Tag Archives: economics

Chained CPI, Taxes, and Spending

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In years past, Obama had offered to trim cost-of-living increases in Social Security and other benefit programs—known as chained CPI.  Not anymore.

The Obama administration also has taken to making this claim:

Social Security has not contributed one penny to the deficit.

This, of course, is mendaciously false—it’s government spending, and the government is spending more than it takes in.  The only thing is the bookkeeping fiction that it’s off-budget, and so (so the claim goes) that deficit spending doesn’t exist.  But this meme depends on a carefully distorted definition of the official “deficit”—that of being only an on-the-books deficit, and not including the off-the-books spending that is Social Security (and Medicare).

But, maybe Obama would reconsider.

“The president was willing to step forward and put on the table a concrete proposal.  Unfortunately Republicans refused to even consider the possibility of raising some revenue by closing some loopholes that benefit only the wealthy and well connected,” [White House Principal Deputy Press Secretary Josh] Earnest said.  Officials said Thursday that those potential reductions in spending, included in last year’s Obama budget, had been designed to initiate negotiations with Republicans over how to reduce future deficits and the nation’s debt.  But Republicans never accepted Obama’s calls for higher tax revenue to go along with the cuts.

Never mind that the only legitimate uses of closing loopholes are two: to reduce tax rates, and to pay down the national debt.

Beyond that, government doesn’t need more tax revenue; although it would get more, even at lower tax rates, if it got out of the way of the economy and let that grow.  Government needs to cut pending to below collected tax revenue, and it needs to use the increased revenue from loophole closing (all loopholes, including, say, tax credits for “green” energy boondoggles, not just those convenient to Democrats) to reduce tax rates even further—and then keep that tighter lid on spending.

[Obama’s latest budget proposal] says deficits as a share of the economy will be below 2% after 2025.

In other words, Obama continues to ignore our out of control national debt, since those deficits can only continue to add to the debt.

Welcome to the Republic

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Isn’t this part of what the 10th Amendment is about, guys?

Maybe some States finally are figuring that out.

Governors…have a blunt message for Congress and the White House: They’re moving ahead on job-creation, infrastructure and other matters in the face of federal inaction.

Democratic and Republican governors gathering for National Governors Association meetings say they’ve been forced to fill a vacuum created by the partisan battles in Washington that have blocked agreement on a long-term fiscal plan.

“We’re not waiting.  It would really be great for them to solve the mess here, but in the meantime we’re going to do what we can,” said Michigan Governor Rick Snyder, a Republican.

It’s not their mess to solve, albeit they’ve certainly been actively enthusiastic contributors to it.  Your States’ citizens are your responsibility.  The voters elected you to deal with the problems not to foist them off on relay them to the Federal government.

And this:

“There’s no long-term infrastructure plan coming out of DC—none,” said North Carolina Governor Pat McCrory, a Republican.

Mr McCrory last year pushed through legislation changing the way North Carolina spends scarce transportation dollars.  Under the plan, projects that boost the economy, such as highways that link urban centers and relieve congestion, get priority.

In an interview Friday, Mr McCrory said the measure was partially a response to the failure of federal lawmakers to rework transportation funding.

You guys shouldn’t need one Federal action first; you should be acting on your own initiative.  When that happens, you get McCrory’s outcome: you finally stop feeding your addiction to Federal dollars, you start getting more efficiency and better prioritization, and you stop spending OPM willy nilly.

And this:

Colorado Governor John Hickenlooper, a Democrat, said the “cycle of partisanship and dysfunction” in Washington could ultimately benefit state and local governments by forcing them to rethink how they relate to the federal government.

Well, NSS.  Welcome to the world of independence and responsibility.

States’ rights come with States’ responsibilities.  Where you guys been?

Sovereignty and Sovereign Debt

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Josef Joffe, editor of Die Zeit, is upset with Germany’s high court.  It seems that this court has ruled, again, against the European Central Bank’s President, Mario Draghi, and the ECB itself in continuing to note that ECB moves to buy member nations’ sovereign debt not only is a violation of EU foundational law, it violates the sovereignty of those nations expected to put up their peoples’ money to buy that debt.  Germany’s highest court also committed the dastardly deed of kicking the latest matter to the European Court of Justice.  All in the name of protecting German national sovereignty.

So the docket of the German high court in Karlsruhe never clears, and the battle cry never stops: “It’s our sovereignty, stupid!”

And

The German plaintiffs’ key complaint against the ECB comes in Latin—ultra vires. They argue that it would go “beyond the power” of the ECB to buy sovereign debt.

The horror.  The horror.

While cynically ridiculing the idea of national sovereignty throughout his article, though, Joffe missed another point, perhaps caused by his evident lack of understanding of the nature and importance of national sovereignty.

The larger story proclaims: Europe is still far from the United States, a real union.  The EU has neither a real Federal Reserve, nor a common fiscal policy, nor commonly elected leaders to define the common good.  The logic of a “more perfect union” demands these commonalities, but it collides with the logic of nation-states rooted in 2,000 years of history.

Leaving aside the EU’s demonstrated contempt for the common man (recall its formation: some countries rejected the union in national referenda, so the governments involved told those impudent populations to shove it and signed the Maastricht Treaty, which dragged those populations into the EU against their will), Joffe’s remark misses the fact that the EU also has no common culture, nor does it even have a common view of the purpose of money.

Even in the EU—especially in the EU—national sovereignty matters.  A very great deal.

The Evil 1%

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James Piereson, Senior Fellow at the Manhattan Institute, had some thoughts on these folks.

This crusade [against the richest among us] is based on three questionable claims.  One is that the wealthy are mostly Wall Street bankers benefitting from rising stock and real estate prices, or executives who pay themselves extravagant salaries.  Another claim is that such people unfairly benefit from a system that taxes capital gains at half the highest marginal rate paid by those who earn salaries and wages.  Then there is the assertion that the “super rich” have abundant funds that can be taxed to improve the living standards of everyone else.

All of these claims are false.  By promoting them, the president and his supporters may hope to distract attention from ObamaCare and the economy.

My father always said, “Never let the truth interfere with a good story.”  The difference, though, between my father and President Barack Obama and his fellow…crusaders…is that my father was joking.

[According to] data compiled by the Congressional Budget Office, the top 1% received 15% of the national household income (before taxes) in 2010, up from 9% in 1980.  A taxpayer needed a taxable income of $307,000 to enter the top 1%, a figure that hardly qualifies as “rich” today, especially in cities like New York, Chicago, Los Angeles or San Francisco.

And

[Top] performers earn their incomes in highly competitive environments and through the voluntary patronage of consumers.  Where does their money come from?

The top earners depend heavily on salaries.  In 2010 the top 1% earned 36% of their incomes from salaries and wages (what the CBO calls labor income); 22% from businesses, farms, and partnerships; and just 19% from capital gains.  The majority of their income would thus be taxed today either at the corporate or the highest marginal rate rather than at the lower capital-gains rate of 23.8%.

There’s this tidbit, too:

From 1980 to 2010, as the top 1% increased their share of total before-tax income to 15% from 9%, their share of the individual income tax soared to 39% of the total paid, up from 17%.  Most were paying federal taxes at the highest marginal rate[.]

A 60% increase in income share (from a very small share to a small share) “matched” by a 129% increase in income tax share from small to large.  Hmm….

Minimum Wage and Collateral Damage

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The CBO, the other day, looked into the Democrats’ proposal—demand, really—to raise the Federal minimum wage to $10.10 from the present level of $7.25 per hour.

The CBO found two key outcomes from such a hike.  The first is that the increase is almost certain to cost jobs, to increase unemployment.  While acknowledging that the headline number of jobs lost—500,000—is only an estimate, the CBO said quite clearly that the range of the number of jobs that will be lost from this forced wage increase runs from a “very slight decrease” in jobs to 1 million jobs lost.  Notice that.  No increase at all in job availability will ensue.  A “very slight decrease” in jobs is a decrease in jobs.  Full stop.

The other key finding is this: the

increase to $10.10 an hour by July 2016 would eliminate 500,000 jobs, but lift 900,000 Americans out of poverty from the total of 45 million projected to be living in poverty in 2016.

900,000 Americans will be able to use the wage increase to climb out of poverty.  But 500,000 Americans will be forever locked out of that opportunity, will be sacrificed in favor of those others.  Low-wage jobs—minimum wage jobs—are low skilled jobs, are entry level jobs, in which the worker can accrue experience with which to earn promotion, gain needed skills for better jobs, bring extra money home to the family so the family as a whole can have a chance to climb out of poverty.  These jobs are how teenagers, just starting out, can begin to learn a work ethic, can start earning some money for college or for a car, or just earn some walking around money.

These folks, though, apparently are just necessary collateral damage on the way to equal outcomes for the survivors.

So much for equality of opportunity.

The CBO’s full report can be seen here.