Yes, it’s true. A lie, repeated a thousand times, can become the truth. How so? Just change the definition of “truth.” (See homosexual marriage, or austerity. Human being-wise, “is-master” Bill Clinton comes to mind.)
The lie being repeated today is this: The Economic Argument Is Over — And Paul Krugman Won. How did Krugman win? Because Krugman fanboy Henry Blodget says so. And who is Blodget? He’s a banned for life financial-insider and $4 million disgorgement/fine guy whose bona fides speak for themselves.
What is the Blodget hypothesis?
…”stimulus” spending, economists like Paul Krugman argued, would help reduce unemployment and prop up economic growth until the private sector healed itself and began to spend again.
Yes, we saw how well that worked with the Democrats’ “stimulus,” did we not? And we’re still seeing it in America’s brilliant ongoing economic performance.
Blodget also says a spreadsheet error in has disqualified “austerity” and that we can continue to accumulate debt ad infinitum:
An academic paper that found that a ratio of 90%-debt-to-GDP was a threshold above which countries experienced slow or no economic growth was found to contain an arithmetic calculation error.
Once the error was corrected, the “90% debt-to-GDP threshold” instantly disappeared. Higher government debt levels still correlated with slower economic growth, but the relationship was not nearly as pronounced. And there was no dangerous point-of-no-return that countries had to avoid exceeding at all costs.
Despite Blodget’s assertions—not the same as proofs—reality suggests there are points-of-no return unless the debt accumulator, that is, national governments all around the world, decide to 1) inflate the debt away by making more money or 2) default. And there is, of course, the dread U.S. economic performance where the Obama recovery has been worse than the Bush recession.
They say economics is the dismal science. A better description would be that we have economists who are dismal pseudo-scientists. And those pseudo-scientists who can’t keep up with reality choose to write (as do those who are banned for life from the investment industry).
Oh and that “Nobel Prize for Economics” thing? A bit misleading, to say the least.
From Virginia, the state’s U.S. Senate candidate, Tim Kaine, a Democrat, said that he’s open to having a “minimum tax level for everyone.” Kaine went on to say he feels the minimum tax level should be an individual $2000 tax credit, a position largely consistent with President Obama and his economic advisors. Obama team insiders are said to be debating a minimum tax ranging from Kaine’s $2000 tax credit to a $10000 tax credit per household. Policy makers are also considering allowing qualifying households to opt for a Chevy Volt in lieu of the minimum tax tax credit.
On the campaign trail, the President decried the “bitter clinging” of mob violence, intolerance, mayhem, and destruction of property said to be planned by Mormons in response to the hit Broadway musical “The Book of Mormon.” Internet sources reveal the President is said to have his concerns sharpened based on Homeland Security briefings which relied upon unimpeachable Southern Poverty Law Center and The New Republic sources for their conclusions.
Appearing on Fox News, Presidential advisor David Axelrod responded to The American Spectator’s challenge to Name a single thing that has improved under his [President Obama’s] rule. Axelrod told host Shemp Smith that many things have increased under the President’s governance including gasoline prices, unemployment, food stamp usage, and the federal debt. Smith then challenged Axelrod saying, “While those are increases, almost no one views them as improvements.” Axelrod countered with, “This campaign won’t stoop to partisan politics,” and walked off the set in apparent disgust as soon as the show went to break.
In Washington, several high-level GOP senators emerged from a top secret briefing with senior Administration officials, incensed that the Obama team offered no new information while failing to answer questions regarding the Sept. 11 attack on the U.S. consulate in Benghazi that resulted in the death of four Americans. In response, Secretary of State Hillary Clinton, Deputy Secretary of Defense Ash Carter, Director of National Intelligence James Clapper, and Joint Chiefs Vice Chairman Adm. Sandy Winnefeld told the media they felt the briefings—which in an unusual turn, had been outsourced to the Southern Poverty Law Center and The New Republic—were “accurate, timely, and well received.”
It’s now been more than 100 days since U.S. Rep. Jesse Jackson Jr. began a “medical leave of absence.” Jackson’s staff has not disclosed when he may be able to resume his official duties but denied that his absence is related to alleged drug abuse. Skeptics have questioned this assessment with the revelation that Jackson has already been announced as starring in the season premier of the A&E Network’s popular reality show Intervention.
In the debates associated with the hotly contested campaign for the U.S. Senate seat in Massachusetts, Senator Scott Brown was said to have dismantled his foe, Elizabeth Warren. Warren surprised—and terrified—observers by showing up in a Cherokee head dress, Prada shoes and matching bag, and nothing else. For her part, a Warren campaign spokesman said Warren scored points by saying Brown “spoke with forked tongue.”
In a move disquieting to knowledgeable economists, Fed Chairman Ben Bernanke has decided to skip QE3, 4, and 5 and proceed directly to QE6. Bernanke said, “Tripling our money supply in six years has clearly not done the trick. I hope QE6 will.” When asked by CNBC host Larry Kudlow later that day, “Just what is the trick you’re trying to accomplish, Mr. Chairman?”, Bernanke shrugged. Bernanke soon departed the CNBC set for a fundraiser for President Obama intended to dishonor street economists Fo’pak (University of Chicago) and Notorious H.A.Y.E.K. (University of Freiburg).
Stay tuned for updates which will occur as time and conditions permit.
And now a word on household income from Peter Ferrera, himself quoting the WSJ:
“For household income… the Obama recovery has been worse than the Bush recession.”
But, but, but… that’s impossible! It’s Bush’s fault! Pants on fire! Four Pinocchios!
No, it’s factual. From Ferrera:
Even if you start from when the recession ended in June, 2009, the decline since then has been greater than it was during the recession. Three years into the Obama recovery, median family income had declined nearly 5% by June, 2012 as compared to June, 2009. That is nearly twice the decline of 2.6% that occurred during the recession from December, 2007 until June, 2009.
Accordingly, Barry Oh! and his surrogates need to pull a manmade global warming and hide the decline. But what’s the real damage, Officer Ferrara?
In January, 2009, the month he entered office, median household income was $54,983. By June, 2012, it had spiraled down to $50,964. That’s a loss of $4,019 per family, the equivalent of losing a little less than one month’s income a year, every year.
Well, certainly the President and his Dems have improved the position of the poor?
Now The Huffington Post reports that the poverty rate is on track to rise to the highest level since 1965, before the War on Poverty began… [and] a consensus survey of experts across the political spectrum indicates the poverty rate could soar from the current 15.1% to as high as 15.7%.
So in summary: debt up massively. Unemployment up massively. Household income down significantly. Poverty up significantly. If only we’d had an empty chair like in the Eastwood skit, things wouldn’t be this bad. Instead we have an empty suit with initiative.
And to borrow an old line made modern by Obamanomics, Other than that Mrs. Lincoln, how’d you like the play?
Obama 2012: fool us twice, shame on us.
While the issue of causation versus correlation can be argued all day, Louis Woodhill at Forbes makes a compelling case for moving the dollar out of the “fiat currency” category and once again pegging it to a known standard. Like gold.
I suppose when the dollar was moved off the gold standard, it was viewed as a radical and wild-eyed idea (or maybe not, since it was politically inspired and handed politicos the keys to the printing presses), just as a return to a standard is now viewed as archaic, an anachronism, and basically, freaky-deeky. The floating dollar was sold as temporary issue (part of the Nixon shock) and—whatyaknow—it became permanent.
But the real issue is one of control. When the dollar is tied to a standard, crony capitalism, rent-seeking, and regulatory capture are more difficult for the government to practice. The best impact of returning the dollar to a standard is that this “malinvestment” (think dot com and housing bubbles and the looming entitlements hard-landing/implosion, AKA inflation) would seem to be less likely to occur, largely because investment risk would decrease.
The loss of flexibility (that is, a diminished ability for our enlightened elites to influence the economy—to pick winners and losers) would be the downside…but only for the aforementioned enlightened elites.
The bottom line:
Of the 34 Organization for Economic Cooperation and Development nations, those with the largest [government] spending spurts from 2007 to 2009 saw the least growth in GDP rates before and after the stimulus.
The four nations—Estonia, Ireland, the Slovak Republic and Finland—with the biggest stimulus programs had the steepest declines in growth. The United States was no different, with greater spending (up 7.3%) followed by far lower growth rates (down 8.4%).
The liberal economists will no doubt say “But it would have been so much worse without the stimulus.” Such an argument ignores the facts of this case: mo’ stimulus = mo’ economic shrinkage. It also ignores the fact the “stimulus” has to be repaid.
…the truth is that government spending does come with debits. For every additional government dollar spent there is an additional private dollar taken. All the stimulus to the spending recipients is matched on a dollar-for-dollar basis every minute of every day by a depressant placed on the people who pay for these transfers. Or as a student of the dismal science might say, the total income effects of additional government spending always sum to zero.
I’d suggest that given the bureaucratic transaction costs and poor “investment” choices the government makes (think Solyndra, GM, et al) that the value gained is less than zero. And there’s still the moral hazard of mo’ stimulus:
Meanwhile, what economists call the substitution or price effects of stimulus spending are negative for all parties. In other words, the transfer recipient has found a way to get paid without working, which makes not working more attractive, and the transfer payer gets paid less for working, again lowering incentives to work.
When liberal economists (“experts” like Paul Krugman or Brad DeLong—how often we confuse credentials with knowledge) need to make a point, they often pull out a model or truncate the data. And as with
global warming climate change climate chaos, all that’s required to get the desired results is to change the model’s algorithms and/or its inputs.
The economic blurb of the day from Ryan Streeter at Indystar.com:
…what exactly is the Obama-Buffett ideal? No one, including them, knows — or is willing to say. Should we tax millionaires at 100 percent? Even if we did, anyone with a calculator can tell you it would fund the government for less than half a year.
Just like you can’t out train a bad diet, it ain’t the taxes so much as it’s the spending.
Darwinism offers that random mutations end up driving adaptations that offer survival benefits; survival of the fittest and all that. Secularists, especially lefty secularists, favor Darwinism.
Economic Darwinism offers that peoples (and by extension, nations) must compete economically or regress, but many secularists, especially lefty secularists, don’t favor Economic Darwinism. Instead, they trot out the “social contract” or the President’s “you didn’t build that” argument. Both the social contract and the “you didn’t build that” arguments believe beneficial economic mutations—which are created and driven by our “elites”—will instead offer social survival benefits that are superior to individuals with the freedoms to decide such issues themselves.
As it is, our elites have now burdened us with a sort of Economic Anti-Darwinism where the un-freedom of the welfare state requires the productive support the unproductive. Economic Anti-Darwinism also manages to stick future generations with the bill. It’s kind of like a multi-generational and government-endorsed form of dine and dash (and is generally given a benign sounding Orwellian name).
The disincentives of the anti-freedom and anti-achievement philosophies should be readily apparent in that they bestow power on those who are in a position to “spread the wealth around.” This suggests suggest the only real benefits from the left’s self-invented social contract and “you didn’t build that” arguments are to those in power, that is our “elites.”
Power may corrupt, but ineptness with power is especially dangerous (that assertion is a minor derivation on the whole idiot with initiative thing).
Although it’s common knowledge to the traditional media that Barack Obama is our most intelligent president ever, he too often seems to possess a certain panache or savoir faire for looking like an idiot.
It might help if the President would preview his scripts in advance and ask a few questions as opposed to reading them cold off the teleprompter. (Yes, we know that fundraising keeps him hopping, but…)
Consider this howler offered by Barry Oh! with a straight face and plucked from a recent presidential speech:
The last thing we need right now is more top-down economics.
Barry, Barry, Barry. You’ve given us a command and control economy (legislation via regulation, policy directive, and Executive Order; Obamacare; automotive takeovers; bank and Wall Street bail outs; green “jobs”; the EPA; stimulus; crony capitalism; 40-plus months of above 8% unemployment; a massive growth in the federal debt; etc.) that’s proven to be an epic fail for America.
You, Mr. President, are the very face of top-down economics. Don’t you even have a clue?
And by the way, it isn’t the taxes. It’s the spending.
Yaron Brook and Don Watkins, writing at Forbes, address the epic failure known as the welfare state.
Their basic hypothesis is that the freedom provided by true capitalism is win-win. That is, capitalism allows all—buyers/sellers; employers/employees; the black/the white/the red and brown, the purple and yellow—to participate (or not participate) in economic transactions as they see fit. Conversely, the un-freedom of the mandates of the welfare state require the productive to support the unproductive.
From Brook and Watkins:
…if the false charge against capitalism is that it allows “the strong” to exploit “the weak,” then the true nature of the welfare state is that it allows “the weak”—i.e., the unproductive—to exploit “the strong”—i.e., the productive.
Although our elites tend to use differing forms of Darwinism as an explanation for almost all things, the modern welfare state is a sort of reverse economic Darwinism; an anti-Darwinism.
I’m ready for the social evolution theorist to provide a proper explanation of how we mutated (and to what societal benefit) to the welfare state. Something about unintended consequences, I suppose.
Paul Krugman has a lofty platform. He has a massive megaphone and an epic echo chamber. He has a Nobel Prize for economics. Does any of this mean we should listen to him? If you buy into this from Nassim Nicholas Taleb or the following, no.
When Friedrich von Hayek became a Nobel Laureate in economics in 1974 he said: “The Nobel Prize confers on an individual an authority which in economics no man ought to possess.” The truth of this is demonstrated daily by the case of Paul Krugman.
And some more evidence (there’s lots) that we’d be well advised to ignore Krugman? How about something from The Center for Geoeconomic Studies (associated with the Council on Foreign Relations) which shows he chose to cherry-pick his facts in order to “demonstrate” the “Icelandic Post-Crisis Miracle.”
We showed that Krugman’s “miracle” was merely an artifact of comparing changes in Iceland’s real GDP with that of Estonia, Ireland, and Latvia since the strategically chosen 4th quarter of 2007.
Why did Krugman choose the 4th quarter of 2007? Because starting with any other quarter would have ruined his story. Based on the GDP data available at the time he made his figure (which have since been revised), Iceland’s GDP had fallen a whopping 5 percentage points between Q3 and Q4. By starting his story in Q4 Krugman managed to lop that off, making Iceland look much better.
We showed that the miracle story collapses as the starting date for the comparison is backed up. What we find is a simple story of large booms and busts in Estonia and Latvia, and much smaller booms and busts in Iceland and Ireland.
Ah, the question of economics (and government): what’s your baseline?
The Center initially showed how Krugman constructed his false-miracle in 2010, but now he’s dragging the issue back to the surface. So what’s the real Krugman agenda?
Once again, Krugman has relied on a Potemkin-Village graphic to illustrate his wider claim, which is that Icelanders derive unambiguous net benefits from their government obliging them to hold and transact in a national currency that their trading partners will not accept. (80% of Greeks consistently reject going back to such a state.)
Liberal economists: choosing facts that support their positions, ignoring those that don’t.
If it’s free, it’s for me
It seems we are currently governed by those who feel there really is a free lunch. That is, they fail to grasp the simple fact that, at the end of the day, someone has to pay. Yes, lunch may be free for me, but ultimately, someone is paying. Something that can’t be continued forever—like a Ponzi scheme—won’t.
With that past as prologue set-up, what are the Administration lies regarding Obamacare? Let us count the ways.
Lie number one: it’s not a tax. Reality: it is a tax. That’s why the IRS is hiring and why across ten years, Obamacare will cost Americans an extra $400 billion dollars. And by the time the dust settles (and since Obamacare is backloaded), chances are the tax will be far higher than a mere $400B; the government—and those that are paid by the government—are generally terrible at cost estimating. See space shuttle, Social Security, Medicare, Medicaid, and California for examples.
Lie number two: you can keep your old plan. Reality: it depends how you define old plan. Regardless, expect your old plan to be worsened in terms of care provided and know that it will cost more. Perhaps the SCOTUS will rule you can keep your old plan—even if it’s substantively changed—thereby making it so (see doublespeak).
Lie number three: nothing is going to change. Reality: costs, and therefore, care provided per dollar will worsen. As Jim Powell at Forbes reports, “Starting in 2013, there will be an Obamacare tax on medical devices such as intra-uterine devices, artificial hips, heart pacemakers, breast implants, coronary stents, ear tubes, traumatic fracture repair devices and artificial eye lenses for people with severe cataract problems.” The rule of thumb (all else being equal) is tax something and people will buy less of it.
Lie number four: it’s an issue of fairness. Reality: 75% of the added costs will be borne by Americans making less than $120,000 per year.
The result? Unless the leviathan called Obamacare is rolled-back, the American people, writ large, will experience increased suffering and will live less full lives. And most will pay more to do so.
While the economy is not under the president’s control, it is under the president’s influence.
And Barry Oh! has been a very bad influence on the U.S. economy.
Run away from your record as best you can Barry; you’ll just lose tired.
So I’m working on this book and I’m noodling around doing some research which leads me to the Danny MacAskill clip on YouTube and, well, it’s pretty awesome.
And it’s proof the Adam Smith division of labor thing works when a guy like Danny can specialize in such an incredible way.
As background, consider this: man is the only creature who can deceive himself.
Now onto the economic topic of the week, austerity.
Austerity is alleged to have use as an economic term. However, its precise definition is unclear and it seems austerity can mean many things to many people.
Traditionally, austerity was thought to mean something like “reduced availability of luxuries and consumer goods, especially when brought about by government policy.”
So how was the austerity effort in Europe received? Poorly, it would appear based on recent elections. In fact, in alt-reality land, austerity is being declared dead by bright and shining stars including Paul Krugman, Robert Reich, and Eugene Robinson.
There is, however, a more reality based assessment. And it comes from IBD:
Now, the left’s argument goes, a new “growth strategy” premised on more government spending, not less, is needed — just like in Spain, Greece and Italy.
The only problem: The idea of EU austerity is a myth.
Only the left (and/or the traditional media) would view more government spending as a growth strategy. If such a strategy were to work, wouldn’t you think the people’s long and glorious history of government deficits would have created such growth? And that it would especially gotten better in the last half-decade?
Or would you instead think low levels of productivity, high levels of government interference (and taxes), and bad demographics have led the left to the edge of the fiscal cliff?
Back to IBD:
Austerity? Spending has boomed in the EU over the last decade. During the 2000s, EU member nations collectively boosted government outlays by 62%. Average government spending by EU nations today stands at about 49.2% of GDP — vs. 44.8% in 2000.
On its own website, the EU itself ridicules the notion of government austerity as a “myth.”
“National budgets are NOT decreasing their spending, they are increasing it,” the EU says, noting that in 2011, 23 of the 27 nations in the EU increased spending. This year, 24 of 27 will do so.
Just as an obese person can observe an strict regimen of diet and exercise for a day or two, the EU fail nations (especially Greece, Spain, Italy, and perhaps soon, France) are alleged to have attempted to practice austerity for a few months—even though the EU knows it isn’t true—and they are now resolved: they will limit themselves to a family sized bag of Cheetos washed down with two-liters of Coke and a half-gallon of Chunky Monkey as dessert. For breakfast.
Because of the recent electoral outcomes in Europe, the anti-austerians are declaring austerity is a failure; austerity had its fifteen minutes of fame in Europe and now its as dated to the left as Milli Vanilli is to the rest of the world.
Instead, just remember that George Orwell was ahead of his time. Today, the anti-austerians favor doublespeak which changes the meaning of words and actions as convenient. For them, austerity means more government spending.
After all, the machine must be fed. And ignorance is strength.
The financial crisis has fully exposed the intellectual bankruptcy of the world’s central bankers.
Why? Central bankers neglect the fact that interest rates are prices. Manipulating those prices through credit expansion or contraction has real and deleterious effects on the economy. Yet while socialism and centralised [sic] economic planning have largely been rejected by free-market economists, the myth persists that central banks are a necessary component of market economies.
Snip to the bottom line:
Printing unlimited amounts of money does not lead to unlimited prosperity.
If Paul had earlier come around on a few more issues, the nomination—in my mind—could have been his. But he didn’t.
The President’s many lofty promises, a la Jimmy Carter, have fallen short.
How short? Painfully so. From Louis Woodhill at Forbes on the recent Bureau of Economic Analysis report:
…falling RBNRFI [Real business nonresidential fixed investment] = recession.
Driven by a capital gains tax cut that took effect on January 1, 1997, RBNRFI grew by 38.6% during the first three years of Clinton’s second presidential term. Over the same period, RGDP [real GDP] increased by 14.3%, and total employment increased by 5.2%.
The comparable numbers for Bush 43’s second term were, RBNRFI: 22.7%; RGDP: 7.8%; total employment: 4.4%.
During the first three years of Obama’s term, his economic performance can be summarized as follows: RBNRFI: -6.6%; RGDP: 1.2%; total employment: -1.8%.
RBNRFI matters, Woodhill foot stomps, because that “is what actually drives the economy” (as opposed to voodoo/doodoo Keynesian economics).
Democrats will say it was the economy we inherited from Bush. Democrat strategists will hope the citizenry has become desensitized to the steady stream of bad news. Republicans will be offer we can do far better. Cynics will say you get the government you deserve.
George H.W. Bush is credited with the term “voodoo economics.”
Bush the Elder, of course, missed the reality boat, but he did go on to serve under the man whose economic principles he once reviled. But as it turned out, the 80’s worked out pretty well, setting the stage for economically even-better 90’s (and don’t forget the in-the-middle collapse of the Soviet Union, the poster nation for central economic planning).
Now, decades later, we have doo doo economics, and its prominent practitioner, Brad DeLong.
…the belief that macroeconomic stability requires only minimal government intervention is simply wrong. In the United States, Federal Reserve Chairman Ben Bernanke has executed the Friedmanite playbook flawlessly in the current downturn, and it has not been enough to preserve or rapidly restore full employment.
Flawless? An interesting assessment. DeLong is among those who have called for more government, more borrowing, more debt, that is, more Obamanomics. DeLong can be likened to the wizened sage Joe Biden: we have to keep borrowing so we don’t go broke.
…the Friedmans’ hopes [Milton and Rose, not Tom and Ann] have been disappointed. The end of American preeminence in education, the collapse of private-sector unions, the emergence of a winner-take-all information-age economy, and the return of Gilded Age-style high finance have produced an extraordinarily unequal pre-tax distribution of income, which will burden the next generation and make a mockery of equality of opportunity.
How is it that a liberal economist can look at the same picture the rest of the world sees and draw the completely wrong conclusion? Perhaps because there is such thing as an incorrect worldview.
DeLong has made a huge intellectual investment in the school of liberal—read government interference—economics but even by his examples, the education industry—effectively a state-run monopoly—has been producing diminishing returns for a DeLong time; private sector unions are failing to grasp it’s a competitive domestic and global economy, and; winner-takes-all is more driven and enabled by crony capitalism, not real capitalism which favors competition and not barriers to entry.
And when the government subsidizes health care, picks winners and losers, extends unemployment, “helps” with college costs, “invests” in federal debt, et al, is it any wonder we get more costly health care, nationalized industry, extended unemployment, ever increasing college costs, and nearly unfathomable debt?
Why is it that the thing DeLong attributes as causation—the lack of government interference—is instead the source of the gruesome distortions we are now suffering through?
Because he’s a liberal economist.
(Bumper sticker via Zazzle.)
Those trending liberal actually favor a form of trickle-down economics.
The trickle comes to, through, and from the government.
Unfortunately for those trending liberal, facts are stubborn things and the fact is the government cannot create wealth. What government can do is take and redistribute resources, something it will never be able to do with the efficiency and innovation the market provides.
What’s a media man for America to do?
Try and defend the honor of the dead idea,of course. Unfortunately, ideas, no matter how bad or clearly disproven, seldom actually die; they just go into some form of hibernation.
And defending the honor is exactly what Ezra Klein (warmly known at this site as Ezra Klaun or Extra Klaun) does with this article which uses a rich liberal, David Levine, as its baseline and not as an anecdote:
It would be one thing, Levine says, if the economy had performed so much better after taxes on the rich were cut. But it didn’t. Some of the fastest economic growth of the post-war period came in the 1950s, when the top tax rate was above 80 percent. The slowest growth came in the 2000s, when the top tax rate was 35 percent.
Even Ezra knows what Levine doesn’t… kinda (emphasis added for the kinda part):
As Doug Holtz-Eakin, a conservative economist who squared off against Levine on a panel at the Tax Policy Center, argues, the post-World War II era was good for the United States. We had a kind of global monopoly that allowed us to live large and share the wealth. But that monopoly is gone, and there’s no tax regime that can bring it back.
Yes, after World War II, the United States had quite a few advantages. Our working population hadn’t been decimated (or worse), nor had our homeland. We were not only able to feed and clothe ourselves and sell to others, but we had huge, institutional, national-level advantages. However, the massive expansion of the role and reach of the U.S. government in the post-war era lessened our myriad advantages in a sad process often called reverting to the mean.
However, if we today assume a global-leveling of the ability to produce has occurred, what would help restore a national-level advantage? Taking more money from the makers and investors, running those funds through the black-box of government (reducing its value even more), in order to transfer those riches to the takers?
The wellspring of liberal ideas is shallow, sad, absurd, and surreal.
Let’s take a John Kennedy line (A rising tide lifts all boats) and modernize it for our current president. How about this? All boats need government intervention regarding the threat of rising tides.
Warren Buffet has served as a useful tool for the President for some time. However, Buffett’s aw-shucks demeanor clashes with the reality that he’s the great crony capitalist (that’s no compliment) of our age. Want to see a not-great example of a crony capitalist? Look no further than the bad $3 billion bet Phil Falcone placed with the government.
Similarly, the President has served as a useful tool for Warren Buffett, America’s most beloved venture socialist, by providing him access to the government’s economic level-pullers. The result? Mo’ money via the socialization of risk and the privatization of profits. However, deep-down, even Buffett must be concerned by Obama’s record of economic destruction which clashes not only with the will of the American people but also reveals a toxic combination of aloofness and ineptness not seen since the Carter Administration.
So as we near our tax filing deadline, it useful to remind ourselves that both Buffett and Obama are in favor of the so-called Buffett Rule, which increases the government’s take on America’s most successful—as determined by income—citizens. You see, Warren already has all his wealth (not income) squirreled away where it’s well-insulated from being subjected to the President’s great economic ideas.
Significantly, a Buffett Rule is likely to be a part of tax increases on all tax payers. Since half our citizenry pays no federal income taxes (and because the rule is proposed as an issue of fairness), how one views the reality of its usefulness would probably depend on who is paying the bill.
The most obvious flaw with the Buffett Rule is that it simply raises taxes. It constrains runaway spending, the source of our ills, in no way, shape, or form. It’s aspirin as a cancer treatment.
From the Wall Street Journal:
The Obama Treasury’s own numbers confirm that the tax would raise at most $5 billion a year—or less than 0.5% of the $1.2 trillion fiscal 2012 budget deficit and over the next decade a mere 0.1% of the $45.43 trillion the federal government will spend. When asked about those revenue projections, White House aide Jason Furman backpedaled from Mr. Obama’s rationale by explaining that the tax was never intended “to bring the deficit down and the debt under control.”
If the tax was never intended to reduce the debt/deficit, what’s the point? Oh, right: fairness. More:
The Buffett rule is really nothing more than a sneaky way for Mr. Obama to justify doubling the capital gains and dividend tax rate to 30% from 15% today. That’s the real spread-the-wealth target. The problem is that this is a tax on capital that is needed for firms to grow and hire more workers. Mr. Obama says he wants an investment-led recovery, not one led by consumption, but how will investment be spurred by doubling the tax on it?
Of course, the monies used to create capital gains and dividends have also already been taxed once as ordinary income, before they were ever invested (with a few minor exceptions like retirement investment accounts). Is that an issue of fairness in anyway?
Another issue regarding Obamanomics is the tension between an investment-driven recovery and a consumption-led recovery. Unfortunately, the reality is we’ve already zoomed far past mere consumption and are neck-deep in a debt driven economy. Future consumption will be limited by servicing accumulated debt.
Successful weight-loss programs understand you can’t out-train a terrible diet. Similarly, the United States can’t tax its way into a meaningful and enduring economic recovery. Both the President and Warren Buffett need to set their economic crack pipes down and walk away.
In case that doesn’t happen, I’m also hopeful our national economic detox will begin in November.