Wealth Flight

I came across an article from earlier in the year that details the wealth flight from New Jersey. New Jersey chose to fund its coffers by taxing its wealthy residents and so those residents started leaving the state. This is a good example of what can happen on a grander scale in the United States. Or perhaps instead of Americans leaving, since it takes a lot more commitment to leave one's homeland than simply crossing state lines, wealthy foreigners avoid immigrating here.

Obama and the Deficit

Okay, so we now have proof that Obama is full of crap. Today Bloomberg reported that Obama has added some demands to the bill that would keep current tax rates from increasing come January 1. Before, he was so busy crowing about how by not raising taxes on high income earners, their gained income was going to "cost" the country too much in the form of a higher deficit (see my Oct 2 post). But come today, the deficit doesn't seem to be a problem anymore now that he is making a deal that includes extending the unemployment benefits to infinity which will add another $150 billion (a year?) to the deficit. Remember when Bush a couple of years ago ran a deficit of $445 billion and that was the biggest ever? Well Obama makes even him appear as a tightwad in comparison. When will Obama next embarrass himself about keeping the deficit under control?

Just a TSA thought

What is to stop a terrorist from blowing himself up while he is waiting in the airport security line? Usually there are lots of people around and it would mock the airport security.

TSA Gone Wild!

One poor man has his urostomy bag ripped off his body leaving him covered in urine.

Another lady has her blouse pulled down exposing her breasts to the entire screening area.

You could be arrested for refusing to submit to either scan once you enter the screening area.

And one lady mocks the TSA by stripping down to some transparent underwear... and films it!

An Analogy

Let's say you have a race out in the ocean where the first swimmer to get to the shore gets a new car.

There are a few amateurs and a guy named Peter who has been training for the race for months. Peter is a real go-getter who is really determined and goes after things that he wants. The amateurs, fearing that Peter will have the upper-hand, lobby the race organizers to have Peter penalized. So the race organizers organize a meeting and agree that if they let Peter race unpenalized, they will just be 'giving' the car to him. So they decide that they are going to attach some additional weights to his legs to make the race "fair."

A gun fires into the air and the race begins. The swimmers start splashing and kicking, chugging towards the shore. Peter starts lagging behind the other swimmers due to his exhaustion from the extra weight burden that was placed on him. George, one of the event organizers, fearing Peter will drown decides to give this guy a break. He speeds a powerboat out to remove one of the weights, but leave the other one on so that Peter doesn't have some 'unfair advantage.' The race continues. So at this point do we expect Peter to suddenly run across the water and beat everybody to the finish line because one of the weights was removed? No, of course not. And let's not forget that he still has a weight attached to him.

But the amateurs, looking back because they heard the speedboat racing to Peter, start complaining about Peter being given a break. "Now they are just giving him the car," complains one of the amateurs, "it is so unfair!" But the race continues and Peter starts cutting down the distance between himself and the other racers; His hard preparation is paying off, but he is still quite tired from the extra burden that had been placed on him earlier in the race. He swims past Paul, who is a couch potato and didn't think it was worth any additional effort to prepare for the race.

So Nancy and Barrack, two of the other event organizers, start debating if they should put the other weight back on. Barrack convinces everyone that Peter should have a rope attached in order to tow Paul behind him to make things "more fair" for Paul. "We need to spread the ability around," he says.

Welcome to America.

Obama Understands.

Obama Says Understands Ire Over Airport Screenings?

He's the one that paid for them in his budget!!

"Obama's budget for next year calls for $371 million for 500 more body scanners..."

Naked Body Scanners

So unless you haven't flown on an airplane over the last several years, you are probably aware of new scanning devices that air travelers are subjected to. These devices pummel your body with X-rays which allows an image of your body to be shown to a TSA screener. Critics have likened it to a "virtual strip search" because high resolution images of your most intimate details are exposed. However, I am even highly suspicious of the quality of the images hand released to the press. Usually they provide a tiny 2 inch square on your screen with key zones blurred out. I am quite sure that the resolution is much higher on the TSA's screen.

If one is not comfortable with the naked body scanner, one can opt out for a hand screening instead. Previously, they would pat you down and only touch your buttocks with the back of their hand. The TSA, however, under a guise of "increased security" and instituted an "enhanced pat down" which is a little more invasive and demeaning. Now they use their palms and fingers on the buttocks and groin. Of course, the real reason for this "enhanced" procedure is to make the hand pat down alternative to the naked body scanner much less pleasant. They want travelers to acquiesce to the naked body scan. The TSA claims that only 1% opt out of the scanner, but I am highly suspicious of this number and think they are understating it. They are invoking network effect thinking where if they can convince the public that "everybody else is fine with it" then the rest of the public will accept it as well. The government wants make this scanning device acceptable over time and eventually make it mandatory where one does not have an opt out option.

So whats wrong with the naked body scanners? Aside from the discomfort of knowing that someone is looking at a picture of your naked body and that it may be stored for later viewing, and because TSA screeners are so professional that they will taunt a coworker about the size of his penis after he submitted to scan, or laugh about exposing a traveler's breasts to the entire screening area, there's also the issue of having x-rays beamed at your body. Now of course, the TSA and some research puppets have claimed that it is super safe and that you would have to get 1000 dental x-rays to get the same amount of radiation. Really? It would be more effective to use a more believeable number of say 10 dental x-rays, because I am not buying the 1000 number. And of course, what else are they going to say? Dr. Brenner, head of Columbia University’s Centre for Radiological Research, says that the radiation dose is actually 20 times higher than the official estimate. Other radiological scientists have also called for an independent review because they are concerned with the safety of these machines. They also mention that because the 'safe level' metric that the government uses involves the volume of the entire body as opposed to just the skin, the radiation safety level is understated. Either way, all it takes is a single X-ray to damage DNA which has the potential to cause cancer many years later, and you are having a machine blast your entire body with them.

And this is an early stage device. Time and time again history is looked back upon and mistakes of was considered harmless or good for you which later turned out to be harmful
(remember when smoking was claimed to be good for you? Or drugs that have been given FDA approval, but later were found to cause problems, such as Vioxx). One scientist has estimated that you end up with the same risk of dying of cancer from one of these machines as getting killed by a terrorist.

Then there's the issue that some variants of these machines, like the millimeter-wave scanner, might not even be that effective at exposing certain types of threats. "Material [that] is low density, such as powder, liquid or thin plastic – as well as the passenger's clothing – the millimetre waves pass through and the object is not shown on screen."

The sheeple and naysayers will quip, "Well, if you have nothing to hide..." But this is always a superbly weak argument as it is equivalent to the Ad Ignorantiam logical fallacy. And these scanners encroach on an individual's privacy and freedom to not be seen naked or be subjected to an experience they consider humiliating. Let's not forget how Ben Franklin stated (paraphrasing here) that those willing to sacrifice liberty in exchange for security deserve neither and will lose both.

These devices only give an illusion of additional security, as the naysayers are certainly missing one critical fact: If a terrorist is willing to kill himself to kill others, what is to stop him from placing a stick of dynamite up his ass? What will be next, proctology exams before boarding flights?

A good read by Arthur Laffer, the economist of the "Laffer Curve."

Deficit Commission

There is a proposal out by Obama's deficit reduction commission. From what I have read, it sounds pretty outstanding. A lot of government spending waste is reduced, entitlements are pared back, and tax rates are dropped while simultaneously dropping deductions. But as you read the article you will see why it will never happen: too many vested interests that will fight nearly every aspect of the proposal! These groups are so myopic that real change such as this will never occur in this country. If everyone would work together and look at the big picture, this proposal would have the potential to have a real lasting positive impact on this country. I seriously hope the commission members put this to congress and they vote for it.

Washington's Income Tax Smackdown

It looks like Washington voters aren't so stupid after all. They voted against a proposed state income tax on the 'rich' that would inevitably be applied to the middle class after a few years of acceptance. Congratulations!

Book: Investing Revolutionaries

I recently finished a book mostly themed around stock investing. It is more of an introductory book on why you shouldn't time the market and should stick to broad index funds, so if you have read dozens of investing books like I have, you probably won't get anything new out of it. But overall the book is a decent read. However, in one of the intro chapters, there was some interesting economic insights and I feel I should share some of it:

[Edward C.] Prescott [a 2004 Noble prize winner] visited with us on The Investing Revolution in 2007 to discuss the topic. Here’s a startling fact: Based on labor market statistics from the Organisation for Economic Co-operation and Development (OECD), American workers aged 15 to 64 work 50% more than French workers. Comparisons between Americans and Germans or Italians are similar. What’s going on here? What can possibly account for these large differences in the hours people work? It turns out that the answer is not related to cultural differences or institutional factors like unemployment benefits. Rather, “marginal tax rates explain virtually all of this difference,” says Prescott. He goes on to say, “I’ve made this point about tax rates before, but it bears repeating because it reflects a fundamental economic insight that gets to the heart of policymaking: People respond to incentives. You don’t make economic policy for nations; you make it for people. And it’s the responses of those people, when aggregated, that give us those data that we all love to analyze.

In fact, the current marginal income tax rate in the United States shown in Figure 1-1 rewards dual-income households more than it did in the 1970s when the average tax rate doubled when a spouse joined the workforce. Now that more people are working, there is a greater need for labor to do some of the things people often don’t have time to do for themselves—like provide child care, prepare meals, clean the house, and run errands. Prescott goes on to say, “The bottom line is that a thorough analysis of historical data in the United States and Europe indicates that, given similar incentives, people make similar choices about labor and leisure. Free European workers from their tax bondage and you will see an increase in gross domestic product. The same holds true for Americans and Europeans who live and work in America.”

When I first came to this country in the late 1970s, a sort of ethos had been set by John F. Kennedy, who had said earlier that if you’re young, if you’re idealistic, and if you care, join the Peace Corps. Become a public servant. So the idea was that if you work for yourself or if you’re an entrepreneur or an investor, well, you’re kind of a greedy, selfish guy, but if you go work for the Department of Education, you’re a noble person putting the public good ahead of your own.

“Reagan challenged all that, and he said, it’s not the public servant—who would be called, by the way, the bureaucrat—but rather the entrepreneur who is the embodiment of the American dream. And so Reagan was pushing for a cultural shift. And I think we’ve seen that. We’ve seen a cultural shift in America today, so more parents today would probably like their kids to be like Bill Gates rather than, say, Bill Clinton. And that’s going beyond politics. So when I look back at Reaganism, most people would focus on the Cold War and so on, but I think Reagan also produced
an economic and a sort of cultural shift in the United States.”

And politics takes advantage of that, the prejudice against the rich guy, the successful guy, the entrepreneur. The basic idea is that they must be succeeding at the expense of everybody or they must be succeeding by finagling their way to success, and I think ultimately entrepreneurs are in some ways always on the defensive against this kind of thing.”

I keep hearing people say, ‘The rich are getting richer and the poor are getting poorer.’ But when I actually looked at American living standards over the past generation—let’s say from World War II, or even from 1980—what you see is that the rich get richer, and the poor also get richer, although not at the same pace. So, yes, inequality does rise, but it’s rising because more people from the middle class are moving up.

An academically themed article about the Tea Party. An interesting read for those who have an attention span longer than a garden slug's.

Russia, The Capitalists of the World.

Over the summer Russia moved to eliminate capital gains taxes starting in 2011. Not only are they eliminating capital gains taxes, but they've had a flat tax of 13% since 2001! It begs the question, how in the hell can a former communist country become more capitalistic than America? Here, all the populist rhetoric being spewed by the politicians is class warfare pieces about taxing the 'rich.' And of course somehow you are considered rich if you earn over $200k, even though that means you are likely to live in a high cost metropolitan area.

But I did not see one news article published anywhere on an American news media website about this development in Russia. I read a lot of news articles and I visit several sites each day, so I find this a little strange. Is the liberal media trying to censor pro-capitalist ideas?

Higher Taxes Do Matter

Commenting on Mankiw's post, an author wrote "Why Higher Taxes Won't Backfire," and I commented:

Yes, you are right that people who receive fixed paychecks probably will not put in any more or less hours based on the tax rates. But I do not think you can generalize this to all lines of work. People do think at the margin and if something becomes more expensive, you do less of it. If a business owner already works a lot to promote his business, he will have to decide whether it is worth putting in additional hours if those additional hours are less compensating. He already has the incentive not to put in the extra hours because he may want more leisure to spend with his family, or weekends etc.. But then he is going to reduce the financial incentive on top of that? I think the conclusion is clear.

Or what about the person who does currently have a fixed salary and has a business idea. At the 25% tax bracket, perhaps the math works out so that he can earn a profit on the initial earnings. But perhaps at the 39%+3.8%~43%, it no longer works or isn't worth the additional effort. I am in the 50% (all taxes included) bracket and so it not worth it to me to do consulting on the side for my line of work, but which I would do if the taxes were about half. People who aren't affected by high taxes can make all the claims they want, but only those actually affected by them know the real story.

Social Security Reductions

So of course the benefits reduction topic is hot again. Today there is an article that mentions benefit reduction in Europe and is compared to the USA social security model.

I tried to post this comment and a few variations, but for whatever reason, the administrator of this article kept removing my comment. It is not extreme, so I have no idea why it kept getting removed. Anyway, my 2 cents:

I am all for ending social security, but end it sooner than later. It is a depression era relic where the original people who received benefits never paid into the system. It garnered votes for the election, but it didn't make much long-term financial sense.

If benefits are going to be reduced, reduce them now for EVERYBODY, so that everybody has to have skin in the game for the decision. Politicians always cut benefits for later generations, because it is easy to disenfranchise a populous which does understand the true importance of voting, and who discount the importance of their entitlements because they won't be received for 30 years, and so don't bother. But this is dishonorable. Many older people support this decision because "they've paid into the system for all these years," and lets face it, what do they care, they will get all of their benefits at the expense of the young. But, what do you think we are going to have to do? The difference is that you will get all your benefits and the rest of us will be left holding the bag. So if benefits need to be cut, then EVERYBODY should have to have their benefits cut at the same time. None of this repetitive 'Oh, let's raise the retirement age 4 years for those retiring twenty years from now.'

I have also encountered some debates, such as commentary on Businessweek, similar to this article that says, "Hey, if you've saved too much and you have a nest egg, then you don't need social security." Well obviously then the only reason why they won't 'need' it is because they have made responsible decisions throughout their life. If one is cut out of the benefits, then he or she has paid more taxes than 'advertised' over a lifetime and ends up subsidizing those who chose to live a life of debt. If something like this gets passed, what do you think is going to happen? A phrase learned in Economics 101, but which people always seem to forget is that people respond to incentives. People will stop saving. I know I would. I live below my means so that I can pay down my student loan debt and max out my 401k and Roth IRA. But if the incentives are skewed so that I get punished for saving, you can bet your ass that I am going to spend that money on a Porsche instead.

Probably the main problem in this country is that responsibility is not rewarded, but irresponsibility is - repeatedly.

Tea Party: Karma

There is a good article on WSJ about how the Tea Party represents "Karma." This is a good description of one of the main goals of the movement, because in essence, you reap what you sow -or at least that is what many of us believe. Liberalism over the last half century has damaged this precept. As Milton Friedman stated in his "Free to Choose" book, the new ideaology in this country (new for our country's history, anyway) has changed to a policy of having all citizens "finish the race at the same time." In the article, one survey question asks whether everybody should end up with the same amount of wealth. Liberals were evenly divided on the issue, but tea party libertarians and conservates strongly rejected the idea. This is definitely a concept that bothers us libertarians immensely. Successful people are taxed heavily on the top and subsidized on the bottom, reducing the incentive to work and invest more and encouraging more people to accept handouts. My observation is that Democrats do not want to create opportunities for the middle class to become 'rich' but to make it difficult for anyone to become 'rich.' They want the entire country to be "middle class." The new tax increases that Obama wants to push though on high earners will only strengthen this socialistic principle.

What they obviously do not understand is that reward is what drives people to innovate and pursue careers that are difficult!

Social Security COLAs

Today's first article is about the prospect that the Democrats may attempt to buy some votes by providing $250 paychecks to Social Security recipients. A cheap election year tactic, no less. This is a classic case of the money illusion, where people look at the number of zeros on the bill as opposed to how many loaves of bread that bill can actually buy. So the last time that the economy had an oil supply shock, the CPI surged ahead, but then the price of oil subsided as the world entered into a recessionary period. So inflation has been flat since then and the price of milk, bread, and many other common items has stayed the same. Social Security recipients are used to receiving yearly COLAS, or cost of living adjustments. So, for the past two years, since the CPI has not increased, they have not received raises. Many are very angry about this, even though they are not worse off. People like to see their incomes going up each year, but they do not factor in how much that income can actually buy them. If inflation is 5%, but a worker gets a 3% raise, he is happy, even though he is worse off. If inflation is zero and his raise is zero, he is not happy, even though his state has stayed the same. Similarly if deflation occurs, he still wants to get a raise. This is one of the reasons why many economists think that the economy should have a slight amount of inflation, because it "greases the wheels." That is an actual quote, either from Bernanke's or Mankiw's text (I don't remember which).

So even though Social Security recipients are not worse off than they were the last time they received a COLA, the Democrats want to spend more taxpayer money to buy votes. That's $14,500,000,000, by the way. That may be the biggest campaign expenditure of all time - with our money.

Obama Won't 'Give' Money to the 'Rich'

This is kind of a continuation of Sept 12th article, as it follows the same theme. On Sept 20th, referring to keeping the current tax rates the same for everybody, Obama came out and said, "We can’t give $700 billion dollars away to America’s wealthiest people." Obama's main campaign platform throughout his entire presidency has been to bash anyone who has been ambitious and successful, because it is apparently unfair if someone works 60 hours a week, started a company, or went to college for 6-8 years and gets paid accordingly.

Obama is so pompous with that statement, because we are talking about these earners' own money. Nobody is giving them anything if they are the ones that earned it! Hey, guess what, I gave $10,000 to Obama today because I didn't go over to the White House and steal it from him! Am I generous or what? Obama is so disconnected from the concept of capitalism that it is truly frightening.

Who are generally the people who want to raise taxes on the 'rich?' Generally it is people who won't be affected by the impact of a tax increase. Let me explain. So, as I have discussed in a previous post, there are two elements to 'richness:' stock and flow. Your income is what gives you the potential to become rich if you do the right things with it. Your current asset base is what makes you rich. If you make $100k a year and spend every dime of it each year and have no assets, you are not rich! If you have a salary of $100,000 and have $50 billion in assets like Warren Buffet does, then you are rich!

So in Obama's taxing-the-rich snare, anyone with a salary over $200k is labeled rich because taxes are applied to income earned that year. The money for anyone who has millions of dollars already stowed away is not affected. It is clear why someone who is not rich and will never make more than $40k a year would want to raise taxes on high-income earners. Obviously, jealousy, envy and a lack of ever being affected play a role here. But it may not be so clear why a lot of rich people want to raise taxes. A lot of people think that many politicians, actors, and super-rich billionaires (like Warren Buffett) are altruistic for wanting to raise taxes on their own income levels.

But then there's the truth: There are two obvious reasons for why someone who already has a large asset base would want to raise taxes on high-income earners. (1) The first is that it would be harder for other people to attain their level of wealth. This makes them comparatively richer because there will be less people joining the club and less dollars fighting for their luxury goods like summer homes in the Hamptons. (2) Since the money they already have that is stowed away is not affected, what do they care? They already have enough money to live off comfortably for the rest of their lives.

If these people were so altruistic, they would be giving most of their money away that they already have while they were still alive. But instead they generally wait until they are dead before a pledge actually becomes a check.

The Real Party of NO.

Extending Jobless Benefits Doesn't Pay Off

Kudlow's 12 Step Path to Prosperity. I would add that the dollar shouldn't be linked to gold, but currency growth should not exceed GDP growth.

Obama, More Americans Want Smaller Government!

When exposed to the liberal media it would appear that the majority of Americans support paying higher taxes for bigger government and more social services. Rasmussen Reports apparently found 12 days ago that this was not the case with a telephone survey they conducted. 68% of Americans (+/- 3%) prefer smaller government. What is interesting to note is that 61% the political class wants more active government with more services and higher taxes. This is direct evidence that politicians are out of touch with the rest of America.

But, of course, this makes sense because overpaid politicians want more power and so they want government to grow. Then they tell us, 'oh we are broke, we need more of your money.' After they raise taxes, the cycle continues. Large government is a cancer for America.

Commentary

Some good commentary on SmartMoney.com for keeping taxes low.

The History of Entitlements

The Wall Street Journal published an article today titled, Obstacle to Deficit Cutting: A Nation on Entitlements . I would classify this as a must read. It is interesting to note that the Europeans have realized their entitlement model has failed and are starting to cut back on freebies, whereas America was late to the party and is just beginning to ramp them up. Also note how more and more of the tax burden is being pushed onto a small subset of the population.

Change

Quote Of The Year

The best quote that I have read all year is

The government should be the port of last call, not a universal entitlement for everybody, so it's a matter of using scarce resources in the most fair and equitable way.

Said by, Ruth Richardson, the former New Zealand Finance Minister.

The White House Puppet

The GOP opposes Obama's plan to buy votes by only raising taxes on high income earners. In Today's article, referring to White House Press Secretary Robert Gibbs:

Gibbs said the middle class should not be used as a political football by Republicans maneuvering to give tax cuts to wealthy taxpayers, who he said don't need the reductions. Republicans say paring taxes for the wealthy would encourage them and the businesses they operate to create jobs.

Of course, Democrats are using the same political maneuvering and trying to incite class warfare at every turn. But who the hell is he to say whether or not these people need their own money? This is the main problem that I have with liberals - they believe that your own money isn't yours.

The Tax 'Cuts'

First, I think it is time to retire the description of the "Bush tax cuts." The reduced tax brackets have been law for about 7 years now, so still referring to them as a "cut" is a little silly. When the law expires at the end of the year, the new tax brackets that will take effect will be correctly called a tax increase, because that is what will happen. Okay boys and girls, onto today's article:

So an article came out today where the House Republican leader, Boehner, today said he will support a law that keeps the tax rates for those earning under 200,000 the same and increases tax rates for those making over. The last paragraph says,

At a White House news conference Friday, Obama described the Republican proposal for a tax extension for the highest of earners as an effort "to give an average of $100,000 to millionaires."

What is Obama really saying here? What is this per year? Per decade? A lifetime? Because if yearly that would imply an annual salary of $3,333,333 and that would be a pretty large average salary. He certainly must not be talking about the median salary above that tax bracket. Also, he has repeatedly stated that he wants to raise taxes on those individuals earning over $200,000. Does Obama think that everybody who makes over $200,000 a year is a millionaire? I bet this is news to a lot of people.

And who are the millionaires in this country? Obama would have you believe they are only people on Wall Street bagging million dollar salaries. But Stanley's, "The Millionaire Next Door" provides some answers. Generally they are people in their 50s and 60s who have lived below their means, invested their earnings, and accumulated wealth over time. They probably had good jobs but most weren't making over $200,000 a year.

Oh and about all those Wall Streeters who are making $200-300,000 a year... to most people who live in smaller cities that sounds like a lot, but after the federal, state and local governments eat through half and then they pay 30,000 a year in rent, that only amounts to a good job equivalent for smaller cities. Think those making $85-100k a year. They've got bills too, and these people don't become millionaires overnight.

So who is getting the $100k Obama is talking about with this statement?

And really, who is doing the giving here? The government taking less of worker's own hard-earned money amounts to "giving" the worker money? Karl Marx and George Orwell would be very proud of Obama. He studied hard.

Health Insurance Rate Increase

Here's a good "I told ya so" moment. Health insurance premiums are going up for many people because of the extra benefits now required by law. The phrase, "There is no free lunch" is common to economists, but this concept has yet to be assimilated by Democrats, who apparenty think that you can legislate more benefits to Americans and those benefits will be costless.

An article worth reading. A couple of points include how Obamacare cuts medicare payments to doctors, and how federal employees already enjoy the benefit of being able to divert a portion of their social security taxes to a private account but Obama is against allowing ordinary Americans to do that.

And I'd like to mention about that bullshit promise of not raising taxes on anyone making under $250,000: he plans to raise the capital gains and dividend taxes. Duh! Not only 'rich' people own stocks!!

More false reasoning about tax cuts

Another Leonhardt article. Seriously, they need to stop publishing this guy: Tax Cuts That Make a Difference. I posted in the comments section:

Does more, eh? Where's your data? This is the problem with journalists who know nothing about economics, they just make stuff up without support. Whatever sounds good to them is what they will advocate.

Spending money is only good for the short term. Saving and investing leads to more consumption later. Like always, we face trade-offs. Advocating policy that leads to artificial spending now might make things feel better, but what do you think happens when those policies are lifted?

You think the cash for clunkers program was effective? All it did was transfer money from tax payers to the auto industries. It was a bailout, plain and simple. Just like the housing tax credits, all it did was move buying decisions around and cause the tax payer to lose. If a firm cannot earn a profit because they have promised too many benefits and cannot compete on the global economy, they should be allowed to meet their demise.

Once again Leonhardt fails to understand the concept of a control case. The economy was already on a downward spiral handed over from Clinton. What does Leonhardt expect, the tax cut takes effect and suddenly all problems are cured? No clearly things would take some time and also, what would have happened without the tax cuts? Also, you cite the 2001 cuts, but not the 2003 cuts which were stronger because they phased the tax cuts in at a faster rate (instead of the rates dropping in 2006, they dropped in 2003) and growth exploded the following quarters.

Also, I like how you provide invalid references (sarcasm). Also, you fail to understand that employment lags. The economy can start to do better but unemployment can lag for years, just like in this recession. A better metric is the GDP growth rate, and you will find that GDP grew strongly after his tax cut.

Taxes matter more than you think. Assuming all tax rates go up here: If I make 100k a year and my taxes go up an extra 3,000, do you think I don't feel that? And since my take home pay would be nearly 50k, that would represent 6% of my income. If I make 250,000 that is an extra 7,500, and that is on top of an extra progressive rate, so the actual increase in the tax burden is several percentage points higher.

Liberals like you love to tax away other people's money to spend on your socialist pet projects. You agree that taxes matter, but then downplay its importance with the caveat that follows. If taxes aren't that big of a deal, then why does the government spend so much time manipulating consumer behavior with the tax code (think cigarrette taxes, green rebates, mortgage deductions, etc.)? The tax cuts went disproportionately to high-income tax households because they pay more of their income in taxes! Why do liberals consistently rant about how the wealthly benefited the most from tax cuts.? If I am earning 100k and my taxes go down three percent (for example), I get three thousand dollars back. If Bob makes 10k and his taxes go down three percent, he gets 300 back. Is it really unfair that I got a larger dollar amount? No, especiallly since I was paying a lot more in taxes than Bob was in the first place!

Facebook: For Loving Thyself

Are you a Facebook narcissist? What is up with all the escort pictures on people's profiles?

Homesales Down Again

Shocker... home sales plunged again. Who could have seen that one coming?

Haines on CNBC

In response to:
Haines: The Real Impact of Marginal Tax Hikes on Hiring

I posted the following in the comments section:

This is the problem of what we statisticians call a "control case". You quote all these examples where job growth occurred in the presence of higher taxation, but that does not mean taxation did not negatively affect job growth. The missing question is 'what would have job growth been without the additional tax increase?" Surely, there were a bunch of things that were favorably affecting job growth. Short duration wars stimulate growth in manufacturing industries, naturally, and in the 1990s we embarked on the 4th revolution, namely, the computer revolution. Furthermore, our population dynamics has been changing with the baby boomers coming of age, the arrival of the single family household, and a changing of lifestyles from saving to consumption. There are a million variables not being controlled for in your examples. To compare taxation of different times in a vacuum will help you get your socialist ideals of raising taxes on high income earners across to other people who want to believe in it at all costs and need examples to 'prove their point', but it doesn't fool people who work with data.

"I just don’t see the correlation between raising taxes and job growth"
One must remember the saying "correlation does not imply causation."

It's absurd to think that raising taxes of any kind will promote economic activity and lead to job growth.

I have watched you on squawk box or whatever show you are on and it is clear from interviews and commentary that you want to raise taxes on the rich no matter what. Don't pretend that you are using the data to come to your conclusions.

Your last paragraph is a caveat to defend your article, but I think the intend is an implication that higher taxes do not negatively affect growth, because otherwise this article would not have even been written. Essentially with this paragraph, you are saying you don't know what to think. I applaud you for addressing comments though.

Articles

I have been a little short on time lately, so I have not been able to write any in-depth articles, but I came across some additional news articles for your reading enjoyment:

ObamaCare and the Constitution

Are Jobless Benefits to Blame for High Unemployment?

New Study Blasts Theory That Women do More Work

Thousands of Healthy Workers Still on Disability: GAO

More taxpayer waste: Thousands of Healthy Workers Still on Disability: GAO. Seriously, why do we even pay taxes?

Four Articles

Arthur Laffer (Laffer Curve) on taxation for the wealthy,

more about John Kerry's tax evasion on his yacht,
... for the comment at the end of the article: this would be the equivalent of me not factoring the cost of auto insurance on my car, but I do, and so would most people because people think at the margin. $500k is not trivial even in the face of that $231 million because most of that would be locked into long-term investments, and it would still represent .2% of his net worth.

Some examples on how 50% of Americans can avoid contributing to the federal government and its excellent point about negative tax payments representing "laundered welfare"

and finally, another Democrat is charged with ethics violations. Seriously, who isn't crooked in congress? Americans would like to know.

Two articles worth reading

Two worthy articles today.

The first is that a judge blocked key parts of the Arizona immigration bill. Okay, if immigration isn't such a big deal to all these people why do we even have immigration laws? Apparently, they are not really in force across the country anyway.

And the second compares deficits of Obama with Reagan, and Obama's tactic of attempting to spend and tax our way into prosperity.

Illegals and Disease

Another reason why it is dangerous to have illegal aliens is because of communicable diseases. Illegals are not vaccinated.

More Socialist Propaganda

Socialist themed populist articles have flowed freely since the beginning of the recession. Sadly, they are still coming. Here's my response to an article on Yahoo about "the middle class being wiped out" - a socialist favorite.

-->
This article is such biased trash. I am so sick of the socialist propaganda going on in this country.

point 1: so what. My neighbor having more money than me does not make me poorer.
Point 2: all this says is that 61 percent of Americans live beyond their means. Most of these people do so by choice.
3: once again, refer to point 1
4: a function of choice.
5: a function of choice.
6: so either they didn't save enough or they want to live a more lavish retirement. However,with the stock market dropping by over a third over the last two years, and many people having a big block of savings in the stock market, 24 percent choosing to work longer does not say much about rich vs poor.
7: and millions of Americans were up to their eyeballs in debt keeping up with the Jones' using their houses as ATMs. This just shows poor financial choices once again.
8: and the sky is blue. Thanks for making a circular argument.
9: Uh, yeah, it is called foreclosure. Once again, Americans living beyond their means
10: How much larger are corporations now? Different responsibilities?
11: liquid such as stocks? What is an acceptable number by your standards?
12: once again, what is your acceptable number?
13: Uhhh yeah, because compensation declined 50% from the previous year. If you start with 100 and go to 50, that is a loss of 50%. Then if you gain 25, that is a gain of 50%, but it is still only 75% of the original number!
14: This does not relate to the middle class versus rich debate. This is a problem with big government and is likely the only point that I agree with you that should be changed.
15: blah blah blah
16: This is a symptom of unemployment welfare. See how fast this changes when the benefits are cut.
17:I think you are confusing a service economy (IBM type jobs) with the service industry (waiters).
18: Once again, this is a problem with welfare benefits being too liberal.
19: And how many shirts can these workers put out? How much capital do they require? More importantly, how many people are employed in the American textile industry (low!)
20: How is this relevant to this topic?
21: How many become millionaires in other years? Is it usually 15 percent or so? This could be a statistical error and being a millionaire doesn't say as much as it did 30 years ago.
22: and they also pay about 90 of the taxes.

"What do most Americans have to offer in the marketplace other than their labor? Not much." Are you serious? It's called human capital and innovation.

Capitalism gives people a choice to move up the ladder. There is no free lunch as one must work for it. Sadly, most people take the easy road and their income and savings reflect as much. All self made billionaires and millionaires deserve their wealth because they obviously created something that other people are willing to buy a lot of.

Paying People Not To Work

It looks like it is going to get extended again: Obama & Co's economic policy of paying people not to work. A WSJ article sums it up nicely.

And the U.S. Chamber of Commerce's take on Obama's economic policies.

For the Long Run

Today I encountered an article by the highly regarded economics/finance professor Jeremy Siegel (and many time author) about some antidotes to the current economic slowdown. One of his pieces of advice mentions a reduction in unemployment benefits. Overall a good read. Hopefully Yahoo doesn't kill this article like it seems to do with all of the others I have posted a year or more ago.

Leonhardt's at it again

Leonhardt may be the most left-winged biased writer that the New York Times has on its staff. Today he wrote another piece of trash titled, When Caution Carries Risk.

Leonhardt's douchery knows no bounds. The Fed can only do so much and it has done quite a lot since the beginning of this crisis. Many are saying the Fed has done enough or too much. So how has Ben Bernanke "been unwilling to use his power to lift growth and reduce joblessness from near a 27-year high?" Wait, isn't that Obama's job? Actually I am just kidding here, but making a point because if a Republican were in the White House, that is who he would be bashing. But back to the point, what does he expect the Fed to do? It has already lowered interest rates to near zero and flooded the market with liquidity. What, is Ben supposed to declare an acceptable unemployment rate and somehow pull a rabbit out of a hat to make it get there overnight? Economic cycles take some time and they will eventually be fixed on their own, even without the Fed's help. The Fed can only quicken its pace, but there there is no free lunch as there are side effects. So to answer your rhetorical question, the greater risk is doing too much!

As is common among journalists, they write articles about topics that they are not really qualified for. Leonhardt is no exception because he is not an economist and obviously doesn't understand what the Federal Reserve does.

Also, he mentions,

In effect, Mr. Bernanke and his colleagues have decided to accept an all-but-certain downside — high unemployment, for years to come — rather than risk an even worse situation — a market panic, a spike in long-term interest rates and yet higher unemployment.

Even by your own statement, isn't that the prudent way to play it? Would you prefer he gamble with the economy and lead to the latter, worse situation?

And like usual, he contradicts himself:

If Mr. Bernanke and his colleagues decided to take further action, their most likely move would be to bring down long-term rates. They could do so by buying the bonds that backed longer-term loans.

and then a few paragraphs down he says,

The Fed, meanwhile, has to show it has a strategy for selling the trillions of dollars of assets it bought during the crisis — without damaging the value of private investors’ holdings and without, at some point, igniting inflation. “The more we buy,” Donald Kohn, the Fed’s vice chairman said last month, “the more assets we will ultimately need to dispose of.” The more the Fed buys, the greater the risk that it will find the point at which the market becomes unnerved.

By your own admission it is risky for the Fed to 'do more.' Which by the way, the Fed only has a limited ability to influence long-term interest rates.

Do us all a favor and stop writing columns, please.

Fiscal Austerity

Keynesians would say that the U.S. created the Great Depression because it cut spending. Today I read a convincing perspective that provides reasoning against this line of thinking, titled Liquidate, Liduidate, Liquidate.

Costs of Illegal Immigration

Interesting study that finds Illegal Immigration costs the US $113 Billion a year. Clearly this is a huge cost on tax payers.

Socialism Illustrated

More abuses of the system

Hey, it's only a few thousand dollars of welfare money that was withdrawn at California strip clubs, so no big deal, right? Well then you have nearly $2 million that was withdrawn at casinos over 8 months, so clearly this is a major problem (and this is just one state!). They really should do a long term study of where most money is withdrawn from across the country. I would bet these are not some isolated events. People caught doing this sort of thing should be banned for life from welfare, and forced to return all benefits received, with interest. I think prison time for fraud would be acceptable as well. But that would never happen in this country, unfortunately, because freebies are cherished.

As a bonus, here is an article that describes how Feds wasted millions in utilities programs for the "poor" by paying the utility bills of people who were dead, in prison or living in million-dollar mansions. There's really just too many ways for people to work the system at honest tax payer's expense.

This is just another reason why government spending has to be curtailed! It is the only way to stop the flow of waste.

BP Oil Spill

Why isn't the US doing all it can do to avert the oil spill? An interesting article by an economics professor at Emory appeared at the Wall Street Journal that raises some interesting issues titled, Why Is the Gulf Cleanup So Slow?

The A Whale has arrived and is awaiting approval while doing some test runs. Really, like what is there to approve?

And where have all the environmental groups been picketing and raising a ruckus? There hasn't been a lot of coverage in the media about these groups. Is this an attempt to prevent Obama's popularity from declining further?

The Obama Tax Trap

Read about the Obama Tax Trap.

Response to Valliere

In the article, Valliere: A GOP Conspiracy to Weaken the Economy?, I posted the comment:

Valliere makes a biased and sophomoric argument against Republicans in this article. Extending handouts does not strengthen an economy. In fact, it will accomplish the exact opposite opposite because public money is going out the door and nothing new is being created. These are not public works programs, which would actually help the economy.

The problem with handouts is that incentives become misaligned. On one hand you make the choice to receive free money for doing nothing, compared to getting up at 6am every morning to go to work. The choice is easy for most people.

Republicans are actually doing a great thing for this country by aligning people's incentives with the costs and benefits. I bet these long term unemployed will start finding jobs once their freebies are curtailed.

I personally know people who have been receiving unemployment benefits for years solely because they would rather sit around collecting free money instead of going to work each day. I would bet there is a fair share of those in the current unemployed category.

You are going to compare medical decisions of doctors from 250 years ago who had but a 100th of the knowledge we have now to Republicans making a choice about the economy? A juvenile comparison.

"I would argue loud and long that deep spending cuts — including entitlement reforms — should occur once the economy stabilizes"

The problem is, these cuts never happen. But more to the point, the major fact right now is that voting against additional handouts is not a 'long and deep spending cut' where money was already being spent. The difference is that new freebies are just not being created.

Yes, extra spending could help out our economy, but only on projects that directly add to the GDP. And unfortunately politicians of the past blew it, because now we are all tapped out. Instead of being responsible in the past and saving a rainy day fund, politicians have always had the tenacity to spend, spend, spend regardless of what the state of the economy is in. After the recession is over, politicians are going to suddenly become responsible? Yeah right.

-------------------------------------

Reading other comments brought some additional points. One being that Republicans are the minority in congress and they're still being blamed.

Realtor Lobbyists

More on the housing tax credit waste, which has now been extended yet again.

Diamonds

A good read about the diamond industry on WiseBread. I swear I wrote an article on diamonds before, but I couldn't find it, so I must have never published it.

Plunge in Homesales

As I said in a previous post recently, all tax credits do is move people's decisions around, at a cost to the taxpayer. There is new data out that homesales plunged to a 'record low' after the home buying tax credit expired. Well, gee whiz, who could have seen that one coming? Once again, this is yet another reason why politicians should be required to have some economics training (and stop selling out Americans to lobbyists!!).

Increase in health insurance

Health insurance rates for those who purchase their own policies is already going up, a lot.

More Taxpayer Fleecing

It's government waste like the bailing out of government sponsored (now owned) entities Fannie Mae and Freddie Mac where if we didn't have to deal with them, we would all pay much lower taxes. The CBO, who always seems to underestimate costs, predicts the final tab will be nearly half a trillion dollars.

Internet Kill Switch

I'm a little bit worried that lawmakers are proposing a bill that would give the President authority to turn off all internet activity with a "Kill Switch." What the hell is this country turning into? Are we going to be living in communist China pretty soon here? Sure, they sell it as a way to protect us, but remember this is how they always sell new ideas - they are good for you. They'd never tell you something like, "You're only on a need to know basis when our great Führer, Barrack Hussein Obama, converts this country to a totalitarian regime." Note how the bill specifically targets search engines. What, are terrorists going to undermine America by creating websites? Wake up America!!

A Look to the Future

At least we know where Obama is getting his playbook from. Coming soon, The United Socialist States of America.

Extension of Home Tax Credit

Some lawmakers are pushing for an extension of the home buyers tax credit (unfortunately this is a yahoo news link, so the link will disappear in the not too distant future). Let it Die! All these credits do is move the decision to buying a home sooner, at taxpayer's expense. People who were either on the fence or considering buying in the near future will jump on the chance of saving $8,000, but those without the means to afford a mortgage or do not want to buy a home soon are not affected. Once the first tax credit was announced, home buying activity increased, but once it expired, home buying activity decreased below the level before the tax credit (Series: HXQ.US at economy.com). So, essentially over the time period, the same number of homes would have been sold, but taxpayers got fleeced for billions of dollars. Not a great deal for the rest of Americans who already own their homes or will continue to rent. Essentially these people are subsidizing other people to buy homes (remember, it may not sound like to are going over to your neighbor and handing him a check, but if money like this wasn't wasted, the government could lower taxes, or spend it on more productive purposes)

Also interesting is the rampant fraud found as apart of this tax credit. Many were not first time home buyers, many didn't even buy a home, some people were putting the credit into their children's names, and I'm sure countless other schemes.

So, notice in the first article, "The Realtors group has been pushing hard in Congress for the extension." Once again, lobbyists fleece America for their own benefit. And who is the lead supporter of this bill? Nevada's Harry Reid, of course. This is not surprising, since home values tanked in that state and he would probably like to garner some additional support since his popularity is decreasing.

Evil Shareholders

Being a shareholder gets a bad rap when it comes to populist politics sometimes. Whenever a company runs into trouble, the public and politicians demand that the shareholders be punished. Why? The average shareholder is just mom and dad who have a pension or own a mutual fund. All they wanted was a place to store their savings to gain a return on their investment. They might not even know they own part of the company if they invest through an institution.

So, unless you've been living in a cave, BP/Transocean had an oil rig disaster that exploded back in April and has been spewing oil into the gulf since. Numerous attempts have been made to fix the leak, but there has only been limited success. It is quite a tragedy for those who lost their lives, the animals, and the businesses affected by it. So,

Obama is demanding that BP cut its dividend although analysts are confident that BP could pay both its dividend and handle the cleanup costs/claims expected to near $40 billion. BP made $20 billion in profit last year and can handle additional debt.

So who are these shareholders anyway? They must be real bastards to invest in an oil company, right? Well as it would turn out, there are quite a few U.S. pension funds who now have a capital loss of 40% since $90 billion in market capitalization has been wiped out. Things haven't been helped much with Obama repeatedly beating the drum with his oil bashing and his other highly professional comments such as "whose ass to kick."

But, if the company can handle both the costs and the dividend, then it is not a politician's business to say what a company should do with its stakeholder's money.

As an update, BP bowed to political pressure and cut its dividend for year and set up a $20 billion fund.

Top Federal Tax Rates

So, this blog entry is a two part series where here I will discuss the top tax rates and the next post I will discuss whether lowering income tax stimulate growth or not. These are hotly debated issues.

So, to start, there is a little political cartoon being passed around on the internet titled, "Socialism: The top tax rate, a little historical perspective". It is clearly mocking those who think Obama's soon to be 40% top tax bracket is a big jump from today's 35%. However, this cartoon is an apples-to-oranges comparison because the top rate is only half the information. The other half of the information is what level of income that rate applies to. People probably assume, which is obviously the cartoonist's biased message, that the level of income that the top tax rate applies to has been the same throughout history. Also, what is not shown are the tax rates before the year the 77% rate took effect.

So, that's where I come in. I will give you some real perspective. So before we begin, let me remind you that the planned 2011 Obama 40% tax rate will apply to income over 200k (if the Bush tax cuts were extended, a 35% rate would still apply to income over 373k). And while this may seem like a lot to many people, it is not accounting for the cost of living for those who live in the largest cities in America, where a dollar goes about half the distance.

So, we will walk through a sample of the tax rates since the early 1900s. So, what you will notice is that the top tax rates are dropping, but so is the tax bracket, so that the top rate is affecting more and more of American's income.

Before 1914, taxes were sporadic which came and went depending on what war's debt needed to be paid off. The government collected most of its revenue with tariffs.

In 1914, the top tax rate was 7.0% on income over $500,000. After you adjust that for inflation (CPI) that 7% applies to income over $10,764,646. Okay, so then the 16th amendment was passed with the revenue act of 1916, and the tax rate doubled to 15% (gasp!). But that applied to income over $2,000,000 -that's $39,365,137 accounting for inflation. So over the next couple of years the tax rate increases dramatically until we find that 77% top tax rate that we see in the cartoon. That applied to income over $1 million, or $14,207,947 in 2009 dollars. So then the tax rate drops a little (the government has changed the tax code so many times you would think that they would have found the optimal solution by now). In 1922, the top tax rate drops to 58% on income over $200,000 ($2,554,047 accounting for inflation)... it continues to bob around and drop to 25% on income over 100,000 in 1925 ($1,225,942). In 1932 it jumps to 63% on income over $1 million. 1936: 79% on income over $5 million. 1941: 81% on income over $5 million.

1942 is a big year. The tax rate is raised to 88% on income over $200,000... but that's still $2,632,392 in 2009 dollars. Then in 1944 it was raised to 94% on the same bracket.

In 1964, top tax rate drops to 77% on income above $200,000, or $1,384,129 for 2009 dollars. 1965, 70% applies to $100,000 and above. Are you seeing a pattern here?

Taxes started to get really high during the inflationary period of the 1970s-1980s. For example, in 1981, 70% applied on $107,700 or $252,538. The US went through a period of stagnation around this time, and it is probable that excessively high tax rates played a role here, but many factors were at play.

1982: 50% on income over $42,800.

1983: 50% on income over $54,700.

The bracket grew over the next several years.

So, then we arrive in the modern era of tax rates in 1987. The top tax rate drops to 38.5% on income over $54,000 ($101,982).

2009 dollars from now on:

1988: top tax bracket of 28%, applying to income over $89,560.

1991: 31% on income over $51,900.

Clinton comes aboard and adds two top brackets, with the largest being 39.6 on income over $250,000.

2002: Enter Bush's tax policy: drops the tax rates down a few percent for each bracket, with the top 35% tax rate on income over $311,950

So what I left out was that today's era of tax brackets only have about 5 levels. Back in the olden days when there were tax rates above 40%, there were generally 15 or more tax brackets. And because of that, a better tax comparison would be to take a few samples of income levels (25k, 50k, 100k, etc) and calculate the actual tax bill in each year to get a better idea of what a hypothetical earner was actually paying and to determine which era had the largest burdens. Since this little analysis was already time consuming as it was, I don't plan on doing that here. But you can still clearly see that these "top rates" for most of America's history applied to income over a million. That is a stark contrast from today.

And let's not forget that this tax is only the federal income tax. When we tack on social security, Medicare, state, county, city, sales and sales tax [not to mention the million other taxes we end up paying (e.g. property taxes)], that 40% rate becomes 60% or more. Do you really think that the government is better at spending 60% of your money than you are?

How's that for some perspective?

Two Sowell Quotes

I wanted to share some Sowell quotes. If you haven't bought the book yet (see prior post), you really should because it is a treasure trove of education and thought provoking chapters.

In the special issues final chapter, on page 526:

Nowhere is the weighing of some values against other values obscured more often by rhetoric than when discussing government policies. Taxing away what other people have earned, in order to finance one's own moral adventures via social programs, is often depicted as a humanitarian endeavor, while allowing others the same freedom and dignity as oneself, so that they can make their own choices with their earnings, is considered to be pandering to "greed." Greed for power is no less dangerous than greed for money, and has historically shed far more blood in the process.

On page 527:

People who deplore greed often show a disdain for wealth. Although a disdain for wealth may be admired, only those who already have a certain amount of wealth can afford to disdain any further pursuit of it. The hungry do not disdain food nor the homeless disdain shelter. Wealth means options and who would want fewer options? More important, from the standpoint of society as a whole, wealth is the only thing that can prevent poverty. Yet many people who claim to be concerned about poverty show remarkably little interest in how wealth is generated or which policies make it harder or easier to create more wealth.

Woof

You know, sometimes I just feel like a sled dog. It's me and a bunch of other hard-working Americans pulling the weight of this country while the ones in the sled get to enjoy the ride.

I have dedicated nearly a decade investing nearly all of my time into a successful life path. I did the right things - I studied hard and took on student loan debt to earn three difficult university degrees that would guarantee me success. And I found it, but high taxes that I face remove much of the return. Before taxes, I earn a pretty respectable salary. But after taxes are factored in, more than half my income is stolen from me (including taxes at all levels).

In the meantime, plenty of freeloaders who didn't have to work as hard as me have about the same before and after salary/wage because they barely pay any (if at all) taxes (see prior posts). My salary drops pretty close to theirs because of this fact. They didn't bust their ass in school, they don't have student loan debt and they were able to work the entire time making payments on a sports car, while I was hitting the books working a part time gig to pay my rent, food, and a few classes. And they get to keep most of their money. Now how is that fair?

Supposedly, because of my salary, "I can afford to pay more in taxes." Bullshit, I can't even afford a new car. My high tax burden just makes it harder for me to pay down my student loans, half of which are pegged at 6.8%; a good return for the bank. I had expected things to dramatically improve financially after I had finished school and started a career, but really all that changed is that my employer started paying the government more and bypassing me in the transaction as if I didn't exist. It's almost a sham.

See my problem isn't with paying taxes. Taxes are a necessity for a functioning government. But as they stand today, they are too high, inefficient and not equitable. Much of it just goes to waste.

Amendment to Health Care Bill

So, apparently the new amendment for the health care bill is to provide free public housing for HIV/AIDs patients. H. Con. Res. 137 passed in the House on May 24, and is pending in the Senate. HIV spreads through behavioral choices (i.e. intravenous drug use, unprotected sex) Can someone explain to me how giving free housing paid for by tax payers is really going to slow the spread of the disease?

The bill text says,

Whereas homeless and unstably housed persons are 2 to 6 times more likely to use hard drugs, share needles...

They aren't using hard drugs because they are homeless, they are homeless because they are using hard drugs. Does Congress think that these people are going to get some free housing and all of a sudden make better life choices and stop using hard drugs? (And for those who started using hard drugs after becoming homeless, then obviously they are making poor life choices by wasting their resources that could have been spent on housing or food) Many of these people have shown that drugs are more important than having housing because they chose to buy drugs instead of paying rent.

Even still, the logic of this bill doesn't make sense. If homelessness is the symptom, why not provide free housing to all homeless, or all intravenous drug users (for the record, I am not advocating this; just illustrating a point)?

Two Articles of Interest

So there are two interesting articles noteworthy of mention in this week's BusinessWeek (May 24 - 30th).

The first is that France figured out that that high taxes on restaurants is bad for business because bankruptcies in the industry began to soar (p.16). So, the government decided to drop the VAT tax from 19.6% (!!) to 5.5%. So, what happened? The industry added jobs even though the general economy was losing them, and restaurant salaries are up an average of 5 percent. Obama, take note.

The second article of interest is that there are nearly 40 million people on food stamps in the US (p.33). That is not a typo: 40 million people! Are you telling me that over 10% of the population of this country cannot handle their own affairs and feed themselves? This tells me that the requirements to get such handouts is WAY TOO LIBERAL! People always downplay the significance of welfare/food stamps costs, but with a number that high, they should probably think twice. Reuters reports that it will cost nearly $60 billion this year for just the food stamps. Don't make the fallacy of thinking the number is not so bad by comparing it to the Obama deficit (fallacy of anchoring) - $60 billion is huge!

Also, in that article the author mentioned that many states can keep their welfare numbers artificially low by providing a three month lump sum instead of the usual monthly stipend. The states are not required to report them as being recipients if the lump sum is doled out.

A colleague of mine made an excellent suggestion today: anyone receiving government handouts should have to undergo a mandatory drug screening.

High Earners, Not Rich Yet (HENRY)

On Fortune Magazine: This is truly a good article about people who earn high incomes but are essentially middle class due to their location and their huge tax burden. Also, a shorter newer article on Yahoo about the same. It also raises a good point that probably most Americans think that these high earners are riding around on charters jets and have Bently's lined up in their garages, which is not the case.

Obama's plan is to punish those who have worked hard to be successful. Also note how most of these people are small business owners, i.e. people who have created jobs for others. Yeah, great plan Obama; Obviously he never took an economics class.

Government Bureaucracy

So, reading in BusinessWeek today (May 17 - 23, pp.30), there is mention of Illonois having more government organizations (8,469) than licensed beauty salons and barber shops (6,485), funeral directors and embalmers (2,752), or dental hygienists (7,455). When you put those numbers in perspective, it really gets you thinking: What in the hell are all these government organizations for? This is the problem with government in America. IT KEEPS GROWING! Tax dollars keep getting swept out the door for paper pushers who are hired only for the sake of being hired!
The health-care bill created 111 new federal bureaucracies! I guess we can see the common factor between Illinois and the health-care bill, eh? But seriously, think about who has to deal with all these bureaucrats. How much time will be wasted and how much money will be lost to overpaid 'fat-jackass bureaucrats?' The average pay for a federal employee is $75,419. Are they really worth this much? This is yet another reason why no new taxes must be approved! The problem must be contained, because if more taxes are approved, more bureaucracy will thrive. It's like a cancer.

Updated - June 5, 2010:

A video which details some facts about excessive government compensation.

Washington D.C. and Guns

Previously, the U.S. Supreme court struck down a ban on handguns in Washinton D.C. Well, today an article in the Wall Street Journal surfaced showcasing the new de facto near ban on handguns that has replaced the struck down law. Essentially, Washington D.C. wants to make the process of buying and owning a gun so onerous, that few people will want to do it. Didn't America attempt to disenfranchise some groups from voting with similar measures in the past?

So, some comments about the article:

Mr. Barnes' son was shot while the gun-ban was in effect, so obviously the gun ban doesn't prevent people from getting killed with guns.

"There's no denying the fact that we have a helluva lot of illegal guns on the streets," he said, but the solution isn't to "arm everyone."

So apparently the solution is to disarm only law abiding citizens? When a state outlaws guns, the only people with guns are criminals. It makes it a little unfair doesn't it?
Arizona apparently subscribes to the constitution a little more so than the nation's capital, ironically, and "last month, Arizona Gov. Jan Brewer signed a law permitting residents 21 years and older to carry concealed weapons without permits." I'd like to see how this plays out over the next few years. This could be a great social science experiment.

Further about Washington D.C.:

"In 2009, the first full year the law was in effect, homicides in the city dropped to 143 from 186 in 2008. The 2009 total was the lowest since 1966."

So what? Was this statistically significant? Was there a trend in declining gun violence over time? How about neighboring cities nearby without the gun ban, did they find similar numbers? Sometimes we are provided an answer to the wrong question.

Six Reasons Why the Capital Gains Tax Should Be Abolished

Watch the video

New Pre-Paid Cellphone Plan

I have been a customer of Net10, a prepaid cell phone company that offers 10 cents a minute all the time, for nearly 5 years. I am not fond of contracts, don't need a fancy phone, don't need to use many minutes each month, and don't want to spend an extra $40 a month for the luxury of sending radio waves into my head. So, for this entire time, other pre-paid cell phone companies have been in existence with various calling rate plans, but if anyone did any research at all, they would find out that Net10 offered the best deal.

Now, Sprint is offering a new contender called Common Cents Mobile. They offer 7 cents a minute and per text message (Net10 offers 5 cents a text message), and they round minutes down! Who the hell else does that? They also offer some packages for those heavy texters ($20 a month for unlimited)

20% of all cell phone subscribers are now pre-paid users. Its about time we began to see some healthy competition. Free markets baby!

Greece's Excuse

Greece is the paragon of fiscal irresponsibility. They ran up debt that they couldn't afford and lied about it to the Euro Union and now it is time to pay the piper. With the requirement to fix the problem, taxes have been increased and entitlements cut. Now citizens are rioting in the streets and people have been killed. What a bunch of idiots. Gee, that's a constructive fix to the problem. Their country is about to default on its debt which will cause huge global ramifications and the only thing they are worried about is their handouts. I can see America following this same route in the not so distant future as more debt is run up and more taxes are pushed onto high earners to pay for it.

And just like in American, there is class warfare and they want the 'rich' to bail them out. During the protesting, they were chanting, "No more illusions, war against the rich." Why do so many people think that the 'rich' are the cause of their problems? How does entering a valued profession (i.e. it must be in high demand if it pays so highly) and then being responsible and saving a lot of that money for the future cause other people problems? The answer is simply that the 'rich' are scape goats (hey, scape goating worked for the Nazis). Those in a less fortunate position are jealous and are more numerous and therefore attempt to pass social policies that take more away from well off people to give to themselves. It's pure selfishness. But then again, those who want something for nothing are generally selfish people.

Cheating in 2000 Olympics

So it took 10 years to figure out that the Chinese had cheated in the 2000 Olympics. I wrote an article a couple of years ago about the suspicions of Chinese gymnast cheating in the 2008 Olympics. So will we find out that they had cheated in 2018? It seems like a long wait.

Price Controls On ObamaCare

From WSJ, About those lower insurance costs we promised . . . .

The SEC hard at work

Doesn't it seem like that the SEC is two steps behind sometimes? Maybe it's because it's another inefficient government organization. Or maybe it's because some of the staffers they have there are serious porn addicts.

Scape Goats

So previously, Greece was attacking everybody's favorite villains, Wall Street banks, for causing their debt problems. This is a very false assumption.

How do credit default swaps cause instability in Greece? Take a horse race analogy for example:
When you go to a horse track, you research the horses, you've seen how it has performed in the past, but more importantly, you compare relative performance. This horse may be good, but another horse may be better. However, when you place your bet on the third lane, your bet does not alter the performance of the horse in that lane! This is the same concept of credit default swaps.

From the book, Getting Started in Hedge Funds:

If these men and women were so powerful that they could control currencies and markets, wouldn’t they do so all the time so that they could always make money? No matter how much or how little money one has, no one likes to lose it. If the funds could truly control currencies or manipulate the markets, these massive losses would not have occurred.... The Economist magazine believes the reason hedge funds [and Wall Street Banks] catch flak for all of the world’s financial crises is ignorance.

Still not convinced? Read Swaps Not Responsible for Crisis, Greece Is and CDS not cause of Greek debt woe. In this second article there is mention of AIG causing a problem with CDS contracts, but the difference is that they took the other side of the trade with other firms, as insurance policies (first person). CDS contracts on Greece debt are third-party deals. CDS spreads on Greece debt are just contract prices that firms must pay to enter into default protection and simply reflect how risky Greece bonds have become.

Proportionate to Earnings

People treat wealth as a matter of fact, as if it is just a state of nature; you are born either a cat or a dog. They refer to the 'wealthy' as some privileged class as if those people took no action on their part to earn that status (I am not referring to the wealthy who were born wealthy, but those who get regarded as wealthy through the tax code - those earning high salaries). Consequently, the populist masses who are not in the same situation, despise these people. They want for them to pay higher taxes and complain that even the high progressive tax system of the US is not enough. It is obvious these populists want the 'elite' to earn the same salaries as them, even though it is likely their education, experience, position, and hard work to get there is the cause of this discrepancy in earnings.

America, once regarded as the land of opportunity, meant that if you wanted to have a better life, own a nice home, go on more vacations and have more toys, you could work to attain it. The system is not entirely defunct, but the treatment towards people who make it is viewed negatively and punished through the tax code. Those who have not achieved this elite status take comfort in their friends who are in the same situation and readily complain of those wealthy people who are taking advantage of them or have it so easy, how ever they justify such conclusions. If any of them defect and make it to a higher status, their old friends can no longer sympathize with them and secretly despise their new found status. It's like the old saying goes, misery loves company.

Populists complain that paying X amount of dollars for a product or tax is a higher percentage of their income and it is not fair that a 'wealthy' person pays the same amount and it is such a smaller percentage of their income. But obviously, isn't that the whole point of working hard to become 'wealthy'...? So that the relative cost of products or taxes is not as taxing on one's finances? These populists want to undermine the whole point of striving to earn more so that one can afford more. Otherwise, why bother getting a better paying career if the relative burden of things is going to stay the same?

Take downtown parking for example. I am not aware of a downtown city where it is not expensive to have the wonderful privilege of leaving one's car on the street. Populists will complain that it is unfair to them because only well off people can afford it. But there is only a limited number of spaces, and they have to be rationed somehow! The capitalist system is very efficient for problems like this, and the cities benefit greatly from those high parking fees. I would suspect their solution would be some sort of price discrimination, like everything else going back to the previous paragraph, but so far they have not offered a solution to the problem where costs would not be raised overall. As an aside, why encourage more auto use if there is already an over saturation? When some people cannot afford something, it encourages a cheaper option like mass transit.

For populists, the new American ideology is not about attaining a higher status, but about depressing the status of others.

The Democrat Strategy

The Democrats are eliminating federal income taxes on the bottom 50% to grow their base.

Unemployment Insurance

Economists have known since the beginning that unemployment insurance promotes unemployment. Even the liberal Krugman acknowledges this.

The attitude is, why work when you can get a reasonable amount of money for doing nothing? An article by Stossel sums it up with his take on French entitlements in America. This is why unemployment insurance should be limited to 3 months during boom periods and perhaps 6 months during recessions. Obama and friends are probably kicking themselves in the asses by continuing to extend these benefits because unemployment will remain high for a much longer time period, which makes them look bad.

Party Crasher

This explains a lot about a Liberal Teacher planning to undermine the Tea Party:

Levin has said he would seek to embarrass Tea Partiers by attending their rallies dressed as Adolf Hitler, carrying signs bearing racist, sexist and anti-gay epithets and acting as offensively as possible -- anything short of throwing punches.

Dirty politics. I bet there is a lot more of this going on as mentioned by other commentators. All the racist remarks, death threats and spitting that we have heard of, now there is proof on the record that liberal operatives are engaging in this kind of behavior.

Tax Breaks for the Wealthy

This is a very misleading statement, and depending on the motives of the speaker, it is also biased. Most Americans hear this and think that somehow the 'wealthy' are paying a lower percentage and/or a lower absolute amount than them. The 'wealthy' pay both a higher percentage of their income and a higher absolute. There are of course exceptions, such as Warren Buffett, who pay a lower percentage (but not an absolute level) but this is because nearly all of this income comes from capital gains. Capital gains are returns on investments and receive a lower tax rate
because there is an element of risk that one must factor into the true cost. You may win, or you may lose. It is different than just collecting a paycheck.

Fratto's Rebuttal

CNBC: Fratto: That 47 Percent No Taxes—Another Closer Look

Rebuttal

So a writer at the left-leaning NYTimes felt he had to attempt to skew perceptions a little bit by writing a completely biased article in response to the 47% fed-tax-free article (prior posts). Also at CNBC (you have to give it to CNBC, they try to provide both sides to the issue).

Something I posted in the comments section:

The author himself is selectively reading the facts.
"Over the last 30 years, rates have fallen more for the wealthy, and especially the very wealthy, than for any other group"
But the fact remains, they are still paying most of the taxes!! A 35% Top federal (+ 7.5% SS + 3% Medicare/medicaid) is still higher than ZERO. It doesn't matter if tax rates have come down from 90%, they are still paying a 1) higher percentage and 2) higher absolute. Why do we have a problem with people's incomes growing? Obviously they have a useful skill and should be 'rewarded' by allowing them to keep more of the income that THEY earned.

Stop raising taxes, it just gives politicians more incentive to SPEND MORE! Across the board cuts need to take place including wiping out a large portion of the 57% of the federal budget that goes towards social entitlement programs.

Some selected quotes:
"There are also payroll taxes and capital gains taxes, among others. And, of course, people pay state and local taxes, too."
Yes, but did you read the article? It specifically mentions 'federal' not all taxes.

"If anything, the government numbers I’m using here exaggerate how much of the tax burden falls on the wealthy. "
The numbers are not exaggerated, the top 10% of earners pay about 90% of the taxes in this country. The burden falls on 'the wealthy.' Which by the way, I would expect a NY times columnist to expect anyone earning more than 100k a year to be wealthy.

"That is, middle-class and poor families may face higher tax rates than the wealthy"
This is consistently one of the most bogus Orwellian arguments ever. The sky is blue, but it is really green. If a tax is based on a fixed percent, or it is progressive, it cannot be regressive! By definition.

"Well, it’s hard not to notice that the talk show hosts themselves tend to be among the very wealthy. "
It's not hard to notice that the very ones promoting more taxes on the 'wealthy' are the ones who are not. Sounds like taxation without representation to me.

"They would prefer if other people had to pick up the bill for Medicare, Social Security and the military "
Wait, isn't this the attitude of the 'non-wealthy' Americans and the system currently in place (the 'wealthy' picking up the tab)?

Get rid of the free loaders in this country, support a flat tax. If everybody had to put some money into the pot they would stand up against the wasteful government spending of this country.