Tag Archives: economics

Rules and Defense Spending Cuts

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The House—in particular, the majority Republicans—along with too many so-called defense journalists are having trouble with a rule that potentially leads to defense spending cuts, a particular anathema in today’s environment of a Russia at war and a People’s Republic of China threatening war.

However, the fact is defense spending has always been vulnerable to cuts, particularly by the Progressive-Democratic Party and its predecessor Democratic Party. The proposed rule just makes the potential explicitly stated. But it does not mandate defense spending cuts; it mandates spending cuts in one (or more) places if there are to be spending increases in other places. Quoting from the proposed rules:

Initiatives to Reduce Spending and Improve Accountability. Subsection (a)(1) replaces current “pay-as-you-go” requirements with “cut-as-you- go” requirements. The provision prohibits consideration of a bill, joint resolution, conference report, or amendment that has the net effect of increasing mandatory spending within a five-year or ten-year budget window. This provision continues the current practice of counting multiple measures considered pursuant to a special order of business which directs the Clerk to engross the measures together after passage for purposes of compliance with the rule and provides a mechanism for addressing “emergency” designations.

And

Subsection (e)(2) establishes a point of order against consideration of a bill or joint resolution reported by a committee (other than the Committee on Appropriations) or an amendment thereto, or a conference report thereon, which has the net effect of increasing direct spending in excess of $2,500,000,000 for any of the four consecutive 10 fiscal year periods beginning with the first fiscal year that is 10 fiscal years after the current fiscal year. The levels of net increases in direct spending shall be determined based on estimates provided by the chair of the Committee on the Budget.

And

Spending Reduction Amendments in Appropriations Bills. Subsection (f) provides for spending reduction account transfer amendments and requires a spending reduction account section to be included in all general appropriations bills.

There’s nothing in there that mandates cuts in defense spending. All spending, though, needs to be up for discussion in light of the current Progressive-Democratic Party-driven economic condition of our nation, as Freedom Caucus Founder, Congressman Jim Jordan (R, OH) has pointed out. That I—and lots of others—disagree with not continuing to increase defense spending in these parlous times simply means that we need to make our case instead of relying on inertia to carry it. And refreshing the case is entirely good.

In the event, the rules package was passed without significant change.

The rules as proposed can be read here.

Yes, and No

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Company employees are getting pay raises just for staying on the job rather than moving on to other endeavors.

Wages for workers who stayed at their jobs were up 5.5% in November from a year earlier, averaged over 12 months, according to the Federal Reserve Bank of Atlanta. That was up from 3.7% annual growth in January 2022 and the highest increase in 25 years of record-keeping.

It’s also the case that new hires are getting bigger signing bonuses, initial salaries, and more perks for joining the company.

However, this claim by The Wall Street Journal (at the link above) is mostly backwards in the present environment:

Faster wage growth is contributing to historically high inflation….

It’s true that increasing wages—increasing labor costs generally—feeds into inflation as companies have to raise their prices when labor costs eat too far into their profit margins. However, as WSJ also noted,

Prices rose at their fastest pace in 40 years earlier in 2022.

That sharp rise in inflation actually began before the sharp rise in wages, and it has far outstripped the rise in wages: 2022’s inflation peaked above 9%, and it’s still around 7%. The current wage increase is only a nominal increase. The real change in wages, what real people spend on real necessities and wants, has been negative: that 5.5% nominal increase in November, compared with November’s 7.1% inflation for instance, actually represents a 1.6% decrease in actual buying power for us average Americans.

The fact is that the current period of high inflation is driving the rise in labor costs, not the other way around.

Taxes and our Federal Tax Code

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Former President Donald Trump (R) paid breathtakingly little Federal taxes compared to his wealth over the six years covered by his tax records, which the Progressive-Democrats so dishonestly, if strictly legally, released. And yet, despite those same Progressive-Democrats’ desperation to expose illegalities in his low tax payments, those same records prove he did nothing illegal; he simply took advantage of what our tax code—as enacted over the years by both parties as they held sway—plainly, and by design, allows.

Think that’s unfair compared to you and me? Think it’s not right that rich folks should have access to…loopholes…that us average Americans can’t reach?

Nah. For all the imbalance, there’s nothing unfair about it. The opportunities are right there in plain sight in our byzantine body of tax law. And they become increasingly accessible to us as we rise up our nation’s economic ladder.

Still the imbalance should be corrected, and that’s easy to do. Nor does it involve increasing taxes on the rich, although it does involve closing those…loopholes.

All it takes is two things.

First, we get rid of our existing income tax code, every jot and tittle of it.

Then we replace it with a new income tax code. That new code would eliminate entirely business income taxes—not merely zero out the maximum rate, eliminate that tax altogether. If it’s still on the books, it’s too easy to raise the rate later, even from zero.

Businesses don’t pay a significant portion of that tax, anyway; their customers do in the form of higher prices, and the rest of us do in the form of reduced rates of business growth, hiring, and wage increases—with the resulting reduced productivity—and in reduced rate of innovation.

With the elimination of the business income tax, businesses would be able to raise capital, grow, innovate, produce—make business decisions—based solely on the economic wisdom of the decisions. Having to dance around the tax code, having decisions influenced by tax advantage or disadvantage would be a thing of the past.

The new income tax code would include a low (10% perhaps) flat tax on all personal income regardless of source, and the code would have no subsidies, deductions, credits, what-have-you. No loopholes. Just: enumerate your income, remit 10% of that.

Now us Americans would be able to keep more of our money, make freer decisions concerning our needs and wants, have more to save for emergencies, future expenses, retirement. All based on our own view of our present and future economic situation, instead of having to do our own dance around the tax code.

Too, with everyone paying at least a little, the Federal government would see a net increase in tax revenue, and that increase would be even larger from the increased overall economic activity in a free market economy in which the private players, us Americans and our businesses, are more active.

Easy peasy. All it takes is political courage. And for us American voters to inject that courage by repeatedly firing those politicians who lack it and repeatedly hiring those who have it. After all, that’s what elections are for—they really do have consequences.

Think about Leaving

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Portland business owners are more than fed up with the level of crime destroying their businesses. Their idea of who has the solution is misguided, though.

Frustrated business owners are calling on city and county leaders to do more to combat rising property crime in Portland….

This situation is not solely on the heads of Portland’s city councilmen or the county commissioners. The business’ fellow residents of Portland keep electing those councilmen and commissioners, politicians who’ve demonstrated their lack of commitment to order and rule of law.

Why would any business owner want as his customers folks who so consciously approve of and vote for such politicians? Those are the voters, after all, who then vandalize, rob, and otherwise trash their businesses. There are plenty of jurisdictions that do regard rule of law to be a Good Thing, and those jurisdictions have sound economies with plenty of room for businesses currently domiciled in lawless Portland.

Overreach

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The New York banking regulator, the New York State Department of Financial Services, has announced “rules” that would require banks of all sizes to consider climate change in their risk assessment considerations. NYSDF’s rules are made the worse because it has outsized influence due to the plethora of Wall Street institutions in the State.

Banks would be called upon to look at climate-related risks when bringing on new clients and when extending credit.

This is naked government overreach, even at the State level, and it’s one more reason financial institutions should leave New York. I can suggest Miami, Austin, Dallas, Sioux Falls, and Fargo as alternative locations.

It’s more than that, though. It’s an…inaccurate…goal. The only climate-related risk any American business, banking or other, faces is Government behavior vis-à-vis government bureaucrat-perceived climate situations.