Australia taxes their Rich People far more than the US but it’s still Not Enough to Pay for their Welfare State

Posted by PITHOCRATES - November 10th, 2012

Week in Review

With President Obama’s reelection some are saying it is a mandate to raise taxes on the rich.  Because he said all along that he wanted to tax the rich more.  And he won reelection.  Ergo, ipso facto, mandate.  But we should be careful about raising taxes.  For it seems our government is always raising taxes.  Or demanding that we need to raise taxes.  So the question is where does all this tax-raising end?  A new carbon tax?  A GST?  Well, Australia has both.  Yet they’re still talking about raising taxes (see States to eye online shopping for GST boost – Sydney Morning Herald posted 11/10/2012 on Canberra Hub).

State treasurers will this week consider calls to cut the GST-free threshold for goods bought from overseas online stores, in an attempt to bolster flagging revenues from the tax.

Under current rules, products costing less than $1000 that are privately purchased from overseas are not subject to GST, sparking complaints domestic retailers face an uneven playing field.

State governments – which receive the revenue raised by the GST – also miss out on about $600 million a year due to the threshold, and this foregone revenue is projected to rise as online shopping takes off…

NSW Treasurer Mike Baird, who wants the GST-free threshold to $30, will raise the issue as a “key consideration” at the meeting, a spokeswoman for Mr Baird said…

The simplest way to resolve the situation was to require foreign retailers selling into Australia to charge GST, he said.

Mr Greiner has also called for a debate on raising the GST’s rate from 10 per cent or broadening its base, but this was ruled out on Monday by the Treasurer, Wayne Swan.

Australia’s top marginal tax rate is 45% on incomes over $180,001 ($187,021 US).  They tax companies at 30%.  And capital gains, after some discounting and adjustments, they tax as income.  Whereas in the US the top marginal tax rate is 35% on incomes over $388,350.  The corporate tax rate is 35%.  And a capital gains tax of 15%.  Apart from the higher corporate tax rate, the Australians tax individuals far higher in Australia than the US taxes their individuals.  And yet it’s still not enough.

On top of these higher tax rates are additional taxes.  Like the carbon tax.  And the goods and service tax (GST).  Which they are currently discussing ways of increasing to generate more tax revenue.  There’s an important lesson to learn here.  No matter how much government taxes their people it will never be enough.  For the unsustainable rising costs of a welfare state for an aging population will always exceed the tax revenue from an aging population.  Higher tax rates and new taxes are inevitable.  And for those states with national health care, cost cutting, longer wait times and service rationing are also inevitable.  Because however much they tax it will never be enough.

This is the future in America.  Because we’ve just added Obamacare even though we’re already suffering record budget deficits under the Obama administration.  And 4 years of anemic economic growth.  Which will only become more anemic with higher tax rates.  And new taxes.

The only way a state will ever pay for its welfare state is if they have a population that is getting younger such that there are always more people entering the workforce than leaving it.  Or by reducing the size of the welfare state to a size the current population growth rate can fund.  So the United States has two paths to solvency.  Start having a heck of a lot babies.  Or start slashing state benefits.  Or both.  Which would be a third option.  But the current option, increasing state spending with a declining birthrate, will not work.  No matter how much you tax rich people.

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The Obama Deficits are Biggest since the 1940s and Taxing the Rich can’t Pay them Down

Posted by PITHOCRATES - August 5th, 2012

Week in Review

President Obama and Vice President Biden have both said the Obama administration did not increase government spending.  In fact all of their deficits were caused by some other guy.  George W. Bush.  It wasn’t their fault.  But they knew how to get rid of those George W. Bush deficits.  All they had to do was tax the rich just a little more.  So they paid their fair share.  Well, if you examine the numbers you can see they’re not exactly telling the truth (see Federal Deficit Highest Since 1940s by Elizabeth Flock posted 8/1/2012 on U.S. News & World Report).

The federal deficit is higher than it has been since the 1940s, in the years immediately after World War II.

A new visual from the “Face the Facts USA,” a non-partisan election project from George Washington University, shows the federal deficit has risen significantly under President Barack Obama, and that the government is increasingly spending money it doesn’t have…

An ad released by the Obama campaign Tuesday sought to stave off criticism about the president’s handling of the deficit. Titled “Worried,” the ad argues that Obama was the only candidate who had a plan to reduce the deficit, by having “millionaires pay a little more” in taxes.

Have millionaires pay a little more?  All right, for the sake of argument, let’s look at some tax return data.  In 2008, the total taxable income from all tax returns (see Table 1) for everyone taxed above 28% (including ALL capital gains income) was only $2.079 trillion.  That includes capital gains income taxed at 15%, 25% and 29%.  And income taxed at 33% and 35%.  The high-end earners.  Including a lot of small business owners who are not millionaires.  So, how much additional tax revenue will the government take in if they taxed these people an additional 2%?  About $42 billion.  An additional 5%?  About $104 billion.  An additional 10%?  About $208 billion.  These are all billions with a ‘b’.  So, no, a little more from the millionaires won’t even dent a trillion dollar deficit.

Class warfare may help win an election.  But when you check the numbers it’s downright nonsensical.  The ‘rich’ people, those in the 35% bracket in 2008 earned $1.1 trillion.  The budget deficit in 2011 was $1.3 trillion.  So even if you took ALL of their income there would still be a deficit.  The spending is just too great.  And there just aren’t enough rich people to tax.  The only way we can reduce our deficit is with spending cuts.  At least, mathematically.

So the Obama campaign isn’t telling the truth when they say President Obama had a plan to reduce the deficit by getting the millionaires to pay a little more in taxes.  For even if you took all of their income the deficit would still grow.  So if that’s not a true claim then perhaps their other claim isn’t true either.  And George W. Bush isn’t still spending money 3 and a half years out of office.

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The U.S. Starting to Chase the Wealthy and Job Creators out of the Country like the French

Posted by PITHOCRATES - May 13th, 2012

Week in Review

It’s just not the Socialist Hollande in France scaring the wealthy and job creators out of their country.  It’s happening in America, too (see Facebook’s Eduardo Saverin Joins Americans Renouncing Citizenship by Enjoli Francis posted 5/11/2012 on ABC News).

In 2011, billionaire Facebook co-founder Eduardo Saverin relinquished his U.S. citizenship and joined nearly 1,800 other Americans to do it last year — up from 235 in 2008…

Those in the expatriate community said that although Saverin’s move was likely a financial one — he paid an exit tax on the capital gains from his Facebook stock but the stock is now tax-free — they said expatriates who gave up their citizenship were driven by other factors.

Phil Hodgen, an international tax lawyer in Pasadena, Calif., said that since 2009, when more than 150 U.S. customers of Swiss banking giant UBS were investigated for alleged tax evasion, the IRS had been going after Americans abroad with foreign bank accounts with a vengeance.

He said that in the last three years, new and old rules had created an enormous amount of resentment — and paperwork expenses — for expatriates…

Peter Dunn, a popular blogger who gave up his U.S. citizenship, said the expatriates he spoke to were mostly standard middle-class U.S. citizens who were ready to retire or who had retired abroad. He said because of these “invasive” rules, they now feared substantial penalties from not reporting their finances correctly.

In an expanding welfare state your wealth isn’t yours.  It belongs to the people.  At least that’s the way governments look at it.  With ever expanding deficits and debt they’re trying to take as much wealth away from the wealthy as possible.  Despite the great things they create for us.  Such as Facebook.  For if it wasn’t for Saverin’s wealth he invested in Facebook we wouldn’t have it today.  But he believed in it.  And took a risk.  With his own money.  The way entrepreneurs do.  Something a lot of people do.  But few ever experience the success Saverin has.  And few will ever take these risks again if they are going to be hounded for the rest of their life by the tax authorities.

Of course those who want to tax the rich will look as these expatriates as the lowest of scoundrels.  Running away with their wealth instead of paying their ‘fair’ share of taxes.  Even though the amount in dollars they pay in one year is greater than most people will pay in taxes in a lifetime.  But these expatriates are the greedy ones.  For not letting us take all of their wealth. 

Of course should someone win the lotto it’ll be a different story.  For though we attack the rich we all want to be rich.  If not we wouldn’t be buying those lotto tickets, would we?  So, yeah, we hate the rich.  Right up until we become rich.  Then all this antagonism against the rich is just a silly misunderstanding.  And those taxes on the wealthy really are too high.  But until we become rich we’ll hate pretty much anyone who has more than us.  Be jealous of them.  And covet what they have.

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The Occupy Wall Street Protesters don’t want Fairness, They want Privilege

Posted by PITHOCRATES - October 9th, 2011

People who hate Capitalism hate America

Those on the Left keep trying to paint these Wall Street protesters as the Left’s version of the Tea Party.  Only better because they are standing up to corporate greed.  But when you step back and look at the broader picture you see some interesting things.  For one, our enemies abroad hate the Tea Party.  And love these Wall Street protestors (see Iran calls Wall Street protests ‘American Spring’ posted 10/9/2011 on The Associated Press).

An Iranian military commander said Sunday that the protests spreading from New York’s Wall Street to other U.S. cities are the beginning of an “American Spring,” likening them to the uprisings that toppled Arab autocrats in the Middle East.

Gen. Masoud Jazayeri of Iran’s Revolutionary Guard said the protests against corporate greed and the gap between rich and poor are a revolution in the making that will topple what he called the Western capitalist system.

So the Occupy Wall Street people have the support of Nancy Pelosi, Hugo Chavez and this guy.  This Iranian general.  Who hates America.  And would love nothing better than to see its collapse.  There’s a lesson here.  People who hate capitalism hate America.

What strange bedfellows.  Pelosi.  Chavez.  And this Iranian general.

Class Warfare Works because Gullible People are Fed with Misinformation to Produce a Withering, Festering Hate

But they don’t see that.  These Occupy Wall Street people.  All they keep hearing is how the rich are screwing them.  And business owners are getting rich by underpaying them.  Because many of them think gross sales are also net profits.  They’re not.  And have no idea of what it costs to run a business (see Small Business, Occupy Wall Street Is Aimed at You! by T. Scott Gross posted 10/9/2011 on Forbes).

Small business owners, this protest is about money—yours. And if you want to bring a semblance of sanity to the discussion, you had better start showing the money…

So I say you had better show them the money. Gather your employees. Take a handful of coins that add up to a dollar. Swipe away your cost of goods. Take out payroll and then payroll taxes. Follow with utilities, cost of capital, training, advertising, maintenance, insurance, and the rest until you have accounted for all the overhead, leaving those few lonesome pennies of profit that you have risked everything to make.

Been there.  Done that.  The problem is they won’t believe you.  Because they’ve been so brainwashed to believe you are lying when it comes to the money.  Say all you want but someone is telling them, “Sure, they say that, but look at the car your boss drives.  The house your boss lives in.  Are they better than yours?  You bet they are.  And you know why?  Because they’re screwing you.  That’s why.”

This is why class warfare works so well.  You have people who don’t know any better.  Being fed with misinformation to produce a withering, festering hate.  Which is how people like Nancy Pelosi, Hugo Chavez and this Iranian general rise to power.  By exploiting the gullible masses.

The Obama Administration wants us to Hate People Making $250,000 or More

This kind of hate makes it easy to tax the rich.  Which is a very popular sentiment these days.  Because everyone hates the rich.  Especially those who don’t make the rich cut (see Democrats aim to tax the rich — but who are they? by Kathleen Hennessey posted 10/8/2011 on the Los Angeles Times).

President Obama and Democrats in Congress have aligned on a populist, “tax the rich” strategy for the 2012 campaign. Now they have to figure out exactly who that is…

Obama and his fellow Democrats for years have described the wealthy as couples making more than $250,000 and individuals making more than $200,000 — 3% of U.S. households. By shifting away from that number in hopes of benefiting from the sound-bite punch of a millionaires tax, the administration may find it difficult to return to casting the broader net…

Obama’s threshold was based on broad principles, including the desire to leave the middle class untouched by higher taxes while collecting “enough” tax revenue, Bernstein said, although even he quibbles with the president’s cutoff and suggests that a broader tax increase may be needed in the future.

Going in the other direction — aiming for incomes of $1-million-plus — would yield far too little revenue to fund “a recognizable government,” Bernstein said. While the Democrats’ surtax proposal may make sense to pay for a jobs bill, “it’s actually quite important that $1 million does not become the new $250,000 when it comes to the permanent tax base,” he added.

Well, that complicates things.  Who’s rich?  People earning $1 million or more?  Or people making more $250,000 or more?  Who exactly are we to hate?

The Obama administration wants us to hate people making $250,000 or more.  Because there are a lot more of them than millionaires.  So that’s a lot more money they can spend.  But it’s also a lot of people to piss off by raising their taxes.  And with an election year coming up that’s the last thing those up for reelection in Congress want to do.

But if they only settle for $1 million now will that mean it will be harder to hate those making between $250,000 and $1 million later?  Oh me oh my.  Just who to hate?  As you can see this is quite the quandary for the hate monger.

Stimulus is Temporary whereas Tax Cuts and Deregulation are Forever

But there is a bigger issue at play.  You see, the problem with hating those earning between $250,000 and $1 million is that this income range includes our small business owners.  The job creators.  Who tend to not create jobs when things bother them.  Such as people waving their pitchforks at them crying, “Tax!  Tax!  Tax!” (see Poor Sales by Russ Roberts posted 10/9/2011 on Cafe Hayek).

Finally, I would note that while the survey that Invictus cites does indeed list “Poor Sales” as the single most important problem (25% in the September survey (scroll down to “Single Most Important Problem), taxes are listed as the single most important problem by 18% and government regulations and red tape is listed by 19%. So the two combine to 37%. They also happen to be two factors that government can actually control.

The Keynesians look at this and say we need more stimulus.   But if they’re saying this after that $800 billion stimulus in 2009 you can have but one conclusion.  Stimulus doesn’t work.  A big reason for this is that stimulus is temporary.  Like pain.  Whereas tax cuts and deregulation are like pride.  They’re forever.

Sales are complicated.  A lot of things influence people before they depart with their hard-earned money.  And there’s not a lot government can do about that.  But there’s a lot they can do about taxes and regulations.  And they do.  Unfortunately, they always choose to do the wrong thing.

The Occupy Wall Street People are Angry at Capitalism because they weren’t Born into Privilege

There are a few kinds of people in the world.  The informed.  Such as Tea Party People.  Who cite law and tradition in at their Tea Party events.  And the uninformed.  Such as the Occupy Wall Street People.  Who are an angry mob.  Angry at capitalism because they weren’t born into privilege.

And then you have people who love America.  And those who hate America.  Such as Iran.  And Hugo Chavez in Venezuela.  Enemies of freedom.  And democracy.  Who have come out to support the Wall Street protestors.  There’s another lesson here.   Actually, it’s the same lesson as before.  People who hate capitalism hate America.

Here’s a solution to solve their unhappiness.  Let’s ask these protesters which country is better than America.  Whatever nation that is we’ll generously pay for their one way airfare there.  Problem solved.  Everyone happy.

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FUNDAMENTAL TRUTH #85: “The rich pay more than their fair share of income taxes to provide tax relief for the poor and middle class.” –Old Pithy

Posted by PITHOCRATES - September 27th, 2011

The ‘Rich’ Obama wants to Tax more already Pays the Majority of all Federal Income Taxes

Some people complain that too much wealth is concentrated in too few hands.  And they say that isn’t fair.  But you know what else is concentrated into too few hands?  Federal income taxes.  That is, who pays these taxes.  The top 10 percent of income earners pay about 70% of the taxes.  That doesn’t sound fair.  This 10% paying 70% of the tax bill.  While 90% only pays 30% of the tax bill.  No, this isn’t fair.  But that’s okay.  At least that’s what the 90% think.  I mean, we don’t hear them demanding to pay their fair share of federal income taxes, do we?

Let’s look at some of the numbers.  From 2008 tax returns (see Table 2.  Returns with Modified Taxable Income [1]: Tax Generated, by Rate).

The first thing that jumps out at you is that the poor pay no income taxes.  Only the middle class and rich do.  The biggest income groups of taxpayers are those earning from $100,000 to $200,000.  And from $200,000 to $500,000.

Are these factory workers?  No.  Are these construction workers?  No.  These aren’t blue collar jobs.  These are white collar jobs.  And small business owners.  Currently in the crosshairs of the Obama administration.  Those ‘rich’ people who aren’t paying their fair share of taxes.  People who in fact pay the majority of all federal income taxes.

Those who don’t Pay Income Taxes are Dictating Tax Policy on those who Do

So why is president Obama so vilifying these most generous ‘rich’ people?  Because it’s the largest group of ‘rich’ people whose taxes he can raise.  From the same data let’s take a look at the distribution of income earners.  By looking at the number of actual tax returns filed by each group.

Interesting.  The distribution has shifted down to the lower income groups.  There are very few people earning $1 million or more and yet they pay a substantial amount of the total federal income tax.  While there are a great number of people earning less than $50 thousand who pay little to no federal income tax.

There’s another way to look at these numbers.  One person one vote.  Despite the amount of money you earn.  And the amount of taxes you pay.  Or the lack of taxes you pay.  So in essence what we have is those who don’t pay income taxes dictating tax policy on those who do.  Hence the appeal of class warfare.  Tax the rich?  Raise tax rates on high earners?  A millionaire’s tax?  Absolutely.  As long as I remain in the near 50% of those people who pay no income taxes.

Small Business Owners Earn a lot because they’re both CEO and Investor

There’s yet another way to look at these numbers.  With 70% of all taxes paid by those earning $100,000 or more let’s focus on these people.  We’ve summarized this data here (Taxable Income and Income Tax Generated are in thousands of dollars):

The sweet spot of tax revenue are the people earning from $100,000 to $200,000.  Who pay an effective tax rate of 17.91%.  And a good chunk of these are small business owners.  Who have S corporations.  Where their earnings pass directly to their private income tax return.  That’s why they earn so much.  Because they’re both CEO.  And equity investor.  But they don’t use those retained earnings to live an extravagant lifestyle.  No.  Instead, they use them to grow their business.  And create jobs.

Raising the tax rate on those retained earnings will not help grow these businesses.  In fact, it will prevent these businesses from growing.  And you don’t want to do that.  Because not only do these small business owners pay as much in federal income taxes as all the millionaires do.  They also create the majority of jobs in the American economy.

If you want Tax Policy that will Raise Tax Revenue don’t Raise Tax Rates on Job Creators

Is the purpose of tax policy to raise tax revenue?  Or politics?  When about half of the people pay no income taxes there is definitely a political aspect in taxing the rich.  But exploiting the political capital in the tax code defeats the purpose of the tax code.  Raising taxes.  Let’s look at a simple example.

Everyone agrees that lowering taxes helps businesses more than raising taxes.  That’s why even President Obama extended the Bush tax cuts to prevent a double-dip recession.  So let’s look at some numbers.  Let’s say we make it more business friendly out there.  Cut back on some onerous regulations that cost businesses.  Such as repealing Obamacare. Or some other costly legislation(s).  Not cutting taxes mind you.  Just cutting the costs on the job creators.

If we do this business-friendly deregulation let’s assume businesses respond.  They do well and grow.  And these small business owners earn more income.  So much that about 20% of them move up from the $100,000 to $200,000 income group to the $200,000 to $500,000 income group.  This group pays an effective tax rate of 23.3%.  Federal income taxes would increase approximately $100 billion with this growth in income.  Or an increase of 23.3%.  And that’s without cutting taxes.  Imagine what they could do if did cut taxes.

If you want good tax policy.  If you want tax policy that will raise tax revenue.  Don’t raise tax rates on job creators.  Instead, cut their costs.  Cut the cost of job creation.  Then watch the jobs they’ll create.  And the tax revenue they’ll pay.  Both the small business owners.  And their new employees.

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‘More Taxes, Regulations, Uncertainty and Spending’ is the Mantra of the Obama Administration

Posted by PITHOCRATES - September 21st, 2011

Obama’s Proposed Aviation Fees will Fall Predominantly on the People who can Least Afford It

In Obama‘s deficit reduction plan he plans to tax the rich.  Those who can most afford it.  Rich people.  And by rich people he means anyone who has any money to spend (see Airline groups attack Obama proposals to boost fees for aviation security, air traffic control by Associated Press posted 9/21/2011 on The Washington Post).

The aviation fees are part of Obama’s deficit-cutting plan that was released Tuesday. The plan would:

— raise the passenger security fee — now $5 to $10 per round trip — to $15 by 2017 and give the Homeland Security Department the power to push it higher.

— impose a surcharge of $100 per flight to help pay for air traffic control.

But college students fly.  Middle class families fly on vacation.  Non-rich people everywhere fly to visit family members that have moved away.  A lot of people fly.  And an interesting tidbit about the flying public?  They’re not all rich.

The rich people that Obama wants to tax?  Because they can most afford it?  Those well-to-do folk who fly those private jets?  Well, a lot of them do just that.  Fly private jets.  And, therefore, do NOT fly on commercial planes.  So they won’t be paying these new taxes/fees.  So these taxes/fees will fall predominantly on the people who can least afford it.  Imagine that.

The Air Transport Association, which represents large airlines, said it’s unfair for airlines and passengers to pay for security against terror attacks that target the U.S. and not the airlines themselves. The trade group says a typical $300 round-trip ticket already includes $60 in taxes and fees.

The Regional Airline Association, a group of smaller carriers, said the fees could lead to a loss of flights to smaller cities. The group’s president, Roger Cohen, said the $100 surcharge would cost more than regional airlines earned last year, threatening service to smaller cities.

The groups also complained that some of the money raised from airlines and passengers would be used to pay down the federal budget deficit and not to improve the air-travel system.

The airlines have a vested interest in protecting their planes.  Because they bought them.  And planes that blow up or crash in terrorist attacks don’t help the bottom line.  There’s the loss of an expensive airplane.  And the future revenue from that airplane.  The cost of replacing that airplane.  And the lost business from passengers who tend to shy away from an airline whose planes are easy pickings for terrorists.

So let them hire a security contractor to secure their planes.  Using the Israeli model.  Ask very pointed questions and observe people’s responses.  It works well for the Israelis.  Couldn’t be any worse than what the TSA is doing.  I mean, what passengers are going to complain about being groped less?

The administration estimated that boosting passenger security fees will raise $24.9 billion over 10 years. It proposed to spend $15 billion of that to reduce federal debt.

This is telling.  The airlines did not run up that federal debt. So there’s something really troubling about this.  Taking $15 billion from the airlines under the auspices of national security.  Just so they can continue their irresponsible spending ways in Washington.  This is no different than an addict stealing from his mother’s purse to support his habit.

This is Washington’s problem.  Not the airlines.  Washington has a spending problem.  And they can’t stop spending.  Or simply choose not to.  Instead they look for other people to steal from.  Like an addict.  While denying that they have a problem.  And always blaming others.  Like the rich who don’t pay their fair share.  And by rich they mean anyone that has any money to spend.

Tax Cuts Stimulate, not Keynesian Stimulus Spending Funded by Taxes

So how bad is this spending?  How much of a debt problem has it given us?  That the president is shaking down the airlines for $15 billion (see Committee Searches for Economic ‘Tipping Point’; Prefer Not to Find It by Jim Angle posted 9/20/2011 on Fox News)?

“We know that the debt is now 100 percent — approximately 100 percent of (gross domestic product),” said Allan Meltzer, a professor of political economy at Carnegie Mellon University in Pittsburgh. “That doesn’t include the unfunded liabilities. It doesn’t include (mortgage lenders)Fannie Mae and Freddie Mac. It doesn’t include a number of other things.”

By unfunded liabilities, Meltzer means entitlement programs. Social Security and Medicare alone have $46 trillion in unfunded liabilities, meaning that much more is promised in benefits than the government — and taxpayers — have as a plan to pay for them.

Oh.  It’s that bad.  We owe a dollar for every dollar our economy produces.  But it’s even worse than this.  All of those unfunded liabilities that don’t appear in the official budget.  Fannie and Freddie.  And let’s not forget the Social Security and Medicare trust funds.  Which are filled only with IOUs from Uncle Sam.  Because Uncle Sam spent our money.  That money we put aside with each paycheck.  Those FICA and Medicare withholdings.  That money they forced us to save.  Because we were untrustworthy with our own money.  As they apparently are, too.

Chris Edwards, Director of Tax Policy Studies at the Cato Institute, a libertarian think tank in Washington, argues that U.S. debt is so far out of control that it must be contained soon.

“We’ve had five trillion (in) deficit spending since 2008, the most enormous sort of Keynesian stimulus you can imagine, and yet we’ve had slower growth than any time since World War II. So I don’t think spending helps.”

So the government owes more money than taxpayers can fund.  And yet that didn’t stop them from spending $5 trillion more.  For stimulus.  Which is just code for throwing money at political cronies.  I mean, it’s obvious that it didn’t stimulate anything.  Because the economy is still in the toilet.

And there’s a very good reason for that.  Because tax cuts stimulate.  Not Keynesian stimulus spending funded by taxes.

Meltzer pointed to three “fiscal changes that really did enormous good.” One was the tax cuts from the Kennedy and Johnson administrations, the most effective part of which were business tax cuts.

“They got the biggest bang for the buck,” he said.

The second were the Reagan-era tax cuts which came in two rounds and boosted a flagging economy. Meltzer said a completely different option worked well too.

“(The) third policy that gave people confidence were the Clinton tax increases, which assured people that their future tax rates were not going to go up, that they had seen what they were going to have to take, and there wouldn’t be anymore.”

Meltzer said the increases gave people certainty about what tax rates would be, which reassured businesses they wouldn’t go higher, allowing employers to plan and create jobs with confidence.

The Clinton tax increases?  That’s not why the Nineties were booming.  It was because of greedy capitalists.  Looking to strike it rich in the dot-com boom.  The economy was smoking hot because of irrational exuberance.  Not higher taxes.  And the budget went into surplus when all those dot-com people cashed in their stock options.  And they paid a boatload of capital gains taxes.  Before the dot-com bubble burst.  And threw the economy into recession.

But he’s right on the Kennedy and Reagan tax cuts.  Both used good Austrian supply-side economics.  Which exploded economic activity.  And similar policies could do that again.  If we would just stop with the Keynesian nonsense.  And the belief that crippling regulations will spur economic growth.

Business Owners Hate Uncertainty because, Unlike Uncle Sam, they can’t Print Money

And speaking of regulation, remember the Dodd-Frank act?  Have you read it?  Probably not.  For I doubt anyone in Congress has read it in its entirety (see Dodd-Frank and Uncertainty by Veronique de Rugy posted 9/20/2011 on National Review).

Remember how President Obama promised that the Dodd-Frank bill would provide certainty, stability and growth…?

It’s 1,623 pages long. It is very heavy. If it could fit it in my purse, I could use it as a protective weapon. Whatever else this will do, however, it will not make lending cheaper or credit more readily available, and it will not protect us from another financial crisis. And it will not protect consumers or taxpayers.

What it will do, and already does, is continue injecting gigantic uncertainty into the economy, paralyzing entrepreneurship and job creation. Imagine how long it will take for all the rules to be written and for U.S. businesses to figure out how they are supposed to operate from now on. The vagueness of the law as written means that even business owners and consumers who have the courage to pick up this book and try to figure out what’s in their future won’t get the answers they are looking for.

Really, is there any doubt that some of the $2 trillion in cash that companies are sitting on is a direct result of this uncertainty?

That’s right.  If you don’t know what tomorrow may bring you save your money.  You deleverage.  Pay down debt.  And hoard cash.  Because cash is king.  It’s the only thing you can pay your employees with.  The only thing you can pay your suppliers with.  The only thing you can pay for your insurance with.  And it’s the only thing you can pay Uncle Sam with.  So if you don’t have enough of it around during bad times you may not be around for the good times.  When they return.  If they return.

Business owners hate uncertainty.  Because, unlike Uncle Sam, they can’t print money.  So they have to be very careful with what they have.  To survive things like recessions.  Depressions.  And Dodd-Frank.

In these Tough Economic Times, it is the People that are Suffering, not Rich Liberals

‘More taxes, more regulations and more uncertainty’ is the mantra of the Obama administration.  And, of course, more spending.  Always more spending.  Is it any surprise the economy is not responding well to Obama’s policies?

There is no way businesses will grow in this environment.  Or create jobs.  And without new jobs the economy will never recover.  People understand this.  That’s why Democrats are losing elections.  Even in New York.  It’s a repudiation of Obama.  And the liberal Democrat agenda.

For though the mainstream media has been a loyal propaganda outlet for the liberal elite, the people aren’t buying it anymore.  For in these tough economic times, it is the people that are suffering.  Because of Obama’s policies.  While rich liberal elitists are living well everywhere.  And continue to fly on their private jets.  While the common people will be paying Obama’s new aviation fees.

www.PITHOCRATES.com

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

Posted by PITHOCRATES - September 15th, 2011

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Democrats sacrifice the Poor for Votes

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

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

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

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FUNDAMENTAL TRUTH #65: “The only thing the market is inefficient at is funneling money to anti-business politicians.” -Old Pithy

Posted by PITHOCRATES - May 10th, 2011

The Natural Order and a good Last Name

There are two types of people in America.  Those who work.  And elitists who want others to work for them.  It’s been this way since the dawn of civilization.  One group asserted their power over the masses.  The masses then worked.  The ruling elite didn’t.  They just gave the work orders.  The masses dutifully followed their orders and grew the food.  The ruling elite took in the bounty and ate until they were full.  And then some.  While famine thinned out the masses.  It was the natural order once upon a time.  And those who held dominion over the land liked it.

Land, then, was key.  The aristocracy owned the land.  Hence we called them the landed aristocracy.  They owned the land, the food and the wealth.  And the people.  In European and Russian feudalism there were serfs.  In the antebellum American South there were slaves.  The landed aristocracy may buy and sell land and move.  But the serfs/slaves stayed on the land.  Forever.  As their parents did.  As their children would.  It was the natural order.

Your name was very important in the landed aristocracy.  For land was hereditary.  As was wealth.  As was political power.  And it stayed this way for a long time.  While everyone who worked farmed.  But over time, something happened.  People got smarter.  They were able to grow food surpluses.  And they took these surpluses to markets.  Which became cities.  Where we saw the rise of artisans.  Skilled people who made tools and crafts that further improved our lives.  Allowed people to leave the farms.  And create a middle class.  Greatest thing that ever happened for the masses.  It allowed a way out from the back-breaking toil of working the land.  Even if you didn’t have a ‘good’ last name.

Representative Government changes the Natural Order

Of course, not everyone was keen about this.  Because it disrupted the natural order of things.  And threatened the old power structures.  Some adjusted.  Some shared the power.  Like in England.  Where there was a representative government.  There was a bicameral house.  The Parliament.  Representing all people.  The rich in the House of Lords.  And the common people in the House of Commons.  And, of course, the king.  Who represented the king.  And the state.  Now, kings like to wage war.  Conquer.  And add to empire.  But it takes soldiers and sailors to fight.  And money to pay for armies and navies.  Which the king didn’t have.  The rich people had the money.  The landed aristocracy.  The Lords.  So the king just couldn’t wage war unless Parliament consented.  Pretty nice thing this check on power.  This representative government.  It made for happy subjects.

It wasn’t like this in France. While the English were checking the king’s power, the French monarchy was absolute.  It  could do whatever it wanted.  And did.  Spent a lot of money.  Ran up great debts.  Fought a lot of wars.  Including the Seven Years’ War that lost much of French North America to Great Britain.  And helped the Americans in their War of Independence.  Helping them to gain their independence from the British monarchy.  Which proved to be a deadly game for the French monarchy.  For the French people grew fond of representative government themselves.  And they thought if the Americans can overthrow king-rule maybe they could, too.  So they gave it a try.  The French Revolution was a bit bloodier than the American Revolution, but it got the job done.  France, too, had a representative government.  Until Napoleon declared himself emperor, of course.  And then he did a lot of kingly things.  Waged war.  Conquered.  Built empire.  And added to the debt.

Great Britain gave up on minority rule.  France tried to hang on to it, lost it then Napoleon got it back.  The reason minority rule failed in these countries is because a minority ruling power needs money.  And it was easier to get money in an agrarian economy.  When all the wealth was concentrated in the few who owned the land.  The rise of a middle class changed all of that.  Artisans and merchants made a lot of money.  Some even without ‘good’ last names.  The people who didn’t have to kiss any royal ass to get or maintain their wealth.  It was a whole new game out there.  Minority rulers needed to find another way to amass money and power.  And they found it.  In the ‘lie’.

Lies from Marxism to Socialism

A ruling power lying wasn’t anything new.  But some of the lies were.  Marxism, for example, was a new brilliant lie.  It made those the ruling elite wanted to oppress ask to be oppressed.  In the name of egalitarianism.  Rise up you miserable oppressed factory workers.  Attack the industrial bourgeoisie (i.e., the middle class).  You have nothing to lose but your chains.  Karl Marx may have believed the claptrap he wrote.  But those who used it could care less about the underlying philosophy.  They just liked the power it gave them.  So those who aspired to rise to power and rule over the majority led worker revolutions.  And after they won, the workers went back to suffering just as they had before.  Only they had less.  Because the communist commissars knew jack squat about the means of production.  But that was okay.  For it just helped to enslave the masses more.  Well, that.  And the brutal police state that discouraged any inappropriate behavior.  Or thought.

It was a good run for the communist powers that be.  While the masses suffered they lived a very comfortable life.  Just like the landed aristocracy of old.  Unfortunately for them, their ruling policies sent their economies into nosedives.  And they suffered recurring famines.  Marxism was a failure.  The ruling elite knew it.  And most of the people knew it, too.  Often, those who could escape from their communist utopias did.  Because they were anything but utopian.  So those aspiring to ascend to the ruling elite needed a new lie.  And they found it in communism-light.  Socialism.  Which appealed to the people they wanted to oppress for the same reasons Marxism did.  It would stick it to the rich in an egalitarian utopia.

But there was little difference between Marxism and socialism.  Both systems tried to manage the economy.  And both did a horrible job.  Why?  Because state planning is not about improving the lives of those they rule over.  It’s about maintaining power.  An economy left alone will always outperform a managed economy.  Everyone knows this.  But if they leave the economy alone, how can the ruling elite amass power and wealth?  It can’t.  Ergo, the lie continues.  Not to improve the lives of the masses.  But to improve the lives of the ruling elite.  The minority power.  Who only ascends to power by a good lie.

Wealth Redistribution Killed the Golden Goose

The free market does have one inefficiency.  It does not enrich those who do not partake in it.  The ruling elite aspire to be in a minority rule for a couple of reasons.  First of all, when you’re stealing from and oppressing the people, the fewer people in the ruling elite the wealthier each member gets.  Which is what they want.  Wealth.  And being in the ruling elite gives them access to wealth.  Because they are so completely untalented that they could never make any wealth in the free market.  So they use the lie to acquire their wealth.  To live the good life.  Like the landed aristocracy of old.

So they become the champion of the working man and woman.  And promise to deliver that egalitarian society via wealth redistribution.  They promise to tax the rich.  And give to those who will vote for them.  It has proven to be a very effective system.  And in its heyday they were reaping in the money.  Even found a way to funnel tax money directly to them via public sector union dues.  But they just got too greedy.  Pulled too many people into the new aristocracy.  And too many people out of the work force who paid the taxes that paid for their comfortable lives of plenty.

The taxes and policies of the ruling elite have grown so anti-business that it’s reduced economic activity.  And tax generation.  So not only have they bloated the public sector with nonworking people and reduced the taxpaying workforce, they killed the golden goose as well.  And no lie may change the mess they created.  They may have no choice but to unfetter the free market.  And get real jobs.

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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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Public Sector Pay and Benefits are Bankrupting France and New Jersey

Posted by PITHOCRATES - October 22nd, 2010

Soon, in France, You’ll be Able to Retire Before You Start Working – If the Protestors Get Their Way

Je suis français.  I am French.  And being French, it is my birthright to get lots of free stuff.  Or so says Gilly, a cemetery union representative in Marseille.  The following quotes come from AP’s French strike to save ‘birthright’ of privileges posted 10/20/2010 on Google News.

For Gilly and many other Frenchmen and women, social benefits such as long vacations, state-subsidized health care and early retirement are more than just luxuries: They’re seen as a birthright — an essential part of the identity of today’s France.

I remember reading about the French Paradox.  While Americans were suffering epidemics of heart disease, the French were living to ripe old ages.  Free from heart disease.  The paradox?  The French diet.  Heavy creams.  Cheese.  Wine.  Sure, the Americans eat a lot of crap.  But how can the French have such a high cholesterol diet and not suffer heart disease like the Americans?  Perhaps this can explain it:

“We want to stop working at 60 because it’s something our parents, our grandparents and even our great-grandparents fought for,” says Gilly, 50, a union representative at Saint-Pierre Cemetery, the largest in this bustling Mediterranean port city.

Retire at 60?  Work for half of your life (or less) and enjoy a generous retirement.  No wonder they’re living so long.  No stress.  Cradle to grave welfare.  An early retirement.  Gosh, that sounds good.  Almost too good to be true.  Once upon a time, in feudal France, you worked from childhood until you died.  Things have definitely got better.  Just how long has it been this good?  According to Gilly, it goes back generations.  All the way to his great-grandparents.  But has it?

It was in 1982, under Socialist President Francois Mitterrand, that the minimum age to stop working was lowered from 65 to 60. The measure, emblematic of the 14-year Mitterrand presidency, was adopted by a special ordinance that bypassed parliament.

And now the government wants to raise the retirement age to 62.  You can understand Gilly’s consternation.  If you do the math, the average lifespan per generation must be somewhere around 10 years.  So one can understand how the 50 year old Gilly is anxious to retire at age 60 instead of at age 62.  Because people in his family rarely live beyond 10 years of age.  Unless Gilly is exaggerating for effect.  Or lying.  Because the French were retiring at age 65 until Mitterrand changed that in 1982.

Tax the Rich, Middle Class and Anyone Else Who Isn’t in the Public Sector

This is all well and good as long as someone else is paying the bill.  And this is something that the people in the social democracies don’t understand.  There is a limit to the treasury’s generosity.  For the public treasury to pay these very generous benefits, there has to be money in the treasury.  And states fill their treasury, basically, in one of three ways: taxing, borrowing and printing money. 

If they tax too much, people will have less disposable income.  They will buy less.  Private business will see a loss in sales revenue.  At the same time, they will have to pay more in taxes.  They may lay off employees to adjust to the reduced demand and higher tax burden.  The economy will slow into a recession. 

If they borrow too much money, interest rates will rise.  This will increase the interest people pay on their credit cards.  They will buy less.  Private businesses will see a loss in sales revenue while their costs go up (because of the higher interest rates).  They may lay off employees to adjust to the reduced demand and higher costs.  The economy will slow into a recession.

If they print too much money, they may ignite inflation.  Inflation raises prices.  People buy less because of high prices.  Private businesses will see their costs go up with these higher prices.  They may lay off employees to adjust to the reduced demand and higher costs.  The economy will slow into a recession.

To summarize, excessive government spending leads to recession.  Which results in fewer jobs in the private sector.  This is a big problem for those public sector jobs.  Because it’s the taxes from those private sector jobs that pay for those public sector jobs.  In other words, the more the public sector demands, the more they kill the private sector, the golden goose providing that rich public sector pay and those glorious public sector benefits.

The Sans-Culottes are Very Much Avec-Culottes These Days – But They Still Revolt

I’m sure the French understand this.  I mean, how bad is it really getting over there?  Well, see Clashes, protests in French tensions over pensions by AP’s Angela Charlton on www. apnews.myway.com.  She begins with:

PARIS (AP) – Protesters blockaded Marseille’s airport, Lady Gaga canceled concerts in Paris and rioting youths attacked police in Lyon on Thursday ahead of a tense Senate vote on raising the retirement age.

A quarter of the nation’s gas stations were out of fuel despite President Nicolas Sarkozy’s orders to force open depots barricaded by striking workers.

Gasoline shortages and violence on the margins of student protests have heightened the standoff between the government and labor unions who see retirement at 60 as a hard-earned right.

New violence broke out in Lyon, as police chased rampaging youths who overturned a car and hurled bottles. Riot officers tried to subdue the violence with tear gas. A gendarme helicopter circled overhead.

Wow.  If it wasn’t for the Lady Gaga and the airport and the gas stations and the police helicopter, you’d think the sans-culottes were making another revolution.  It brings to mind the classic lyrics of Adam and the Ants’ classic Ant Rap (my sister was a BIG fan):

Liberté, égalité, au jourd’hui c’est tres tres tres

Voici l’opportunite nous incroyables!

But this ain’t the 18th century.  And famine isn’t a way of life for the masses.  No.  In fact, life is pretty darn good.  No 18th century peasant lived as grand.  In fact, the life they’re protesting about today was closer to the French nobility than it was to the Third Estate in 1789.  These aren’t food riots.  This generation just doesn’t want to work another 2 years before retirement. 

It would appear that these protestors don’t understand the intricacies of a market economy.  Perhaps they have lived too long in a quasi-socialist state.  Been brainwashed by their unions.  Or maybe they just don’t care.  As long as they get their benefits now they don’t care how they impoverish future generations.  It’s a pity.  How a minority of the French people can destroy a great nation. 

Good Work if You Can Get it – and You Can Get it if You Belong to a Public Sector Union

One wonders how people can resort to violence.  Of course, when you consider how much better the public sector lives than the private sector, you wonder how this hasn’t exploded earlier.  Let’s go across the pond.  To New Jersey.  But first, if you work in the private sector, pause for a moment and think about your pay and benefits.  How hard you work and how little time you get off.  Feel overworked and underpaid?  If you worked a 60-hour week or two, you probably do.  Now, think about the last time some public sector union went on strike.  When they asked you to feel their pain.  To support their cause.  Okay, now read this excerpt from a My FOX New York article by Luke Funk (see Audit: NJ Turnpike Wasted Millions On Perks on www.myfoxny.com):

MYFOXNY.COM – Auditors say the New Jersey Turnpike Authority wasted $43 million on unneeded perks and bonuses.  In one case, an employee with a base salary of $73,469 earned $321,985 when all payouts and bonuses were included.

How does that make you feel?  Think about this the next time you get change from the person sitting in a New Jersey toll booth.  Think about your skill level and your pay.  Then think about the toll booth occupant’s skill level and pay.  Now switch places and imagine someone wanting to cut your pay and benefits.  I mean, if someone was trying to cut your pay by, say, $300,000 because the state is on the brink of bankruptcy, what would you do?  Start looking in the want ads for another unskilled job that pays 3-5 times of a skilled job in the private sector?  Or are you going to do what the French are doing?

Is it any wonder Europe is burning?  First Greece.  Now France.  You get pay and benefits like this and you live like royalty.  And one thing about royalty.  They don’t abdicate without a fight.

www.PITHOCRATES.com

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