Tag Archives: taxes

The State of Our Nation’s Economy

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Senator Jeff Sessions (R, AL), Ranking Member of the Senate Budget Committee, had some in his opening remarks at last Wednesday’s Committee hearing on the President Barack Obama’s FY2015 budget proposal (Treasury Secretary Jack Lew was the opening witness here).

Thank you, Secretary Lew, for appearing before us today.

In 2009, the Administration wagered America’s financial future on the idea that a record increase in government spending and debt would revive the economy.

Since then, government debt has increased 64% and is on track to double by the end of the President’s second term.  What are the results?

  • America is in the midst of slowest recovery since the end of World War II.
  • Workforce participation has shrunk to a nearly 40-year low.
  • The Labor Department reports that most occupations pay less today than they did when the President took office.
  • Government debt has leaped from roughly $10 trillion to $17 trillion, yet median income has dropped $2,268 per household over that same time, and the decline has actually accelerated.

This is a huge disaster.

The justification for this unprecedented accumulation of debt was the claim that it would lead to prosperity.  And yet now, we have none of the prosperity and all of the debt.  This plan has proven to be one of the most costly failed gambits in American history.  The White House’s average 2013 growth projection in their 2009 through 2012 budgets was 3.9%.  Economic growth is critical for America’s workers-translating into higher wages and better jobs with benefits.

But actual growth last year came in at half what was projected, 1.9%—a huge difference with real impact on millions of Americans.  For example, CBO has repeatedly said that the Administration’s $870 billion stimulus bill would be a long-term drag on the economy.

So what does the President propose in his new budget?

The plan increases spending growth by almost $1 trillion, bursting through the Ryan-Murray spending caps he signed into law only two months ago.

So, while the military gets hammered, other agency budgets soar.  The White House proposes the following increases next year:

  • A 45% increase for the Department of Housing and Urban Development
  • An 18% increase for the Legal Services Corporation
  • A 15% increase for the Department of Energy
  • A 30% increase for the Commodity Futures Trading Commission, and
  • A 7% increase for the Bureau of Consumer Financial Protection.

The plan also raises taxes more than $1 trillion—in addition to the $1.7 trillion in taxes he’s already enacted.  New proposed taxes include:

  • Limit the value of itemized deductions to raise taxes by almost $600 billion.
  • Raise the death tax and reduce the exclusion to increase taxes by over $100 billion.
  • Increase taxes on unemployment insurance by $78 billion.
  • Increase taxes on energy production by $49 billion.

So the President raises taxes to increase spending.  It is a tax-and-spend budget that will never pass. Altogether, the White House budget plan would add another $8 trillion to our $17 trillion debt.

The seriousness of the situation is demonstrated by this fact: last year, we paid our creditors $221 billion in interest on our federal debt.  Under the President’s plan, according to his own numbers, annual interest payments will nearly quadruple to $812 billion.

Rising interest payments represent arguably the gravest threat to our nation’s financial security.

Should interest rates increase even slightly above projections, the costs of financing our debt would quickly surge to emergency levels.  As the Director of the Congressional Budget Office warned, we face “the risk of a fiscal crisis.”

Clearly, we must pursue a new course that creates jobs and that does not add to our debt.  Here’s how:

  • Produce more American energy to create jobs right here in the US
  • Streamline the tax code and lower rates to make America more globally competitive
  • Eliminate every unnecessary regulation that destroys jobs
  • Adopt a trade policy that defends the legitimate interests of US workers
  • Enforce an immigration policy that serves American workers
  • Turn the welfare office into a job a training center
  • Make government leaner, doing more with less
  • Balance the budget to restore confidence and growth

A couple of idle thoughts: That addition of $8 trillion to our debt by the Obama budget is an optimistic figure, depending on interest rates not rising, despite the Fed’s OEx programs and easy money position.

For perspective on how the Obama budget debt payment growth fits in with the other growths projected from his budget, see here.  [Note: the article is behind Ricochet‘s pay wall.  I strongly recommend you subscribe; it’s well worth the $29.95 per year.]

Other than that, what Senator Sessions said.

Chained CPI, Taxes, and Spending

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In years past, Obama had offered to trim cost-of-living increases in Social Security and other benefit programs—known as chained CPI.  Not anymore.

The Obama administration also has taken to making this claim:

Social Security has not contributed one penny to the deficit.

This, of course, is mendaciously false—it’s government spending, and the government is spending more than it takes in.  The only thing is the bookkeeping fiction that it’s off-budget, and so (so the claim goes) that deficit spending doesn’t exist.  But this meme depends on a carefully distorted definition of the official “deficit”—that of being only an on-the-books deficit, and not including the off-the-books spending that is Social Security (and Medicare).

But, maybe Obama would reconsider.

“The president was willing to step forward and put on the table a concrete proposal.  Unfortunately Republicans refused to even consider the possibility of raising some revenue by closing some loopholes that benefit only the wealthy and well connected,” [White House Principal Deputy Press Secretary Josh] Earnest said.  Officials said Thursday that those potential reductions in spending, included in last year’s Obama budget, had been designed to initiate negotiations with Republicans over how to reduce future deficits and the nation’s debt.  But Republicans never accepted Obama’s calls for higher tax revenue to go along with the cuts.

Never mind that the only legitimate uses of closing loopholes are two: to reduce tax rates, and to pay down the national debt.

Beyond that, government doesn’t need more tax revenue; although it would get more, even at lower tax rates, if it got out of the way of the economy and let that grow.  Government needs to cut pending to below collected tax revenue, and it needs to use the increased revenue from loophole closing (all loopholes, including, say, tax credits for “green” energy boondoggles, not just those convenient to Democrats) to reduce tax rates even further—and then keep that tighter lid on spending.

[Obama’s latest budget proposal] says deficits as a share of the economy will be below 2% after 2025.

In other words, Obama continues to ignore our out of control national debt, since those deficits can only continue to add to the debt.

The Evil 1%

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James Piereson, Senior Fellow at the Manhattan Institute, had some thoughts on these folks.

This crusade [against the richest among us] is based on three questionable claims.  One is that the wealthy are mostly Wall Street bankers benefitting from rising stock and real estate prices, or executives who pay themselves extravagant salaries.  Another claim is that such people unfairly benefit from a system that taxes capital gains at half the highest marginal rate paid by those who earn salaries and wages.  Then there is the assertion that the “super rich” have abundant funds that can be taxed to improve the living standards of everyone else.

All of these claims are false.  By promoting them, the president and his supporters may hope to distract attention from ObamaCare and the economy.

My father always said, “Never let the truth interfere with a good story.”  The difference, though, between my father and President Barack Obama and his fellow…crusaders…is that my father was joking.

[According to] data compiled by the Congressional Budget Office, the top 1% received 15% of the national household income (before taxes) in 2010, up from 9% in 1980.  A taxpayer needed a taxable income of $307,000 to enter the top 1%, a figure that hardly qualifies as “rich” today, especially in cities like New York, Chicago, Los Angeles or San Francisco.

And

[Top] performers earn their incomes in highly competitive environments and through the voluntary patronage of consumers.  Where does their money come from?

The top earners depend heavily on salaries.  In 2010 the top 1% earned 36% of their incomes from salaries and wages (what the CBO calls labor income); 22% from businesses, farms, and partnerships; and just 19% from capital gains.  The majority of their income would thus be taxed today either at the corporate or the highest marginal rate rather than at the lower capital-gains rate of 23.8%.

There’s this tidbit, too:

From 1980 to 2010, as the top 1% increased their share of total before-tax income to 15% from 9%, their share of the individual income tax soared to 39% of the total paid, up from 17%.  Most were paying federal taxes at the highest marginal rate[.]

A 60% increase in income share (from a very small share to a small share) “matched” by a 129% increase in income tax share from small to large.  Hmm….

Bipartisanship, Compromise, and the Conservative Movement

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The Conservative movement, and the Republican Party generally, need to cut out the internecine sniping and concentrate on the real problem: the destruction being done by current—and over the last 80 years—Progressive policies.  Herewith, some advice, even though it’s unasked for.

You need to study the Progressive movement and the mechanism they’ve used for making the gains they’ve made up to the Obama administration, and the naked power grab in which the Obama administration is engaged.  Until Obama, they made their gains by sticking to their core principles and accepting smaller changes than they wanted—to keep you coming along, while they made those smaller, but positive, gains in their direction.

You of the Conservative movement, similarly, need to stick to your core principles, but you must be willing to take incremental steps, and to accept gradualism in moving things back to the right, back to limited government.  This, of course, means you have to become better communicators, too, getting out into the neighborhoods of your and your Democrat neighbors’ constituents and into their newspapers and televisions.  In this era of a news “medium” that’s generally hostile to Conservative principles, you also have to learn to bypass this medium as well as use it: that’s what the social media are for.  The NLMSM can’t manipulate those.

In last five years, the Progressives have gotten their way with a my way or the highway, all or nothing, tactic because they’ve had the votes to force it in the first part of that period, and in the last three years, they’ve still had the luxury of no coherent, united opposition, even when they didn’t have the votes in one branch of Congress.  Get over yourselves.

These last several years, with the euphoria of the 2010 election outcome and the bitterness of the 2012 outcome having clouded your judgment, you’ve been trying for yourselves the Progressive all or nothing tactic.  How’s that been working out for you?  You demanded no tax increase at all in the fall of 2012 Fiscal Cliff fiasco, even scotching Boehner’s Plan B before either getting a vote in the Senate (putting each Democrat, individually, on record as rejecting a small increase in favor of a big one) or forcing Reid, Schumer, and Durbin onto the record as being too afraid of the issue even to permit a vote.  Your result was an even bigger tax increase—on $400k or more income—than you could have gotten away with.  This is not progress at all; you lost ground.

You demanded to entirely defund Obamacare in one fell swoop, even at expense of shutting down government.  That felt good, surely, but it was very damaging politically, hurting your and Party chances in the Senate elections in 2014.  And the concrete result here was another spending increase.  Again, you lost ground.

Now you’re demanding a total rewrite of the tax code all in one fell swoop, ignoring the lessons of the Obamacare law, which rewrote the health industry in one fell swoop—and is a failed law, as much because it overreached in one step as because of the goals of Obamacare.  You’ll get a similar lack of success from a whole hog effort on the tax code.

No.  You must move for compromise, for bipartisan solutions—if other party has a role in the solution, it’ll be a more stable foundation from which to move the question further in your direction on the next go-round.  Notice that: it’s possible to compromise while maintaining your core principles, while accepting smaller moves in your preferred direction than you want.  It’s what the Progressives have been doing for four generations.  Are they really that much smarter than you?

Furthermore, you must recognize that the work is never done, there’s always more for the next year, more for the next session.  Even were you to get, for instance, the tax code completely revamped all in one bill, it still would need improvement.  But working from a stable outcome generated this year makes working toward next year’s progress easier.

Thus: move incrementally, accept a smaller tax cut, for instance, or smaller spending cut, this year, while holding out for those cuts (and no accounting gimmicks, either: real cuts this year, not phantom reductions in growth rates in the out years), so you can work for further cuts in the other, or both, next year.

You must stop, for now, the arguments over raising the debt ceiling.  You don’t have the votes in the Senate to win this one today, and the Progressives in the Senate don’t care about the threat of default.  They know you’ll get the blame for it in today’s news climate.  Besides, and more importantly (gradually) cutting spending to less than tax revenues (while also cutting tax rates and—gradually—rationalizing the tax code) will lead to eliminated deficits for the current year, which will eliminate borrowing in the next year, which will make the debt ceiling irrelevant.

You Conservatives today are acting like Obama Progressives with your all or nothing, right damn now, positions, and that’s a losing proposition while you don’t have the votes, and it’s a losing proposition even were you to get the votes—look at the animus generated by the Progressives’ all or nothing, their way or the highway Obamacare.

To Conservatives, then: by all means, force a vote—in the Senate, too, or force Reid, Schumer, Durbin, et al., on the record as too fearful of a vote—on a debt ceiling raise paired with commensurate spending cuts, but then let the debt ceiling raise go through.  Don’t let that argument become a distraction from Obama’s failed Obamacare, his failed economic policies, his failure to promote job creation, his denigration of the private sector.  Stay focused and win the Senate while increasing your hold on the House in 2014, and do the same (while increasing your hold on the Senate) while winning the White House, too, in 2016.

Accept, separately, smaller spending cuts, a lesser tax reform than you want.  On those items’ passage, come back the next year, the next session, again and again, with more, building on the little steps—they’ll take you to the full cuts and the full reform.

With the victories in 2014 and 2016 (and in the later election cycles), you can begin serious repair of the Progressives’ damage.

To Republicans: listen to the Conservatives, incorporate their ideas.  They’re sound—and they won’t give ground as easily as you’ve done these last 80 years.  Your own performance has only been to allow the drift to the left, as the Democrats and their Progressives have executed incrementalism better than you’ve resisted it.

To RINOs: shut up.  Whacko bird-ism just makes you indistinguishable from Progressives.  You have no credibility.

To Conservatives and Republicans: develop a unified message that both of you can push.  And get out and push it.

Obama’s Obamacare Tax Increases

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Here are many of the ones that start this year.  As does President Barack Obama’s war on marriage, using his IRS to prosecute it.

  • top marginal tax rate rose to 39.6% for those at higher incomes
    • $400,000 for single filers
    • $450,000 for married couples filing jointly
    • $425,000 for heads of household
  • itemized deductions and personal exemptions phase out as income increases
    • beginning at $300,000 for married couples filing jointly
    • $250,000 for singles
  • higher capital gains taxes—up to 20% for some taxpayers
  • additional 0.9% Medicare tax
    • on earnings over $250,000 for married couples filing jointly
    • $200,000 for singles and heads of household
  • 3.8% tax on investment income
    • on earnings over $250,000 for married couples filing jointly
    • $200,000 for singles and heads of household

Notice that marriage penalty.