Birth Control and Abortion have reduced Tax Revenue and House Values for Seniors

Posted by PITHOCRATES - August 26th, 2012

Week in Review

Birth control and abortion will bankrupt Social Security and Medicare.  And they will bring down Obamacare, too.  When Social Security became law we had a growing birth rate.  More people were being born each year.  So the population was expanding.  And the Roosevelt administration thought it would keep expanding.  So they created a Ponzi scheme.  Social Security.  Where more young people (i.e., taxpayers) pay into the system than retirees (i.e., tax consumers) collect from the system.  A foolproof system.  As long as the population continues to expand.  Keeping the base of the pyramid growing larger than the top of the pyramid.

Well their assumptions didn’t hold.  Women stopped having babies beginning in the Sixties.  Just as the Johnson administration gave us the Great Society and Medicare.  Based on the previous assumption that women would keep having babies.  So the funding mechanism was a flawed as it was for Social Security.  And now Obamacare is going to expand the Medicare model.  In the face of what is now a declining population growth rate.  Meaning the number of taxpayers will dwindle as the number of tax consumers retiring will explode.  Causing the aforementioned bankruptcies.  And that declining birth rate is causing even more financial damage (see Is Our Aging Population Partly to Blame for the Slow Recovery? by Philip Moeller posted 8/21/2012 on U.S. News & World Report).

As the unusually weak economic recovery continues, you’ve at least got to wonder if future studies of what ails us will include our aging population as a material cause. Simply stated, older people tend to liquidate assets to fund their retirements. Younger people tend to acquire financial assets as their personal wealth rises and they build their own nest eggs.

The United States has enjoyed nearly 40 years where the number of people acquiring assets was greater than the number of people disposing of them. This condition is being turned on its head. We now face roughly 40 years where there will be more people in this country wanting to sell financial assets than buy them. This supply-demand shift could put a lid on asset values and depress overall economic growth.

So on top of the government failing us in our retirement even our own retirement savings are going to fail us.  It will be like being on the far side of a housing bubble after the bust.  Where seniors want to sell their houses to finance their retirement.  Only to get tens of thousands of dollars less than they had planned.  For just as there are fewer taxpayers to pay the taxes to support an aging population there are fewer homebuyers (as well as other asset buyers) to buy the houses of an aging population.  Lower demand means lower selling price.  And a less comfortable retirement.  All because of that generation of greed and selfishness.  The baby boomers.  Who were all about sex, drugs, rock & roll, birth control and abortion.  And not so much about raising children.  Of course they, too, will suffer the effects of their selfish ways.  As there will be fewer taxpayers to support them in their retirement.  Or to buy their houses.

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As the Financial Crisis deepens in Greece the Best and Brightest are choosing to Leave Greece

Posted by PITHOCRATES - June 23rd, 2012

Week in Review

Greece struggles to remain in the Euro.  But it may all be for naught.  For the damage is done.  The best and brightest have been leaving Greece for sunnier pastures (see Greece brain drain ‘wrecking my social life’ by Giorgos Christides posted 6/22/2012 on BBC News Magazine).

According to the latest national polls, more than seven out of 10 young Greeks aged 18 to 24 believe that emigration is the ideal – indeed the only – way out from the crisis. Two out of 10 have already applied for jobs and university places abroad.

For many Greek high school graduates, who are currently sitting for their university entrance examinations, studying in Greece is not a choice but an imperative dictated by their families’ lack of economic means to fund a university education abroad.

Those families who can afford it, don’t give the matter a second thought – they hide their tears and frustration as best they can, and wave their children goodbye, wishing them to go abroad and stay there for good…

Little did we know that a decade later, Greece would be considered an economic wasteland for ambitious young students and graduates, who are now suffering from unemployment rates in excess of 50%.

Workers’ and students’ mobility has been, of course, one of the landmarks and major achievements of European integration. But it is now evolving into a medium-term death sentence for the ageing Greek society and economy.

In an era characterised by intensified global competition for talented, innovative and highly-skilled workers, the brain drain afflicting Greece means the country is losing its best hope of revival.

Rather ironic, isn’t it?  The thing that brought Europe closer together, the Eurozone, may be the thing that makes the Greek tragedy so tragic.  As the politicians massaged the financial numbers to get Greece into the Eurozone, and to keep Greece in the Eurozone, the young people who were to pay for their financial chicanery saw no future and left.  Saying goodbye to that generous social democracy.  Walking away from the welfare state.  And all of that government spending that caused all of this trouble in the first place.  To get a good education.  So they can get a job.  Which they can do relatively easily thanks to the currency union and European integration.

Greece is in a world of hurt.  An unemployment rate of 50% for the young and ambitious is bad.  But it’s better than having the young and ambitious leave.  Because these are the people who get good jobs.  And make a lot of money.  Who pay a large share of the taxes.  These are the tax contributors.  Who barely consume any taxes.  As they leave the tax consumers will be the only ones left.  Which will only make the current financial crisis worse.

The austerity requirements for their financial bailout caused rioting in the street.  And the rioters were primarily tax consumers.  For who else would riot over these spending cuts?  The taxpayers?  Not likely.  The tax consumers are the ones panicking over proposed austerity measures.  Because they are wholly dependent on government spending.  But while they protest the tax contributors, like Elvis, have left the country.  Making the future indeed a dark one.

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The Weight of Europe’s Sovereign Debt Crises forces Rich People to flee with their Wealth to Escape ever Higher Taxes

Posted by PITHOCRATES - April 21st, 2012

Week in Review

The problem with the European sovereign debt crisis is the population growth rate.  These nanny states set up their social democracies when people were having babies.  And based their calculations on a continuing rising birthrate.  Which would have paid for their social democracies until the cows came home.  But then something happened.  They stopped having babies.  And now have a declining birthrate.  Which means they have an aging population.  There are more people becoming seniors than there are being born.  There are more people leaving the workforce than there are entering the workforce.  And worse of all is that they have better health care.  And are living longer.  Put it all together and you have a real big problem (see Europe’s old wealth seeks new home in Asia by John O’Callaghan and Charmian Kok posted 4/17/2012 on Reuters).

Wealthy people from Europe and the Americas have long looked to the East for ways to build and preserve their fortunes. But only recently have they started opening family offices – private companies that manage the trusts and investments of rich households – in the region in earnest…

Campden Wealth, which provides research and data on family offices, says up to 10 European family offices have moved to Singapore since the financial crisis in 2008, bringing $5-$10 billion worth of assets with them.

Singapore, a global banking and investment centre in the heart of Southeast Asia, is an attractive base for its efficient registration process, relatively benign regulations, smooth movement of money, financial infrastructure and low tax rates…

Asia’s prospects are alluring as economies in Europe and the United States look weak. After the crisis, regulatory pressures in the West and a crackdown on offshore centers have hastened the pace of family offices moving to Singapore and Hong Kong…

The Spinolas are clubbing together with two other family offices to cut costs and leverage on efficiencies. Parly officials declined to identify the partners, other than to say they are “household names” in Europe – one is an English entrepreneur who has donated much of his money to charity and the other is a Swiss-based family…

Concerns about the health of big banks and dismay at their hard-sell tactics that pushed products of dubious merit onto high net worth clients – such as mortgage-backed securities that turned toxic – are other factors.

The tax-consumers are growing at a greater rate than the taxpayers.  Which means you have to raise tax rates on taxpayers.  Find other things to tax.  Or cut back on pensions and health care for retirees.  Not a difficult decision for the politicians to make.  They’re going to raise tax rates.  And find other things to tax.  Precisely because the population is aging.  For they’re just not going to cut any benefits from the largest voting block out there.

And, of course, the fallout is that rich people will finally say enough is enough.  They’ll take their wealth and leave.  Because they’re tired of being screwed.  Whether it was the American government passing off toxic subprime mortgage backed securities as safe investments through their GSEs Fannie Mae and Freddie Mac.  Or government taking an ever larger piece of their wealth through ever higher taxes and costly regulations.  They’ve had enough.  So they’re taking their wealth (i.e., much coveted investment capital businesses so desperately need) to greener pastures.  Investing in economies in other nations.  And donating large sums of their wealth to charities in other nations.  Which, of course, will cause ever greater budget hardships.  Because contrary to popular belief rich people pay the lion’s share of a nation’s income tax.  So when a big chunk of their wealth leaves the country it will explode budget deficits.

The sad truth is this.  There isn’t enough wealth to confiscate to pay for rising pensions and health care benefits with a declining birthrate.  There just aren’t enough rich people.  No matter how you crunch the numbers.  You just can’t have a declining number of taxpayers pay for a growing number of tax consumers.  It will only lead to deficits.  And sovereign debt crises.  Kind of like what they’re having in Europe right now.  Because of their unsustainable social democracies.  And unless they start having babies like they once did there is no way to sustain the unsustainable.

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Jobs and Unemployment, Taxpayers and Tax Consumers

Posted by PITHOCRATES - March 19th, 2012

Economics 101

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

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

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

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

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

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

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

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

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

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

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

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

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

Posted by PITHOCRATES - February 17th, 2011

Good Times Turned into Chronic Deficits and Punishing Debt

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

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

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

Government Employees Grew 280% from 1946 to 2010

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

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

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

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

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

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

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

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

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

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

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

It’s Spending Cuts or Bust

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

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

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

Posted by PITHOCRATES - February 15th, 2011

That Great Sucking Sound of our Money Leaving our Pockets

All right, here’s the dirty little secret about politics.  Most people enter politics for the money.  They can say whatever they want but when it comes to voting tax increases, guess what?  There are tax increases.  Always.  The amount of money transferring from the private to the public sector is always increasing.  Always.  Congress set up close to half of the federal budget to increase automatically.  That great sucking sound isn’t jobs going to Mexico.  It’s our money leaving our pockets.

Take a look at your check stub.  Compare gross pay to net pay.  Are these numbers almost the same?  Or is the difference closer to a car payment?  A house payment?  Depending on where you are in your career this difference on your weekly paycheck could pay for a nice car.  Add them up in a month and they could get you into that nice house in the good school district.  This is a lot of money.  Ask your grandparents what was the difference between gross pay and net pay on their paychecks.  You’ll probably be surprised.  Because, back then, net pay was very nearly gross pay.

Today, nobody gives gross pay a second thought.  We talk about what we ‘net’.  Because we’re just used to it.  You see, the government (federal, state and local) didn’t just start taking hundreds of dollars out of our paychecks.  It was incremental.  Over a long period of time.  Sometimes coming to pennies a day.  Hard to see.  And just not enough to bitch about.  We may see tens of dollars of our gross pay taxed away over a decade or two.  But we typically make more over that same time.  Again, in the great scheme of things, these are small incremental changes.  Just not big enough for a great number of people to bitch about.

Incrementalism, Progressive Tax Rates and the Withholding Tax

That’s the power of incrementalism.  Baby steps.  Little by little.  Big growth over time.  Like watching grass grow.  You don’t see it grow.  Then one day you have to cut it.  And so it is with taxes.  One day you look at your check stub and realize how much you’re paying in taxes.  You may have never realized you were paying so much.  A progressive tax system keeps the tax burden on the young who don’t make a lot money yet low.  So they don’t see it at first.  And keep voting Democrat.  Not because they want to pay higher taxes.  But because the higher taxes haven’t impacted their lives yet.  When they do start paying more in taxes, that’s when some of them start voting Republican.

So taxes creep up on us.  We don’t see them all that clearly at first because of progressive tax rates.  And the fact we pay them before we see them.  Via the withholding tax.  Which provided the greatest advancement in the collection of confiscatory taxes.  For without it there would be tax revolts when April 15th rolled around and people didn’t have tens of thousands of dollars sitting in their checking accounts to pay their taxes.  I mean, what’s easier?  Getting us to pay our taxes with money we never saw?  Or paying our taxes after having that money in our hands first?  Funny thing about earnings.  Once we have the cash in hand we don’t give it up lightly.

That’s why the government introduced withholding taxes.  It makes getting our money from us easier.  And allows them to raise our taxes ever higher.  Because we pay those taxes with gross pay.  Pay we never get.  In our real world, gross pay is a myth.  It doesn’t exist.  Our earnings only become real at net pay.  Sad.  But true.  So they can increase our taxes a lot more than if we were paying them in full in April.  And do.

Pandering and Patronage

Yeah, but America is a center-right country.  And liberal Democrats on the left are the ones who want to keep increasing our taxes to pay for their Big Government programs.  So how can they?  When America is a center-right country.  I mean, if it’s a minority of Americans that want to raise our taxes to grow government, how do they get the votes to increase our taxes in the first place?

By pandering.  Buying votes.  And patronage.  The power to tax provides near-limitless money for politicians to spend.  The trick is in the getting and giving amounts of money.  You tax the many.  And give to the few.  You tax a hundred dollars or so from each paycheck.  And give hundreds of thousands of dollars to those who can help you win election.  That’s how the tax and spend people win elections.  They give money to small groups in exchange for their vote.  Or legislate favorable legislation for them.  Or put someone from that group in the government itself in an oversight position of the industry there’re in.

A small group by itself can’t make a big difference at the polls.  But you get enough of them, they can.  Luckily for the tax and spenders, a lot of these small groups can be found in the political center.  Which helps pull some of that ‘center-right’ to the left.  And this is how the difference between gross pay and net pay continues to grow larger.  These ‘swing votes’ may pay more in taxes, too, but the special privileges they receive from the government more than makes up for it.

The Little Programs Add Up

We pay a lot in taxes.  And yet you don’t hear too many people complain about it.  Why?  The progressive tax rate plays a role in this.  There are more poor people than rich.  So fewer people pay taxes.  And the withholding tax helps, too.  Because most of us don’t even pay attention to what we’re paying.  But what really helps government is the number of taxpayers.  The total amount of taxes each taxpayer pays can ‘appear’ small.  And the amount each taxpayer pays for a specific program can appear smaller still.  This can get a lot of people to ‘support’ these little programs.  Simply by their passive lack of opposition.

For example, heating assistance for the poor is not a very big part of the budget.  And it doesn’t take much out of your paycheck.  You feel for the poor who can’t pay for heat.  You want to help.  So there isn’t a lot of political action against this program.  It’s like those commercials where you can save a child in Africa for the price of a cup of coffee.  I mean, who wouldn’t feel guilty for refusing to buy one less cup of coffee to save a life?  It’s an effective tactic.  Making people feel guilty for being so greedy that they are unwilling to drink one less cup of coffee.  And no one wants to be seen as this greedy.

But the little programs add up.  You start out by sacrificing a cup of coffee.  But when each of these little programs costs you a cup of coffee, they can add up to a dinner.  A movie.  A night on the town.  A new car.  And they do.  That’s why a lot of people can’t live in the school districts they want to.  Because of the aggregate of all of these little programs.  But we never look at the aggregate.  It’s always one program at a time.  To make the taxpayer feel guilty for their greed.  To break down their will to oppose cuts.  To go along with further tax increases.  And a lot of us do.  Which makes that gap between gross pay and net pay grow ever larger.

Taxpayers and Tax Consumers

But things are changing.  And it’s causing a problem.  The baby boomers are beginning to retire.  They’ll soon be using Medicare.  And collecting Social Security.  So the number of taxpayers will go down.  While the number of tax consumers will go up.  And that changes everything.  The fewer taxpayers will have to pay a larger amount of taxes to support these entitlements as well as all of those little programs.  And this will make it a lot harder to hide these taxes.  To make them appear small.  More people will have to go with less to pay these taxes.  Even those who once did all right during periods of high taxation will have to go with less.  Because more people will be consuming Medicare and Social Security benefits.  And it’ll be political suicide to cut these programs.  Leaving little choice but to cut some of the little programs.  Which will give the patrons of Big Government little incentive to support tax and spend any longer.  Because they’ll see more taxing.  And less spending.  On themselves.

Politics as usual will not work as well as it once did.  Because they will not be able to hide the cost of Big Government any longer.  They won’t be taking from the many to give to the few anymore.  They’ll be taking from the few to give to the many.  Which can’t be anything but a recipe for disaster.

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

Posted by PITHOCRATES - December 16th, 2010

Lying to Make Future Liberal Democrat Voters

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

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

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

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

Tax Cuts and the Roaring Twenties

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

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

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

Higher Tax Rates Shelter Wealth instead of Creating Jobs

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

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

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

Government Activism Gives us the Great Depression

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

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

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

Tax Cuts Stimulate Economic Activity

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

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

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

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

Posted by PITHOCRATES - December 14th, 2010

Tax and Spend and Do as I Say

Liberal Democrats like to tax and spend.  And they are also so full of themselves that they like to tell other people how to live their lives.  Because they think they are smarter than us.  And know what’s best for us.

Funny thing.  A lot of these liberal Democrats are rich.  Like Nancy Pelosi and her San Francisco constituents (you need to be rich to live in her neighborhood).  Though they’re rich they prefer to spend other people’s money.  And spend a lot of it.  They take the concept of ‘redistribution of wealth’ to new heights.  As long it’s other people’s wealth, that is.

Not many agree with them.  Liberal Democrats make up about 20% of the electorate.  So theirs is a minority opinion.  Which can be a problem when you want to tax and spend.  Because that other 80% tend to have real jobs.  Which means they pay the taxes that liberals like to spend.  And they’re none too keen on giving up their hard-earned money so a bunch of rich liberals can assuage their guilt for being rich.

Democracy Ruined the Good Old Days for the Privileged Classes

Being a 20% minority has its problems.  Especially when you want to tell how the other 80% should live.  They lament that we live in a democracy.  Where people have the right to vote.  Unlike in the good old days.  Where your blood determined rank and privilege.  There were no questions asked.  You did what you want.  Because you could.  And there was no voting.  No silly inconvenience of elections.  No, back then the rich and privileged classes knew how to live.  And the suffering masses knew their place.

But, alas, the miserable Founding Fathers had to go and muck all of that up.  Liberty.  The biggest pain in the ass the entitled classes ever had to deal with.  Nowadays, the privileged just can’t do what they want.   You need to win elections.  They need to get others to vote their way.  They need others to agree that their living the good life is in the best interest of the country.  And how do they do that?  They lie, of course.  And make as many people as possible dependent on their generosity.  Their generosity with other people’s money, that is.

Of course, it wasn’t always other people’s money.  It used to be their food.  In the 1790s, things were getting pretty bad in France.  For the suffering masses, that is.  The ‘Third Estate’.  Things were going pretty darn well for Estates 1 & 2.  The rich nobles.  And the rich clergy.  And we know how all that ended up.  Bad.  For Estates 1 & 2.  The Third Estate (i.e., the poor suffering masses) grew tired of going hungry and suffering famine.  So they stormed the Bastille and kicked off the bloody French Revolution.  Because they were hungry.  And the rich and privileged were not.  But I digress.

Using Class Warfare to Demonize their Political Opponents

Sadly, for the rich and privileged, the American and French Revolutions changed things.  The ruling minority could no longer rule as they pleased.  They had to consider the majority.  There would now be taxation with representation.  Like in Great Britain.  People paying the taxes would have a say in how the politicians spent those taxes.

Merde.  Pardon my French.  Or so said the rich and privileged classes.  Who now had a problem.  If the rich and privileged were no longer entitled to a better life, how could they then live a better life?  I mean, let’s face it, these people aren’t exactly busting with ability.  Most couldn’t find their way out of a wet paper bag.  So what does one do with no ability?  Scheme deviously.

And one of the most devious and effective tools?  Class warfare.  You attack the people with ability who have earned their wealth.  Something that few liberal Democrats can do.  Because they have no ability.  So they demonize those that do.  Business owners.  Corporate America.  And you tell the poor masses that the only reason that they’re poor is because the rich business class is exploiting them.  And that they, the liberal Democrats, will rectify that situation.

Lying to Independents and Moderates

So they give them stuff.  They tax the rich.  And give stuff to the poor.  Which makes the poor grateful.  And dependent on the government.  Grateful and dependent, of course, equals votes.  This giving of other people’s money isn’t limited to the poor, though.  They make the not-so-poor special interests even less poor with this same generosity.  This generosity of other people’s money.

It’s a full-proof deviousness.  When the rich and privileged classes shower the poor and special interests with other people’s money, they get their votes.  And it’s a lot more than 20% of the electorate.  But it’s not quite a majority, though.  So they have to lie to another group of people to push them into the majority.  And who are these people?  Moderates and independents.

These people, though, are a problem.  They have honest jobs.  They don’t stand to prosper by voting liberal Democrat.  And they’re not likely to respond well to a campaign slogan that says we want to raise your taxes so others can live better without working as hard as you do.  People just don’t choose to pay more.  So others can have more.  While they go with less.  It’s why some people will drive 5 miles to save 2 cents per gallon of gas.  People choose to pay as little as possible.

Liberals Hate Ronald Reagan.  But they Campaign like him to Win.

So how do you get people who won’t benefit by voting for you to vote for you?  By demonizing your opponent.  The Left destroyed Newt Gingrich because he wanted senior citizens to ‘wither on the vine’.  Or so they said.  He never said that (he said Medicare would wither on the vine after enough people took proposed government subsidies to move into private insurance policies).  But all moderates and independents heard was that he wanted to kill senior citizens.  And that was enough.  His approval ratings plummeted.  To save his party, he resigned.

This is the only way liberal Democrats can win elections.  By lying.  They never run openly.  They never say they want to raise your taxes.  Far from it.  Because people don’t want to pay more taxes.  Few can even afford to.  No, when they campaign, they try to sound like the great conservative, Ronald Reagan.  Why?  Because the majority of Americans approved of his policies.  So they hide their true selves during the elections.  And hope and pray (figuratively, of course) that the moderates and Independents have short memories.

They have to do this because of one very inconvenient fact.  There are more taxpayers than tax consumers.  Which is a double-edged sword for liberal Democrats.  On one hand, more taxpayers mean more tax money.  But, on the other hand, because of Democracy, it also means more people they have to successfully lie to.  Merde.

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