Tag Archives: political economy

Spending

Posted on by
Reply

Here‘s an interesting table, from The Motley Fool.

A couple of notes.  Spending in 2012, the fourth year of the Age of Obama, relative to our nation’s total economic output, our GDP, is up 18%.  The government spends nearly a quarter of our total economic production, production that by the government’s usurpation we in the private sector cannot use for our own ends.

Defense spending is down more than 17% from its long term average.  Even so, President Barack Obama is bent on gutting our defense capability by another half-trillion dollars, starting next month.  Never mind that al-Qaeda is resurgent across northern Africa, the Middle East, and western Asia.  Never mind that Iran is on the verge of a nuclear breakout.  Never mind that Russia and the People’s Republic of China both are increasing their own military spending and that the PRC, especially, is becoming increasingly aggressive militarily with their growing capability.

Welfare spending is nearly 9% of our GDP, up nearly two-thirds from a skosh over 5%.  Yet Obama wants to increase welfare spending even further.  I’ve written here about the trap that is welfare; one can only speculate about Obama’s motives for this.

Gimme

Posted on by
Reply

Collis P Huntington, President of the Southern Pacific Railroad (among others) is reputed to have said

Whatever is not nailed down is mine.  What I can pry loose is not nailed down.

Via Spirit of Enterprise comes this AEIDeas article of charts illustrating the attitude from a different perspective.  Below, some of those charts.

The rate of entitlement growth per capita has been nearly twice as fast as per capita income growth for the last fifty years

Note: Derived by author on the basis of data on official transfers, price changes, and population change. Sources: US Bureau of Economic Analysis, US Dept. of Labor, US Census International Data Base

And

In the 1960s, the federal government spent $2 on governing for each $1 it spent on entitlement transfers. Today that ratio has completely flipped:

Sources: Derived from: Federal government entitlement transfers: Bureau of Economic Analysis, Federal Budget Outlays: White House Fiscal Year 2012 Historical Tables

And

Here’s where the money goes:

Sources: Bureau of Economic Analysis, US Department of Labor, Bureau of Labor Statistics, consumer price index

And

As the Welfare State has expanded, Americans are working less.

Source: Bureau of Labor Statistics, One Screen database, Labor Force Statistics, Series “LNU01300001”, “LNS12300001”

And there’s this from The Daily Caller:

After accounting for federal taxes, the median hourly wage drops to between $21.50 and $23.45, depending on a household’s deductions and filing status.  State and local taxes further reduce the median household’s hourly earnings. By contrast, welfare benefits are not taxed.

Now it’s the culture of dependency which the Progressives have created that is making the demand.  And President Barack Obama is prying ever more loose, actively abetted by an increasingly pliant Republican Party.

RINO Surrender?

Posted on by
Reply

Fox News reported over the weekend that Senator Bob Corker (R, TN) now is saying Republicans

should cave to President Barack Obama on [tax rate increases] in order to not only resolve the current crisis but move on and start negotiating spending cuts, which could result in more significant deficit reduction.

Never mind that excessive spending—and runaway entitlements—are part of the current crisis.  Furthermore, with Obama getting his tax increases, there’ll be no spending cuts and no entitlement reform.  Corker knows full well that Democrat promises of spending cuts tomorrow in return for tax rate increases today are worthless.  And he’s begging for surrender anyway.

Corker said this to rationalize his surrender recommendation:

The focus then shifts to entitlements, and maybe that puts us in a place where we actually can do something that really saves this nation[.]

This is…naïve.  If the Republicans surrender on the tax rate increases, why should President Obama believe they won’t surrender on the debt ceiling, on spending cuts, on entitlement reform?  Why should any of the rest of us?

Corker wants to surrender.  That’s his right.  But let him do so as a private citizen.  This RINO needs to be replaced at the next election.  Republican acquiescence with Progressives’ demands over the last 80 years are how we got into this mess in the first place.  And the magnitude of the destructiveness of their demands has been especially manifest these last four years.  Our nation can’t afford any more of those policies.

Taxes and Fairness

Posted on by
Reply

There’s this example from a recent Wall Street Journal op-ed.

[I]t is worth noting that from 1958 to 2010, the taxes paid by the top 3% of earners, as a percentage of total personal income (which can’t be reduced by shelters), increased to 3.96% from 2.72%, while the percentage paid by the bottom two-thirds of filers fell to 0.51% in 2010 from 2.7%.

We went from everyone paying roughly the same rates on personal income to some Americans being forced to pay 8 times the rate as other Americans.

And those earlier, higher tax rates that are supposed to be so much more fair?  They were coupled with things like this:

The tax code of the 1950s allowed upper-income Americans to take exemptions and deductions that are unheard of today.  Tax shelters were widespread, and not just for the superrich….

For instance, a doctor who earned $50,000 through his medical practice could reduce his taxable income to zero with $50,000 in paper losses or depreciation from property he owned through a real-estate investment partnership.  Huge numbers of professionals signed up for all kinds of money-losing schemes.  Today, a corresponding doctor earning $500,000 can deduct a maximum of $3,000 from his taxable income, no matter how large the loss.

Now, it’s true enough that the Clinton-era tax rate tables, so beloved of the Progressives today, didn’t allow for such uneconomic activities as write-offs.  But the Clinton-era spending rates also didn’t allow for the spending rates so beloved of the Progressives today.

Welfare and Economic Mobility

Posted on by
1

I’ve written elsewhere of the trap for Americans that is welfare in  the form of handouts. The CBO’s Nov 2012 report, Effective Marginal Tax Rates for Low- and Moderate-Income Workers, makes this explicit.  Here are two examples from the report:

[T]he single parent who moved from not working to working part-time would face a marginal tax rate of 36 percent because even a modest level of earnings would result in the reduction or loss of several transfer benefits [the tax].  Earnings from part-time work would result in a loss of eligibility for assistance through the Temporary Assistance for Needy Families program, some reduction in the housing voucher, and a decrease in benefits available through the Supplemental Nutrition Assistance Program.

And

The marginal tax rate associated with moving from part-time to full-time employment…would be higher—47 percent.  Earnings from full-time work would place the single parent in the EITC’s plateau range and would allow him or her to claim the maximum EITC [Earned Income Tax Credit] amount ($3,169 in 2012).  However, because moving from part-time work to full-time work does not increase the EITC as much as does moving from not working to working part-time, marginal tax rates in this scenario would be higher than in the first scenario.

The disincentive to get work is large, but by remaining in her current situation, the single mother (yes, I’m assuming) is foregoing opportunity to improve her economic situation: there is potential for advancement, pay raises, and so on with a paying job.  Remaining on the government’s dole leaves this woman dependent on her government for her livelihood.  And doing so makes it even harder for her child(ren) to move up the economic ladder in his own time.  Upward mobility is severely handicapped, if not foreclosed altogether.