and Senate.  Forcing Clinton to the center.  Dropping any thoughts of national health care.  With Republicans even forcing welfare reform on him.  The Republican Revolution kept spending down.  And the debt only grew 13.6% during Clinton’s 8 years.  Or about 1.7% a year.

After the 9/11 terrorist attacks George W. Bush ramped up military spending.  For national security.  And two wars.  He also ramped up domestic spending.  Giving us Medicare Part D.  A program to subsidize the prescription drugs for Medicare recipients.  In the 8 years of the Bush presidency he added about 41.4% to the national debt.  About 5.2% a year.  Which sounded like a lot until President Obama came along.  A near trillion dollar stimulus bill that stimulated little.  Investments into failed solar power companies and electric car companies.  Automotive (i.e., union pension fund) bailouts.  In his 5 years in office Obama has raised the debt by 53.8%.  Or 10.8% each of his 5 years.  A little more than twice the rate of George W. Bush.  At this pace he will even add more debt than Ronald Reagan.  Adding up to 18.3% per year (over 8 years) if no one stops his spending.

Under President Obama the Gap between Black and White Unemployment grew Greater

President Obama said those ‘wise’ investments and higher taxes on those who could afford to pay a little more would generate economic activity.  His income redistribution would balance the playing field.  And raise the poor out of poverty.  While people everywhere celebrated the first black president.  For it would bring the races together.  This is why some on the right joked that President Obama was the messiah.  Because he was going to do all of that.  As well as make the ocean levels fall.  Black America especially loved the nation’s first black president.  As 95% of the black vote went to Obama in 2008.  Though the enthusiasm waned a bit in 2012.  As only 93% of the black vote went to Obama.  And how has black American done under the Obama economic policies.  Well, not as good as they did under the Bush economic policies (see archived data from Table A-2. Employment status of the civilian population by race, sex, and age in the Employment Situation Archived News Releases by the Bureau of Labor Statistics).

Unemplyment Rates by Race Age Sex 2003-2013 R2

The Great Recession officially ran from December 2007 to June 2009.  Which corresponds to the transition from George W. Bush to Barack Obama.  People often call the Great Recession the worst recession since the Great Depression.  Of course they say that primarily because the current economic recovery is the worst since that following the Great Depression.  And the reason for that is President Obama’s economic policies.

Unemployment was lower for everyone under Bush.  On average the unemployment rate for white/black men, women and 16-19 year olds under Bush was 4.2%/9.3%, 4.0%/8.2% and 14.7%/31.1%, respectively.  Under President Obama these numbers jumped to 7.8%/15.7%, 6.7%/12.2% and 21.8%/40.3%.  Which should give black America cause for concern.  For under President Obama the gap between black and white unemployment grew greater.  The gap between black and white men went from 5.1 to 7.9.  An increase of 55.6%.  The gap between black and white women went from 4.2 to 5.5.  An increase of 32.9%.  And the gap between black and white 16 to 19 year olds went from 16.5 to 18.5.  An increase of 12.7%.  So whatever President Obama is doing it isn’t helping America find work.  Especially black America.

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The Democrats have refused to Raise the Debt Ceiling for Republican Presidents

Posted by PITHOCRATES - October 8th, 2013

History 101

The Democrats opposed Raising the Debt Ceiling for Republican President Dwight Eisenhower

President Obama and the House Republicans are at a standoff.  At the center of the debate is Obamacare.  The House Republicans want to defund Obamacare.  They didn’t like it when it cost $1 trillion over ten years.  And they like it even less now that the CBO has revised its cost to $3 trillion.  It has frozen hiring.  And pushed people from full-time to part-time.  President Obama has also revised the law.  Taking on legislative powers that the Constitution gives only to Congress.  With the one year delay for the business mandate being especially galling to Republicans.  As well as the 75% subsidy members of Congress and their staff get.

The House Republicans have reduced their demands to basically giving the president a continuing resolution to fund all of government if he would only give the American people what he gave to his friends in Big Business.  A one year waiver of the individual mandate.  Infuriating the president.  Saying he will not negotiate with terrorists taking the American people hostage.  However, he said he will negotiate with the Republicans.  After they give him everything he wants.  Including raising the debt limit.  For shutting down the government is one thing.  But messing with the full faith and credit of the United States is another.  With the Republicans having the gall to demand spending cuts before raising the debt ceiling.  This was just unprecedented.  Never before did anyone use the debt ceiling to bully a president before.  In the past Congresses always raised the debt ceiling whenever a president requested.  Whistling a happy tune in the process.  Except, of course, in 1953 (see Can Debt Ceiling Debates Be Useful? History Says Maybe. by Joseph J. Thorndike posted 8/28/2013 on the Huffington Post).

The idea of using the debt ceiling for leverage is not new. Indeed, the nation’s first debt limit crisis hinged on it. In the summer of 1953, President Dwight Eisenhower asked Congress for a modest boost in the debt ceiling. When austerity-minded lawmakers refused, it prompted a crisis that brought the nation to the brink of default – or to its fiscal senses, depending on your point of view…

Eisenhower didn’t believe that spending cuts would be sufficient to keep federal debt under the cap. “Despite our joint vigorous efforts to reduce expenditures,” he told Congress, “it is inevitable that the public debt will undergo some further increase.” On July 30, Eisenhower asked Congress for an increase in the debt ceiling from $275 billion to $290 billion…

Sen. Harry F. Byrd, D-Va., took the lead in fighting the increase. Raising the limit would be “an invitation to extravagance,” he declared. Keeping the present cap, moreover, would encourage much-needed economy. “It may be that the administration would be forced to operate on a very prudent and conservative budget in order to avoid an increase in the debt limit,” he predicted.

A host of senators joined Byrd’s campaign to reject the increase. The New York Times reported that Democratic opposition was “almost solid,” and many Republicans were also prepared to break with the president…

As a leverage goes, it was pretty effective. Almost immediately, Eisenhower told his department heads to cut their spending. “It is absolutely essential that you begin immediately to take every possible step progressively to reduce the expenditures of your department during the fiscal year 1954,” he told them.

So it started early.  And it started with the Democrats.  Holding the debt limit hostage to get what they want.  And in 1953, the Democrats got what they wanted.  They forced President Eisenhower to make spending cuts.  Just like the Republicans asked for in 2011.  And will ask again now.  But President Obama was not as reasonable in 2011 as President Eisenhower was.  And he is saying he will be even less reasonably now.

The Democrats opposed Raising the Debt Ceiling for Republican President Ronald Reagan

So was 1953 an isolated incident?  Were the Democrats more accommodating at other times when a president asked them to raise the debt ceiling?  As President Obama would have us believe?  Well, they weren’t very accommodating in 1984.  When President Ronald Reagan asked Congress to raise the debt ceiling (see In 1984, debt debate looked different to Biden, GOP by Stephen Dinan posted 7/19/2011 on The Washington Times).

With time running out on a looming debt crisis, the president and his allies in the Senate are fighting to win a raise in the government’s borrowing limit, only to be stymied by a minority insisting that a spending freeze be part of the deal.

Sounds like present day, but it was October 1984 — when the partisan roles were reversed. Republicans controlled the White House and the Senate, while Democrats controlled the House. Democrats also could sustain filibusters in the Senate and were balking at raising the debt ceiling unless it was attached to big spending cuts…

One of the leaders of that 1984 Democratic revolt — a man who tried to impose a spending freeze and fought for a smaller debt increase than President Reagan wanted — was none other than current Vice President Joseph R. Biden, then a senator from Delaware and now President Obama’s right-hand man in negotiations with Congress.

“I must express my protest against continually increasing the debt without taking positive steps to slow its growth. Therefore, I am voting against any further increase in the national debt,” Mr. Biden said in a floor speech just before helping fellow Democrats defeat an increase of $251 billion on a 46-14 vote.

Once again the Democrat-controlled House refused to raise the debt ceiling.  So 1953 was not an isolated incident.  But the beginning of a pattern of Democrat willingness to risk the full faith and credit of the United States for political reasons.  To get their way despite losing the election to President Reagan.  Apparently back then elections didn’t have consequences.

How embarrassing it must be for the vice president.  Being part of an administration trying to do what the Reagan administration did when he stood in opposition.  Imagine trying to argue for something you argued against previously?  Thankfully, it was only the vice president that had such a hypocritical past.  Imagine how embarrassing it would be if the president had such hypocrisy in his past.

The Democrats opposed Raising the Debt Ceiling for Republican President George W. Bush

Well, as it turns out, another young Democrat senator went toe-to-toe with another Republican president over the debt ceiling.  And he just didn’t vote against it.  He made a speech.  On the record.  For posterity.  To prove he was no spendthrift.  At least, not when a Republican was in the White House.  That president was George W. Bush.  And that senator was, of course, Barack Obama (see Obama Really Wishes He Never Gave This Speech About The Debt Ceiling by Walter Hickey posted 1/14/2013 on the Business Insider).

In 2006, then-Sen. Barack Obama gave a floor speech defending his decision to vote against an increase in the debt ceiling under President George W. Bush…

Here are some of the key parts of Obama’s speech:

Mr. President, I rise today to talk about America’s debt problem. The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies.

[…]

Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘‘the buck stops here.’’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.

In the midst of the first debt-ceiling standoff in 2011, Obama was asked about his flip by ABC’s George Stephanopoulos. He chalked it up as a “political vote” and said his mindset changed as President.

Hypocrisy, thy name is Barack Obama.

Interesting.  It was okay for him to do what the House Republicans are doing now when he was in Congress.  When there was less debt.  And less of a debt crisis.  But it’s not okay for the House Republicans to do so now.  When there is more debt.  And a greater debt crisis.

So what is the right thing to do?  Well, if you’re President Obama the right thing to do is what he wants to do.  Not what is best for the country.  For if you argue both sides of the same issue at different times it means you’re more interested in what’s best for yourself.  Not the country.  Unless he evolved on this issue, too.  If so, perhaps we should ask for President Obama’s resignation.  For if he keeps evolving on issues he must be too ill-informed or naïve to be president.

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Keynesian Policies and Obamacare reduce Household Incomes

Posted by PITHOCRATES - August 25th, 2013

Week in Review

President Obama is a horrible president.  Why?  Because he’s black?  No, that’s not it.  He’s a horrible president who just happens to be black.  One of the big reasons why he is a horrible president is because he is a Keynesian.  And has tried the same failed Keynesian policies of the past to turn the economy around.  And just as they failed in the past they have failed consistently during the Obama presidency.

Keynesian economics states that during a recession when people aren’t spending money the government should do something about it. They should start spending money.  And they should implement policies that put more money into consumers’ pockets.  So they go out in the economy and spend it.  Thus generating economic activity.  And pulling the nation out of recession.  The government could cut taxes to put more money into consumers’ pockets.  But they don’t like cutting taxes.  Preferring to add more welfare programs.  Which give money to consumers.  So they can spend it.  That’s how President Obama has chosen to pull the nation out of the worst recession since the Great Depression.  And as expected by every non-Keynesian, his Keynesian policies have been an abject failure (see Incomes Have Dropped Twice as Much During the ‘Recovery’ as During the Recession by JEFFREY H. ANDERSON posted 8/23/2013 on The Weekly Standard).

New estimates derived from the Census Bureau’s Current Population Survey by Sentier Research indicate that the real (inflation-adjusted) median annual household income in America has fallen by 4.4 percent during the “recovery,” after having fallen by 1.8 during the recession.  During the recession, the median American household income fell by $1,002 (from $55,480 to $54,478). During the recovery—that is, from the officially defined end of the recession (in June 2009) to the most recent month for which figures are available (June 2013)—the median American household income has fallen by $2,380 (from $54,478 to $52,098).  So the typical American household is making almost $2,400 less per year (in constant 2013 dollars) than it was four years ago, when the Obama “recovery” began.

Importantly, these income tallies include government payouts such as unemployment compensation and cash welfare. So Obama’s method of funneling ever-more money and power to Washington, and then selectively divvying some of it back out, clearly isn’t working for the typical American family. Nor would his proposed immigration bill help the income prospects of the median American.  And perhaps it’s just a coincidence, but the span of time over which the typical American household’s income has dropped by about $2,400 a year (during an ostensible “recovery”) corresponds almost exactly with the span of time that we’ve been living with the looming specter of Obamacare—which began to be debated in earnest around June 2009.

Another reason why President Obama is a horrible president is that he is more interested in transforming the nation than he is in improving people’s lives.  He wants to make it what it was before President Reagan made the nation great again.  President Reagan followed President Carter.  Who was another horrible president.  Because of his Keynesian economic policies.  While President Reagan wasn’t a Keynesian.  Which is why the economic recovery following Carter’s malaise was one of the strongest economic recoveries in history.  Making President Reagan a great president.  Because he made life better for people.  Unlike Carter and Obama.  Who made life worse.  Because of their Keynesian economic policies.

Obamacare, the pathway to national health care, is a big driver of the fall in household incomes.  The plan for Obamacare was to put the private health insurance business out of business.  So Obamacare can evolve into full-blown national health care.  And to do that they forced businesses to spend more money on their health insurance for full-time employees.  Of course, the idea was for businesses to avoid this additional cost by pushing people to part-time.  And taking away their health insurance.  Advancing the nation further down the Obamacare pathway to national health care.  Which is more important to him than household incomes.  Which he will gladly trade away to transform the country.  Not to just what it was before Ronald Reagan.  But even further left.  Because, for President Obama, what he wants is more important than what the people want.  Jobs, a rising household income and private health insurance.  Which makes him a horrible president.  Just as his Keynesian economic policies make him a horrible president.

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Is the New York Times ready to blame Bill Clinton for the Subprime Mortgage Crisis?

Posted by PITHOCRATES - August 18th, 2013

Week in Review

President Obama likes to say that the Republicans only want to try the failed policies of the past.  And he’s both right and wrong.  For the Republicans do want to implement the policies of the past.  Because these policies did NOT fail.  Contrary to President Obama’s recurring bleat.  For the policies of President Reagan were based on classical economics.  Those same policies that made America the world’s number one economic power.  While the policies of the left, Keynesian economic policies, have failed every time they’ve been tried.  And reduced America’s economic prowess.

Before John Maynard Keynes came along during World War I the U.S. economy was steeped in the philosophy of our Founding Fathers.  Thrift.  Frugal.  Rugged individualism.  These are the things that made America great.  For over a hundred years Americans worked hard and saved their money.  Spending as little for the here and now.  Always planning for the future.  They put everything they didn’t have to spend into the bank.  As everyone put away these small amounts of money banks turned the aggregate of these numerous small deposits into capital.  Which investors borrowed at reasonable interest rates because we had a high savings rate.  Providing plenty of capital to grow the American economy.  Thanks to a sound banking system.   That exercised sound lending practices.  With investment capital a high savings rate provided.

This system worked so well because people balanced risk with reward.  Bankers made wise lending decisions based on the likelihood of those loans being repaid.  And investors with a history of wise and responsible borrowing had continued access to that investment capital.  While banks who took too great a risk failed.  And investors who took great risks soon found themselves broke with no further access to investment capital.  This balance of risk and reward complimented with a populace that was thrifty and frugal with their money created Carnegie Steel.  The Standard Oil Company.  And the Ford Motor Company.  Risk takers.  Who balanced risk with reward.  And paid a heavy price when they took too great a risk that had no reward.

But the days of Andrew Carnegie, John D. Rockefeller (Standard Oil) and Henry Ford are gone.  These men probably couldn’t—or wouldn’t— do what they did in today’s regulatory environment the left has created.  The higher taxes.  And the financial instability caused by the left’s destruction of the banking system.  As the left has made high-finance a plaything for their rich friends.  By transferring all risk to the taxpayer.  Allowing bankers to take great risks.  With little downside risk.  Giving us things like the subprime mortgage crisis.  Where President Clinton’s Policy Statement on Discrimination in Lending (1994) unleashed 10 federal agencies on banks to pressure them to loan to the unqualified or else.  So they did.  Using the Adjustable Rate Mortgage as the vehicle to get the unqualified into homeownership.  These with no-documentation mortgage applications, zero-down, interest-only, etc., put people into homes by the droves.  Especially those who could not afford them.  Of course, banks just won’t loan to the unqualified without some federal assistance.  Which came in the guise of Fannie Mae and Freddie Mac.  Who bought those toxic mortgages from these lenders, repackaged them into collateralized debt obligations and sold them to unsuspecting investors.  And, well, you know the rest.

So Bill Clinton gave us the subprime mortgage crisis.  And the Great Recession.  It’s always the same.  Whenever liberals get into power they do the same thing over and over again.  They destroy the economy with policies that only benefit them and their rich friends.  America’s aristocracy.  Yet they talk the talk so well people believe that THIS time things will be different.  But they never are.  Already President Obama is talking about doing the same things to increase homeownership that got us into the subprime mortgage crisis.  And his disastrous policies didn’t even prevent his reelection.  Because he can talk the talk so well.  Just like Clinton.  So well that few look at the swath of destruction in their wakes.  At least, not on this side of the Atlantic (see The New York Times takes down the Clinton Foundation. This could be devastating for Bill and Hillary by Tim Stanley posted 8/14/2013 on The Telegraph).

Is the New York Times being guest edited by Rush Limbaugh? Today it runs with a fascinating takedown of the Clinton Foundation – that vast vanity project that conservatives are wary of criticising for being seen to attack a body that tries to do good. But the liberal NYT has no such scruples. The killer quote is this:

For all of its successes, the Clinton Foundation had become a sprawling concern, supervised by a rotating board of old Clinton hands, vulnerable to distraction and threatened by conflicts of interest. It ran multimillion-dollar deficits for several years, despite vast amounts of money flowing in.

A lot of people are scratching their heads as to why the New York Times would run this story.  For it is very out of character for a liberal paper to attack a liberal icon.  Could it be to air out this dirty laundry long before Hillary is a candidate for president?  What, that?!?  That’s old news.  We’ve talked about it already.  Talked it to death.  Nothing to see there.  So let’s focus on what’s important for the American people.

Or could it be that the left has grown tired of the Clintons?  After all, Barack Obama was the first black man elected president.  Something the young people can get excited about.  But will today’s young even know who the Clintons are?  Could be a problem for a party that historically gets the youth vote.  So is this the first sign that Hillary won’t be the anointed one in 2016?  And is this an opening broadside against Hillary?  A harbinger of what is yet to come?  Perhaps.  Or it could mean people are just not falling for the Clinton charm anymore.  Something our friends in the British media have no problem seeing through.

The cynical might infer from the NYT piece that the Clintons are willing to sell themselves, their image, and even their Foundation’s reputation in exchange for money to finance their personal projects. In Bill’s case, saving the world. In Hillary’s case, maybe, running for president.

It’s nothing new to report that there’s an unhealthy relationship in America between money and politics, but it’s there all the same. While the little people are getting hit with Obamacare, high taxes and joblessness, a class of businessmen enjoys ready access to politicians of both Left and Right that poses troubling questions for how the republic can continue to call itself a democracy so long as it functions as an aristocracy of the monied. Part of the reason why America’s elites get away with it is becuase they employ such fantastic salesmen. For too long now, Bill Clinton has pitched himself, almost without question, as a homespun populist: the Boy from Hope. The reality is that this is a man who – in May 1993 – prevented other planes from landing at LAX for 90 minues while he got a haircut from a Beverley Hills hairdresser aboard Air Force One. The Clintons are populists in the same way that Barack Obama is a Nobel prize winner. Oh, wait…

Wish America could see Clinton and Obama as plainly as this.  And not get lost in the gaze of their eyes.

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Social Security Receipts, Outlays and Surplus 1940-2012

Posted by PITHOCRATES - February 19th, 2013

History 101

Social Security is going Bankrupt because of an Aging Population, Inflation and Untrustworthy Politicians

Social Security introduced the era of Big Government.  When the Roosevelt administration passed it into law it faced fierce opposition.  For it wasn’t the job of the federal government to provide a pension.  If it was the Founding Fathers would have included it in the Constitution.  But they didn’t.  Thanks to the Great Depression, though, a serious crisis FDR didn’t let go to waste, FDR was able to change America.  By taking the federal government beyond the limits of the Constitution.

The fear was that it would grow into a massive program requiring more and more taxes to support it.  Which the FDR administration refuted in a 1936 pamphlet (see The 1936 Government Pamphlet on Social Security).

…beginning in 1949, twelve years from now, you and your employer will each pay 3 cents on each dollar you earn, up to $3,000 a year. That is the most you will ever pay.

Of course, that wasn’t true.  It was either a lie.  Or a disbelief that anyone would ever decouple the dollar from gold.  Or wishful thinking that we can trust politicians.  Whatever the reason the Social Security tax rate is a long way from that 3% today.  And the maximum earnings amount is a lot higher than $3,000.  But despite the tax rate and the maximum earnings amount soaring from these promised lows it’s still not enough.  For Social Security is struggling to avoid bankruptcy in the near future.  Because it has become a massive program requiring more and more taxes to support it.

Social Security is suffering from three major problems.  The first is an aging population (fewer people entering the work force to pay for the greater number of people leaving the workforce).  The second is inflation.  And the third is that politicians manage it.  Who just can’t control themselves around big piles of money.

The Social Security Surplus increased in the Nineties thanks to the Peace Dividend, Japan’s Lost Decade and the Dot-Com Boom

Social Security is off-budget.  Employers and employees pay into the program to provide for the program’s benefits.  These are dedicated taxes.  They are only to pay for Social Security benefits.  That is why it is off-budget.  They don’t mingle Social Security taxes with all the other taxes the government collects.  To pay for all the things in the federal budget.  Technically, those taxes are supposed to go into a retirement account that grows with interest.  And this big, growing pile of money is supposed to pay the benefits.  But in reality it doesn’t work this way.  The government collects taxes.  From these taxes they pay current benefits.  And anything left over, the Social Security surplus, goes into the Social Security Trust Fund.  We can see this graphically if we plot receipts, outlays and the surplus (see Table 2.1—RECEIPTS BY SOURCE: 1934–2017 and Table 3.1—OUTLAYS BY SUPERFUNCTION AND FUNCTION: 1940–2017 at FISCAL YEAR 2013 HISTORICAL TABLES).

Social Security Receipts Outlays Surplus 1940-2012

For the first 30 years or so of this program it hardly made a dent in our lives.  Small amounts were going in.  Small amounts were going out.  And small amounts were going into the trust fund.  Then a lot of people started retiring.  Just as birth control and abortion changed the family size.  And President Nixon decoupled the dollar from gold.  Allowing them to print money like never before.  Which, of course, depreciated the dollar.  This is why receipts and outlays started trending up after 1971 (when Nixon decoupled the dollar from gold).  To get a better look let’s zoom in and look at the years from 1970-2012.

Social Security Receipts Outlays Surplus 1970-2012

The Seventies were a horrible time economically.  As the government went all in with Keynesian economics.  Which resulted with high inflation and high unemployment.  And stagnant economic growth.  Stagflation.  And Social Security was in trouble.  Receipts were greater than outlays.  But not by very much.  Receipts and outlays may have been trending up but the surplus was pretty flat.  Until President Reagan and the Democrat Congress fixed Social Security to avoid bankruptcy.  After 1983 receipts trended up greater than outlays.  Which caused the surplus to trend up.  Thus saving Social Security.  For awhile.  Now let’s zoom in further to the years 1990-2012 to see what happened in the last two decades.

Social Security Receipts Outlays Surplus 1990-2012

President Reagan won the Cold War by spending more on defense than the Soviets could ever match.  At least not without starving her people to death.  And the Strategic Defense Initiative (aka Star Wars) was the straw that broke the camel’s back.  In 1991 the Soviet Union was no more.  Creating a huge peace dividend for President Clinton.  Which coincided with the dot-com boom.  And Japan’s Lost Decade (Japan’s economic woes were America’s prosperity).  Making the Nineties a very good time economically.  And that healthy economic activity translated into a nice uptrend in the Social Security surplus.  However, low interest rates and irrational exuberance fed the dot-com boom.  It was not real economic growth.  It was a bubble.  And when it burst it gave George W. Bush one painful recession at the start of his presidency.  Which was compounded by the tragedy of 9/11.  Causing a fall in economic activity.  Which caused Social Security receipts to fall.  While outlays continued to grow.  Causing a decline in the Social Security surplus.  Once again cuts in tax rates restored economic activity.  And the Social Security surplus.  Which continued until another bubble burst.  This one was a housing bubble.  Caused by President Clinton with his Policy Statement on Discrimination in Lending.  Where his justice department pressured lenders to qualify the unqualified.  And when the housing bubble burst into the Subprime Mortgage Crisis giving us the Great Recession receipts fell while outlays increased.  Sending the surplus into a freefall.

Social Security is Doomed to Fail because you just can’t Trust Politicians around Great Big Piles of Money

There is both a Social Security tax rate.  And a maximum amount of income to tax.  Both of which they have had to increase to keep up with inflation.  To make up for that aging population.  And to offset the corrupting influence of politicians around big piles of money.  And contrary to that 1936 pamphlet those tax rates started rising early.  And often (see Historical Social Security Tax Rates).

Social Security Surplus and Tax Rate

The Social Security tax rate rose as high as 12.4%.  Which is a 313% increase from the maximum amount guaranteed in that 1936 pamphlet.  And this great upward trend began in the Fifties.  Continuing through the Sixties.  In fact most of the increases came before Nixon decoupled the dollar from gold.  Showing what a horrible job the government actuaries did in crunching the numbers for this program.  As it turned into exactly what the opponents said it would.  A massive program requiring more and more taxes to support it.  And President Obama reducing the tax rate from 12.4% to 10.4% didn’t help the surplus any.  Or the solvency of Social Security.

Social Security Surplus and Maximum Earnings

While the tax rate began rising in the Fifties the maximum taxable earnings amount didn’t.  This amount was pretty flat and able to produce a surplus until 1971.  When President Nixon unleashed the inflation monster by decoupling the dollar from gold.  And the only way to produce a surplus after that was by continuously increasing the maximum earnings amount.  Further proving what a horrible job the government actuaries did in crunching the numbers for this program.  But why are they projecting Social Security will go bankrupt after raising both the tax rate and the maximum taxable earnings amount?  For despite all of the ups and downs there has been a surplus throughout the life of the program.  Some seventy years of a surplus and the miracle of compound interest should have built up quite a nest egg in the Social Security Trust Fund.  But it hasn’t.  Why?  Well, we can see what it could have been.  If we take each year’s surplus (starting in 1940) and add it to an account earning interest compounded annually at an interest rate of 3% through 1971 and 6% after 1971 (to account for inflation) it would look something like this.

Social Security Surplus Earning Compound Interest

Note that these amounts are in millions of dollars.  So at the end of 2012 the ending balance in the trust fund would be $16.5 trillion.  Which is large enough to wipe out the entire federal debt.  From 1980 through 2008 the surplus grew on average 8% each year.  If we assume this growth through 2050 that would take the trust fund to $184.5 trillion.  In 2075 it would be $960.9 trillion.  In 2076 it would be $1.03 quadrillion.  Or $1,027.3 trillion.  With this phenomenal growth based on a realistic 6% interest rate why is Social Security going bankrupt?

Because there isn’t a big pile of money in the Social Security Trust Fund earning compound interest.  The money goes in.  And the government takes it out.  Leaving behind treasury securities.  IOUs.  They raid the Social Security trust fund to pay for other on-budget government expenditures.  With the off-budget surplus.  Hiding the true size of the federal deficit.  And putting Social Security on the path to bankruptcy.  Because you can’t loan money to yourself.  You can only take money meant for one thing and spend it on another.  Leaving that first thing unpaid.  This is Social Security.  And why it was doomed to fail from the beginning.  Because you just can’t trust politicians around great big piles of money.

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Progressive and Regressive Taxes and Marginal Tax rates

Posted by PITHOCRATES - July 9th, 2012

Economics 101

The Beatles fled Britain to Escape a Confiscatory Top Marginal Tax Rate of 95%

George Harrison wrote Taxman.  The song appeared on the 1966 Beatles album Revolver.  It was an angry protest song.  For George Harrison was furious when he learned what exactly the progressive tax system was in Britain.  In the song the British taxman is laying down the tax law.

Let me tell you how it will be
There’s one for you, nineteen for me
‘Cause I’m the taxman, yeah, I’m the taxman

Should five per cent appear too small
Be thankful I don’t take it all
‘Cause I’m the taxman, yeah I’m the taxman

That’s one for you, Mr. Harrison.  And nineteen for us.  The government.  Meaning that for every £20 the Beatles earned they got to keep only £1.  This is a 95% top marginal tax rate.  A supertax on the super rich imposed by Harold Wilson’s Labour government.  So if the Beatles earned £1 million because of their incredible talent and hard work touring in concert, working on new albums in the studio and making movies, of that £1 million they got to keep only about £50,000.  While the government got £950,000.  If they earned £10 million they got to keep about £500,000.  While the government got £9,500,000.  As you can see 5% is a very small percentage.  Which is why George Harrison got so angry.  The harder they worked the less of their earnings they were able to keep.

Is this fair?  George didn’t think so.  Nor did his fellow Beatles.  For they fled Britain.  Moved to another country.  Becoming tax exiles.  For they were little more than court minstrels.  Who the government forced to entertain them.  Earning a lot of money so they could take it away.  To help pay for an explosion in social spending Harold Wilson unleashed on Britain.  Socializing the UK like never before.  And all those social benefits required a lot of taxes.  Hence the progressive tax system.  And marginal tax rates.  Where the super rich, like the Beatles, paid confiscatory tax rates of 95%.

The Top Marginal Tax Rate was around 70% under President Carter and around 28% under President Reagan 

As social spending took off in the Sixties and Seventies governments thought they could just increase tax rates to generate greater amounts of tax revenue.  For governments looked at the economy as being static.  That whatever they did would result in their desired outcome without influencing the behavior of those paying these higher tax rates.  But the economy is not static.  It’s dynamic.  And changes in the tax rates do influence taxpayer behavior.  Just ask the Beatles.  And every other tax exile escaping the confiscatory tax rates of their government.  Because of this dynamic behavior of the taxpayers excessively high tax rates rarely brings in the tax revenue governments expect them to.

Even when it comes to sin taxes government still believes that the economy is static.  Even though they publicly state that taxes on alcohol and tobacco are to dissuade people from consuming alcohol and tobacco.  (The U.S. funded children’s health care with cigarette taxes clearly showing the government did not believe these taxes would stop people from smoking).  Perhaps some in government look at sin taxes as a way to discourage harmful habits.  But the taxman sees something altogether different when they look at sin taxes.  Addiction.  Knowing that few people will give up these items no matter how much they tax them.  And that means tax revenue.  But unlike the progressive income tax this tax is a regressive tax.  Those who can least afford to pay higher taxes pay a higher percentage of their income to pay these taxes.  For sin taxes increase prices.  And higher prices make smaller paychecks buy less.  Leaving less money for groceries and other essentials.

Most income taxes, on the other hand, are progressive.  Your income is broken up into brackets.  The lowest bracket has the lowest income tax rate.  Often times the lowest income bracket pays no income taxes.  The next bracket up has a small income tax rate.  The next bracket up has a larger income tax rate.  And so on.  Until you get to the high income threshold.  Where all income at and above this rate has the highest income tax rate.  This top marginal tax rate was around 70% under President Carter.  Around 28% under President Reagan.  And 95% under Harold Wilson’s Labour government in Britain.  An exceptionally high rate that led to great efforts to avoid paying income taxes.  Or simply encouraged people to renounce their citizenship and move to a more tax-friendly country.

When the Critical Mass of People turn from Taxpayers to Benefit Recipients it will Herald the End of the Republic

Progressive taxes are supposed to be fair.  By transferring the tax burden onto those who can most afford to pay these taxes.  But the more progressive the tax rates are the less tax revenue they generate.  What typically happens is you have a growing amount of low-income earners paying no income taxes but consuming the lion’s share of government benefits.  The super rich shelter their higher incomes and pay far less in taxes than those high marginal tax rates call for.  They still pay a lot, paying the majority of income taxes.  But it’s still not enough.  So the middle class gets soaked, too.  They pay less than the rich but the tax bite out of their paychecks hurts a lot more than it does for the rich.  Because the middle class has to make sacrifices in their lives whenever their tax rates go up. 

As social spending increases governments will use class warfare to increase taxes on the rich.  And they will redefine the rich to include parts of the middle class.  To make ‘the rich’ pay their ‘fair’ share.  And they will increase their tax rates.  But it won’t generate much tax revenue.  For no matter how much they tax the rich governments with high levels of spending on social programs all run deficits.  Because there just aren’t enough rich people to tax.  Which is why the government taxes everything under the sun to help pay for their excessive spending. 

If you drive a car, I’ll tax the street,
If you try to sit, I’ll tax your seat.
If you get too cold, I’ll tax the heat,
If you take a walk, I’ll tax your feet.

Don’t ask me what I want it for
If you don’t want to pay some more
‘Cause I’m the taxman, yeah, I’m the taxman

Now my advice for those who die
Declare the pennies on your eyes
‘Cause I’m the taxman, yeah, I’m the taxman
And you’re working for no one but me.

This is where excessive government spending leads to.  Excessive taxation.  And confiscatory tax rates.  Taking as much from the wealth creators as possible to fund the welfare state.  And as progressive tax systems fail to generate the desired tax revenue they will turn to every other tax they can.  Until there is no more wealth to tax.  Or to confiscate.  When the wealth creators finally say enough is enough.  And refuse to create any more wealth for the government to tax or to confiscate.  Leaving the government unable to meet their spending obligations.  As the critical mass of people turn from taxpayers to benefit recipients.  Heralding the end of the republic.

www.PITHOCRATES.com

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