Sooner or later the harsh realities have to be faced. Why not face it now? Obama thinks Republicans will be blamed. Maybe....maybe not. Obama is in the White House and his party controls the Senate. Why not fight the good fight right now. Go over the cliff and do not raise the debt ceiling. Force the country to come to grips with the debt situation while it is still possible to do something about it.
By coming to a fictitious agreement that may seem politically advantageous in the short run, such an agreement gives up on the country. Letting the national debt spiral out of the control, which is the Obama plan, destroys the American economy and potentially it's political fabric. Why not tackle the issue now while Republicans control the House and can block any further madness by the Obama Administration. The future isn't very bright either way, but there is no hope for the future if Republicans cave in here.
The time is now.
Friday, November 30, 2012
The Geithner Plan Bares All
According to Geithner, the President has no interest in reducing spending at all. In fact, he proposes major spending increases for infrastructure. As for taxes, the sky is the limit, apparently, to the President. So much for the economy. This is all about "revenge" after all.
As noted in a journal op-ed two days ago, the unfunded liability in social security and medicare increases by over $7 Trillion every single year. This $ 7 Trillion is not in the budget or under discussion. So, raising $ 1.6 Trillion in taxes over the next ten years does what? The only purpose of the Obama tax cut is to punish enemies. That's it. And if the American economy is condemned to stagnation for a generation or two, who cares? Certainly not the President.
Going over the cliff looks so much better than this. Let's hope the Republicans think of country first, strap on their seat belts, and take us over the fiscal cliff. Only in this manner can we ever hope to deal openly with the problems that the country faces. Avoiding the fiscal cliff, simply means avoiding have to face the issues squarely.
As noted in a journal op-ed two days ago, the unfunded liability in social security and medicare increases by over $7 Trillion every single year. This $ 7 Trillion is not in the budget or under discussion. So, raising $ 1.6 Trillion in taxes over the next ten years does what? The only purpose of the Obama tax cut is to punish enemies. That's it. And if the American economy is condemned to stagnation for a generation or two, who cares? Certainly not the President.
Going over the cliff looks so much better than this. Let's hope the Republicans think of country first, strap on their seat belts, and take us over the fiscal cliff. Only in this manner can we ever hope to deal openly with the problems that the country faces. Avoiding the fiscal cliff, simply means avoiding have to face the issues squarely.
Wednesday, November 28, 2012
Buffett Should Study the Numbers
Warren Buffett opined today that a minimum tax of 30 percent should be placed on incomes north of $ 1 million, jumping to 35 percent for those with incomes above $ 10 million. In the same interview he seemed to be either (1) unaware of how Berkshire Hathaway pays corporate taxes; or (2) intent on misleading his audience about the taxes that Berkshire actually pays. You wonder if Warren is really doing his homework these days.
Buffett argues that the fiscal cliff is easy to avoid. Simply move tax revenues up to 21 percent and hold federal spending at 21 percent. Thanks, Warren, but that won't even come close to getting it done. The entitlements are on a trajectory to consume 40 percent of GDP within the next two generations (that 40 percent rises to over 100 percent eventually). What's the plan, then, Warrren -- raise rates to a minimum of 60 percent and 70 percent on the way to 100 percent?
Making tax revenues chase entitlement spending is a losers game and ends up with modern day Europe. There is no reason, Warren, for you to be collecting social security and receiving medicare. That is the problem. These programs apply to everyone. Such programs should be restricted to the truly needy, though, under what you advocate, Warren, the truly needy will be an ever growing percentage of the American population.
Buffett argues that the fiscal cliff is easy to avoid. Simply move tax revenues up to 21 percent and hold federal spending at 21 percent. Thanks, Warren, but that won't even come close to getting it done. The entitlements are on a trajectory to consume 40 percent of GDP within the next two generations (that 40 percent rises to over 100 percent eventually). What's the plan, then, Warrren -- raise rates to a minimum of 60 percent and 70 percent on the way to 100 percent?
Making tax revenues chase entitlement spending is a losers game and ends up with modern day Europe. There is no reason, Warren, for you to be collecting social security and receiving medicare. That is the problem. These programs apply to everyone. Such programs should be restricted to the truly needy, though, under what you advocate, Warren, the truly needy will be an ever growing percentage of the American population.
Sunday, November 25, 2012
Giving Up on Economic Growth
Growing the economy is no longer an American policy objective. The Obama Administration rarely mentions the topic. They talk about the economy but do not seem to think that eononmic growth is really all that important. Somehow, according to Obama, you can get jobs and full employment with little or no economic growth. There are no prior historical examples of job creation without economic growth, but maybe Obama knows something that we don't know.
The main focus of the administration is to figure out how to put the economy into a straight jacket. The political rhetoric that garners support for this absurd economic program is to demonize the rich and successful. The media helps, of course. When was the last time you watched a television program where a businessman was anything other than a sleazy crook. The anti-business mentality not only infects the White House, it permeates our entire culture.
If business is the enemy and economic growth is irrelevant, then the future is clear. These are exactly the policy plans of Europe. Europe does not see economic growth as relevant and they are not facing their own fiscal cliff. There is no hope for Europe and political and economic stability are now unavoidable for Europe. That seems to be our future as well.
Only going "over the cliff," offers any real hope of facing up to the problems that America faces. Kicking the can down the road once more is not the solution. The media and the financial press will hail a "solution," but there will be no real solution, just more political rhetoric and a continued march down the path to Greece. Entitlements are not a "sustainable" economic policy. That's the true message of the European crisis.
The main focus of the administration is to figure out how to put the economy into a straight jacket. The political rhetoric that garners support for this absurd economic program is to demonize the rich and successful. The media helps, of course. When was the last time you watched a television program where a businessman was anything other than a sleazy crook. The anti-business mentality not only infects the White House, it permeates our entire culture.
If business is the enemy and economic growth is irrelevant, then the future is clear. These are exactly the policy plans of Europe. Europe does not see economic growth as relevant and they are not facing their own fiscal cliff. There is no hope for Europe and political and economic stability are now unavoidable for Europe. That seems to be our future as well.
Only going "over the cliff," offers any real hope of facing up to the problems that America faces. Kicking the can down the road once more is not the solution. The media and the financial press will hail a "solution," but there will be no real solution, just more political rhetoric and a continued march down the path to Greece. Entitlements are not a "sustainable" economic policy. That's the true message of the European crisis.
Friday, November 23, 2012
Walmart and the Free Market
Walmart has provided low wage jobs for hundreds of thousands of Americans. None of those employees were promised a living wage, guaranteed health care, and a plethora of fringe benefits. If an employee did not want the low wage job that was offered, they could look elsewhere. That is still true. Nothing has changed.
Now the big unions want a new deal. The new deal is all about the living wage, health care coverage and host of other goodies not normally available to low-skilled, low wage employees. So, now Walmart is the bad guy, in the eyes of the unions.
Walmart should be free to offer whatever jobs they want to offer and if people don't want those jobs, then they can work somewhere else. This is an economic transaction, not a religious order. Any Walmart employees, unhappy with existing working arrangements, can leave and work somewhere else. That's what disgruntled employees of Walmart should do, instead of inconveniencing customers of Walmart with demonstrations. The customers of Walmart are well serviced by a company that provides products to the great middle class at lower prices than were previously available.
Walmart is a triumph of capitalism, not an icon to be pilloried by the liberal establishment. Those who want higher pay should develop the skill set and the energy level that can lead to a job with a higher pay level. Paying people more money than their skill set would justify will not encourage such people to develop the work ethic and skill set that would truly justify higher pay and all that goes with it. Long term, the effort to gut the essence of free market economics will lead to a poorer society with fewer opportunities for those who would like a step-up on the ladder of life.
Once again, a peek into the future is right in front of our eyes.....Greece.
Now the big unions want a new deal. The new deal is all about the living wage, health care coverage and host of other goodies not normally available to low-skilled, low wage employees. So, now Walmart is the bad guy, in the eyes of the unions.
Walmart should be free to offer whatever jobs they want to offer and if people don't want those jobs, then they can work somewhere else. This is an economic transaction, not a religious order. Any Walmart employees, unhappy with existing working arrangements, can leave and work somewhere else. That's what disgruntled employees of Walmart should do, instead of inconveniencing customers of Walmart with demonstrations. The customers of Walmart are well serviced by a company that provides products to the great middle class at lower prices than were previously available.
Walmart is a triumph of capitalism, not an icon to be pilloried by the liberal establishment. Those who want higher pay should develop the skill set and the energy level that can lead to a job with a higher pay level. Paying people more money than their skill set would justify will not encourage such people to develop the work ethic and skill set that would truly justify higher pay and all that goes with it. Long term, the effort to gut the essence of free market economics will lead to a poorer society with fewer opportunities for those who would like a step-up on the ladder of life.
Once again, a peek into the future is right in front of our eyes.....Greece.
Thursday, November 22, 2012
Redistribution Economics
Casey Mulligan, an econ prof at the University of Chicago, has provided a fascinating analysis of why so many people have given up looking for work in the Obama economy. His new book, "The Redistribution Recession," lays out the "high marginal tax rates" that the unemployed and the poor in general face in the Obama economy.
Here's an example you might not have thought about. Under the Obama mortgage loan foregiveness rules, the amount of loan forgiveness depends upon your income. The higher your income, the less you can receive in loan forgiveness. This functions like a tax: if you work and receive income you lose the ability to receive loan forgiveness. So, why work? The same kind of disincentives are in place with food stamps, unemployment compensation and host of government programs to help the needy and the middle class.
The result: people rationally choose to leave the labor force and live off of the various pecuniary benefits that one can receive if one is not working. The point is that you lose these benefits if you choose to work for a living. That is essentially the same as a tax.
Mulligan's argument is that, as folks drop out of the labor force (as more than 6 million Americans have done since Obama was sworn into office), the economy deteriorates because those 6 million and more are no longer producing anything. That lost GDP is gone forever. Transfer payments, Obama's favorite economic policy, reduce GDP. The result is that we are all poorer. In the end, the middle class suffers, because the middle class depends, for economic improvement, on a vibrant economy.
The policy of redistribution makes the whole society poorer than the society would be otherwise. Of course, a weak economy, made weaker by Obama policies, has the most severe impact upon our lowest income citizens. The result: policies designed to help poor people end up impoverishing poor people.
Yes, the middle class has lost ground in the last couple of generations. But, not for the reasons you might think. The steady rise of government and the steady rise of redistribution schemes has created disincentives for a growing number of Americans, who simply drop out. These folks, an increasingly larger percentage of the population, become a burden to themselves and to the country.
Fast forward....Greece.
Here's an example you might not have thought about. Under the Obama mortgage loan foregiveness rules, the amount of loan forgiveness depends upon your income. The higher your income, the less you can receive in loan forgiveness. This functions like a tax: if you work and receive income you lose the ability to receive loan forgiveness. So, why work? The same kind of disincentives are in place with food stamps, unemployment compensation and host of government programs to help the needy and the middle class.
The result: people rationally choose to leave the labor force and live off of the various pecuniary benefits that one can receive if one is not working. The point is that you lose these benefits if you choose to work for a living. That is essentially the same as a tax.
Mulligan's argument is that, as folks drop out of the labor force (as more than 6 million Americans have done since Obama was sworn into office), the economy deteriorates because those 6 million and more are no longer producing anything. That lost GDP is gone forever. Transfer payments, Obama's favorite economic policy, reduce GDP. The result is that we are all poorer. In the end, the middle class suffers, because the middle class depends, for economic improvement, on a vibrant economy.
The policy of redistribution makes the whole society poorer than the society would be otherwise. Of course, a weak economy, made weaker by Obama policies, has the most severe impact upon our lowest income citizens. The result: policies designed to help poor people end up impoverishing poor people.
Yes, the middle class has lost ground in the last couple of generations. But, not for the reasons you might think. The steady rise of government and the steady rise of redistribution schemes has created disincentives for a growing number of Americans, who simply drop out. These folks, an increasingly larger percentage of the population, become a burden to themselves and to the country.
Fast forward....Greece.
Wednesday, November 21, 2012
More Big Government Needed
Another economist for big government. We don't seem to run out of these guys. This time Eduardo Porter is in the spotlight. His article in today's NY Times argues that the middle class is losing ground because government isn't big enough!
No, that is not a joke. Porter really said that.
I guess he must think government has been shrinking over the past few decades. What rock has he been hiding under?
As government in the US at all levels has expanded without any apparent limit, the position of the middle class has deteriorated. Yes, that is true. Guess why?
The government is not the friend of the middle class. It is the government that has taken away the incentives that the middle class once had to save and provide for their future and the future of their children. Now, the middle class presumes, incorrectly it turns out, that the government is doing the saving for them and will provide for them in their old age. Wrong.
The government and the Democrats are simply trading the future of middle class Americans for power today for a few entitled Democrats. Nancy Pelosi is not a middle class American, nor is John Kerry, Chuck Schumer, Barrack Obama or any of these folks. They are all one percenters. Big government won't hurt them. They know how to play the game.
The folks that will be decimated by the continued expansion of the government and the middle class are the middle class and the poor. Their future opportunities are rapidly disappearing in the wake of an ever expanding government and entitled class of government employees.
The rulemakers are ruling out a future for the American middle class. Fast forward to Greece to get a view of how well big government solves the problems of the middle class. Waiting in the wings are Spain, France, Italy and yes, even Germany. The big government outcome is visible for all to see. Maybe economist Eduardo Porter should take a glance at the future. Porter, of course, is one of the entitled, so maybe he hasn't noticed the turn of events in Europe.
No, that is not a joke. Porter really said that.
I guess he must think government has been shrinking over the past few decades. What rock has he been hiding under?
As government in the US at all levels has expanded without any apparent limit, the position of the middle class has deteriorated. Yes, that is true. Guess why?
The government is not the friend of the middle class. It is the government that has taken away the incentives that the middle class once had to save and provide for their future and the future of their children. Now, the middle class presumes, incorrectly it turns out, that the government is doing the saving for them and will provide for them in their old age. Wrong.
The government and the Democrats are simply trading the future of middle class Americans for power today for a few entitled Democrats. Nancy Pelosi is not a middle class American, nor is John Kerry, Chuck Schumer, Barrack Obama or any of these folks. They are all one percenters. Big government won't hurt them. They know how to play the game.
The folks that will be decimated by the continued expansion of the government and the middle class are the middle class and the poor. Their future opportunities are rapidly disappearing in the wake of an ever expanding government and entitled class of government employees.
The rulemakers are ruling out a future for the American middle class. Fast forward to Greece to get a view of how well big government solves the problems of the middle class. Waiting in the wings are Spain, France, Italy and yes, even Germany. The big government outcome is visible for all to see. Maybe economist Eduardo Porter should take a glance at the future. Porter, of course, is one of the entitled, so maybe he hasn't noticed the turn of events in Europe.
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