What No One is Talking About

Something everyone should be aware of regarding the ongoing debt ceiling negotiations...

Whatever deal is reached, assuming one is, there will be no spending cuts at all. Doesn't matter whether it's Boehner's plan, or Reid's, or anyone else's. The reason is something called "baseline budgeting". Under this budgeting gimmick, spending increases are built into the system each year. Essentially, spending increases are on auto-pilot. According to the CBO, these automatic increases are estimated to be $9.5 trillion over the next decade.

After some deal is reached, politicians will tell us that they have made significant progress toward getting our fiscal house in order. In reality, all they will have done is reduce the rate of growth of spending. Only in Washington can an increase in spending be called a "cut" with a straight face. The train wreck will only have been postponed.

So, my suggestion is to drink heavily.

Debt Negotiations

Some thoughts on the debt ceiling negotiations...

We are told that if we don't raise the debt ceiling by August 2, we will default on our debt. Why? From what I've read, monthly debt service is about $20 billion. Federal revenues per month are about $200 billion. So, we can certainly service our debt, i.e., not default. That said, we'll have to prioritize spending, and it won't be pleasant, but default? At least in the short term, we'll default only if Obama decides to default.

On our current pace, we will have deficits over the next ten years of approximately $10-15 trillion. We are told that a "big deal" would mean $4 trillion in deficit reduction over ten years. That means we will have an additional $6 to 11 trillion added to the current $14 trillion in debt we currently have. That means we will be Greece. And it won't take ten years to get there.

When the top 5% of income earners pay about 58% of federal income taxes, and approximately the bottom 50% pay none, why do Democrats insist that the wealthy have to start paying their fair share? Aren't they already doing that? Wouldn't "shared sacrifice" mean that at least some of those in the bottom 50% pay some federal income tax?

Why do Democrats assume that if we raise tax rates on the wealthy, we will generate X amount of revenue? Do they not grasp that people change their behavior in response to higher tax rates? Do they not understand that the wealthy are better able than the rest of us to avoid higher taxes? Why don't Democrats understand the concept of dynamic analysis? Why don't they understand that when you punish the wealthy, you also punish those who aren't wealthy (see luxury tax, 1990)? Why can't they see that the pursuit of "fairness" ends up hurting those they claim to champion? Why are they so blinded by their hatred of the wealthy? Why don't they recognize that lower rates on the wealthy not only increase revenues to the government, but also increase the proportion of revenues paid by the wealthy? I realize this is counter-intuitive, but see Coolidge, Kennedy, Reagan, and Bush II. I see where some Democrats are floating the idea of a return to an upper marginal rate of 70%. It is difficult to describe how stupid that would be.

Why do we hear so much about tax "loopholes"? Loosely speaking, a loophole is something which allows someone to evade the spirit of the law. But when oil companies deduct business expenses as permitted by the tax code, just as other companies are allowed to do, we are told that they are taking advantage of a "loophole". No, they are not. They are abiding by the tax code, which Congress has put in place. If we want to change the tax code and disallow these "loopholes", let's not be shocked when oil companies scale back their efforts to find more oil, or pass along their higher costs of doing business to us. Couching provisions of the tax code in terms of being "loopholes" is a deliberate attempt to stir up populist anger. Sadly, it's effective.

Obama tells us that if a deal isn't reached by August 2, social security checks may not go out. There may not be enough money "in the coffers". But what about the Social Security Trust Fund? We've been told by progressives that social security is solvent till 2036. Progressives have ridiculed those who say there is nothing in the trust fund but government IOU's because government has already spent that money. If progressives are correct, we should be able to simply tap the trust fund to keep social security checks flowing. Right? For all the carping by politicians about the excesses of the free market, if those in the private sector did what politicians do, they'd be in jail.

I hear progressives criticizing Republicans for their unwillingness to compromise with Obama. After all, they say, Obama is willing to cut spending and even put entitlements on the table. What could be more reasonable? But while Obama wants tax increases quickly, spending cuts would be put off to the "out years", i.e., sometime down the road. We have seen this gambit before. Both Reagan and Bush the elder fell for it. They trusted that democrats would honor future promises of spending cuts, which of course never happened. Why should Republicans today believe such promises? And does anyone know what Obama's plan is? I suspect not, since he has offered no specifics. He also knows that as long as Democrats control the Senate, he can throw out entitlement reform with no worries that it will actually happen. He wants to pretend to be the reasonable adult in the room while offering nothing of substance.

Obama says we don't need a Balanced Budget Amendment, that politicians just have to "do their job". Does anyone trust politicians to do their job? Wouldn't it be preferable to try to prevent politicians from doing the "job" they've been doing for decades and which they are apparently hard wired to do, namely, screw the public? It would take a while for a BBA to get passed, assuming it could, so it won't help in the short term. But long term, I'd like to see some mechanism in place to make politicians "do their job", rather than trusting when they say "I'll respect you in the morning."

Revenues vs. Fairness

The video below is a flashback from a debate between Obama and Hillary. Obama is asked why he wants to raise capital gains tax rates when the data show that lower rates produce more revenue to the government (because people are more likely to sell an asset if the tax bite is lower). He says it's not about revenue, it's about fairness. Then he goes on to talk about needing more revenue to do the things government needs to do, and how he will not run up the debt that George Bush did. Sadly, he's technically correct on that last point, since he's already blown by Bush on accumulating debt.

I am posting this not just as evidence of his Marxist tendencies. If you listen to his words, it's easy to see that he doesn't have a clue what he's talking about. His approach then, and now, is to give long-winded, meandering responses which are apparently designed to challenge the attention span of his audience, who are then supposed to conclude that what he said must be really smart.

Obama Says Raising Taxes Not About Revenue, But About Fairness

History of Homosexuality 101

Governor Jerry Brown signed a bill today making CA the first state to mandate the teaching of gay history in the public schools.

I think this is an excellent idea. We don't want American kids to fall behind kids throughout the world in learning that the first recorded case of a guy sucking a dick was an ancient Babylonian named Blowjobus Maximus. And of course no education is complete without knowing that lesbians in the ancient world were known as Papyrus Munchers. Or that the struggle between Robert E. Lee and Ulysses S. Grant was actually motivated by a latent desire for each other and a dispute over who would be pitching or catching.

The end of Western Civilization draws nigh.

Here We Go Again

History repeating itself?  First, banks are accused of discrimination against minorities in their lending practices. Then, the government forces banks to lower their lending standards so more minorities can buy a house. A real estate bubble ensues. The bubble bursts when, quite predictably, many of these loans default. Then banks are accused of predatory lending for doing what the government told them to do. Banks return to sounder credit standards. These standards mean that fewer minorities get loans. The government then goes after banks for discriminatory lending practices.

One could almost forgive government folks not knowing the economic lessons of, say, the Coolidge administration. But we haven't even dug out of the mess that this kind of intervention created the last time it was tried.

DOJ Begins Bank Witch Hunt

The Importance of Knowing Our History

“I think we ought to go back to the people and the party that was the only party and the only people to balance the budget in 40 years. I hate to break it to my Republican friends, but that is the Democratic Party. We are the ones who did it. We did it when Bill Clinton came into office. We did it after hard work. We did it after painful cuts. We did it with smart investments.” — Sen. Barbara Boxer (D-Calif.), June 29, 2011

Of course, as anyone familiar with recent history knows, Boxer's comments are uttter hogwash. But don't take my word for it. The Washington Post Fact Checker says "it is a rewriting of history that borders on the absurd."

Barbara Boxer's Blatant Rewriting of History

Racial Preferences in Michigan

The 6th U.S.Circuit Court of Appeals has ruled against a ban on affirmative action which was passed by Michigan voters.

It would appear that "equal protection under the law" is a concept which continues to elude many jurists.

A Horrible Racial Preference Ruling in Michigan

Green Energy

The reality of green energy is often at odds with the political rhetoric. To the extent that the ideology of central planners ignores the wisdom of the market, people will continue to suffer.

From a recent column in the U.K. Telegraph...

In the week when it was reported that 20 percent of the EU's fast-soaring, trillion-euro [US $1.4 Trillion] budget may soon be spent on "fighting climate change", it was timely that Britain's energy companies should have met with the Department of Energy and Climate Change to raise one of the best-hidden secrets of our Government's obsession with wind power.

Centrica and other energy companies last week told DECC that if Britain is to spend 100 Billion Pounds [US $162 Billion] on building thousands of wind turbines, it will require the building of 17 new gas-fired power stations simply to provide back-up for all those times when the wind drops and the windmills produce even less power than usual.

We will thus be landed in the ludicrous position of having to spend an additional 10 Billion Pounds [US $16.2 Billion] on those 17 dedicated power stations, which will be kept on "spinning reserve" 24 hours a day, just to make up for the fundamental problem of wind turbines. This is that their power continually fluctuates between full capacity to zero (where it stood last winter, when national electricity demand was at a peak).   [Many people, particularly in Scotland were without power for many days in the depth of one of worst winters in history]

Two things make this even more absurd.  One, as the electric companies pointed out to DECC , is that it will be amazingly costly and wildly uneconomical, since the dedicated power plants will often have to run at a low rate of efficiency, burning gas but not producing electricity.  This will add billions more to our fuel bills for no practical purpose.  The other absurdity, as recently detailed studies have confirmed, is that gas-fired power stations running on "spinning reserve" chuck out much more CO2 than when they are running at full efficiency-thus negating any savings in CO2 emissions supposedly achieved by the windmills themselves.

The policy on which our national energy strategy is now centered is a ludicrously expensive, self-defeating joke, which will achieve no benefits whatsoever -- even if you are among the diminishing number of people who still believe that man-made CO2 is causing catastrophic climate change.

More on Tax Breaks

During Wednesday's press conference, Obama repeatedly (at least six times) mentioned fat cats who get tax breaks on their corporate jets, saying that these kinds of tax loopholes should be scrapped. This is the kind of rhetoric that appeals to those who love class warfare. After all, who cares about rich guys who get to fly in corporate jets? Shouldn't they be paying their fair share?

Obama apparently forgot that the tax breaks he constantly berated were created by his own "stimulus" package. Oops.

The tax breaks allow for accelerated depreciation, which let companies take a larger tax deduction in the early years of the life of an asset, such as a plane. This obviously makes the purchase of a jet more attractive to companies. The incentive was first used after 9/11 to help plane manufacturers cope with lost sales as a result of the terrorist attacks. With the recession, the aviation industry again experienced a slump in business and had to cut jobs as a result. Cessna and Hawker Beechcraft, based in Wichita, KS, lost almost 7,000 jobs. So, Congress approved the tax break in the stimulus, signed by Obama.

There should be a lesson here for Obama, beyond the need to remember what he signed into law. You can't soak the rich without affecting those who aren't rich. Go ahead and revoke the tax break on corporate jets. A lot of people will applaud that the rich are getting what they deserve. Tell that to the people who then lose their jobs in the aviation industry as a result of declining sales.

This is the same lesson that should have been learned from the 1990 luxury tax, but some people refuse to learn it. Or, maybe Obama knows better, but the temptation to wage class warfare is simply too great to pass up. Facile but foolish appeals to the notion of fairness evidently trump reality.