Blue Collar Muse

Robert Romano at Americans for Limited Government has an excellent piece on the effectiveness of Obama’s proposed tax plans.  You’ve been bombarded with TV ads telling you Obama will cut taxes - even more than McCain.  It’s only necessary (and fair) to raise taxes on the top 5% of earners to generate enough Government revenue to effectively “spread the wealth around.”  The question, ‘The $5 Trillion Question’, is, will it work?  Let’s see Bob’s take on the issue …

THE $5 TRILLION QUESTION
-by Robert Romano,
Editor ALG News Bureau
Americans for Limited Government

A lot of attention has been placed in recent days to Barack Obama’s plans to raise taxes on the top 5 percent of wage earners. The Illinois Senator assures the American people that he, as President, will not raise taxes on everybody else—just those at the tippy-top of the income spectrum.

Never mind that upwards of 38 percent of Americans do not even pay income taxes. Or that the top 5 percent of wage earners are employers and investors who contribute significantly to the economy.

Let’s simply consider the claim that, somehow, only the top 5 percent are going to have their taxes raised. As my favorite arithmetic teacher would say, “Let’s do the math.”

The federal budget for Fiscal Year 2008 wound up being $2.98 trillion, with a deficit of $454 billion. For the sake of argument, let’s add to that the $850 billion bailout package that Congress enacted on October 3rd. After all, it was conveniently passed just three days after the annual deficit was calculated.

Again, hypothetically, let’s also assume that the Treasury makes no money back on the Troubled Asset Relief Program. Then the total budget for the year would jump to $3.93 trillion, with a deficit of $1.3 trillion.

Let’s also assume that, for the sake of argument, the budget does not shrink next year. After all, the federal government did just acquire about $5 trillion in risk from Fannie Mae and Freddie Mac. It stands to reason that in these troubling times, some of those debts are going to go sour, and there will be more bailouts next year. So, let’s assume the same amount just to keep things simple.

Now, methodology aside, Senator Obama is proposing approximately $1 trillion in new federal spending. You know, all those new welfare entitlement programs. Whammo. The budget then jumps to $4.93 trillion—nearly a whopping $5 trillion!

So here’s the $5 trillion question: Where does the Senator think he’s going to get the money to pay for all of that new spending?

Read the rest of Bob’s excellent piece at ALG …

Blue Collar Muse

Popularity: 88% [?]

Paulie, a friend from Chicago and one of the handful of non-Obama Kool-Aid drinkers left in Cook County, has a great post up at Paulie’s Point on the results of Chicago’s recent efforts at generating revenue. I don’t know how many times it will need to be said before Democrats and the Left will get the message, but I’ll keep it up. Here goes …

Raising taxes is not a successful strategy to pursue if your goal is to end up with more money! Raising taxes will only result in less consumption of or participation in whatever is being taxed. That reduction usually far outstrips the revenue gained via the increase.

Cook County raised its sales tax to 10.25%, making it the highest in the nation. Paulie spills the beans that The Illinois Department of Revenue reports in the first month the increase went into effect, revenue plummeted nearly 12%!

A partial explanation is that a huge percentage of Cook County lies within easy driving distance of both Indiana and Wisconsin, not to mention other Illinois counties with lower sales taxes. Quick trips over a border to avoid ignorant, asinine and ineffective taxes are just part of the “We should have seen this coming!” reality obvious to anyone but Democratic Big Tax, Big Spenders.

To make matters worse, the flight outside Cook County does more than just hurt the city’s coffers. Business people and service providers lose revenue, too. Why should I buy gas or groceries in Cook County when I can drive 5 miles and save 10% or more? Over the course of a year, that’s serious savings for me and serious loss for businesses. When businesses lose money the cutback or close. That means even more revenue loss for the county as there are fewer working taxpayers and those that remain pay less because they make less. But Cook County Democrats don’t see that. Actually, most Democrats everywhere don’t see that.

At this point, they seem to only have two choices. They can demand people buy their highly and arbitrarily taxed goods, not because the price is good for the consumer but because Cook County REALLY needs the money. Or they can follow Tennessee’s lead and make criminals out of their citizens who have the sense to shop at places that are working for them and not against them.

Higher Taxes … just another bad idea from Democrats, Socialists and other Central Planners …

Blue Collar Muse

Popularity: 88% [?]

When unexpected good things happen, we call it Serendipity. Not so with unexpected bad things. The Law of Unintended Consequences, abbreviated LUC and pronounced “luck” as in “If it weren’t for bad LUCk I’d have no LUCk at all!”, is perhaps the most famous non-scientific Law. No need to be a rocket scientist to recognize no matter how hard you try to avoid it, bad things will happen which you did not foresee and did not intend.

BCM’s corollary to LUCk postulates the larger the pool of original actions from which to derive consequences of any sort, the greater the odds of realizing a Spontaneous Unintended Consequence, abbreviated SUC and pronounced “suck” as in, well, you’re likely way ahead of me here! All of which puts Democrats, with their emphasis on more regulation, bigger Government and expanding bureaucracy at huge risk for SUCking on a regular basis.

News reports this week show Dems SUCking in 2 ways which don’t bode well for Americans. As always, in November, remember who got you into this mess.

Both instances of Democratic SUCking stem from their Energy policy which refuses to acknowledge both the value of drilling for American oil and of increasing our ability to refine oil we are able to acquire from any source. While Democrats publicly pretend to hate high prices for items impacted by oil costs, privately they are jubilant.  High fuel prices are  particularly joyous as they force Americans to drive less thereby ushering in the long awaited dream of planetary salvation. But just here, things start to SUCk for the country.

World Net Daily reports BusinessWeek is running a story on a new Ford, the Fiesta ECOnetic. It gets a stunning 65 mpg, but the carmaker can’t sell it in the US. Only Europeans will be able to buy the ECOnetic.

“We know it’s an awesome vehicle,” says Ford America President Mark Fields. “But there are business reasons why we can’t sell it in the U.S.” The main one: The Fiesta ECOnetic runs on diesel.

Automakers such as Volkswagen (VLKAY) and Mercedes-Benz (DAI) have predicted for years that a technology called “clean diesel” would overcome many Americans’ antipathy to a fuel still often thought of as the smelly stuff that powers tractor trailers. Diesel vehicles now hitting the market with pollution-fighting technology are as clean or cleaner than gasoline and at least 30% more fuel-efficient.

Yet while half of all cars sold in Europe last year ran on diesel, the U.S. market remains relatively unfriendly to the fuel. Taxes aimed at commercial trucks mean diesel costs anywhere from 40 cents to $1 more per gallon than gasoline. Add to this the success of the Toyota Prius, and you can see why only 3% of cars in the U.S. use diesel. “Americans see hybrids as the darling,” says Global Insight auto analyst Philip Gott, “and diesel as old-tech.”

Higher taxes, higher production costs and decades of irresponsible environmentalism - all thanks to Democrats - leave Americans out of fuel, walking on the roadside. Meanwhile, world citizens in Europe reap benefits from American technology, manufacturing jobs and the economic benefit of both.

The second instance of Democrats as LUCky charms also comes via World Net Daily, this time pointing to an ABC News story that the Highway Trust Fund, in which monies are held to be disbursed to the several states for infrastructure upkeep and repair, will run out of money at the end of this month.

… the Transportation Department said that this month it is expecting to bring in $2.7 billion in gas tax revenues but anticipates needing $4.4 billion to reimburse states for their highway and road projects. The department said it will start the upcoming fiscal year that begins Oct. 1 with no money in the trust funds if patterns continue as is.

Why? The story reports that Americans are driving less due to the high cost of fuel. A lot less. Try 10 billion miles less in May of ‘08 than in May of ‘07. Music to Democratic ears. But wait. The Highway Trust Fund is kept chuck-full-o-bucks by fuel taxes. Less driving means less fuel purchases. Less fuel purchases means less revenue to the Fund. And less Fund revenue means that “…starting next week [The Transportation Department] will begin delaying payments to states …” for the projects they are working on. Oooops, the favorite Democratic tactic of raising taxes to generate income doesn’t work yet again!

The solution? Democrats want yet another $8 billion in tax money for the Fund. Is there no end to the SUCkiness? The Bush administration recently opposed that plan. Democrats merely criticize the President, pointing to projects that will suffer if the Fund stops paying. Leaving alone, for this post anyway, the waste inherent in sending money from the states to the Feds to be sent back to the states, another factor is at work here. Railing at the GOP, Democrats conveniently forget another truth.

In this highly charged political season, Transportation Secretary [Mary] Peters blamed the financial crisis on earmarks included in the last transportation bill, which she said amounted to $24 billion in pet projects.

The last transportation bill, the one passed by a Democratic Congress, the Congress with a 9% approval rating, contained enough Pork to fund the Highway Trust Fund for almost 6 months! But it’s the GOP who is wrong for not simply ponying up another $8 billion. Democrats in control of purse strings don’t have to exercise fiscal constraint or oversight. If Bush and Co. won’t go along, open fire on the GOP. If the Right continues to balk and Dems need another few billion dollars for something, they’ll just raise another tax.

But which candidate is campaigning on reforming the earmark tradition so taxpayers get the most for the money taken from them in taxes? And which Party wants to reduce the size of Government so it doesn’t continue to cost Americans 54% of every dollar they make just to fund some level of Government? Which leads inexorably to the crucial question, “Who offers realistic hope to Americans that their SUCky LUCk can change?” How you answer that question on November 4th will have a profound impact you both of our lives. Choose well.

Wondering if that’s enough talk about the Economy for Senators Obama and Biden …

Blue Collar Muse

Popularity: 49% [?]

I was fascinated by a recent article in The Miami Herald on a modern day exodus that is happening below the radar.  It seems that between 2000 and 2006, a full 5% of the population of Puerto Rico has left the island for the United States due to inflation, recession and rising crime.  That works out to 200,000 people leaving a population of just 4 million!  According to a study done by the University of Puerto Rico, that exodus continues at a rate of 65,000 annually! They leave behind a workforce of 1.3 million people to provide for the needs of the population. Each worker is now responsible for 3 people, himself and 2 others.

”We are committing collective suicide,” said Elías Gutiérrez, who runs the graduate school of planning at the University of Puerto Rico. “This is going to become a country of elderly and poor people.”

If Gutierrez’s comment is true, one would think there would be a bit more helpful information given in the article. Unfortunately, there’s not. Titled ‘Recession Drives Educated Puerto Ricans to South Florida’, the piece is filled with information on 4 of the 5 ‘Ws’ of good reporting while skimping on the most important one, the one that would help us fix the problem in Puerto Rico and other places where it occurs, including right here at home.

The ‘Who’ is clearly seen. This is a disastrous drain on the skilled and highly skilled middle and upper class demographic of Puerto Rico. The people leaving are professionals. Doctors are specifically mentioned but the list includes Teachers, Nurses, Civil Servants, Sales and Law Enforcement. As Puerto Ricans are US citizens and a high percentage speak English, companies and governments alike are assisting the exodus by actively recruiting skilled, bi-lingual professsionals.

The ‘What’, ‘When’ and ‘Where’ are basic facts and are also easily found. These people are leaving in droves, from Puerto Rico to the States and, while that happens all the time, the last 8 years have been particularly harsh.

But the most important ‘W’, the ‘Why’ is basically left unaddressed. It’s a shame because if one doesn’t know what causes a problem, one cannot even begin to formulate a solution. There are a couple of hints, however.

Taxes. The legal status of Puerto Rico makes for some interesting relations. Taxes fit into that category. Puerto Ricans living on the island pay some Federal taxes and Federal Payroll taxes but they do not pay US Income Tax. The island has its own income tax. They also have their own sales tax. According to the article, two years ago the government faced a budget crisis and was forced to shut down for several weeks and furloughed many employees for that time. In a very brief mention, the article states that, when it reopened, it promptly instituted an increase in the sales tax to as high as 7 percent in some places. It is unmentioned whether or not there were also corresponding spending cuts (beyond the money government employees weren’t paid while the government was shut down). Raising taxes as the government’s solution of first resort, especially in the midst of a financial crisis among the people, is generally a bad move on government’s part.

Jobs. Also buried in a comment near the end of the article is this clue. “…the island has seen at least 55,000 manufacturing jobs go away in the past eight years, just after losing federal subsidies for corporations.” I’m unclear whether or not these subsidies came from the government of the US or Puerto Rico. But the situation as described is a great object lesson. Taking care of the goose which lays golden eggs is wise. Taking care of the corporations which pay the workers which pay the bills is a good thing. But it is possible to do good things in bad ways. Subsidies are a horrible way to provide incentive. Tax breaks work much better but they are SO politically incorrect and SO market driven that governments and the people they represent tend to hide them. In addition, tax breaks, unlike subsidies, tend to be contractual in nature. Corporations know what they’re getting and under what terms and for how long. No surprises. Subsidies? Not so much. Poor planning in the arena of employment and how to attract and retain it doesn’t sit well with citizens.

These are the only two ‘Whys’ given. They are not explained, amplified upon or put in context. They are meaningless facts added as fill in a story on the plight of Puerto Ricans in the States and at home. Unfortunately for news consumers, they are the most important facts. Thus, when the paper refuses to explain what caused the problem and merely reports that there is one, no constructive dialogue can be entered into; no solutions can be proposed; no thought goes into the process and no change can be put into place.

Make no mistake. This is an important issue buried in a human interest piece. America has 50 states which each function more or less like the government of Puerto Rico. Bad choices made in any of these 50 laboratories plus the one on the island will produce bad results and can be teaching moments for us all. Beyond providing the States with a solid core of well educated, bilingual professionals, the island is providing us a couple of other clues for fiscal health. The question is are we willing to study hard enough to learn the lesson?

Blue Collar Muse

Popularity: 28% [?]

A friend emailed me about Bob Corker’s involvement in the Gang of 10. He asked, “What is Corker doing?” To quote Bob Corker himself, he is doing “…exactly what I came to the Senate to do.” To the host of Tennesseans who bemoaned the choice of Corker over Ed Bryant as our Senate choice in 2006, he’s doing exactly what we feared. In fairness, for two years Corker has been a pleasant surprise. However, he couldn’t have picked a worse time to begin living down to our expectations.

Just like GOP Senators in the Gang of 14 and judicial nominees, Republicans in Energy’s Gang of 10 are undermining GOP leadership and strategy. Mitch McConnell and GOP leaders have worked this issue for months with the backing of Republicans and Democrats; legislators and voters. Pressure was mounting on Democrats to surrender their sellout of Americans. Gas and oil prices were falling. Support for Energy Independence via drilling and R&D for alternative and renewable energy sources was growing. It seemed inevitable the GOP would get their vote and sooner rather than later. Now, thanks to meddling by Corker, instead of continuing to exploit flaws in Democratic policies, Senate GOP leaders might be forced to regroup and decide if they can even continue in the face of the Gang’s treachery.

Worse is Corker’s betrayal of Tennesseans and Americans in general. The Gang’s proposals ask for less concessions than GOP leadership would likely have been able to get from the Senate. The Gang does call for drilling. But they accept serious restrictions on drilling the GOP would likely not have needed to give up; restrictions which make the oil produced more expensive. Drilling 50 miles offshore is more expensive than drilling 15 miles offshore. Unmentioned is most oil we already know about is inside the Gang’s 50 mile ban meaning more time and expense for exploration.

Then there are the taxes. $84 billion worth. That’s what Corker proposes taking from oil companies who successfully find oil outside of 50 miles. It doesn’t sound too bad to Americans at their kitchen tables figuring how to pay for fuel. They don’t call it a tax and so taxpayers are off the hook, right? In fact it even sounds helpful.

The proposal also seeks to provide tax incentives for converting cars to non-oil fuel sources, including $20 billion for research and development, grants to help U.S. automakers develop alternative fuel vehicles and consumer tax credits for purchase of highly efficient cars.

5 Republicans signed on to this? How exactly will this help Americans pay for fuel anytime soon? What widely available, inexpensive, “non-oil fuel source” currently exists for Americans to convert to? Propane? Driven past a commercial propane station lately?

R&D grants to automakers clearly indicate any benefits are expected to be future ones. Even the current existence of increasingly fuel efficient cars to which proposed tax credits might be applied is misleading. They are brand new cars, not used ones; many sporting new technology making them even more expensive. Corker’s plan is to give Americans a $2,500 tax credit, for example, to buy a $25,000 car? This is making things more affordable?

Add to this the plan’s call for 85% of cars on the road by 2028 to run on non-petroleum fuel and you see how much this will cost American families already unable to afford $4 gas.  Considering there are at least 100 million vehicles now on the road, Americans and American business will have to replace or modify 85 million vehicles in the next 20 years.  At $2,500 to $25,000 per vehicle that’s a $212.5 billion to $2.125 trillion high drag, low speed burden the Gang imposes on Americans and the American economy in the name of saving us from high prices.  It sounds like the joke about buying things one doesn’t need because they are on sale and justifying the purchases based on “savings”!

Worse, there won’t be any real savings. Adding $84 billion to oil companies’ cost of production only means the product produced will cost $84 billion more at the pump. Americans are going to pay more thanks to Corker and the Gang. R&D is fantastic. Even if it takes years to bring something to market, the wait is generally worth it. But at issue is what do Americans do in the meantime? Cheap oil now while we transition is better than expensive oil now until we transition.

The final insult is that oil produced under the Gang’s plan cannot be sold outside the US. Democrats have whined for years about losing good jobs and weakening the Economy. Here is an opportunity to create jobs and fuel the Economy and Corker and the Gang won’t allow it. Brazil has enjoyed record economic growth and job creation as it has changed from a net oil importer to a net exporter over the last 5 years or so. But for Corker and the Gang, oil production beyond that necessary to eliminate US oil imports cannot be sold on world markets. The jobs, economic growth and general prosperity oil exporting nations enjoy is denied to America and her citizens, corporate and individual.

Thus the next command from government beyond where we drill and where we sell will be how much we produce. Only produce here; only sell there - as if government owned the oil. Couple these restrictions with government requirements that Big Oil finance R&D which makes their product less marketable and you complete the picture of the ignorance the Gang wants foisted on the American public as beneficial. And Bob Corker says this is exactly what he wanted to accomplish in DC.  Corker and the Gang would be better advised to join up with their GOP House colleagues’ #Don’t Go Movement.  It provides all the benefits they say they want with none of the drawbacks.

To recap, the R&D the Gang proposes won’t be helpful for years. They tease you with tax credits for far off R&D results you’ll end up paying for later anyway via the same high prices they claim to be fighting. As beneficial as R&D is for tomorrow, today’s prosperity requires inexpensive, readily available oil. The immediate burden of surviving lean R&D years falls on Big Oil. But they must work while prevented from drilling in the best places, selling for the best prices or providing the best wages and profits for Americans; all the while dealing with government imposed reductions on the value of their market and product.

Thanks, Bob! Do us a favor and don’t Gang up on us anymore. We can’t afford it!

Blue Collar Muse

SEE ALSO:

Gang of 10, Continued at Terry Frank

Letter to Senator Bob Corker, R-TN by Debbie at Right Truth

Gang of 10 Compromise: Conservative Sellout or Minority Political Reality? by Truman Bean at Truman’s Take

Popularity: 33% [?]

In honor of today being April 15th, likely the most reviled day on the calendar (after January 1st and the necessity to make all those fleeting resolutions - not to mention the hangover) , I thought to direct you to an excellent piece on taxes by a friend of mine, Doug Bandow.

Doug notes in his American Spectator piece, ‘Voluntary Clinton Surtax Day’, the many ways Leftists and other tax hikers can participate. Since they believe we don’t pay enough in taxes, Doug outlines any number of ways people with more money than sense can voluntarily increase the amount of taxes they pay.

Doug recommends that the movement begin with the Clintons since they have publicly stated they did not want or need the Bush Tax Cuts. Check out the story at American Spectator.

Blue

Popularity: 40% [?]

Peter, a recent commenter here at Blue Collar Muse on the topic of Sub-Prime mortgages and the bail out of those who tossed the dice in that game and lost, got me thinking about the issue again.

My principle break with his position is that I do not believe, as he does,

The government is largely responsible for the subprime problem with the MINORITY AND LOW INCOME HOME OWNERSHIP PROGRAMS and the reduction of LENDING STANDARDS.

Nor am I in agreement with his assessment that

The banks were just doing the fed’s bidding and are responsible for the poor assessment standards that inflated house values in loan sizes and profit margins.

The current Sub-Prime mortgage crisis is exactly that, a Sub-Prime mortgage crisis. The government isn’t in the Sub-Prime business. While Fannie Maes and Freddie Macs are government programs, they are not Sub-Primes and are not facing default and foreclosure rates beyond what they normally expected.

Neither are the banks. Banks, by nature, are much more conservative than other lenders. They run from such loans. The real culprits are mortgage companies who made such loans for the profit involved and/or subsequently sold them as investments. Companies like Country Wide for example. There isn’t a single bank I can think of that is in danger of going out of business because they made Sub-Prime mortgage loans. There are a host of mortgage companies that have done so and may yet do so.

Where banks have been hurt is in the narrow segment of the market where the bank is large enough to have several divisions, one of which is for investments. Those bank investment divisions, CitiBank for example, who speculated with high risk loan portfolios did take a hit. But not because banks were in on making these sorts of loans. Their involvement was after the fact and unrelated to the wisdom of making such loans.

Peter suggests resolving the crisis by instituting a number of government programs. In my opinion, this is precisely the wrong approach. The market is already dealing with the issue. Mortgage rates and money for conventional loans are abundant and available. Qualified buyers are able to get all the money they want for chasing that part of the American Dream that is home ownership. To reiterate, there isn’t a Mortgage crisis, there’s a Sub-Prime Mortgage crisis. But if we fail to allow the market to spank those who gambled and lost; if we prop up the bad decisions of both companies and individuals; that is where we will fail our nation. The danger is not in failing to step in and prevent damage to people and companies for bad business decisions. If we bail out bad lenders and borrowers, that is where we will threaten the economy with serious, long term damage. If we take away the risk, penalty and consequence for bad financial decisions we take away the most effective tool the market has - punishing failure - and we threaten to expand governmental influence in our daily lives even more.

Anyone familiar with Economics understands that you get more of what you pay for. In fact, that is a financial tool often used to gain specifically desired ends. Pay for what you want. It’s market based and it works. Unfortunately it works even if the payer is the Government.

Government bailouts pay for bad financial judgment. If we do them, we’ll get more of it. That’s not really debatable from an economic standpoint. That government does it using our own tax dollars is reprehensible but par for the course when it comes to government! The entire process leads directly to three of the things that ought to be fought by every America - bigger government, higher taxes and curtailed liberty.

To bailout those hurt by their choices in the Sub-Prime market, the government will have to grow by creating the bureaucracy to administrate the program. Peter actually openly calls for such growth. Tax money will have to be spent for the expansion and to fund the bailouts. When has government ever cut spending to afford new growth? Finally, people will have their freedom curtailed. Once we allow the federal camel nose under the tent to bail us out, the entire camel will inevitably wind up IN the tent, telling us when, how, where and why we can buy and sell our homes. Not only is that a frightening scenario for personal liberty, the related threat to private property ownership in the nation is horrible to contemplate.

I understand Americans are a good and compassionate people. We want to help. Bailouts seems like such a correct and such an easy choice. The problem is, as it always is, that all of our choices have consequences. The consequences to choosing to bail out those who made bad choices of their own is that eventually such a choice will destroy not just the people involved but the nation itself. And trust me, there won’t be anyone around to bail the country out in that all too possible scenario.

Let the market do what it does best. Let the people learn from their experience. While it sounds harsh and it may have its downside, it’s the best course and the country and the economy will be better for it in the long run.

Blue

Popularity: 79% [?]