Tag Archives: taxes

Promises and Policies

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Fox News reports this from the CBO:

Nearly 6 million Americans—most of them in the middle class—will face a tax penalty for not carrying medical coverage once President Barack Obama’s health care overhaul law is fully in place, congressional budget analysts said Wednesday…a 50 percent increase [over CBO’s report from last year].

Recall Democratic Presidential Candidate Barack Obama’s solemn promise from his 2008 campaign, repeated constantly over these last four years.  He’s not going to raise taxes on any one of us with less than $200,000 of annual income, or on couples of us with a combined annual income less than $250,000.

The CBO said why this sharp increase had occurred, too.

…most of the increase in its estimate is due to changes in underlying projections about the economy, incorporating the effects of new federal legislation, as well as higher unemployment and lower wages.

How’re those several promises

  • that promised no-tax-increase
  • unemployment held under 8%
  • everyone pays their “fair share”
  • failure to achieve would produce a one-term presidency (yet he’s running for a second term)
  • and so on

and our “recovery” working out for you?

With all this government “help,” we’re having trouble building anything anymore.

A Tax Reform Idea

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Close, but no cigar.  Here are some ideas that are being kicked around.

…the president is pushing for tax incentives for making products, especially high-tech ones, in the US.  He also wants more focused federal research programs, including funds for new privately run institutes to study advanced manufacturing techniques.

Senator Debbie Stabenow (D, MI):

…legislation that would give tax breaks to help companies cover the cost of moving production back to the US and ban tax deductions for the expenses of moving operations abroad.

Congressman David Cicilline (D, RI):

…federal grants to help companies upgrade equipment and retrain workers.

Republican Presidential Candidate Mitt Romney has these:

…repealing “excessive” regulation in such areas as environmental protection.  He also wants to require secret ballots for union-certification votes, which might make it harder for organized labor to win.”

The Democrats want Big Government solutions—that are careful to keep government’s hands in business’ pockets—and solutions that simply make an already excessively convoluted tax code even more so.  Romney’s ideas don’t even address the tax question; although they would help business.

No.  Instead of that claptrap, simplify and reduce.

Get rid of the tax subsidies.  Get rid of the tax credits.  Get rid of business regulations that do not actively support productivity improvement or enforce contract law—contracts between businesses and suppliers, businesses and customers, business management and business employees.

Lower—if not eliminate—tax rates on businesses.  They’re not the ones paying the taxes, anyway; their customers pay them in the form of higher prices, so that a tax on business is simply a second tax on private American citizens.  Including those 50% who pay little to no income tax of their own; including seniors who have only a fixed income with which to pay for their necessities.

Renewable Energy

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Has German Chancellor Angela Merkel figured out something Barack Obama hasn’t?  As recently as last June, her government had set a goal that by 2020, renewable energy (vis., wind and solar) would comprise 35% of Germany’s electricity production.  In the first half of 2012 (ending that June), Germany already was generating 25% of its electricity from wind and solar, among other renewables.

Then some other things became apparent.  Germany’s Renewable Power Act requires power companies to buy wind- and solar-originated electricity in significant quantities.  Their largest industrial electricity users consume 18% of the electricity produced,  However, they pay only 0.3% of the extra costs generated by those required buys—German taxpayers pay the difference.

The power grid hasn’t kept up with the growth in alternative energy sources—like the offshore windparks in the Baltic and North Seas off the country’s north coast.  Many of those projects are at a standstill, with no way to deliver the power they generate to the mainland.

That Renewable Energy Act provides incentives to build wind turbines, but it doesn’t provide incentives to build the natural gas-fired power plants the country needs for when the sun isn’t shining and the wind isn’t blowing (see the figure).

Withal, German consumers are faced with skyrocketing electricity bills.

Now Merkel is changing her mind.  She; her Environment Minister, Peter Altmaier; and her Economy Minister, Philipp Rösler are meeting with industry and union representatives “to discuss the rising costs for consumers.  In the run up to that meeting, Altmaier has indicated that he hopes to…put the brakes on the current rush toward renewables.”

In the US, we have these: green energy subsidies (guaranteed loans, tax credits) and a Federal requirement that power companies buy power from renewable energy producers.

Off the New England coast, special interests found the views from their beach front manses would be offended by wind farms, and the potential farms themselves were declared a “hazard” to aircraft, so they are not even being built.  In central California, environmentalists won’t allow some solar farms to be built and won’t allow the power cables that would deliver solar electricity to cities to be built.

The EPA still requires ethanol to be blended into our gasoline, even though not enough of that is being produced to meet EPA requirements, much that is produced is exported, and the whole charade is driving up the cost of food.

Maybe we should, in  this case, try Obama’s meme of being more like Europe, or at least more like Germany.

Government Spending

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Much of this originated as a comment to a Gay Patriot post.  I strongly recommend the post and then the accumulating commentary.

It’s important to note at the outset that government has no money of its own.  It only can act as intermediary in the (forced) process of transferring money from one group of private citizens to another.

Now a few remarks on government spending.  First, much of the money taken from private individuals and/or their businesses (which are just agencies of private individuals) to pay for government spending is lost to friction, including outright waste (I won’t get into losses to graft.  Could the graft be identified, it’d be rooted out.  Right?).  The waste includes money spent on government middlemen, money spent on government contractors hired to oversee the transfers and transferees, time and money spent schmoozing with lobbyists (both the good ones who are only identifying constituent needs—Congressmen generally fit this bill, for instance—and the bad ones, who are sure to take a taste of their own as the money flows, or to provide some vig in return for future consideration), and so on.

Second, money taken from private individuals to pay for government spending—whether through current taxes, current borrowing (future taxes), or printing money (future inflation)—is money that is not spent in the private sector, or husbanded against future spending in the private sector.  Thus, the multiplier effect of government spending, such as it is, is cancelled, if not exceeded, by the known, and fairly large, multiplier effect of private spending that is lost.  In many sequences of private spending, for instance, that multiplier effect runs out to 1.7x.  The best Keynesian estimate for the government spending multiplier is 1.5x.

Third, those husbanded funds generally are deposited in financial institutions as savings, and these deposits then are loaned to borrowers: these deposits are the primary source of loanable funds.  Taxes, then, reduce the amount of private money available for saving and so reduce the amount of lending that can occur.  This effect isn’t enough to cause a credit crunch like the one coming out of the Panic of 2008, but it hasn’t helped.  Further, that future inflation from printing to support excessive public borrowing devalues the funds that are saved.

There’s more.  As government debt grows, more private funds become husbanded, not against future spending goals in the private sector, but against those future taxes.  And even more borrowing is encouraged by that inflation (in the period before the recession that is the inevitable result of that high inflation)—in both the private and government sectors—since the repayment will be with inflation-devalued dollars.  Then that inevitable recession hits, and payback becomes, as they say, a bitch.

In sum, government spending isn’t zero-sum, it’s negative sum.

Update: clarified the second point.

A Thought on Our Economy These Last Few Years

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Both the Pew Research Center and the Congressional Budget Office have published reports in the last week that talk about the condition of our economy and the fiscal cliff that awaits us in a few short months.  Others have commented extensively on the reports themselves; I want to talk about some of the information that lies between the reports’ lines.

The Pew report focuses on the plight of the middle class, referring to “The Lost Decade of the Middle Class ” in its own headline.  The report points out, among other things, that middle class annual income has shrunk from $73k in 2001 (and 2008) to $69.5k in 2010, their most recent data.  Pew notes, also, that median middle class household net worth has fallen from $153k in 2008 to $93k in 2010.

The CBO report, on the other hand, has the following to say: if the Obama tax increases and the sequester spending cuts are allowed to go through at the start of 2013, the deficit will be cut roughly in half as a per cent of GDP, but at a cost of economic contraction of 0.5% on the year.  On the other hand, if the tax increases and spending cuts are put off for another year, the deficit will remain a damaging 6.5% of GDP, unemployment still will be at 8%, and the economy will grow an anemic 1.7%.  This is the fiscal conundrum the present administration’s Keynesian policies have created.

Plainly, the administration’s policies have been an utter failure; they have not produced economic recovery.  Indeed, the middle class, whom Progressives pretend to favor so much, have been devastated by those policies.  Still, Democratic Presidential Candidate Barack Obama wants four more years in which to do more of the same—or more so, since he’d have “more flexibility” after re-election, when he’d be beholden to no one.

After all, Obama says

The private sector is doing fine.

Hmm….