The Petulant President scolds Republicans, Conservatives and Anyone Else who dares to Oppose Obamaism

Posted by PITHOCRATES - October 17th, 2013

Politics 101

The government shutdown is over. And we avoided defaulting on the national debt  Or so they say.  So who won and who lost?  Well, at this point in time it looks like the Democrats lost less than the Republicans.  But it is the American people who lost.  For they are stuck with Obamacare for the time being.  And President Obama can raise the national debt to a new record high.  But it gets worse.  This morning the president gave a petulant, God-awful speech scolding the Republicans, the Tea Party, talk radio, the blogosphere and pretty much anyone else who dares to oppose Obamaism (see Transcript of Obama Remarks on End of Standoff posted 10/17/2013 on The Wall Street Journal).

Good morning, everybody.  Please have a seat.

Well, last night, I signed legislation to reopen our government and pay America’s bills.  Because Democrats and responsible Republicans came together, the first government shutdown in 17 years is now over.  The first default in more than 200 years will not happen.  These twin threats to our economy have now been lifted.  And I want to thank those Democrats and Republicans for getting together and ultimately getting this job done.

There was never a risk of default.  With $2.45 trillion in annual revenue coming into the treasury from the taxpayers there was never a risk of the $415.7 billion annual interest payment on the debt going unpaid.  Lying about it just helped a petulant child get his way.  Waaa.

Now, there’s been a lot of discussion lately of the politics of this shutdown.  But let’s be clear:  There are no winners here.  These last few weeks have inflicted completely unnecessary damage on our economy.  We don’t know yet the full scope of the damage, but every analyst out there believes it slowed our growth.

What growth?  Since coming to office the president’s policies have lost approximately 9,966,000 jobs through the September jobs report.  That’s just shy of 10 million jobs he’s lost.  So what recovery?  Or is he just setting the stage to blame the worst economic recovery since that following the Great Depression on this 16 day shutdown?  And not the lost economic activity from those 10 million or so lost jobs?  Of course he is.  Because what are 10 million jobs when he can stick it to the Republicans?

We know that families have gone without paychecks or services they depend on.  We know that potential homebuyers have gotten fewer mortgages, and small business loans have been put on hold.  We know that consumers have cut back on spending, and that half of all CEOs say that the shutdown and the threat of shutdown set back their plans to hire over the next six months.  We know that just the threat of default — of America not paying all the bills that we owe on time — increased our borrowing costs, which adds to our deficit.

Yes, pity the government bureaucrats who had to go 16 days without reporting to work.  Even though they will be paid for those 16 days they missed.  Yes, pity the government bureaucrats.  And not the 10 million who have disappeared from the labor force since President Obama assumed office.  I mean, what are 5 years without a paycheck compared to missing 16 days of work?  Which the taxpayers will still pay them for?

Businesses cut back on spending and hiring because of the great uncertainty of a 16-day shutdown?  Are you sure it wasn’t the regulatory requirements of Obamacare that is forcing employers with close to 30 ‘full time’ employees (30 hours or more per week) to not hire any more workers?  Even pushing full-time workers to part time?  Are you sure this isn’t the reason why they’re not hiring?  Especially with the cost of health insurance going through the roof now that it must cover everything under the sun (such as pediatric care for a couple whose children are now grown adults) as well as pre-existing conditions?  Where someone can walk in off the street who was just diagnosed with cancer and buy an insurance policy for the first time in their life?  Are you absolutely sure it’s the 16-day shutdown and not Obamacare?   If so someone needs to attend a high school economics class to learn the first thing about economics.

And, of course, we know that the American people’s frustration with what goes on in this town has never been higher. That’s not a surprise that the American people are completely fed up with Washington.  At a moment when our economic recovery demands more jobs, more momentum, we’ve got yet another self-inflicted crisis that set our economy back.  And for what?

Again, are you sure it was the 16-day shutdown and not the 4 years or so of Obamacare?

There was no economic rationale for all of this.  Over the past four years, our economy has been growing, our businesses have been creating jobs, and our deficits have been cut in half. We hear some members who pushed for the shutdown say they were doing it to save the American economy — but nothing has done more to undermine our economy these past three years than the kind of tactics that create these manufactured crises.

The last fiscal year ending deficit while George W. Bush was president was $498.37 billion (adjusted for inflation).  At the end of the first fiscal year with President Obama in office the deficit soared to $1.539.22 trillion.  An increase of 208.9%.  It is this deficit number that he cut in half.  The one he exploded with his near trillion dollar stimulus that did not stimulate anything but unions and the president’s cronies on Wall Street and in Big Business.  Especially Big Green Business.

And the president had something else preventing him from spending as much as he did during his first term.  Sequestration.  Which the Democrats hate with a passion and want to get rid of.  So they can turn on the spending spigot once again.  Like they did during his first term.

And you don’t have to take my word for it.  The agency that put America’s credit rating on watch the other day explicitly cited all of this, saying that our economy “remains more dynamic and resilient” than other advanced economies, and that the only thing putting us at risk is — and I’m quoting here — “repeated brinksmanship.”  That’s what the credit rating agency said.  That wasn’t a political statement; that was an analysis of what’s hurting our economy by people whose job it is to analyze these things.

Really?  Brinkmanship?  You don’t think adding $6.2 trillion to the national debt during your presidency had anything to do with the credit rating agency’s concern about our debt paying ability?  A high school economics student can understand that the greater your debt is the greater your debt-paying problem.  Funny how you don’t, Mr. President.

That also happens to be the view of our diplomats who’ve been hearing from their counterparts internationally.  Some of the same folks who pushed for the shutdown and threatened default claim their actions were needed to get America back on the right track, to make sure we’re strong.  But probably nothing has done more damage to America’s credibility in the world, our standing with other countries, than the spectacle that we’ve seen these past several weeks.  It’s encouraged our enemies.  It’s emboldened our competitors.  And it’s depressed our friends who look to us for steady leadership.

I thought it would have been your bad foreign policy that did all those things.  Starting with the Green Revolution in Iran.  An uprising of the people against the Islamist and oppressive government of Iran.  The precursor to the Arab Spring.  Where you did nothing.  Leaving the good Iranian people with that oppressive Islamist government.  Which is currently working to produce a nuclear bomb.  Then there was the Arab Spring and you telling our friend and ally and anchor to peace and stability in the Middle East, Hosni Mubarak, that he had to go.  Turning Egypt over to the anti-Western Muslim Brotherhood.  And then there was Libya.  Another ally in the War on Terror, Muammar Gaddafi (who joined the fight against terrorism after our invasion of Iraq), that he had to go.  Turning Libya over to radical Islamists.  Who killed four Americans in Benghazi.  Then there was the red line fiasco with Syria.  If you cross that red line I will hem and haw and stammer.  Then I might say something else.  Then Vladimir Putin steps in and saves the day for their Syrian ally.  Russia.  Who suspended all adoptions to Americans to spite America.  Who are also helping the Iranians with their nuclear program.  All the while laughing at President Obama who they see as weak.  Who couldn’t get one nation to join him for military strikes against Syria.  If you want to talk about our prestige on the world stage you gave that up long ago.  For today no one fears the wrath of the United States these days.  With some nations seeing the United States becoming irrelevant in the world.  Especially Russia and China.  As well as radical Islam.

Now, the good news is we’ll bounce back from this.  We always do.  America is the bedrock of the global economy for a reason.  We are the indispensable nation that the rest of the world looks to as the safest and most reliable place to invest — something that’s made it easier for generations of Americans to invest in their own futures.  We have earned that responsibility over more than two centuries because of the dynamism of our economy and our entrepreneurs, the productivity of our workers, but also because we keep our word and we meet our obligations.  That’s what full faith and credit means — you can count on us.

And today, I want our people and our businesses and the rest of the world to know that the full faith and credit of the United States remains unquestioned.

There is a difference between economic investment and buying our bonds.  Any money that buys government bonds is money pulled out of the economy.  Investing in government bonds doesn’t create economic activity.  It actually destroys economic activity.  And the only worry the rest of the world had was what you were going to do, Mr. President.  Would you not pay the interest on the national debt out of spite to attack the Republicans?  That’s what they were worried about.  For even they knew we had the money to pay our debt without new borrowing.  They just don’t trust you.

But to all my friends in Congress, understand that how business is done in this town has to change.  Because we’ve all got a lot of work to do on behalf of the American people — and that includes the hard work of regaining their trust.  Our system of self-government doesn’t function without it.  And now that the government is reopened, and this threat to our economy is removed, all of us need to stop focusing on the lobbyists and the bloggers and the talking heads on radio and the professional activists who profit from conflict, and focus on what the majority of Americans sent us here to do, and that’s grow this economy; create good jobs; strengthen the middle class; educate our kids; lay the foundation for broad-based prosperity and get our fiscal house in order for the long haul.  That’s why we’re here.  That should be our focus.

Strong words coming from a professional activist.  For he was a community organizer.  And taught activism.  Funny how there are two types of activism.  The good kind in his world.  When it advances a liberal agenda.  And the bad kind in his world.  The kind based in conservatism.  The president hates conservative activism, otherwise known as a government of the people, by the people and for the people, and believes it should be silenced and replaced with one-party rule.

Now, that won’t be easy.  We all know that we have divided government right now.  There’s a lot of noise out there, and the pressure from the extremes affect how a lot of members of Congress see the day-to-day work that’s supposed to be done here. And let’s face it, the American people don’t see every issue the same way.  But that doesn’t mean we can’t make progress.  And when we disagree, we don’t have to suggest that the other side doesn’t love this country or believe in free enterprise, or all the other rhetoric that seems to get worse every single year.  If we disagree on something, we can move on and focus on the things we agree on, and get some stuff done.

And the Democrats calling the political opposition terrorists, arsonists, hostage takers, the Taliban, etc., how is that coming together to focus on the things we agree on?  To get some stuff done?  Well, Mr. President, it is obvious you believe compromise is the Republicans caving and becoming your bitch.  This is not a government of the people, by the people and for the people.  This is a government of, by and for you.

Let me be specific about three places where I believe we can make progress right now.  First, in the coming days and weeks, we should sit down and pursue a balanced approach to a responsible budget, a budget that grows our economy faster and shrinks our long-term deficits further.

At the beginning of this year, that’s what both Democrats and Republicans committed to doing.  The Senate passed a budget; House passed a budget; they were supposed to come together and negotiate.  And had one side not decided to pursue a strategy of brinksmanship, each side could have gotten together and figured out, how do we shape a budget that provides certainty to businesses and people who rely on government, provides certainty to investors in our economy, and we’d be growing faster right now.

The last time we did this little dance it was the same.  You want to raise taxes and cut no spending.  That’s your idea of a balanced approach.  Oh, you’ll promise spending cuts after we raise some taxes.  But those spending cuts will never come.  Democrats just don’t cut spending.  Unless they get themselves stuck in a sequester.  And that’s not even real spending cuts.  It’s only smaller increases in future spending.

Now, the good news is the legislation I signed yesterday now requires Congress to do exactly that — what it could have been doing all along.

And we shouldn’t approach this process of creating a budget as an ideological exercise — just cutting for the sake of cutting.  The issue is not growth versus fiscal responsibility — we need both.  We need a budget that deals with the issues that most Americans are focused on:  creating more good jobs that pay better wages.

Can the nation afford anymore of your job creation?  After losing some 10 million jobs we should just cut our losses.  And refuse anymore of your ‘help’ with the economy.

Cutting for the sake of cutting?  What, we don’t have a debt crisis that requires our debt ceiling to be raised again and again?  We’re spending too much.  Hence the need to keep raising our debt ceiling.  And Obamacare only makes this worse.  A lot worse.  Hence that 16-day government shutdown.  Or did he miss that?

And remember, the deficit is getting smaller, not bigger.  It’s going down faster than it has in the last 50 years. The challenges we have right now are not short-term deficits; it’s the long-term obligations that we have around things like Medicare and Social Security.  We want to make sure those are there for future generations.

Oh, you are devious, Mr. President.  The deficit is going down faster than in the last 50 years only because you raised it to record highs in your first year in office.  Your smallest deficit is still larger than George W. Bush’s last deficit.

Medicare?  You cut Medicare spending so you can spend that money on Obamacare.  And Social Security?  The Social Security Trust Fund has no cash in it.  It’s stuffed with government IOUs.  Because the government is spending so much money that they have to raid the Social Security Trust Fund to pay for it.  And even that’s not enough to prevent deficit spending.  So they’re robbing Peter to pay Paul.  This out of control spending is why Medicare and Social Security may not be there for future generations.

So the key now is a budget that cuts out the things that we don’t need, closes corporate tax loopholes that don’t help create jobs, and frees up resources for the things that do help us grow — like education and infrastructure and research.  And these things historically have not been partisan.  And this shouldn’t be as difficult as it’s been in past years because we already spend less than we did a few years ago.  Our deficits are half of what they were a few years ago.  The debt problems we have now are long term, and we can address them without shortchanging our kids, or shortchanging our grandkids, or weakening the security that current generations have earned from their hard work.

More on education?  That’s to shore up the teachers’ underfunded pensions.  Infrastructure?  That’s just pork-barrel spending.  Building airports where no one wants to fly.  Or high-speed rail that requires constant government subsidies.  Money that buys votes in Congress to pass huge spending bills.  Like Obamacare.  Which passed only by buying off Democrats with the Cornhusker Kickback, the Louisiana Purchase, the Florida Flim Flam, etc.

So that’s number one.  Number two, we should finish fixing the job of — let me say that again.  Number two, we should finish the job of fixing our broken immigration system.

There’s already a broad coalition across America that’s behind this effort of comprehensive immigration reform — from business leaders to faith leaders to law enforcement.  In fact, the Senate has already passed a bill with strong bipartisan support that would make the biggest commitment to border security in our history; would modernize our legal immigration system; make sure everyone plays by the same rules, makes sure that folks who came here illegally have to pay a fine, pay back taxes, meet their responsibilities.  That bill has already passed the Senate. And economists estimate that if that bill becomes law, our economy would be 5 percent larger two decades from now.  That’s $1.4 trillion in new economic growth.

There’s a reason why people hire illegal aliens.  So they can pay them less than legal citizens.  So once these illegals become legal they’re not going to work for illegal wages anymore.  So it will raise labor costs.  Forcing businesses to lay off some workers.  Creating no net economic benefit.  But the Democrats don’t care.  Because it’s not about the economy.  It’s about all those new Democrat voters.  To turn the nation, like they turned California, Democrat.

The majority of Americans think this is the right thing to do.  And it’s sitting there waiting for the House to pass it.  Now, if the House has ideas on how to improve the Senate bill, let’s hear them.  Let’s start the negotiations.  But let’s not leave this problem to keep festering for another year, or two years, or three years.  This can and should get done by the end of this year.

Really?  A majority of people want immigration reform?  And because of that we should pass it?  Well, the majority of people want to repeal Obamacare.  So perhaps this is a negotiation the Republicans and Democrats can agree on.  To please the majority of people.  Exchange immigration reform for the repealing of Obamacare.

Number three, we should pass a farm bill, one that American farmers and ranchers can depend on; one that protects vulnerable children and adults in times of need; one that gives rural communities opportunities to grow and the long-term certainty that they deserve.

You know, it was a farm bill that helped precipitate the Great Depression.  Price parity.  Increasing the price of farm goods so they were closer to the price of nonfarm goods.  In response to their increased productivity due to the mechanization of the farm that produced bumper crops.  Increasing supply beyond demand.  Causing the price of farm goods to fall.  So Hoover passed legislation raising the price of food.  Making it harder to put food on the table for the average American.  An example of the unintended consequences of government intervention.  Such as requiring gasoline to include a portion of the corn crop.  Thus raising the price of corn.  And everything in the food chain downstream from corn.  Like beef, chicken, milk, eggs, etc.  No, the last thing consumers need who are trying to put food on the table is another farm bill.

Again, the Senate has already passed a solid bipartisan bill.  It’s got support from Democrats and Republicans.  It’s sitting in the House waiting for passage.  If House Republicans have ideas that they think would improve the farm bill, let’s see them.  Let’s negotiate.  What are we waiting for?  Let’s get this done.

So, passing a budget; immigration reform; farm bill.  Those are three specific things that would make a huge difference in our economy right now.  And we could get them done by the end of the year if our focus is on what’s good for the American people. And that’s just the big stuff.  There are all kinds of other things that we could be doing that don’t get as much attention.

I understand we will not suddenly agree on everything now that the cloud of crisis has passed.  Democrats and Republicans are far apart on a lot of issues.  And I recognize there are folks on the other side who think that my policies are misguided — that’s putting it mildly.  That’s okay.  That’s democracy.  That’s how it works.  We can debate those differences vigorously, passionately, in good faith, through the normal democratic process.

And sometimes, we’ll be just too far apart to forge an agreement.  But that should not hold back our efforts in areas where we do agree.  We shouldn’t fail to act on areas that we do agree or could agree just because we don’t think it’s good politics; just because the extremes in our party don’t like the word “compromise.”

When the Republicans wanted to add tax breaks for small business in the stimulus bill President Obama refused to listen.  Because he won the election.  And elections have consequences, he said.  And to the winner goes the spoils.  When the Democrats had the House, Senate and the White House they had no interest in compromise.  And didn’t.  But when they don’t have all the power they expect the other side to compromise.  And give them what they want.  That’s their idea of compromise.  Unconditional surrender.

I will look for willing partners wherever I can to get important work done.  And there’s no good reason why we can’t govern responsibly, despite our differences, without lurching from manufactured crisis to manufactured crisis.  In fact, one of the things that I hope all of us have learned these past few weeks is that it turns out smart, effective government is important.  It matters.  I think the American people during this shutdown had a chance to get some idea of all the things, large and small, that government does that make a difference in people’s lives.

We hear all the time about how government is the problem.  Well, it turns out we rely on it in a whole lot of ways.  Not only does it keep us strong through our military and our law enforcement, it plays a vital role in caring for our seniors and our veterans, educating our kids, making sure our workers are trained for the jobs that are being created, arming our businesses with the best science and technology so they can compete with companies from other countries.  It plays a key role in keeping our food and our toys and our workplaces safe.  It helps folks rebuild after a storm.  It conserves our natural resources.  It finances startups.  It helps to sell our products overseas.  It provides security to our diplomats abroad.

Really?  You want to go there?  Security of our diplomats?  The administration that let 4 Americans die in Benghazi on its watch?  Despite ample warnings?  Warnings so serious that the British pulled out of Benghazi?  Before our four diplomats were killed?  But there was an election, wasn’t there?  And we just couldn’t have trouble with terrorists during an election, could we?  Not for the president that won the War on Terror with the killing of Osama bin Laden.

So let’s work together to make government work better, instead of treating it like an enemy or purposely making it work worse.  That’s not what the founders of this nation envisioned when they gave us the gift of self-government.  You don’t like a particular policy or a particular president, then argue for your position.  Go out there and win an election.  Push to change it. But don’t break it.  Don’t break what our predecessors spent over two centuries building.  That’s not being faithful to what this country is about.

The Founding Fathers created LIMITED government.  What we have today is far from limited.  The progressives/liberals have destroyed what the Founding Fathers gave us.  Today we have a big, fat, bloated bureaucracy.  And the Republicans would like to change it by winning elections.  Which isn’t that easy when the Obama administration suppresses the vote by turning the IRS loose on the Tea Party.  Limiting their fundraising ability.  Causing their turnout to be less than it was in the 2010 midterm election.  When the Tea Party stirred the people to vote the House of Representatives back to the Republicans.  Which they weren’t going to let happen in 2012.  Hence using the IRS to suppress the Republican vote.

And that brings me to one last point.  I’ve got a simple message for all the dedicated and patriotic federal workers who’ve either worked without pay or been forced off the job without pay these past few weeks, including most of my own staff: Thank you.  Thanks for your service.  Welcome back.  What you do is important.  It matters.

You defend our country overseas.  You deliver benefits to our troops who’ve earned them when they come home.  You guard our borders.  You protect our civil rights.  You help businesses grow and gain footholds in overseas markets.  You protect the air we breathe and the water our children drink.  And you push the boundaries of science and space, and you guide hundreds of thousands of people each day through the glories of this country. Thank you.  What you do is important.  And don’t let anybody else tell you different.  Especially the young people who come to this city to serve — believe that it matters.  Well, you know what, you’re right.  It does.

And those of us who have the privilege to serve this country have an obligation to do our job as best we can.  We come from different parties, but we are Americans first.  And that’s why disagreement cannot mean dysfunction.  It can’t degenerate into hatred.  The American people’s hopes and dreams are what matters, not ours.  Our obligations are to them.  Our regard for them compels us all, Democrats and Republicans, to cooperate, and compromise, and act in the best interests of our nation –- one nation, under God, indivisible with liberty and justice for all.

Thanks very much.

The majority of people want to repeal Obamacare.  But the president doesn’t care about these American people.  Because they don’t share his vision of expanding government power in our lives.  People who would prefer to keep the health insurance they have.  And the doctors they have.  As well as not paying more for their health insurance.  But what they want isn’t as important to President Obama as what he wants.  So there is no compromise.  No cooperation.  Or acting in the best interest of the United States.  For this may be one nation, under God, indivisible with liberty and justice for all.  Where all Americans are equal.  Only some are more equal than others.  Like those who share President Obama’s vision.

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The Threat of Default on the Debt is from the Left not the Right

Posted by PITHOCRATES - October 10th, 2013

Politics 101

We have a Debt and Spending Problem as we are Spending so much that we have to Raise the Debt Ceiling

Contrary to popular belief the government doesn’t just borrow money.  They also raise money by taxing us and charging us fees.  A lot of it.  In this past fiscal year (October 2012 to September 2013) they raised $2,450,200,000,000.  That’s $2.45 trillion dollars.  Sadly, they spent $3,537,100,000,000.  Or $3.5 trillion.  Giving us a deficit of $1,086,900,000,000.  Or $1.1 trillion.  Which is why we’re having a debt crisis.

Interestingly, the left does not believe that we have a debt problem.  Or a spending problem. For they see no problem with these numbers.  The only problem they have is with Republicans.  Who do believe we have a debt problem.  As well as a spending problem.  And they want to do something about it.  Before the debt grows so big that it threatens the full faith and credit of the United States.

Now the Democrats, who don’t think we have a debt or a spending problem, are saying the Republicans are threatening the full faith and credit of the United States.  With their shutting down of government.  And their demand for spending cuts before raising the debt ceiling.  Which proves the Republicans point.  We have a debt and a spending problem.  Because we are spending so much that we have to raise the debt limit.

The Interest on the Debt is only 11.75% of the Available Revenue so there is no Danger of Default

Of course, this explains the $1.1 trillion deficit.  Out of control spending.  That the government is funding with more and more borrowing.  Which threatens the full faith and credit of the United States.  Because the more debt we accumulate the less likely we’ll ever be able to pay it off.

But are we risking default on the debt now?  With this battle over the debt ceiling?  No.  Yes, the debt is huge.  Currently it is in excess of $16 trillion.  About six and a half times total federal revenue.  To get an idea what that means consider you have the median household income which is approximately $51,000.  If you carried the same amount of debt the federal government carries you would have approximately $331,500 in credit card debt.  Any household with a median income of $51,000 with credit card debt of $331,500 has a bleak future.  And unless they win the lottery they will not escape bankruptcy.

So $16 trillion in debt is recklessly high.  And impossible to pay off.  But as bad as that is the amount of revenue the federal government collects via taxes and fees greatly exceeds the interest on the debt.  The interest on the debt is $415.7 billion.  This is the amount the government has to pay to avoid defaulting on the debt.  Which is easy to do with $2.45 trillion in revenue.  The interest on the debt is only 11.75% of the available revenue.  So even if the Republicans refuse to raise the debt ceiling there is no way in hell the government will be unable to pay the interest on the debt.  Unless the government chooses NOT to pay the interest on the debt.  Even when they have the ability to pay the interest on the debt.

The Democrats become Chicken Little whenever anyone ever Threatens their Spending Authority

So why all the talk of defaulting on the debt?  And ruining the full faith and credit of the United States?  Simple.  Democrats are liars.  And what do liars do?  They lie.  The interest on the debt is in no danger of going unpaid.  It’s all that other government spending that is in danger of going unspent.  That spending that makes people dependent on government.  And buys votes.

The left tries to frighten the people so they can keep spending.  And keep buying votes.  They try to scare Social Security and Medicare recipients.  Telling them they will lose their benefits if the Republicans don’t stop what they’re doing.  Even though they won’t.  First of all we pay into our own retirement account. At least that’s what the government tells us.  And there is a Social Security Trust Fund.  Full of our money just waiting to pay our benefits.  Or so they say.  But the Trust Fund doesn’t have money in it.  It has government IOUs.  Because the government spent that money.

So that’s why Democrats lie.  So they can keep spending and buying votes.  Which they won’t be able to do if they can’t borrow more money to spend.  And they’re spending so much that they can’t afford to lose their charging privileges.  This is why they warned the sky would fall if the sequestration spending cuts went into effect.  But as we all witnessed the sky did NOT fall with those spending cuts.  There was some discomfort.  But nowhere near the calamity the Democrats warned would befall us if they didn’t get their way.  Bringing us to their greatest fear.  That life can go on with a large spending cut.  And telling us that the government can cut spending even more.  Far more.  Which is a threat to their ability to buy votes.  And to their power.  Which is why they become Chicken Little whenever anyone ever threatens their spending authority.

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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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France tried the President Obama Balanced Approach to Deficit Reduction only to see it Fail

Posted by PITHOCRATES - September 1st, 2013

Week in Review

All we heard during the debt ceiling debate and the sequester debate from President Obama is that we must have a balanced approach.  Tax hikes now.  And spending cuts later.  Which, of course, means no spending cuts.  Ever.  For why would they cut spending after they got their tax hikes?  Too many Republicans got snookered by past Democrats on that false promise.

President Obama assures us that if we raise tax rates it will solve all of our problems.  But if we cut spending that’s just stupid.  Because government spending creates economic activity.  According to the Keynesian economics playbook, at least.  And President Obama is a Keynesian.  In fact, he’s so much a Keynesian that some would even call him a socialist.  But Keynesian economics hasn’t worked in America.  It didn’t work in the 1970s.  It gave us a dot-com bubble in the 1990s.  And the beginning of the real estate bubble that burst into the subprime mortgage crisis in the 2000s.  So we’ve tried Keynesian economics and it doesn’t work.  And, as it turns out, Keynesian economics that borders on outright socialism doesn’t work either (see France signals shift to tax cuts in boost to business by AFP posted 9/1/2013 on France 24).

France’s Socialist government is hinting it may appease discontent at tax rises by putting more stress on spending cuts in its fight to control the budget and boost growth…

France has so far relied on tax hikes for about two-thirds of its fiscal adjustment. Most famously it hiked the tax rate to 75 percent on income above 1 million euros.

The reliance on tax hikes has also prompted warnings from the IMF and European Commission that it should focus more on cutting spending in order to avoid snuffing out the recovery…

France’s social welfare system is funded primarily by charges on labour, burdening businesses…

A threat to nationalise a French plant owned by steel giant Arcelor Mittal to protect jobs raised concerns among foreign businesses…

The latest purchasing managers surveys by Markit found that while business activity is picking up in the eurozone overall, it contracted at a faster rate in France this month.

Francois Hollande has been president since May 15, 2012.  That’s about one year and three months.  And in that time his socialist government raised taxes.  But barely cut spending.  Just as President Obama wants to do to reduce the U.S. budget deficit.  Despite the fact that it doesn’t work.  As France has proven.

The U.S. doesn’t have to try the President Obama way.  The balanced approach.  AKA, the all tax and no spending-cut approach.  Because France has tried it in a grand way only to see it fail.  It failed so badly that they’re talking about outright socialism.  Nationalizing industry.  Because the economic climate is so anti-business in France that there is no job creation.  Because there is no business growth.  Worse, the French economy is contracting.  That’s right, while the rest of the Eurozone is seeing growth France’s economy is going deeper into recession.  Because they’re doing what President Obama wants to do in the U.S.

It’s time we purge Keynesian economics from our governments for good.  It is the source of all the great financial problems countries are having all around the world.  All it does is empower those in power.  Elevating them to elite positions.  Where they enjoy a life of plenty and extreme comfort.  While their people struggle to provide for their families.  It’s time that we return to classical economics.  Save our money and live frugally.  Creating private investment capital from our savings via a sound banking system.  Where bankers practice good lending practices without governments passing their risks onto the taxpayers.  Which is what gave us the subprime mortgage crisis.  And the worst recession since the Great Depression.

Finally, governments have to spend less.  So we can cut tax rates.  Providing the spark to ignite private investment.  Which drives business expansion.  And creates jobs.  Which is what people want.  So they can provide for their families.  Not more benefits that the government can’t pay for.  No matter how high the government taxes them.

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State of the Union, Benghazi, Sequestration and the Politics of Spending

Posted by PITHOCRATES - February 14th, 2013

Politics 101

President Obama’s Idea of Compromise and Bipartisanship is Unconditional Surrender

President Obama’s State of the Union Address was a little light on details.  But the general gist is no spending cuts.  And more taxes.  Which makes the sequestration about to hit a crisis in the making for the president.  For it was sort of his idea.  And he did sign it into law.  But to him it was more like playing a game of chicken.  Confident that the Republicans would cave and roll over.  Giving him whatever additional tax increases he wanted to prevent cuts in defense spending.  But the Republicans aren’t blinking.  Because this is the only way they’re going to get any spending cuts.  Even if it means gutting defense spending.  Something the president didn’t consider.

Despite being an architect of the sequestration he called it a stupid idea during the State of the Union.  He doesn’t care about the cuts in defense spending.  He is, after all, a leftist liberal.  And they hate defense spending.  He even denied Ambassador Stevens’ request to beef up security in Benghazi.  Which led to Ambassador Stevens’ death.  Along with three other Americans.  But it’s the equal cuts in things he does care about that has him worried.  That social spending.  The kinds of things that buy votes.  And makes people dependent on government.  Helping to endear the Democrat Party to the American people.  While making them hate the Republican Party.  Who want to take away the great things the Democrats so generously give them.  Even if the government can’t afford to give these things to the American people.

President Obama may talk about compromise and bipartisanship but he doesn’t mean it.  His idea of bipartisanship is unconditional surrender.  He has no interest in meeting Republicans halfway.  He wants to destroy the Republican Party.  And undo the Reagan Revolution.  And bring back the Big Government of the Sixties and Seventies.  When the Democrats ruled supreme.  And you do that with spending money.  Not cutting spending.  Which is why the sequestration bothers him so much.

Running Deficits is OK if it provides for Senior Citizens, Our Children and Clean Stuff

Leading Democrats are saying we don’t have a spending problem.  We’re just not paying enough for the stuff we want.  Which also happens to be the stuff that buys votes.  So the excess spending to buy votes is not the problem.  The problem is that we’re not raising taxes enough to pay for this orgy of spending that is the problem.  We’re not taxing rich people enough.  Or corporations.  And once we do then we won’t be taxing the middle class enough.  And once we do that it probably won’t matter what we do as the country will be so deep in debt that no amount of new taxes will help.  Unless they figure out a way to tax away more than 100% of a person’s earnings.

So low tax revenue is the problem.  Well, that, and spending money on the wrong things.  On things that don’t buy votes.  Things that weren’t on the laundry list President Obama rattled off during the State of the Union that we need to spend more on.  Defense spending.  And…, well, defense spending.  Which is the only thing the Obama administration is willing to consider cutting.  Because we can get a lot of free things by gutting defense.  New programs that won’t add a single dime to the deficit.  Something he said more than once during the state of the union.  Obamacare, for example, will be deficit neutral.  Because the money we were going to spend on the wars in Iraq and Afghanistan will pay for it.  So even though the spending will still add to the deficit it’s now Obamacare spending.  Not defense spending.  Which is OK.

You see, running deficits is OK if it provides for senior citizens.  Our children.  If it gives us clean water.  And air.  Invests in clean energy.  And in those jobs of the future.  If it builds roads and bridges.  For less face it, we would be nothing without our government-provided roads and bridges.  Which we simply could not have it if it weren’t for government.  (Then again railroads build and maintain their own roads and bridges.  With funds they earn operating their railroads.  But I digress.)   In fact, any deficit reduction that comes from cutting this spending is just about the worst thing in the world we could do.  According to those on the left.  So we should tax rich people and corporations more.  And cut defense spending more.  Because we spend way too much on defense spending anyway.  And for what?  It’s not like we’re going to use it for anything.  Such as protecting our ambassadors in hostile lands.

Defense Spending is the only Spending growing at a Rate less than Total Federal Outlays

If you listened to the State of the Union (and didn’t fall asleep during it) you’ve learned that we don’t spend enough on our social spending.  And too much on defense spending.  That’s what the president said.  But what do the numbers say?  To find out let’s look at federal outlays (see Table 3.1—OUTLAYS BY SUPERFUNCTION AND FUNCTION: 1940–2017).  The following chart graphs the historical data from 1958 to 2011 and the projection for 2012.  We look at 4 areas of spending: defense; education, training, employment and social services; Medicare; and Social Security.  We calculate the spending as a percentage of total spending and graph the results.

Percent of Total Federal Outlays

The one area we spend too much on that the Obama administration is willing to cut is the one area that has seen the greatest decline in spending.  Defense spending.  Which as a percentage of total outlays has fallen while non-defense has trended up or held steady.  This tells us the government has pulled money from defense to pay for these other things.  But this chart doesn’t tell the whole story.  For although Medicare and Social Security have trended up they haven’t taken as big a piece of total spending as defense gave up.  And education spending has been pretty flat.  Perhaps giving credence to President Obama’s claim that we’re not spending enough on education.  But if you look at the year-to-year growth in spending you see a different picture.

Federal Outlays as a Percentage of 1958 Outlays

Here we divide each year’s spending by the spending in 1958 (or 1966 for Medicare).  Showing the increase in spending over time.  This chart also includes total federal outlays.  Which tells a startling story.  Not only is defense spending being gutted to pay for other spending it is the only spending growing less than the growth rate of total federal spending.  While the other three areas are growing at greater rates.  In 2011 Social Security spending was 8,892% of the spending in 1958.  Medicare, which came into existence in 1965, grew at an even greater rate.  In 2011 it was 17,673% of the spending in 1966.  More than twice the growth in less time.  And education spending tracked pretty close to Medicare spending.  In 2011 it was 15,744% of the spending in 1958.  While defense spending in 2011 was only 1,509% of the spending in 1958.

Note that the general trend of increased spending holds regardless of who is in power.  That’s because of baseline budgeting.  Which provides for automatic increases in spending.  When government talks about spending cuts it not really spending cuts.  It a cut in the rate spending increases.  You can see some dips in the graphs and where they may have cut the rate of growth.  But nowhere is there really a cut that results in reducing net spending.  Except for defense.

Increases in spending on education (and training, employment and social services) has grown at a rate greater than most other spending.  And what can we learn by throwing money at education?  Well, based on the president’s remarks, it doesn’t work.  It doesn’t increase the quality of education.  At least based on the great increases year after year that only give us the need to spend more money.  And this spending doesn’t even include the bulk of education spending.  That generated from property taxes.  Which can mean only one thing.  If we’re paying more and need to spend even more the quality of education is not as good as it should be.  Or all that money is going to teachers’ salaries, pensions and health care benefits.

Of all this spending the only sustainable spending is defense spending. For it is the only one growing at a rate less than total federal outlays.  While increases in the other spending is going off the chart.  With the slopes of these graphs getting ever steeper.  And the closer they get to vertical the more impossible it will be able to pay for these programs.  That’s why Medicare is near crisis mode.  With the cost of our aging population pushing that graph closer and closer to vertical.  Where our spending obligations will approach infinity.  Which is, of course, impossible to sustain.

Of all this spending the only sustainable spending is defense spending. For it is the only one growing at a rate less than total federal outlays.  While increases in the other spending is going off the chart.  Contrary to what the president said we are increasing spending in these areas so much that we won’t be able to sustain it.  For there just won’t be enough money to tax away from the people.  Unless we figure out a way to tax away more than 100% of their earnings.

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Abortion and Birth Control are Bankrupting Social Security and Medicare

Posted by PITHOCRATES - January 20th, 2013

Week in Review

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Class Warfare

Posted by PITHOCRATES - January 3rd, 2013

Politics 101

Over 99.5% of all Rich People ARE paying Federal Income Taxes

President Obama won reelection by denigrating Mitt Romney.  He didn’t win by running on a successful record.  He did not win by running on a plan to pull the economy out of one of the worst recoveries in history.  No.  He won it by getting people to hate Mitt Romney.  And by getting people to hate Republicans.  Who they painted as evil rich people who want nothing more than tax cuts for the rich.  And to take away birth control and abortion so only rich people can have access to them.  As well as taking welfare benefits from the poor.  It’s called class warfare.  And it can be very effective.  For it won President Obama a second term despite a horrible first term by almost any metric you measure it.  At least based on the majority of the electorate that just believed the rich aren’t paying their fair share.  So let’s just see who is paying what (see Table 3.  Number of Individual Income Tax Returns, Income, Exemptions and Deductions, Tax, and Average Tax, by Size of Adjusted Gross Income, Tax Years 2001-2010).

The above chart shows who are NOT paying any federal income tax.  Approximately 40% of all taxpayers.  Are these the evil rich people like Mitt Romney?  And those rich Republicans?  No.  Contrary to the Left, it’s not the rich.  They’re paying their taxes.  It’s the poor and the middle class not paying their fair share.  Those earning $5,000 and less pay virtually no federal income taxes.  Over 80% of those earning from $5,000 to $13,000 pay no federal income taxes.  You have to get up to those earning $25,000 or more before more than half of that income group pays any federal income taxes.

We don’t see who actually pays the majority of federal income taxes until we get into the middle class.  Where those who DON’T pay any federal income taxes rapidly drop away.  Those at the low end of the middle class taking advantage of the tax code to maximize their tax credits and deductions (mortgage interest, energy tax credit, medical and dental Expenses, child and dependent care credit, etc.) to reduce their tax bill.  While those at the higher end of the middle class are likely small business owners suffering a business loss.  Or a personal or business bankruptcy.  Approximately 0.8% of those earning $100,000 – $200,000 pay no federal income taxes.  While less than half of one percent of those earning $200,000 or more pay no federal income taxes.  Perhaps this tiny sliver of income earners are not paying their fair share.  But one thing for certain is that over 99.5% of all rich people ARE paying federal income taxes.

Those earning $1,000,000 and more account for less than 1% of Tax Exemptions and Deductions

So are the rich taking advantage of the tax code to reduce their taxable income and federal tax bill?  We hear a lot about tax loopholes.  Those perfectly legal tax credits and deductions written into law by the United States Congress.  That both those on the Left and those on the Right take advantage of.  Yet those on the Left have convinced enough of the electorate that these legal credits and deductions are tax evasion.  And that only the rich on the Right are using these to evade paying their fair share.  So who is taking the biggest advantage of the tax code to reduce their tax bill?  In 2010 this totaled about $3 trillion.  Is this why those earning $100,000 or more paid no income tax?  For those few not paying any federal income tax?  Not exactly.  (The dollar amounts in the following charts are in thousands of dollars.)

In 2010 taxpayers claimed in total about $3 trillion in exemptions and deductions.  The deficit in 2010 was about $1.3 trillion dollars.  So perhaps this is the reason why we had a deficit in 2010.  This is what the Left would have us believe.  It’s those tax loopholes that the evil rich take advantage of to avoid paying their fair share of taxes.  The only problem with this is that it’s not the rich taking advantage of these tax loopholes.  It’s the poor and middle class.

Those earning $1,000 and less account for less than 1% of these exemptions and deductions.  Those earning $1,000,000 and more also account for less than 1% of these exemptions and deductions.  It’s those earning from $1,000 to $1,000,000 that are taking advantage of these tax loopholes.  Especially those earning from $50,000 to $200,000.  The only income groups claiming 10% or more of the nearly $3 trillion in exemptions and deductions claimed.  So not only are the evil rich paying federal income taxes whatever they claim as exemptions and deductions doesn’t even come close to what the poor and middle class are claiming.

Prosperous Economic Times brought about by Tax Cuts INCREASED Tax Revenues

These numbers don’t exactly support the claim that the rich aren’t paying their fair share.  They’re paying federal income taxes.  And what tax loopholes they exploit hardly makes a dent in the amount of tax revenue the IRS collects.  Which can only mean one of two things.  Either the poor and middle class need to pay more federal income taxes.  Or the federal government is just spending too much.  Well, as we just witnessed in the fiscal cliff debate, President Obama and the Left want to raise taxes.  Blaming the record Obama deficits on the Reagan and Bush tax cuts.  Their deal includes higher income tax rates on households earning $450,000 or more.  But NO spending cuts.  Which will be a problem.

In 2010 the total adjusted gross income totaled just over $8 trillion.  Most of which came from 4 income groups.  About a trillion each from those earning from $50,000 to $75,000, from $75,000 to $100,000 and from $200,000 to $500,000.  Those earning from $100,000 to $200,000 earned in total almost $2 trillion.  Which means the new higher tax rates aren’t going to bring in much new tax revenue.  Because they aren’t taxing the people with the money.  The middle class.  And with some additional spending instead of spending cuts the deficit will only grow larger.  So this whole fiscal cliff debate was nothing but theatre.  For it wasn’t about deficit reduction.  It was about politics.

The Left wants to destroy the Republican Party.  And to do that they need to turn prosperous economic times brought about by the tax cuts of the JFK, Reagan and Bush administrations into the source of all our problems.  Yes the economy boomed, goes the argument, but at what cost?  Massive deficits.  Deficits not brought about by tax cuts.  But by spending.  For those prosperous economic times brought about by tax cuts INCREASED tax revenues.  The deficits resulted from spending increases greater than the revenue increases.  But with a successful campaign of class warfare they have revised history.  Those deficits are now the result of the rich not paying their fair share.   Which helped them increase tax rates on the rich today.  Because the Left got everyone to hate the rich.  And the Republican Party.  Even though the rich are the only ones paying their fair share.  In fact, they’re paying more than their fair share.  But the majority of the electorate doesn’t know this.  Because of that successful campaign of class warfare.

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Japan clings to the same Keynesian Policies that have Failed for over 20 Years

Posted by PITHOCRATES - December 30th, 2012

Week in Review

The fiscal cliff negotiations are all about deficit reduction.  The Right wants to do it with spending cuts.   The Left wants to do it with new taxes.  So they can spend more.  This is why they can’t reach an agreement.  The Right wants to reduce the deficit.  While the Left wants to increase spending.  For benefits.  For education.  For investments in Green Energy.  For infrastructure.  For economic stimulus.  Which will only increase the deficit.  So the Democrats are not exactly sincere when they talk about deficit reduction.  Which is why they can’t make a deal with the Republicans.  Who are serious when they talk about deficit reduction.

Another reason why the Democrats want to spend so much money is that they are Keynesians.  Who believe the government can bring an economy out of a recession with stimulus spending.  Despite that failing every time we’ve tried it.  In the United States in the Seventies.  Again during the Obama administration.  In the Eurozone.  In Asia.  Especially in Japan.  Where they’ve been trying to stimulate themselves out of a recession since their Lost Decade.  The Nineties (see Japan’s New Stimulus: The Race With China To The Bottom by Gordon G. Chang posted 12/30/2012 on Forbes).

The universal consensus is that the fall in manufacturing bolsters the case for Shinzo Abe’s plans to stimulate the economy.  The new prime minister is pursuing a broad-based program of shocking Japan out of its fourth contraction since the turn of the century.

First, Abe is going to prime the pump in a big way…

Second, Abe is going to push the yen down to help struggling exporters…

Third, the just-installed prime minister is leaning on the Bank of Japan to open up the taps…

Markets may love Abe’s stimulus solutions, but they are at best short-term fixes.  Tokyo, after all, has tried them all before with generally unsatisfactory results.  What Japan needs is not another paved-over riverbed—past spending programs have resulted in useless infrastructure—but structural reform to increase the country’s competitiveness.

Tokyo’s political elite, unfortunately, has got hooked on the false notion that governments can create enduring prosperity.  Two decades of recession and recession-like stagnation in Japan are proof that repeated government intervention in the economy does not in fact work.

If you keep trying to stimulate yourself out of a recession with Keynesian policies for over twenty years perhaps it’s time to give up on those failed policies.  Of course to do that may require some spending and tax cuts.  And you know how well that goes over with big government types.  It’s why the Americans can’t make a deal to avoid the fiscal cliff.  And why the Japanese are going to try more of the same failed policies of the past.

Another impetus for these bad policies decisions is what’s happening in China.  Whose economy is much younger than Japan’s economy.  So they don’t have years of failed Keynesian policies digging their economy into a deep hole.  And because of that they’re going to go big.  Their stimulus is going to include the building of cities.  And that’s what the Japanese see.  That, and the (one time) economic explosion of their export economy.  Something they once had in Japan.  And would love to have again.  So they are going to follow China’s lead.  Even though their economic expansion is pretty much at its end.

Although there has been a “recovery” beginning in October, it looks like the upturn is already running out of steam.  China’s technocrats know they’re in trouble: they are apparently planning to increase the central government’s planned deficit for 2013 by 41% to 1.2 trillion yuan ($192 billion).  At present, it is now slated to be only 850 billion yuan.  Much of the shortfall is going toward an urbanization push next year.  Last year, Beijing announced its intention to build 20 new cities a year in each of the following 20 years.

The two biggest economies in Asia are ailing at the same time, and both Beijing and Tokyo have decided that government intervention is the shortest path to long-term growth.  Neither government’s program, however, looks viable.  Unfortunately, both China and Japan are going down the wrong road at the same time.

This could help the U.S. economy.  If they enacted spending cuts for their deficit reduction they could cut tax rates to spur the economy along.  And make the U.S. competitiveness soar while Japan and China dig themselves into deeper holes.  But the Americans, being the foolish Keynesians they are, are going to follow the Japanese and the Chinese into economic stagnation.  And with President Obama’s reelection they will stay Keynesian.  Drive over the fiscal cliff.  And compete with the Japanese to see who can have more lost decades

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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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The Politics of Tax Rates

Posted by PITHOCRATES - December 19th, 2012

Politics 101

Cash Starved Small Businesses cannot Afford to pay a Dime more in New Taxes

America is staring at a fiscal cliff.  Thanks to the budget debt limit debate in 2011.  The US was in danger of running out of money and defaulting on their sovereign debt.  The Republicans controlled the House of Representatives.  And the House is in charge of the money.  Before increasing the debt limit the Republicans wanted to get some spending cuts to reduce the federal deficit.  The Democrats wanted to raise tax rates (letting the Bush tax cuts expire, returning to the Clinton tax rates) to reduce the deficit.  They couldn’t reach an agreement.  So they did what politicians always do when they want to run away from a problem.  Create a committee.

The so-called super-committee.  Tasked to come up with $1.2 trillion in spending cuts (over ten years) by the end of 2012.  Or else.  With the ‘or else’ being sequestration.  Automatic budget cuts in defense and entitlement spending to the tune of $1.2 trillion.  The politicians knowing how unpleasant sequestration would be were full of confidence that the super-committee would overcome hell and high water to complete their task.  Because sequestration would be so very, very unpleasant.  Of course, politicians being politicians, kept running away from that problem.  And now we’re staring into the face of sequestration.  Taxmageddon.  The fiscal cliff.  Because the Democrats want to raise taxes on everyone earning over $200,000 (single) or $250,000 (married filing jointly).  But Republicans don’t want to because that will raise taxes on the job creators.  Something that won’t make an anemic economic recovery any better.  So let’s look at the numbers and see what kind of damage we’re looking at.

President Obama’s proposal for new tax rates leaves everything at the 28% marginal rate and below the same.  He proposes increasing the 33% rate to 36%.  And the 35% rate to 39.6%.  The new rates kick in at earnings of $250,000 (all the examples here are calculated for a married couple filing jointly).  Which raises the top income band at the 28% rate.  Holding the net tax increase to only $1,115 for a small business owner with a net income of $350,000.  Which doesn’t seem that bad.  But a small business owner with a net income of $350,000 isn’t exactly rich.  Despite paying income taxes like they are rich.  For most small business owners are S corporations or LLCs.  With their net income passing through to their personal income tax return.  So if the business owner lives on enough to equal two incomes (say $75,000 X 2 = $150,000) so his or her spouse can be a stay-at-home spouse that $1,115 comes out of $107,045 ($350,000 – $92,955 – $150,000).  Which is all they can put back into the business.  To pay for new equipment (which isn’t enough for most purchases forcing them to borrow more money and go further into debt).  To repay debt.  To cover unpaid accounts receivable.  To pay for customer write-offs for an employee error on a project.  To pay for a production run that failed to meet specifications that they couldn’t sell.  To pay for inventory shrinkage (damaged, lost and stolen goods).  To pay for employee raises.  Bonuses.  To hire new employees.  Or to pay for the newly mandated Obamacare.  When you factor in all these cost issues a small business owner may face $107,045 of retained earnings is not a lot of money and leaves a very small cash cushion.  Which is why Republicans do not want to raise taxes on small business owners.

Taxing the Rich more will do nothing to Lower the Deficit

Then presidential candidate John McCain opposed then presidential candidate Barack Obama’s proposed tax rate increases in the 2008 campaign.  Saying it would raise taxes on 23 million small business owners.  FactCheck.org debunked this number saying the actual number is closer to 6 million.  So using their number the additional tax revenue from small businesses would equal about $6.7 billion.  Approximately 0.48% of the federal deficit.  Which will do nothing to reduce the deficit.  But it will take more money away from cash-starved small businesses.  So what about millionaires?  What’s their damage?  And how much will they reduce the deficit?

The proposed tax rates will increase a millionaire’s tax by $30,549.  According to the IRS there were about 119,810 tax returns filed by people earning a million dollars in 2010.  Meaning the proposed increase in tax rates would raise another $3.7 billion in tax revenue from those earning a million dollars.  Which is only 54.7% of the new tax revenue from small business owners generated by those same new tax rates.  And only 0.26% of the federal deficit.  Which will do nothing to reduce the deficit.  So what about richer people?  Will taxing richer people do anything to reduce the deficit?  Let’s look at the numbers for someone earning $5 million.

Someone earning $5 million will pay an additional $214,549 in taxes.  Which is a huge increase.  But according to the IRS there were only 16,574 people who earned $5 million.  Which brings the total increase in tax revenue to only $3.6 billion.  Which is a $100 million less than the millionaires.  And only 0.25% of the federal deficit.  Meaning it will do nothing to reduce the deficit.  Even though they are taking an additional $214,549 away from each person earning $5 million.  That’s a lot of money from each person that results in no significant deficit reduction.  Which is the purpose of the higher proposed tax rates.

We’re simply Spending More than our Tax Revenue can ever Hope to Pay For

Crunching these numbers further we find that the proposed higher tax rates will increase tax revenue by $38.2 billion for everyone earning a million dollars and more based on 2010 IRS tax information.  Which is only 2.7% of the federal deficit.  Which is less than the automatic increases included in baseline budgeting.  Which means these proposed tax increases won’t do anything to reduce the deficit.  In fact the deficit will still grow larger.  Thanks to baseline budgeting.

The problem is that there aren’t enough rich people to tax.  The top 10% of earners are already paying 70% of all federal income taxes.  To raise new tax revenue you have to go to the middle class.  Based on the IRS there were 44,637,653 people filing income tax returns who earned between $50,000 and $200,000.  If each of these people paid an additional $1,115 like those small business owners that would raise an additional $49.8 billion in tax revenue.  Which is 3.6% of the federal deficit.  If you increased their taxes by $2,500 that would increase tax revenue by $111.6 billion.  Or 8% of the federal deficit.  Which may actually keep the deficit from growing.  But it won’t pay it down.

To get serious deficit reduction from the rich you have to take very large sums of money from them because there are so few rich people.  And even then it’s probably not possible to raise tax revenue enough to offset the automatic spending increases included in baseline budgeting.  But it’s a different story with the middle class.  Because there are so many more people in the middle class than there are rich people.  You can keep the deficit from growing by taking a far smaller amount from each of them than you would have to take from the rich.  You could even take enough to overcome the automatic spending increases of baseline budgeting to keep the deficit from growing.  But even the middle class doesn’t have enough people in it to wipe out a $1.4 trillion deficit.  Or make a dent in the federal debt.

No.  The only way to make any significant deficit reduction is with spending cuts.  Which the Democrats are steadfast against.  Because spending is their power.  It’s why people vote for them.  Which is why they will fight for increasing tax rates to the bitter end.  And never negotiate them away.  To continue the facade that new revenue can reduce the deficit.  Even though no amount of new revenue can.  Only spending cuts can.  For our spending has long since passed the Rubicon.  We’re simply spending more than our tax revenue can ever hope to pay for.  And any further increases in tax rates only reduce economic activity.  Causing the small business owners to stand fast on expanding and hiring.  Because economic growth is rewarded with punitive taxation.  So they will grow less with every increase in tax rates.  And with every increase in tax rates tax revenues will fall.  Which will lead to a downward spiral of deficits, debt, lowered credit ratings and possible default.  But anything is better to Democrats than admitting they are wrong.

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