Tag Archives: taxes

Economics and the AP

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The backdrop is this: last spring, Japan enacted a tax hike in an effort to start covering its public debt and bring that under control for the benefit of the Japanese economy and the Japanese citizen. The country promptly fell into recession as even more money was taken out of the citizens’ hands, removed from the private sector of the economy. As a result of this, Prime Minister “Shinzo Abe called a snap election for December and put off a sales tax hike planned for next year until 2017.”

Here’s the AP’s lack of understanding of basic economics, as demonstrated on the other side of the link above.

Japan needs more tax hikes to get its swollen government debt under control, but the April tax increase, to 8% from 5%, crushed consumer and business spending.

Their own statement ignores both the nature of debt and reason the current Japanese national debt is so far out of hand (an error the present American administration has been making for these last six years). Debt is created by borrowing, which is the result of spending more than income. Certainly one way to address that is by increasing income: in (the Japanese) government’s case, by raising taxes. That well, though, can only be gone to so much, as the AP illustrates without understanding. Raising taxes takes money away from the employers and employees—the folks who power any economy by buying stuff and so creating demand for producers of stuff, who produce more stuff, and so hire more folks, and so…. After a point, too much money is taken out of the economy through taxes, and the thing stalls—as Japan’s economy has just done, from last spring’s tax bump.

The other way to address national debt, though, is to stop borrowing by stopping spending so much. This is the step the AP has demonstrated, via that quote above, that it does not understand.

If Japan wants to get its government under control, if Abe and his Liberal Democrats want to break Japan out of its new recession and its decades-long stagnation, they need to reduce spending below current revenues, not attempt to raise revenues above current spending. This is necessary for two reasons. One is that the latter is open-ended: there is no incentive to cap spending; spending always will rise, necessitating ever increasing taxes.

The other reason is one I keep harping on. Taking money out of the private sector, out of the hands of the drivers of economies, stunts the economy. Taking money out of the private sector and using government to spend it creates a vicious circle: it crowds out the private economy and, keeping the money out of the private economy, government spending shrinks the private economy even further.

And this claim by the AP:

Eventually, Japan must boost taxes to cover rising costs for health and elder care in this aging society.

No. Japan must reduce taxes and reduce spending even further, thereby letting the resulting robust and growing economy generate the money to cover those costs.

One last bit of understanding lack, this time by Abe, but a thing about which the AP writes approvingly is this:

Abe reportedly plans to announce tens of billions of dollars in new stimulus….

This is just more spending and borrowing, though. Look for it to fail as completely as have the repeated spendulus episodes our own administration has inflicted on us these last six years.

Taxing Europe

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Speaking at a gathering of the Group of 20 major economies in Brisbane, the former prime minister of Luxembourg defended his position, saying a lack of cooperation between European Union member states created a system where “very low taxation of companies” was legal. “Things of that kind could happen because of the divergency between national tax legislation,” he said.

European Commission President Jean-Claude Juncker said that like he thought low taxes were a bad thing. Leaving more money in the hands of the folks who earned it, instead of transferring it to Government Know Betters is a bad thing.

Contra our own President Barack Obama and his Democratic Party, I don’t want us to be more like Europe.

What Emails?

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They can’t be there, because I didn’t look for them. If they had been there, I’d have looked.

Attorneys for the IRS have told a federal court that they have not searched various “other sources” for the missing emails of former agency official Lois Lerner, claiming that doing so would be fruitless.

… The IRS has said that potentially thousands of emails belonging to Lerner, a central figure in the agency’s targeting of conservative groups, were lost in a hard drive crash in 2011.
…
[T]he IRS said that it did not search the agency’s servers for the emails because it determined doing so “would not result in the recovery of any information.”

So there.

And

In addition, the IRS said did not search the agency’s disaster recovery tapes because the tapes are reused or destroyed every six months, therefore rendering them useless in the hunt for Lerner’s emails from or before 2011.

It’s time to impound the servers and conduct a forensic search. Time, also, to arrest the IRS officials involved. This willful destruction is a violation of the Federal Records Act, which

requires executive branch departments and agencies to collect, retain, and preserve federal records, which provide the Administration, Congress, and the public with a history of public policy execution and its results..

It’s also evidence tampering.

Outcomes

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Tuesday’s mid-term elections have the potential to be a sea change in the governance of our country and in the direction we take as a nation. The elections have resulted in a sharp change of control of the Senate to the Republicans, giving them both houses of Congress for the last two years of President Barack Obama’s term; an expansion of House control by 13 seats; a net gain of three (so far) governorships; and an increase in Republican control, depending on how too-close-to-call local races come out, to between 67 and 69 out of 99 of State legislatures. The governorships are especially telling given some particular victories: Scott Walker in Wisconsin, John Kasich in Ohio, Rick Scott in Florida, Bruce Rauner in Illinois, and Larry Hogan in Maryland, among others.

Together, these outcomes represent a stark and clear repudiation by Americans all across our country, in Red States and Blue, of the policies of President Barack Obama and his fellow Democrats. This is demonstrated not only by the broad swath of States involved in the Senate and Gubernatorial elections, but especially by the fact that every Representative in the House was up for election—Americans in every district of America had something to say on the matter—and by those state legislature results: Americans in every local district had something to say on the matter.   It’s also demonstrated by the fact that Obama put his policies on the ballot—every single one of them—and the voters said, “No.”

Now Republicans need to do things.

In short order, they need to organize and publish a coherent legislative agenda, as House Majority Leader Kevin McCarthy (R, CA) said on the night of those elections that he wanted them to do. Then, just as quickly, they need to pass legislation with specific, simple, coherent requirements. A good set of bills with which to start would include tax reform, jobs (re-execute, for instance, the 40+ jobs bills the House passed and sent to the Senate, where Majority Leader Harry Reid (D, NV) personally killed them); immigration reform; repeal of Obamacare; a series of bills to restore health insurance and to improve the operation of health insurance and health care systems; approval of the Keystone XL pipeline; and elimination of “green” subsidies (and subsidies for oil and gas companies).

It’s entirely likely that Obama will veto most, if not all, of those bills.

However, if the Republicans in Congress put forward a coherent plan and then act with specifics in the first days and weeks of the new Congressional Session, three things will occur: Republicans will demonstrate that they can govern better, with more coherence, and less intrusion into Americans’ lives than the Democrats have done; our economy finally will take off; and whatever Obama does—sign or veto—will enable the Republicans to shape the 2016 elections on terms favorable to them.

In the meantime, Congressional Republicans need to be alert to, and able to stop, Obama and Reid shenanigans during the Democrats’ lame duck next couple of months. The Senate Democrats, don’t forget, have judgeship confirmations to approve, and they have an Attorney General to confirm, and they have cover for Obama’s immigration travesties to provide, and they have….