Romney's Goof

Mitt Romney missed a "teachable moment" when he released his tax returns the other day.

Predictably, critics on the left, and amazingly some on the right, like Gingrich, pounced on Romney's returns as proof that the wealthy don't pay their fair share. Or, as Gingrich put, being paid for "no work". As you all know, this is because Romney's income derives from capital gains on investments, which are taxed at 15%. And as we have heard before, how does it make sense that Warren Buffet pays a lower tax rate than his secretary? Egad! The unfairness of it all!

But a couple of points are worth noting. First, that income from capital gains has already been taxed at the corporate level. And as we all know, U.S. corporate tax rates are either the highest or second highest among developed countries in the world (depending on whether Japan has finally lowered their corporate tax rate, which I don't know). So, by the time Romney realizes a capital gain, the effective tax rate on that money can be as high as 45%.

Second, there is a reason that capital gains are taxed at lower rates. The economy benefits by having capital flowing, as opposed to being locked up. If we raised the cap gains rate to, say, 35% (the upper earned income rate), investors will be less likely to sell assets that trigger the tax. We have seen this scenario play out over and over again. When cap gain tax rates are low, people are more likely to sell assets and pay the tax. This not only keeps capital flowing through the economy, it increases revenue to the government. And as someone once said, you can't have capitalism without capital.

Why Romney didn't explain all of this is a mystery to me. My guess is that he's so paranoid about the class warfare strategy of the Democrats that he's like a deer in the headlights.

Is There a Limit on Federal Power?

Below is an excerpt from an article by George Will on the upcoming Supreme Court case on Obamacare...

"If there is no outer limit on Congress’s power to regulate behavior in the name of regulating interstate commerce, then the Framers’ design of a limited federal government is nullified. And if there is no outer limit on the capacity of this government to coerce the states, then federalism, which is integral to the Framers’ design, becomes evanescent."

Full article linked below. It's worth a read. As Will notes, it could be the most important USSC case since 1954.

George Will: A Supreme Obamacare Test

Wesley Mouch Lives

This kind of stuff is straight out of Atlas Shrugged. If someone asked these Democrats whether a company or an individual will continue to produce once the marginal tax rate reaches 100%, how would they answer?

Democratic Party Economics: The "Reasonable Profits Board"

More Solyndras

In light of the fact that Mitt Romney is getting heat from both Republicans and Democrats for his time at Bain Capital, heat which is either steeped in ignorance or political gamesmanship or both, it is remarkable that the venture capitalism undertaken by the Obama administration, with taxpayer dollars, is not garnering much attention.

It is comforting to find out that CBS has at least one journalist who takes her job seriously.

Unreal: CBS News Identifies Eleven "New Solyndras"

Emperor Obama

I am somewhat aghast at the latest example of Obama's imperiousness.

His "recess" appointment of Richard Cordray to head the Consumer Financial Protection Bureau not only ignores the Constitution but Dodd-Frank as well, which created the CFPB. The Senate is not in recess. Granted, Republicans are gaveling the Senate into session every three days for the express purpose of preventing Obama from making these recess appointments, but this is a strategy that Democrats have employed in the past as well. It may be unseemly, but that's the way they do things in the dysfunctional world of Washington. The fact is that the Senate is not in recess, ergo, Obama cannot make a recess appointment. But he doesn't care. He will just do as he pleases, Constitution be damned.

Even if one were to forgive him this transgression, there is the problem of the language in Dodd-Frank. It specifically states that the director of the CFPB shall not assume authority until confirmed by the Senate. Perhaps it was an oversight by the staffers who wrote the bill, but the end result is that language forbids the use of a recess appointment, which by defintion is not confirmed by the Senate.

Obama is defending his action by proclaiming that he won't let Congress stand in the way of doing what he believes is right for American consumers. He neglected to mention that he won't let the Constitution, or the Act itself, stand in the way of what he wants. His ends apparently justify any means.

For anyone who may believe that George Bush conducted an imperious presidency, I have a question: Is it abhorrent when Bush does it but acceptable when Obama does it?

My Other Car is an Escalade

More good news for the Chevy Volt...

An interesting tidbit from this item is that the average income of Volt buyers is $170,000. In other words, we have wealthy folks being subsidized by taxpayers to buy these little firetraps, all so they can assuage their green consciences.

I just love it when government thinks it possesses greater wisdom than free markets.

Great news: GM to "call back" 8,000 Chevy Volts for "structural modifications" related to battery fires

Medicare Reform

I have heard critics of the Ryan-Wyden plan claim that it will end Medicare "as we know it." Well, Medicare "as we know it" is going to end, whether the critics want it to end or not.  It is only a question of when and how destructive the end will be.

I applaud this bipartisan effort to reform a program that will, left untouched, ruin the country. I will be curious to see how the administration reacts, whether it has the political courage to offer a rational alternative or will resort to demagoguery.

A Big Step

Cracking Down on Warming Bloggers

In the wake of Climategate 2, the release of another 5,000 emails from the notorious East Anglia crew, the authorities are starting to play hard ball (see article linked below).

According to another source, the latest email dump has a twist--rather than just communiques between scientists on how to manipulate data, smear critics, and subvert peer review, this batch includes emails with government officials. No wonder these guys are getting desperate.

 British Poice Raid Climategate Blogger's Home

Infrastructure Spending

The article linked below sheds some much needed light on the alleged benefits of spending on infrastructure by the federal government.

Limited Mileage When Feds Spend

Whither compromise?

For those who believe that compromise in Washington is the sine qua non of how politics should work, I have a question. What gives with Obama?

Obama wants to extend the payroll tax cut, and fund it with a surtax on millionaires. Republicans believe, correctly, that this is not a pro-growth economic policy. But, they are willing to go along with the extension if  Obama will agree to move forward on the Keystone XL pipeline, and they propose to fund the tax cut in other ways. That sounds like compromise to me. But Obama has threatened a veto, and Harry Reid says he won't even allow such a proposal to come to a vote in the Senate. This is the same Harry Reid who thinks the concept that millionaires create jobs is as mythical as the unicorn, but I digress.

In other words, Republicans are saying let's compromise. Obama gets his payroll tax cut, and in return they ask for a project that will create jobs and allow the country to lessen its dependence on oil from the Mideast. Sounds like a pretty reasonable compromise to me.

It seems to me that Obama is now in the unenviable position of having to explain to the middle class, who he claims to champion, that he will not extend their payroll tax cut if it means creating more jobs and improving the nation's energy situation. Then again, he recently said that the payroll tax cut would create more jobs than the Keystone XL pipeline. Which means that, like Harry Reid, he is either astonishingly ignorant or couldn't care less whether his utterances have any connection to reality. He will have to rely heavily on his spin doctors and hope that the public is not paying attention.

Tax Rates, Inequality, and the 1%

As the article linked below correctly points out, those who obsess over income inequality should hope and pray for stock market crashes and deep recessions. They are a great recipe for reducing income inequality.

Tax Rates, Inequality, and the 1%

The Norquist Myth

Following is an article by Charles Krauthammer. It sheds some much needed light on what is arguably the most important debate currently being waged in Washington.

I would add to Krauthammer's comments that, historically, whether tax rates on the rich are high (90%) or low (28%), revenues to the federal government remain fixed at approximately 19% of GDP. Therefore, the key to more revenues is a growing economy and policies that promote such growth, as opposed to the policies pursued over the past few years. I fear that in the pursuit of "fairness," progressives will bring the economy down.

The Grover Norquist Tax Myth

SEIU: Taking Money from the Handicapped

Robert and Patricia Haynes live in Michigan. They have two adult children, both of whom have cerebral palsy. The parents are the caregivers for the adult children.  The Hayneses receive assistance from the state in the form of Medicaid. So far, so good.

But there's a problem. According to state law, the Haynes are state employees since they care for their children. This means that they must pay dues to the Service Employees International Union (SEIU). Therefore, union dues are deducted from their Medicaid payments, even though the Haynes are not employed by the state in any real sense and they have no interest in belonging to a union.

According to the Examiner," Michigan Department of Community Health Director Olga Dazzo explained the process in to her members of her staff.  'MQC3 basically runs the program for SEIU and passes the union dues from the state to the union,' she wrote in an email obtained by the Mackinac Center. Initiated in 2006 under then-Gov. Jennifer Granholm, D-Mich., the plan reportedly provides the SEIU with $6 million annually in union dues deducted from those Medicaid subsidies."

This is a good example of the money laundering scheme that exists between unions and democrats, both of which claim to be champions of the downtrodden.

The entire article is linked below for anyone who gives a damn.

SEIU Siphons "Dues" from Michigan Medicaid Program

Quote of the Day

… is from an 1835 “Minute” on India written by Thomas Babington Macaulay:

 "A government cannot be wrong in punishing fraud or force, but it is almost certain to be wrong if, abandoning its legitimate function, it tells private individuals that it knows their business better than they know it themselves."

From Cafe Hayek

Rooting for Failure

This will not be accurately portrayed by major media...

Rooting for Failure: Democrats Walk Away From Super Committee

Triumph Visits Occupy Wall Street

Axelrod: Obama's Hired Muscle

Is the Obama machine behind the attacks against Herman Cain? I don't know. But they have done this sort of thing before. More than once. No one would know who Obama is but for this type of campaign.

David Axelrod's Pattern of Sexual Misbehavior

Milton Friedman on Greed

Fun Facts

OK, here's a pop quiz. In what year did the U.S. federal government collect the most tax revenue in its history? (Jeopardy theme song playing) Give up? The answer is 2007, when it collected $2.568 billion. But wait. How can that be? What about those Bush tax cuts? Hmmm, quite a mystery. Maybe the conundrum can be solved by adjusting for inflation. Nope. The answer is still 2007. Well, what about tax revenues as a percentage of GDP? Got me there. In FY 2007 the percentage was 18.5%. The record is 20.9%, in 1944. But that 18.5% is still higher than the average from 1970-2000. So, how is it that the federal government got historically solid revenues after Bush cut taxes?

What has happened to revenues since FY2007? From FY2007 to FY2011 revenues fell $394 billion, and 4.1% as a percentage of GDP. Of course this is a result of the recession, but it's worth noting that bad economic times have not just hit the middle class. The rich also got poorer. From 2007-2009 the number of $1 million earners dropped by 40%. Their income dropped 48%. Federal taxes paid by this group dropped 43%.

The point of all these numbers is that it should be clear that the Bush tax cuts are not responsible for the fiscal mess we are in. While revenues have fallen in the past fews years due to the recession and a sluggish, fragile recovery, federal spending per year has increased by approximately $1 trillion. Presto, crippling deficits and debt, capital that is unavailable to the private sector, and an environment in which businesses are leary about hiring new employees.

Now, Obama wants more Keynsian stimulus to provide what he calls a "jolt" to the economy. The imagery is disturbing. It brings to mind a guy on the operating table who has flat-lined and the doctors use the shock paddles while yelling "Clear!" Perhaps that is the current state of the economy. But it is difficult to see how another, smaller jolt is going to help after the major jolt, aka Stimulus 1, has failed miserably. He ridicules Republicans for promoting the same old policies that haven't worked (tax cuts, reduced spending and fewer regulations) while simultaneously promoting policies that didn't work in the 1930's, haven't worked since then, and most recently haven't worked since he took office. It's bad enough that Obama knows nothing about economics. The bigger tragedy is that he thinks he does.

One more point. While Obama has been chastising Republicans for not bringing his "jobs bill" to a vote, Senate Majority leader Harry Reid prevented just that last night. Republicans in the Senate were happy to bring the bill to a vote. Granted, they knew it wouldn't pass, but so did Reid, because several Democrats (one suspects those up for election next year) won't vote for it. Reid broke long standing Senate rules to save Obama the embarrassment of having Democrats shoot down the bill. Don't expect any public acknowledgement of this from Obama. He will continue to smear Republicans as the only ones standing between the people and good jobs. He will, of course, know that he is being disingenuous (to be kind), but he'll say it anyway.

Figures from an article I read, which used: Source for budget numbers: The White House Office of Management and Budget, Table 1.3. Source for tax numbers: Internal Revenue Service, Table 1.1.

Random Thoughts...

 For what it's worth, some comments on items in the news...

1) Attorney General Eric Holder is either incompetent or a liar, or both. He testified last spring that he had first heard about operation Fast & Furious "a few weeks" earlier. We now know that he was told about it at least as early as summer of 2010. He should be fired.  But he won't be. No way Obama will fire a black Attorney General.

2) Can anyone explain how Obama's newly proposed "jobs bill" is anything other than Stimulus 2? More spending of money we don't have, more spending on infrastructure, more central planning. Wasn't Stimulus 1 supposed to fund infrastructure, aka "shovel ready projects"? Shovel ready projects have been replaced by projects that are "ready to go", which is nothing more than rhetorical sleight of hand intended to the ignorant masses. Obama recently mocked Republicans for proposing the same old ideas that, he says, don't work. No word from the White House on whether he grasped the irony.

He also said recently that there are 153 bridges in the country that are so dilapidated they are dangerous, so we must pass his bill. But he didn't tell us which bridges we should avoid. If these bridges actually exist, shouldn't he have named them? You know, in the interest of public safety?

3) Sen. Dick Durbin (D-IL) took to the Senate floor the other day to tell the public not to bank with Bank of America. BofA apparently aroused Durbin's ire by deciding to charge customers a $5 per month fee to use their debit cards. Bastards! What Durbin failed to mention is why BofA is charging the fee. Durbin himself included an amendment to the Dodd-Frank financial reform bill that limited the amount banks could charge retailers for accepting debit cards. Anyone who is reasonably familiar with how business works could have told Durbin that when government passes a law that reduces income, businesses will look for ways to recoup the loss. But Durbin is shocked that BofA acted in its own best interests and the interests of its shareholders. Durbin is a poster child for what happens to a politician after years of spending other people's money.

4) The Washington Post's attempt to destroy Rick Perry is both despicable and predictable. The Perry family leased the property, with a rock that had the word "Niggerhead" on it, for the purpose of hunting. The Perrys evidently sprayed paint over the offensive word and turned the rock over. This doesn't sound like the action of a racist, but the Post used unnamed sources and innuendo to smear Perry.

5) Some leading Democrats and liberal media pundits are quite enamored of the protesters known as Occupy Wall Street. These protesters are essentially a bunch of anti-capitalist, anti-profit, anti-business dimwits who think the minimum wage should be $20 per hour, that people have a "right" to a "living wage" regardless of employment status, and that all debt, of every type, should be erased. In other words, they are taking the lessons they learned from their college professors and trying to force their implementation. A self-avowed communist and former Obama czar, Van Jones, is a leading figure in the movement. But these knuckleheads are being cheered by so-called progressives. Have they learned nothing from history?

By comparison with the Tea Party movement, Occupy Wall Street is an incoherent mob. Some of these protesters are actually comparing themselves to the original Boston Tea Party, evidently unaware that Paul Revere and others in 1773 were protesting against higher taxes and intrusive government, concepts that are appalling to modern day redistributionists.

6) After throwing away over $500 million on loan guarantees to Solyndra, the administration is not only unapologetic, it is spending an additional $6 billion on green energy companies. The administration continues to believe that it is better equipped to determine the best use of capital than the private sector. This is the height of hubris. I have heard many on the left defend the administration's subsidizing of solar energy on the basis that China is pouring money into it and we can't get left behind. Their argument boils down to this: since the Chinese government is stupid enough to subsidize an energy source that can't survive on its own in a free market, we should be just as stupid. The "China does it" crowd also fails to mention that China is also pursuing all sources of energy, including coal and oil, which environmentalists in the U.S. are doing everything in their power to curtail. If we're going to use China as a shining example, let's at least try to follow their lead when they do something smart.

7) Speaking of China, some in Congress, primarily Democrats, think it's a good idea to punish the ChiComs for manipulating their currency. China may in fact be doing that, but it not clear that, on net, it does more harm to us than it does to them. In either event, slapping tariffs on Chinese goods will likely lead to retaliatory tariffs on our goods, aka, a trade war. Does Smoot-Hawley ring a bell?

Those who promote such measures are generally those who also bemoan our trade deficits. But trade deficits are as poorly understood by politicians as most other economic concepts. I have commented in the past about the fact that accounting for trade must consider two different elements, the current account and the capital account. When we hear about deficits, the reference is to the current account. But these deficits are offset by capital account surpluses. Google "cafe hayek trade deficts" for more on this. When considered in its entirety, trade is always, by definition, balanced. Viewed another way, if trade (or current account) surpluses are so desirable, why did we have surpluses in all but one year (1936) of the Great Depression? We have had these trade deficits every year since 1976. If they are as awful as we hear, how have we survived? The fact is that data indicates a strong correlation between expanding trade deficits and economic growth. Yet we constantly hear politicians bray that something must be done about these horrible things. And over such specious claims and worries about China's currency, some are willing to enter a trade war, which would be truly disastrous.