Federal spending in the US rose from 19% of GDP in 2007 to a projected 21% in 2014.
National debt has grown from 61.8% of GDP in 2007 to a projected 103.2% of GDP in 2014.
A Couple of Factoids
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Tag Archives: economics
Democrats and Inversions
Inversions in this context, to oversimplify, are when American companies buy foreign companies and then relocate their headquarters to that foreign country in order to take advantage of that country’s lower tax rates. That this is part of an American company’s management fiduciary duty to the owners to minimize costs and maximize profits is unimportant to the denizens of the present administration and to too many “Republicans” as well.
President Barack Obama’s Treasury Secretary, Jack Lew, had some thoughts about the evils of inversions.
These transactions erode the US tax base, unfairly placing a larger burden on all other taxpayers, including small businesses and hardworking Americans[.]
Of course, Lew and Obama carefully ignore the fact that half of us Americans already pay little or no taxes, “unfairly placing a larger burden on all other taxpayers.”
They also ignore the fact that it isn’t their money in the first place; the money belongs to the companies’ owners.
They also ignore the fact that our “tax base” already is excessively progressive and that it has the highest business rates in the world.
Lew went on:
These first, targeted steps make substantial progress in constraining the creative techniques used to avoid US taxes, both in terms of meaningfully reducing the economic benefits of inversions after the fact, and when possible, stopping them altogether.
A better way to reduce the economic benefits of inversions would be to do the patriotic thing: lower, drastically, the tax rates on American businesses. Taxes, after all, are at the foundation of our Revolutionary War—not only the stereotypical taxation without representation, but also the point of that demand of representation: so we could keep tax rates from getting out of hand.
If our business tax rates were lowered sufficiently—Ireland, for instance, taxes businesses at 12.5%, compared to our 35% rate—a couple of things would occur. The first would be a cessation of inversions, and if our business taxes were lowered significantly below 12.5% (I’ve been advocating all along for an elimination of taxes on our businesses), foreign businesses would be attracted to the US, bringing with them the jobs they have.
The other thing that would occur involves the $2 trillion that American companies with foreign branches, affiliates, and so on are holding overseas in order to avoid our usurious tax rates. With those tax rates vastly reduced, that money would come home. $2 trillion is a lot of jobs and capital investment (which is more jobs in the nearby future) waiting to happen.
But tax rate reductions are anathema, if not inconceivable, to Democrats. And to too many “Republicans.”
An Instructive Graph
This one is from the Census Bureau’s Income and Poverty in the United States: 2013. The headline of the report is that American household median income stagnated for the second straight year and remains, in real terms, 8% lower than it was in the last year before the Panic of 2008. The graph below reflects that.
What interests me about this graph, though, is not the end result snapshot, but the slopes of the graph’s separate lines, the changing levels of median incomes, as we come out of recessions and panics over the last 50 years.
Notice: coming out of nearly every one those dislocations, either immediately after it was over or shortly after, the slopes are up. Median household income recovered quickly for all groups indicated. To be sure, there were some significant lags in this—blacks often, Hispanics coming out of the 1990 mini-recession, for instance. However, even coming out of the 2000 dot-com bust, incomes “merely” stagnated overall (although with that one, incomes didn’t fall very much, either).
But coming out of the Panic, this administration’s policies have set a new record for holding back a recovery—incomes have not stagnated (would that we’d done that well); they’ve been pushed down.
Obamacare, Errors, and Attitudes
The AP has an article that goes into the pitfalls and pratfalls that Obamacare faces this fall, 2014 enrollment period. I’m interested in one error in particular and the attitude of one Democrat in particular who voted for Obamacare’s passage.
The error was the overpayment by the Federal government of many of the subsidies it handed out to…defray…the premium costs of having an Obamacare health plan. Overpayments could occur from a plan buyer underreporting income, from ObamaMart not correctly matching income data with subsidy accruals, and so on.
As a result of having discovered those overpayments, the government is trying to recoup them from the recipients. Congressman Bill Pascrell (D, NJ) disagrees with making people pay back part of their premium subsidy.
Why should individuals be punished if they got a bump in salary? To me, this was not the ACA I voted on.
Indeed, why should individuals be punished? Yet they would be, if Pascrell’s attitude prevails, by paying out more subsidy than was due. Oh, wait, the individuals being punished are taxpayers.
Of course Pascrell (and his fellow Democrats) know this; they just don’t care about those individuals. Taxpayers, after all, are just money trees with which to fund Democrats’ voters.
Doesn’t College Cost Enough Already?
In an effort to combat the high cost if college, the Obama administration thinks it’s appropriate to make borrowing easier.
Under a plan likely to take effect next year, the Education Department would check the past two years of a borrower’s credit, instead of the current standard of five, for blemishes such as delinquencies or debts in collection. Also, any delinquent debts below $2,085 would be overlooked; currently, delinquencies of any amount are grounds for rejected applications.
I’ll leave aside the increased pile of loans for those who least can afford to borrow, and the increased risk of default from that; these questions are addressed in that Josh Mitchell article in The Wall Street Journal that’s on the other side of the link above.
There’s another problem that’s not addressed, either in the article or by the Obama administration.
That problem is a well-known one, except apparently in Liberal circles: subsidizing a thing increases demand for it. And if supply can’t keep up with that increased demand, the price of the thing goes up. A lot.
Making borrowing for college easier will stimulate demand for college. Since the availability of college can’t rise as quickly as that demand, the only outcome is…a large increase in the price of college. This is an increase, too, that’s actively abetted by college administrators, as Professor Peter Wood noted ‘way back in 2005:
Tuition is set high enough to capture those funds and whatever else we think can be extracted from parents. Perhaps there are college administrators who don’t see federal student aid in quite this way, but I haven’t met them.
Wood was talking, at the time, about Federal student subsidies, but his remarks apply just as surely to Federal efforts to make more money available to colleges via easier to get loans like these.