Saturday, December 1, 2012

Quick Hits - November 30, 2012

The likelihood of a deal to prevent 'Taxmageddon' on January 2nd in the wake of the President's laughable plan presented to GOP Congressional leaders yesterday appears extremely remote as the President doubles down on his rhetoric while making a campaign stop today in Pennsylvania.  Appearing at a toy factory in Philadelphia, the President continued to press his case for $1.6 trillion in tax increases, tens of billions in new stimulus spending, a demand that Congress cedes its responsibility for managing / controlling the national debt limit to the President, and vague references for a possible $400 billion in spending reductions in a manner that even staunch media allies, the New York Times and Los Angeles Times, called 'disingenuous'.
Even the liberal press is exposing Obama’s disingenuousness. The New York Times noted on Wednesday that Obama “has barely discussed how he would pare back federal spending, focusing instead on the aspect of his plan that plays to his liberal base.”

The Los Angeles Times on Thursday observed Obama “hasn’t said anything publicly about his targets for entitlement savings or cuts in discretionary spending. Instead, he’s tacitly stuck with the proposals in his fiscal 2013 budget, which Congress has already rejected.”

Obama touts what he calls a “balanced approach” in which Republicans raise tax rates, and he promised during the campaign this year to “cut 2-1/2 dollars” in spending “for every dollar in increased revenue.”

But now, with signs that Republicans will agree to increase taxes, the L.A. Times reports that “Democrats seem to have become more entrenched in their resistance to the other half of Obama’s formula.”
As we've noted before, the President's 2013 budget approach was not just 'rejected' by Congress - but utterly and completely rejected as the proposal failed to receive a single vote of support in either the House or the Senate, falling 0-415 and 0-97 earlier this year.

In an effort to embrace the mantra of his former chief of staff, Rahm Emanuel, Barack Obama seems hellbent on taking the country over the fiscal cliff in order to create another 'crisis' that he believes he can capitalize on to further his hard left tax and spend 'fundamental change' agenda.  As I noted yesterday, in his non-stop campaign, he is continuing to redefine simple and basic words in order to promote the propaganda that his proposals will not plunge the country into a far deeper economic crisis than we are seeing throughout the Eurozone.  In addition to redefining 'Balanced' and 'Fairness', Barack Obama and his allies today focused on two new words to redefine - 'Cuts' and 'Compromise'.

Since 2009, Barack Obama and his allies have insisted that 'Compromise' is what happens when the GOP / Conservatives surrender their values and positions and fully adopt the values and positions of the President and liberal fascists.  This flies in the face of the real definition of 'Compromise' which is where both parties in negotiations achieve an agreement based on either a common middle ground - or one where each side surrenders a little in order to achieve an agreement.  Today, in the wake of a narrow Election Day victory that highlighted how close the divide in this country is between right and left, the President launched new rhetoric that demanded the GOP to surrender their values entirely or pay the price.

House Minority Leader, the insufferable Nancy Pelosi, took her pleas to the sycophantic mainstream media today to press the case for Obama's proposal - calling the offer the President's press for 'Middle Class Tax Cuts'.

A Tax Cut?  For the Middle Class?

In the tortured (or is it 'enhanced') logic of the dim former Speaker, the President is making the entire $1.6 trillion in new taxes entirely  on the backs of the 'wealthy' - those who earn more than $250,000 - even though increasing their taxes 10% will only raise around $400 billion (not the 'nearly $1 trillion that the media is trying to shovel us) to $600 billion over the next decade.  In the new normal of $1 trillion annual deficits, this is little more than a few drops into the bucket.  We're to expect that adjusting deductions for these same wealthy will make up the balance of the more than $1 trillion in new taxes the left is pushing for?  That defies belief.  The only way that the President will achieve $1.6 trillion in new revenues over the next decade (which still will do nothing to reduce the deficit / debt level) will be to increase taxes on the middle class.

Then we have the asinine re-definition of the word 'Cut' pressed today by both Pelosi and Obama.  To them,  keeping the middle class personal income tax level at the same level that it has been for the last dozen years, is a cut.  That's right.  A cut is now defined as preventing an increase in the tax rate.  Just as a cut in spending is now defined as a minor slowing down of the relentless increase in spending levels.

Adding to these insults to the intelligence of normal Americans, the President then tries to apply his 'charm' to the festive season by reminding us all that if his intransigence takes the country off the cliff -- it will be the GOP that has 'Scrooged' us all.

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In today's Captain Renault moment, even the Washington Post is shocked, shocked I say, to discover that Obama's 'balanced approach' to achieve meaningful deficit reductions is neither balanced or will achieve any deficit reduction. This is 'package check time' people - and in particular for the GOP 'negotiators'.  The President is not interested in a compromise.  He is also unconcerned about the impact to the country if he drives the country off this first fiscal cliff.  For him, his goal is the political destruction of the GOP and conservativism - what's best for him not what's best for the country.

So at this point, either the GOP holds the line here and now - making Obama and his liberal fascist allies own the economy and the effects of his actions - or you will offer what amounts to an unconditional surrender of your core values. Yes, holding firm will be unpopular with many because of the ramifications of the fiscal cliff.  Yes, the President's sycophantic allies in the mainstream media will browbeat, castigate, and demonize you.

 But guess what.

 No matter what happens or what you do, you WILL be browbeaten, castigated, and demonized by the sycophants in the press.  Accept that.  That is the reality of the situation.

 No matter what you do - you will lose in the eyes of the press.

Stand firm - they will browbeat, castigate, and demonize you. Surrender - they will browbeat, castigate, and demonize you for cravenly surrendering after tossing a few fluff pieces your way on day one....and then demand even more surrenders. But it is imperative that a counter-offer to the President's laughable offer is made and touted.  And that counter-offer needs mirror, to a large extent, our core positions.
  1. Not only does a deal need to require a major revision in the national tax code - but for the first step of that revision we need to permanently freeze personal income tax, capital gains, and dividend tax rates at the current level while cutting corporate tax rates to 25%.  Then we need to reform and simplify our tax code so its no longer a full employment act for tax attorney's or accountants.  That means maintaining only a minimal number of tax deductions - and scaling these deductions to income.  Higher income levels are limited as to how what percentage of these deductions they can claim.  As we close the loopholes and deductions, we change the tax rates.  The final goal, a 10% or 25% personal income tax rate, capital gains and dividends taxed at 15%, and in the corporate environment, continue to allow companies to deduct their investments into research and development.  The estate tax gets eliminated.
  2. The Alternative Minimum Tax that exists today has to be scrapped / reformed.  All taxpayers will pay at least 5% of their gross income to the Fed as a minimum tax to ensure that everyone has 'skin in the game'.  If deductions bring their tax liability below 5% - they still pay 5%.  That's a hard floor.
  3. Real and significant spending reductions and program elimination has to take place.  Ethanol subsidies, rural electricity, 'Obama' phones, farm subsidies, taxpayer funded abortions / contraceptives, contributions and grants to the arts, public broadcasting, and similar items are gone.  Earmarks end.
  4. In step 2 of real spending deductions - all other programs and spending are permanently capped at the  FY2007 levels plus adjustments for inflation and population growth.  From this point, every department, agency, and taskforce is then examined and re-justified with the goal to eliminate redundancies and increase efficiency and accountability.
  5. Obamacare is delayed until the Debt to GDP ratio is below 75% and the U-6 unemployment rate is below 9.5%.  While it is delayed - it should be reformed to address fundamental structural changes that are needed - tort reform, sales of health insurance across state lines, vouchers, and open market principles as opposed to government control and built-in inefficiencies.
More is needed, in particular reform to Medicare, Medicaid, and Social Security, but these are the first steps that are needed to bring our fiscal house into some semblance of order.

If we needed yet another example of how dysfunctional government is today in this country, we don't have to look much further than California, Illinois, New York, New Jersey, or.... Louisiana.

Unlike the massive attacks on President Bush (43) and the Federal Government in the wake of the massive destruction on New Orleans caused by Hurricane Katrina in 2005, the mainstream press has been silent in the wake of the truly incompetent and dysfunctional response to the destruction caused by Hurricane Sandy in New York and New Jersey.  Pretty much, other than photo ops, little has been done by the Federal Government to assist the victims - or the local / state authorities.

Even the state authorities have been severely challenged in responding to the disaster -lacking funds, people, and most importantly, effective disaster relief / mitigation plans to help those in need or commence the rebuilding process.  This seems to match the general lack of effectiveness in government around being able to act decisively or effectively like private sector organizations are forced to do by market conditions.

But in Louisiana, we're seeing the latest example of how feckless and dysfunctional government is - and why it is sheer folly to depend too heavily on government being effective and efficient.

The US Corps of Engineers, in the wake of Katrina, built the 'Rolls Royce' of flood protection and flood control for the city of New Orleans - all designed to prevent a repeat of the flooding that occurred when the levees failed when hit by Katrina.  Now complete, the Corps is turning over the management of the system to municipal officials. However these municipal officials have neither the inclination or the funding to do anything to manage or maintain this system.  It's not theirs, and the city lacks the revenues to absorb the millions needed each year to manage and maintain the system.  So, the system will atrophy and ultimately fail - quite probably when it is most needed.

Where was the planning around this?  Or the coordination to ensure that the municipal leadership allocated funding for the management and maintenance of this system?  

These are basic functions that exist within the private sector.  If they aren't considered or acted upon, competitive forces will drive those managers / businesses out of business.  But in government?  

Are we really wise in putting more and more dependency on the decision making and effectiveness of government?

California was named this week the worst run state in the United States - and given it's fiscal challenges and decades of enacting the progressive liberal fascist agenda - it's no wonder.  Half a century ago, California was the Golden State - near the top in the country for education, agricultural production, industrial production, and infrastructure.  Millions moved to California for jobs and opportunity.  Today, millions are moving out of California [primarily the middle class and business owners / job creators] and are being replaced by illegal immigrants and the poor.

In more loyalty towards the progressive liberal fascist agenda, the mainstream media is continuing to hype the propaganda about California - now promoting that California's fiscal challenges have ended with the passage of Proposition 30 - massive tax hikes 'on the wealthy' intended to raise $6 billion in additional tax revenues.  The New York Times and other progressive mouthpieces are touting that just the mere passage of the bill - well before one new penny has been added to the state coffers - has not only solved the states fiscal crisis, but sparked an economic recovery that has turned the state around in three short weeks.

This is just laughable - and defies all common sense.  It's about as economically accurate as the fallacy that the higher tax rates of the Clinton-era' ignited the 1995-2000 internet fueled economic boom, or that Barack Obama's fiscal solutions are 'balanced', 'fair', and reflect a willingness to 'compromise' and 'cut' in order to return us to a path of fiscal responsibility.

What do higher taxes on the 'wealthy' actually do?  Well, let's look to France which is implementing a new tax rate of 75% on those who earn more than one million Euros per year -  - the vast majority of those in this category are relocating to Belgium, Switzerland, and the UK - and selling their lavish chateaus.  (Looking for a multi-million vacation home in France?  The prices of these are cratering as inventories increase from more and more seeking to sell and relocate.) In Britain, where the top tax rate for the 'wealthy' increased to 50% two years ago, the UK's Daily Telegraph is reporting that two thirds of British millionaires fled the country.

In this country, we have the same experience.  When New York and Maryland passed new 'millionaire' taxes several years ago - they saw not only a large scale exodus of their millionaires to other states, but a net drop in their tax revenues.  

Maybe California is different now that it's economy is 'booming' in a 'recovery' fueled by higher taxes ripping funds out of the private sector?  What was that about Einstein?

On a final note - tomorrow, December 1st, the USS Enterprise, CVN-65, the world's first nuclear powered aircraft carrier, and the 2nd oldest commissioned warship in the US Navy (behind the USS Constitution, commissioned in 1798), is being struck from the active list of the US Navy and retired after 52 years of service.

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