FT187: “It’s odd how we can never afford a tax cut but we can always afford new spending.” —Old Pithy

Posted by PITHOCRATES - September 13th, 2013

Fundamental Truth

The Democrats’ idea of Bipartisanship is Republican Capitulation

It’s that time of the year again.  Summer is winding down.  The weather is starting to cool.  The harvest is coming in.  The stores are already stocking their shelves with Halloween decorations.  Yes, it’s the end of the government’s fiscal year.  The time the government will run out of money unless Congress passes a new budget.  Or what passes for budgets these days.  Continuing resolutions.

This that magical time of year when Republicans and Democrats come together to negotiate the government’s budget for the upcoming fiscal year.  The give and take process where they sit down and work with each other.  Civilly.  Saying things like, “Yes, that is too costly.  We need to spend less there.”  And, “You’re right, that is important to the people and we should spend more there.”  And the occasional, “I agree.  That program is no longer needed and we can remove it from the budget entirely.”

I am, of course, lying.  These are things that are rarely, if ever, said to each other.  For when it comes to these budget battles it is always the same.  The Republicans try to be responsible and cut spending.  The Democrats then call them greedy corporate toady Nazis.  The Republicans will then suffer a general emasculation and give the Democrats their spending hikes.  And perhaps a tax hike or two.  While asking them to please like them and invite them to the cool parties.  And the Democrats will then commend the Republicans’ bipartisanship.  What others would call capitulation.  Happy that things are once again right in the world.  With the Republicans once again the Democrats’ bitch.

Entitlement Spending creates a Permanent Underclass that keeps the Privileged Class in Power

John Emerich Edward Dalberg-Acton, known more simply as Lord Acton, said, “Power tends to corrupt, and absolute power corrupts absolutely.  Great men are almost always bad men.”  And boy was he on to something there.  For something happens when some good conservatives go to Washington.  They enter a world like no other.  Nothing they could ever have dreamed of.  A world that once belonged only to the nobility and the aristocracy.  Those things Americans fought for their independence from.  And here they are.  After winning an election to rein in the kind of government spending that makes this living possible.  And they say, “What, end all of this?  Are you mad?”

So many cross over to the dark side.  Sell their souls.  Forsake their constituents.   Do great dishonor to our Founding Fathers.  All because they like the money and the power.  Especially the power.  Some resist.  Those from the Tea Party seem more immune than most when it comes to the corrupting influences of Washington.  But these people who stand on principle?  Those who serve their constituents honorably?  The left will fling every invective upon them.  A figuratively flinging of excrement.  To try to beat them down and break them.  To get them, too, to forsake their constituents.  And to join them as they drop trou and defecate on the Constitution.  Figuratively, too, of course.  At least I hope so.

So this is what makes the budget process so adversarial.  You have those who are trying to do the right thing for the people.  And those on the other side who want to corrupt these people.  To get them to quit fighting against them and to join them.  So they can maintain their privileged class.  This is what all that entitlement spending is all about.  It’s nothing but alms.  To keep the people content enough so they don’t rise up.  But not too content that they don’t fear that those greedy corporate toady Nazis may take away their meager alms.  And once they get someone to think like that they have a voter for life.

There comes a Point when Raises in Tax Rates actually Reduce Tax Revenue

The key, then, is keeping people poor.  For the whole privileged class thing those in Washington have doesn’t work unless they have poor people who need them.  Which is why they spend so much time reminding the poor how much they need them.  The Democrats in Congress.  Who are always there fighting for them.  Keeping their alms flowing.  But also keeping them poor.  Which a welfare state does well.  Because if you have enough to subsist lethargy will do the rest and destroy the spirit.  Getting the poor to accept their place as a permanent underclass.  That needs a permanent privileged class taking care of them.

There is only one problem.  This destroys lives.  People in this permanent underclass may have gone on and done great things.  They may have been doctors.  They may have been engineers.  They may have been entrepreneurs.  But they will never be those things because the left sacrificed them to maintain their privileged class.  Forever consigning them to the underclass.  So the privileged class has someone to take care of.  No matter how costly it gets to maintain this entitlement culture.  No matter how great the deficits get.  Or how great the national debt grows.

So there is another problem. As you convert taxpayers into tax-consumers you have to keep raising taxes on those remaining in the tax base.  But as you raise tax rates you put the brakes on economic expansion.  And with reduced economic activity there is reduced tax revenue.  There comes a point when raises in tax rates actually reduce tax revenue.  And we’ve passed that point.  Which is why we have record deficits.  A record national debt.  And the worst economic recovery since that following the Great Depression.  Because we are spending, taxing and regulating too much.  Which is why uncorrupted conservatives want to cut taxes, defund Obamacare, roll back other costly regulations and reduce spending.  Things the left bitterly opposes.  For doing so means we don’t need them as much as they need us to need them.

So as the budget battle commences you will hear the usual refrain from the left.  We can’t afford tax cuts.  As they equate tax cuts with government spending.  But we can always afford new government spending.  So the left will call for bipartisanship.  That is, capitulation.  And eventually make the Republicans their bitch.  Again.  And increase the national debt.  Again.  Putting the nation on the path to bankruptcy.  What the left considers a small price to pay to maintain their privileged class.  As long as that bankruptcy comes after they’re dead and buried.  After they enjoyed their time in the privileged class.  Which is why the left is also less likely to believe in God and life after death.  For it is easier to be bad when there is nothing to fear after a bad life.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Looking at the Economic Data it’s getting hard to tell who’s President, Barack Obama or Jimmy Carter

Posted by PITHOCRATES - August 22nd, 2011

Keynesian Economists’ Poor Forecasts suggests their Keynesian Economics doesn’t Work

More bad news for the housing market.  Not that this is a surprise.  That was a pretty big housing bubble that the Fed created.  With their stimulative low interest rates.  And the bigger they are the harder they fall.  Or pop, as it were.  And as the market corrected the Fed’s damage, it threw a slew of people out of work (see Early Mortgage Delinquencies Rise to Highest in Year as U.S. Economy Slows by Kathleen M. Howley posted 8/22/2011 on Bloomberg). 

The percentage of U.S. mortgages overdue by one month rose to the highest level in a year in the second quarter as homeowners who lost jobs were unable to make their payments…

The gain in early delinquencies signals a slowing economy may increase foreclosures, said Jay Brinkmann, chief economist of the trade group. The unemployment rate in the three months ended June 30 rose to 9.1 percent from 8.9 percent, the first quarterly increase since 2009, according to the Labor Department. Jobless claims jumped to an eight-month high in late April, government data show.

For the quarter ending June 30 unemployment was at 9.1 percent.  Ouch.  Remember why it was so urgent to pass the Obama Keynesian stimulus?  To keep the unemployment rate under 8%.  That was in February of 2009.  That’s two years ago.  Guess Keynesian economics doesn’t work.

The world’s largest economy grew at a 1.3 percent annual rate in the second quarter, the Commerce Department said on July 29. That was less than the increase of 1.8 percent forecast by economists surveyed by Bloomberg. A Federal Reserve report last week showed manufacturing in the Philadelphia region contracted in August by the most in more than two years as orders fell and factories fired workers.

Goldman Sachs Group Inc. and JPMorgan Chase & Co. lowered their forecasts for U.S. gross domestic product last week. The U.S. will expand 1.5 percent this year, down from a previous forecast of 1.7 percent, according to Goldman economists in New York. JPMorgan predicts 1 percent growth in U.S. GDP in the fourth quarter, down from an earlier projection of 2.5 percent, the bank said last week.

And the news just keeps getting better.  And by better I mean worse.  Again another record.  This one for manufacturing.  And actual GDP numbers are coming in under economists’ estimates.  The numbers are so bad these economists are revising their future projections down.  It should be noted that the vast majority of mainstream economists are Keynesian economists.  Which suggests their Keynesian economics doesn’t work very well.

Inflation Growing at a Greater Rate than Wages equals Real Pay Cuts

These mainstream economists said the Great Recession ended by July 2009.  Said that the Obama administration followed their Keynesian advice.  Kicked that recession in the behind.  And launched the recovery with a Recovery Summer.  Yay said the Keynesians.  Everything was going to be all right.  And yet two years later here we are.  Where things are still not right (see Survey: US companies say they’re planning another year of small raises for workers in 2012 by the Associated Press posted 8/22/2011 on The Washington Post). 

After increasing salaries by 2.6 percent this year and last year, companies are planning a 2.8 percent bump in 2012, benefits and human resources consultancy Towers Watson reported Monday.

That’s somewhat smaller than raises in the last decade. From 2000 to 2006, the year before the Great Recession began, salaries rose an average 3.9 percent for workers who were not executives.

And the modest bump may not help add much buying power for shoppers. In the 12 months through July, prices for consumers have risen 3.6 percent, according to the government’s latest calculations.

Those lucky enough to have a job are taking real pay cuts to keep those jobs.  Inflation is growing at a greater rate than their wages.  Which means as prices go up their pay checks will buy less.  Despite those raises.  High unemployment.  And rising inflation.  The last time the economy saw numbers this bad was during the Seventies.  When we called it stagflation.  And blamed Jimmy Carter.  Who became a one-term president because of it.

Obama Cares enough about the People to Hide from them on the Golf Course

President Obama is aware of the nation’s woes.  He is even thinking about them while on vacation.  On Martha’s Vineyard.  Playground for the uber rich (see President keeps low profile on Martha’s Vineyard by Mark Shanahan & Meredith Goldstein posted 8/20/2011 on the boston.com).   

But it was later, at the Vineyard Golf Course in Edgartown, where the president’s recalcitrance was most evident. Approaching the eighth tee in a golf cart with friend and frequent golfing buddy Eric Whitaker, the president noticed three TV cameras and a Globe photographer across the street. Rather than stop and be photographed teeing off, the president skipped the hole.

That’s how much he cares.  He’ll skip a hole during a round of golf just so we don’t see him living well during these bad economic times.  Talk about sacrifice.  He’s just not playing 17 holes instead of 18.  Skipping that hole may have an adverse affect on his handicap.  He called for fair-share sacrifice.  And he, too, is sacrificing.  Walking it like he talks it.  So think about this noble act before you start bitching about another tax hike.  He skipped a hole of golf.

Obama bailed out General Motors and Chrysler and put Detroit back to Work

But it’s back to work after Martha’s Vineyards.  Just like the rest of us after our vacations.  Though our vacations are a bit more Spartan these days.  And rarely venture farther than our own backyards (see Obama to join unions’ Labor Day festivities in Detroit by Aaron Kessler posted 8/22/2011 on the Detroit Free Press). 

WASHINGTON – President Barack Obama will join thousands of union members at Labor Day festivities in Detroit, the Free Press has learned,

Obama will deliver remarks at a Labor Day event sponsored by the Metro Detroit Labor Council, according to a White House official with knowledge of the trip.

While no other details were immediately available, it is likely he would again use the opportunity to tout his administration’s role in the rescues in 2009 of General Motors and Chrysler.

So the president is going to Detroit to celebrate Labor Day.  It makes sense.  I mean, he bailed out General Motors and Chrysler, didn’t he?  And put the good people of Detroit back to work.

With 13.7% Unemployment where’s the Summer Recovery in Detroit?

Then again, looking at the U.S. Bureau of Labor Statistics, it would appear that he has not put the good people of Detroit back to work (see Metropolitan Area Employment and Unemployment Summary posted 8/3/2011 on the U.S. Bureau of Labor Statistics). 

Eleven of the most populous metropolitan areas are made up of 34 metropolitan divisions, which are essentially separately identifiable employment centers. In June 2011, Miami-Miami Beach-Kendall, Fla., and Detroit-Livonia-Dearborn, Mich., registered the highest jobless rates among the divisions, 13.9 and 13.7 percent, respectively. Nashua, N.H.-Mass., reported the lowest division rate, 5.4 percent, followed by Bethesda-Rockville-Frederick, Md., 5.8 percent. (See table 2.)

No wonder Maxine Waters is so angry.  He skips Detroit on his ‘listening’ bus tour.  And vacations on the very exclusive Martha’s Vineyards.  While the Detroit area is suffering double-digit unemployment.  If he was listening anywhere, it should have been in Detroit.

The Detroit area unemployment rate is 13.7%.  While the national rate is only 9.1% for the same period.  Yes, the national rate is bad.  But it’s not Detroit bad.  And this after the automotive bailouts.  That put the good people of Detroit back to work.  On top of the Obama stimulus.  So where’s the Summer Recovery in Detroit?  What’s happened to the Motor City? 

So this is what a Second Jimmy Carter Term would have been Like 

In a word, Obamanomics.  His Keynesian policies that were supposed to save jobs have killed jobs.  In Detroit.  And across the nation.  Worse, on top of high unemployment these policies have ignited inflation.  Unemployment plus inflation equals stagnation.  Misery.  And malaise

So this is what a second Jimmy Carter term would have been like.  Makes one want to say, “Welcome back Carter.”  But not in that warm nostalgic way like in that Seventies sitcom (Welcome Back Kotter).  Of course you never saw Jimmy Carter living it up like Obama.  So there are some differences.

This economy will not help Obama in 2012.  Worse, the American people will get no relief until after 2012.  For it’s like Ronald Reagan said in his campaign against Jimmy Carter (see President Ronald Reagan – Liberty State Park [Pt. 1] at 5:26).  A recession is when your neighbor loses his job.  A depression is when you lose yours.  And recovery is when Barack Obama loses his.

I’m paraphrasing, of course.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Look Out – Here Comes the Middle Class Tax Hike

Posted by PITHOCRATES - September 25th, 2010

A Little Business Primer

Who hires more people?  Big corporations?  Or small businesses?  Some may be surprised to learn that small business provides the majority of American jobs.  Little guys taking a risk.  Doing something they love.  Are good at.  They earn a living.  And provide jobs with benefits for others.  Not too shabby.

These people start their own construction company.  Buy a restaurant (from a lunch counter to a fancy place with table cloths and a wine steward).  Captain a fishing boat.  Move up from fixing cars in a backyard to operating a three-bay service garage.  Open a multi-chair hair salon.  Run a landscaping business (and snow removal business in the winter).  Sell ice cream to tourists from an independently owned Ben & Jerry’s on the strip.  Or buy and operate a McDonalds, Pizza Hut, Dunkin’ Donuts, Kentucky Fried Chicken, Taco Bell, etc.

These are not fat cats running fortune 500 corporations.  They’re no Donald Trump.  So they keep things simple.  And yet protect themselves.  They operate as an ‘S’ corporation.  This is sort of a hybrid between the regular ‘c’ corporation and a partnership.  There’s limited liability (you limit your losses to only what you invested into your business).  And there’s no business tax on earnings like in a partnership.  All earnings are distributed to the shareholders (which could be just one person).  And taxed as personal income. 

I Will Not Raise Taxes on Anyone Earning Under $250,000

Sounds good.  Stick it to the rich fat cats.  But who else makes more than $250,000?  I’ll give you a hint.  Reread the previous section.

A small business owner operating as an ‘S’ corporation is likely to earn more than $250,000.  But they’re not fat cats.  Far from it.  Let’s pick a number.  Something you think is fair for a business owner’s salary.  Someone who probably has his or her house mortgaged to the hilt.  Works 7 days a week and puts in on average 80 hours each week.  If they could earn, say, $75,000 working for someone else, would you begrudge them earning, say, $100,000 working for themselves?  For the sake of the argument, let’s say you don’t.  That’s less than half of the $250,000 tax threshold.  The small business owner, the generator of American jobs, should be safe from any Obama tax hike, right?  Wrong.

As a business struggles to grow, a business owner plows most of their earnings back into their business.  To buy a new copier.  Replace a furnace.  Buy new software.  New computers.  A network for your computers.  Inventory tracking.  A new delivery truck.  Decals for your new delivery truck.  Building signage.  A ‘yellow pages’ ad.  New telephones.  A new website.  New invoicing software with a custom-designed invoice form.  Etc.  But before you can spend this money, you have to earn it.  And, once earned, an ‘S’ corporation small business owner pays taxes on it.  Even if they invest it back into the business.  So, the higher the tax rate, the less they can grow.  And the fewer jobs they can create.

The Obama administration keeps bitching about the greedy bankers and big corporations who are sitting on their cash.  (And they sit on their cash for good reason.  They already have excess capacity.  So there’s no reason to expand.  Because there’re no markets to expand into).  The one area, though, where there may be expansion possibilities is in small business.  Raising taxes on those earning over $250,000 per year, though, will kill small business growth.  Kill jobs.  And prolong this recession.  So why do they persist in attacking the ‘rich’?  Because in terms of voters, they’re less of them than those earning under $250,000.

Playing the Numbers

The Bush tax cuts expire at the end of this year.  If Congress doesn’t extend them, taxes will go up and the economy will tank even further.  And Obama will have violated his no tax rate increase for anyone earning less than $250,000 pledge. 

But there will be no vote before the midterm elections.  (See Congress Punts on Taxes by Martin Vaughan and John D. McKinnon at the Wall Street Journal on line.)  The Republicans want to extend them across the board.  This is a problem for Democrats.  If they do, it endorses George W. Bush’s economic policies and discredits their own.  And angers the liberal base.  They would rather extend the cuts only for the middle class.  This, however, won’t help the small business owners (i.e., the job creators).  So the Republicans are opposing this as it will not help the economy. 

Let’s look at the numbers.  Note the chart at the bottom of the Wall Street Journal article referenced above.  Especially the fine print.  It reads, “2008 tax year, an additional 25% of filers are in the 0% rate category.”  In other words, 25% of the voters pay no federal income taxes.  If you add that figure to the sum of the top three ‘Pct. of filers’ in that chart it equals 95.1%.  In other words, approximately 95.1% of voters earn $140,550 or less.  Only 4.9% of the voters earn more.  Hence the class warfare.  And after stirring up the masses (the 95.1%) to hate the rich (the 4.9%), they have no choice but to keep on hating.  I mean, they can’t tell the 95.1% that they were wrong, can they?  Especially when the poll numbers are moving against them.

So, of course, the Obama administration sticks to the time-honored playbook.  And attacks the rich.  In hopes of persuading enough of the 95.1% to forget about results and to just vote their hate.  We call it playing the numbers.  There’s only one problem.  Most of the 95.1% work for the 4.9%.  So if you make it too costly for the 4.9% to expand and create jobs, they won’t.  They may even cut back.  And the 95.1% are the ones who will suffer.  They may see a reduction in their benefits.  Work longer hours (because their boss can’t afford to hire a new employee). They may even lose their job.  And their house.  They may not like that.  But at least they can find solace in their hate.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , ,