Tag Archives: taxes

Project 100,000

Posted on by
2

In a throwback to the ’60s, and to a similar program, it seems that the present administration really is serious about helping those who are incapable of helping themselves.  Where that prior program centered on helping those who lacked the capacity for measuring up to the rigors of a military life, though, the present incarnation is centered on helping those who lack the capacity to measure up to the rigors of paying their taxes.

The present administration’s program began with the hiring of Timothy Geithner to be the man in charge of the national treasury, bringing him over from the IMF, where he had shown his inability to pay his self-employment taxes, despite having been repeatedly advised in writing by the IMF of the obligation.

Now we learn that 36 of Obama’s current staffers have been brought on board through the same program of outreach to the incapable.  These 36 owe nearly $1 million in back taxes for the 2010 tax year.  It’s not like they’re hurting for the money, either: Obama’s 1%, his staff of 457 aides, were paid a total of $37 million last year.

There’s more: the same IRS report that revealed the deficiencies of Obama’s staff also said that “thousands of federal employees owe,” in the aggregate, more than $3.4 billion in back taxes.  It seems none of these people are capable of understanding their tax obligations.

It’s clear, now, why Obama is so hard over on those who are better off—who are capable—being required to pay more.  Someone has to pay for Obama’s 100,000.

While this administration’s program of handouts for unfortunates is admirable, can we really trust the judgment that puts such people into such positions of power and trust?

(As an aside, Obama’s EPA performs even more poorly, both in total and on a per unfortunate basis: 413 of the EPA’s incapables owe nearly $19.5 million in back taxes.  Paying taxes is harmful to the environment?  Now there’s a rule….)

Basic Economics

Posted on by
Reply

A thought on Keynesian economics.  Brad DeLong offers this thought concerning our current debate over government spending:

The government purchases $100 billion of goods, issues $100 billion of bonds, and raises taxes by $3 billion a year in order to amortize the bonds.  Government purchases go up by $100 billion this year.  Private consumption goes down by $3 billion this year.  Net fiscal impetus is not $0 but rather $97 billion.  Cochrane [and other Keynesians] doesn’t understand the Ricardian Equivalence argument he is trying to make.

Keynesians think $97 billion were created through this spending and taxing program and that government spending is a good.  But having sold $100 billion in bonds generate this “demand increment,” from where would those $100 billion have come, and to where would they have gone otherwise?  The Keynesian view can be summarized in either (or both) of two ways: supply creates its own demand, or demand creates its own supply. Talk about trickle down, or building fields of fancy and hoping fanaticizers come.

No, what goes on actually is this.  Falkenblog commenter Aaron Brown explains:

The main point is…that people react to the $100 billion future tax increase (or spending cut, or reduction in value of nominal assets from inflation, or some other loss).  You might argue that people will under-react in some cases, but it’s highly implausible that they don’t react at all, or that they systematically under-react (and there’s no data supporting either implausible contention).  I think systematic over-reaction is plausible (although also has no empirical evidence) since once currency debasement begins i[t] almost always seems to accelerate.

The question of where the $100 billion would have gone otherwise is a different one.  It could come from private consumption or private investment, in either case likely making the net effect of the stimulus spending negative, even before factoring in the future costs.  Government takes money today from privately-selected uses to government-directed ones (loss of utility there) and also must take money tomorrow from privately-selected uses to repay the debt.

And since the economy continues to be depressed from the government having withdrawn so much money from it for its own spending, government must, apart from tomorrow’s taking for current borrowing, repeat the whole borrowing and taxing cycle tomorrow, also.  This continues to hold down the economy, as we saw with the government’s “stimulus” spending in the Great Depression, and as we’re seeing today.  Brown continues:

The Keynesian hope is that today’s $100 billion comes from hoarding or asset bubbles, in which case the net effect could be neutral or even positive.  The further hope would be that the future debt repayment will go to sound private investment or elimination of future wasteful spending (sort of “stuff then starve the beast”).

However “hoarding” and “bubble” are in the eye of the beholder. So even if you make the assumption people under-react to the future implications of stimulus spending, you also have to assume that the government’s judgment using other people’s money, with officials being paid whether they are right or wrong, is better than people making choices with their own money, bearing the losses if they are wrong.

If people are correctly preparing for future bad times instead of “hoarding” or correctly anticipating a rise in nominal asset prices instead of feeding a “bubble”, then the stimulus will be doubly harmful.

But the fact is, we don’t hoard.  We (both individual and business) save/invest.  We may have a good idea of why we’re saving—a new house, future retirement, or future expansion—or we may not, saving only against an inchoate reservation about the future—but this isn’t “hoarding.”  And government judgment?  We’re seeing how that’s playing out with the government’s substituting its judgment for ours in its use of our money for its entitlement programs.  Keynesians are all about the superiority of government’s judgment.  Otherwise, they wouldn’t keep taking our money and spending it for us, even (especially) when we don’t want to spend, in order to stimulate our economy (which, just incidentally, Keynesians also view as government’s economy).

h/t to Eric Falkenstein at Falkenblog.

Lessons from Germany

Posted on by
Reply

Spiegel Online International talks about a (relatively) strong German economic performance in the coming year, following on the heels of a strong performance for 2011.  It also draws a contrast, while outlining the jealousy of its European neighbors.

Germany’s economic success does not make the country more popular among its neighbors, though. After all, this is the same country that has been blocking all proposals to use the European Central Bank (ECB) to provide more generous financing for embattled euro-zone countries. Some European countries appear to be secretly hoping that Germany, Europe’s economic paragon, will also soon feel the brunt of the crisis.

How did the Germans achieve this?  One path is through the intermediate-term outcome of some economic and governmental reforms they put into place in 2003, in part to cure themselves of being the “sick man of Europe.”  They:

  • increased, from management’s perspective, the mobility of their labor force,
  • provided stronger financial incentives for the unemployed to go back to work, rather than paying them unemployment “benefits” for not working,
  • reduced taxes,
  • reduced government debt relative to their GDP.

One of the things the labor reforms led to was increased hiring because the reforms made it easier for employers to hire.  In 2011 alone, for instance, a half million new jobs were created in a population of 81.5 million.  Their reforms also encouraged more people to try to go back to work.  The resulting increased employment rate matched up with the lower tax burden to leave more money in the hands of individual Germans.  In short, Germany took steps to free up its economy, moving it closer to an open, free market, especially in comparison with their embattled euro-zone neighbors, and embarrassingly so relative to the US.

Their European neighbors, on the other hand, are not implementing similar reforms; indeed, although the embattled euro-zone nations are cutting spending, they’re actually raising the tax burden on their populations and businesses.  Moreover, they’re eschewing reforming their labor laws which leave unions with a decisive upper hand.

Are there lessons here for us?  Let’s see: those half million German jobs would work out to nearly 2 million new jobs in the US in 2011.  Germany cut taxes, but like the failing nations of Europe, our government insists on raising taxes.  Our tax increases aren’t even intended to close any budget gap, or to pay down any national debt, either—they’re for supporting even higher spending.  And here we are, just as are the embattled euro-zone nations, mired in a three-year-old recession in all but name—stagnating away with high unemployment, rapidly increasing budget deficits, and exploding national debt.

Hmm….

Progressives, RINOs, and Taxes

Posted on by
Reply

Now that the Republican fiasco with the temporary payroll tax cut is sort of ended for a little bit, it’s time for these gentlemen and gentlewomen to recover their heads from rectal storage and get serious—and coherent—about tax policy for the US.

This last week has been a textbook example of a Keystone Kops failure to perform.  Others can run the post mortem on their failure; I want to look ahead to early in the next year.

When the new year dawns, and the “negotiation” over the payroll tax cut extension for a whole year begins, we can expect the Progressives to resume their hobby horse demand to pay for the tax cut with their class war-oriented tax increase on groups of Americans of whom they utterly disapprove.  The House Republicans and the Senate RINOs need to change the terms of that debate, rather than continuing to surrender the frame of the discussion to the other side.

The discussion needs to acknowledge, with gratification, the Progressives’ avowal that tax cuts are good for Americans and our economy.  The discussion needs to acknowledge, with enthusiasm, that the Progressives want a 2% tax cut for Americans, and that their leader, President Obama, wants a 3% tax cut on both employees and employers.

Then the House Republicans, and their nominal colleagues, the Senate RINOs (assuming the latter can find their principles anywhere at all nearby), need to push for an income and corporate tax cut of 3%—just as Obama has asked for.  And also acknowledging the need for stability and predictability for all Americans, these worthies need to push for the income tax cuts to be permanent—no more of this annual dual between talking point lists for personal political gain.  After all, as Obama himself said all week long, the $40 per paycheck that this small cut represents “makes all the difference in the world” to those who get it.  Of course, these $40 should be made permanent.

The Republicans and RINOs also need to push the Progressives, when the latter resist the income tax cut and its permanence, about the Progressives’ demand, instead, to reduce funding for an already dysfunctional Social Security system while they also refuse to allow reform of the system (or of Medicare or Medicaid, come to that).

I look forward to the Republicans and the RINOs getting their act and their message together, recovering their integrity and their principles, and arguing for a more serious, income, tax cut.  And after that, they need to push, for the same reasons, for the permanence of the Bush tax cuts (and not allow this also to be merely another periodic talking points duel).

Hypocrisy

Posted on by
Reply

For some time, President Obama has been demanding that the payroll tax cut, due to expire at the end of this year, be extended for another year—the whole year, together with a blanket extension of the unemployment subsidy.  Leaving aside the wisdom of defunding Social Security as a means of providing a tax cut, or of paying the unemployed for not working, let’s explore what’s happened with Obama’s demand.

Obama and Senate Majority Leader Harry Reid have refused to pay for a one-year payroll tax cut and the unemployment subsidy extension with any means that doesn’t include a parallel tax increase elsewhere, as they demand a continuation of their class war programs.  Failing to get agreement for that for a complete year’s extension, the Senate passed a two month extension of the tax cut and subsidy—with, I’m embarrassed to say, the complicity of Senate RINOs who lack the character or courage required to fight this class war.  Certainly, at the end of those two months, the Progressive demand for tax increases on Americans of whom they disapprove will resume, even more loudly.

The House had passed, some time prior, a bill that would have extended the payroll tax cut for the entire year, extended the unemployment subsidy on a gradually decreasing schedule, and paid for all of it without tax increases anywhere else, but with spending cuts only.

When the Senate passed their two-month bill, they ran for the exits to start their precious month-long vacation, their personal welfare being more important to these Senators than the welfare of us Americans.  On the way out the door, they ordered the House to pass the Senate bill with no further argument.

The House rejected the Senate’s failure and voted, instead, to send the two bills to a House-Senate conference committee to resolve the differences, as is the normal way of doing business in the Congress.  “Let’s get this done today,” House Speaker John Boehner told Obama in an effort to enlist the President’s help to get the bill which Obama has been demanding passed.  However.

Reid is actively refusing to negotiate.  He’s actively refusing to bring the Senate back—or to send any Senators back to take part in the conference committee.  He demands that his two-month bill be passed by the House as a precondition to any negotiations.  And he’s castigated those evil Republicans for holding out for Obama’s year-long extension.

Obama is actively refusing to negotiate on the passage of his own bill.  He says:

Now let’s be clear.  The bipartisan compromise that was reached on Saturday is the only viable way to prevent a tax hike on January 1. The only one.

So, Obama, who has been demanding a year-long extension of the payroll tax cut for Americans, doesn’t really mean it.  The only bill he wants is his pet Harry Reid’s two-month extension.  And an opportunity to fight again for divisive tax increases on Americans whom he doesn’t like.