Why can't we tax Republican hypocrisy?

 by Roland Hulme

 
The Republicans are against raising taxes; except when they're not.

The Republicans are playing a losing game in Congress

Last year, the battle between Democrats and Republicans came to a head over the infamous "Bush-era" tax cuts.

These were introduced by George Bush in 2001 and 2003, and lowered people's federal tax rates across the board. In 2010, they were set to expire and that would have resulted in a leap in everybody's taxes.

President Obama put forward the idea of continuing the tax break for those making under $200,000 a year, but allowing the tax cuts for those making more to expire.

This was a compromise to give the struggling middle and working class a break, while attempting to correct the devastating federal budget deficit created, in part, by Bush's cuts.

The Republicans, of course, blew a fuse. Under their promise not to raise any taxes under any circumstances - even though this wasn't a tax "raise", just a tax break naturally expiring - the Republicans held the country hostage until the eleventh hour.

That was when Obama reluctantly handed them a "compromise" consisting of the GOP getting everything they wanted; the tax cuts continued for everybody, and the deficit be damned.

Whether or not you believe in the logic behind the Republican's hard-ball tactics, at the time we at least believed they were being consistent. The GOP looked like they were making good on their promise to balancing the budget and bridging the deficit gap without raising taxes, or allowing tax breaks to expire.

Until this week.

Because that was when another "tax break" came to expire - Obama's stimulus package that lowered the payroll taxes of working Americans from 6.2% on their dollar, to 4.2% - and the Republicans said "non."

Unless they vote to extend it, every working American will see a tax hike of 2% on every dollar they earn in 2012 - and word on the Hill is that the Republicans are going to vote against extending this tax cut and letting it happen.

Why? Because, in the words of Republican House Majority Leader Eric Cantor: "This type of temporary tax relief is not the best way to grow the economy."

Except, as any freshman economist will tell you, it is. 

The fallacy behind the Bush-era tax cuts, and the Republican economic policy in general, is that giving tax breaks to the richest Americans will have a "trickle down" effect as they money that the don't pay in taxes will be "re-invested" in the economy; creating jobs.

This is startlingly incorrect - and is based on an outdated understanding of how the American economy works.

Years ago, America was a producer, and the richest Americans would use what money they didn't pay in taxes to create new companies and drive new forms of increasing their investment.

Today, America is a consumer; and the richest Americans reinvest their money in trust funds, investment portfolios and other options - options which don't pour that money back into the economy. The rich get richer; and unlike in times past, don't benefit the economy while they do so.

In today's age, it's the middle and working class who drive the economy forward; because they spend their money. They buy things; gas, groceries, wide screen TVs, sports utility vehicles and mortgages. That's what keeps the wheels of the American economy moving.

The fairly insignificant cost of extending the Obama payroll cuts would pay hefty dividends in stimulating the economy (the overall cost will be $120 billion a year - only just over what the federal government admits is "improperly spent" every year.)

Compare that to the loss of revenue created by extending the Bush-era tax cuts to the super rich. If those cuts were allowed to expire, the gaping federal deficit would be instantly balanced for the next ten years. That's some indication of just how monstrous they are.

The fact that the Republicans are even discussing letting the Obama payroll cuts expire reveals their blatant hypocrisy regarding tax cuts, and their pathetic dependence on the same bankrupt economic policies that helped drive this country into debt in the first place.

They're indentured to the corporate billionaires of this country, ignoring the very real economic crisis that their core electorate - blue collar Americans - are struggling with. Not to mention that they've turned their back on the basic, fundamentally "Republican" economic policies that could drive the American economy forward again.

And, more than all of that, this inane action reveals the GOPs blindness to the current political climate.

The GOP are currently riding on the crest of national dissatisfaction with the Obama administration; but imagine how quickly that tide will turn when the Democrats capitalize on GOP lawmakers forcing every working American to pay hundreds of dollars more in payroll taxes in 2012.

This is the stand which might even lose them the presidency - not to mention control of both houses during the next election cycle.

The Republicans now have to decide whether they're truly the party of low taxes and fiscal responsibility; or if they're just going to come out as transparent puppets of America's corporate paymasters.

Currently, I fear it's the latter.

Buffett's right, but he misses the point

 by Roland Hulme

  

Buffet: "I've been coddled enough."

Warren Buffett says it's time for the rich to pay more tax. But is that a diversion from a more serious issue?

Warren Buffett, who is arguably the smartest businessman alive, caused a stir this week by writing an op-ed for the New York Times in which he urged America to stop "coddling the super-rich."

In all honesty, it wasn't really news. Buffett's been saying the same thing for years; ever since he pointed out in an annual letter to Berkshire Hathaway investors that he, then the richest man in the world, paid half the tax rate of his secretary.

The NYT op-ed was only different in that it framed the grossly unfair tax code against America's current economic crisis; and how stopping the absurd tax perks for the super-rich would help close the gap without raising taxes for the struggling middle and working class.

Now, I agree with Buffett that it's time for the rich to pay their fair share. Screw the ridiculous Reaganomics rhetoric, proven time and time again not to work. There is simply no logic in allowing those who make money by investing money to get away with paying half the tax rate of those who actually work their asses off for it.

But Buffett's magnanimous monologue ignores the real issue – the one the Tea Party have been ranting about. We shouldn't be thinking of ways to raise the tax rate to meet our increased spending. In fact, we should be doing the opposite.

Just look at the maths. It's an inarguable fact that every American not earning billions in dividends pays roughly the same gross tax rate – 40%. Whether you're on minimum wage or pulling in a million a year, payroll, state and sales tax add up to 40% or thereabouts.

Yet even with every American contributing almost half their income to the government, it's still not enough. Currently, 43 cents from every dollar the government spends is borrowed money – the equivalent of somebody earning $100,000 a year spending $143,000 and sticking the difference on his increasingly strained credit card (raising the debt ceiling was the equivalent of asking for a credit extension.)

What Warren Buffett ignored was the fact that if raising taxes was the answer to meeting America's financial obligations, it would mean the average American citizen would need to pay almost 70% of their income in taxes. That, my friends, is almost an unsustainable as continuing to whack half the federal budget onto a credit card each year.

So I agree with Buffett that it's time for the super-rich to pay their share – after all, investors and speculators aren't job creators, they don't contribute to the economy and, in reality, all they do is get rich by trading pieces of paper with hypothetical dollar values attached to them.

But changes to the tax code need to be met by aggressive, focused spending cuts – otherwise any relief from America's debt burden a super-rich tax hike will bring will be short-lived; quickly eaten up by the bottomless maw of an ever-expanding government monster.

Is this what's killing America?

 by Roland Hulme

 

There are many things that have led to America's dire financial straits; but perhaps none so important at the loss of production and manufacturing in this country. 

Once upon a time, the words "Made in America" meant something. Today, it seems more and more staples of American life are being made instead in sweat shop factories in China.

As a result, the faltering engine which drives the American economy has switched from "production" to "consumption."

It's a recipe for disaster, because it undermines the one thing that has always placed America at the top of the world's economic totem pole; self sufficiency.

America became the greatest economic superpower in the world because it used to make stuff - stuff that was consumed at home, and then shipped throughout the world. Tangible stuff like weapons, planes, automobiles, steel, Coca Cola and movies.

But now, America has become more and more dependent on imports. Today, we fill the gas tanks of our Japanese cars with Middle Eastern oil and drive them down crumbling highways nobody is motivated to fix.

America has become dependent on foreign nations, which in turn means we have become beholden to them. We have voluntarily sacrificed the rudder of our economy and it's leading us towards financial ruin.

So what to do? Well, one thing it to reclaim America's heritage as a producer and go back to doing what got us to the top spot in the first place. But the only thing standing in the way of that is us.

Just look at a recent example from Birmingham, Al., where mining entrepreneur Ronnie Bryant requested to open a new coal mine in an economically depressed region of Walker County.

After investing millions to establish mining standards that meant the state environmental officials and mine operators would verify the mine was environmentally safe, Bryant still met overwhelming opposition to his project from environmentalists and outraged left-wingers. So how did he respond?

He quit.

"I just — you know — what’s the use?" Bryant told an assembled crowd. "Basically what I’ve decided is not to open the mine. I’m just quitting."

But the environmentalist's victory was a Pyrrhic one, as they quickly realized when Robbie Bryant took time to explain his motivation for coming to Walker Country. It turns out it wasn't simply to rape the earth and destroy the environment.

"Nearly every day without fail," he told the assembled crowd, "I see men streaming to mining operations looking for work in Walker County. They can’t pay their mortgage. They can’t pay their car note. They can’t feed their families. They don’t have health insurance. I see these guys — I see them with tears in their eyes — looking for work."

"So I got a permit to open up an underground coal mine that would employ probably 125 people. They’d be paid wages from $50,000 to $150,000 a year. We would consume probably $50 million to $60 million in consumables a year, putting more men to work."

"But there’s been so much opposition to this mine, and to letting these guys making a living, I feel like there’s no need in me putting out the effort to provide work for them any more. And my only idea today is to go home."

"If the federal government want to create jobs, provide health insurance,and increase revenue, they need to back down on the regulatory burden. It’s like pulling an iron ball with a chain. I’m not saying to make it go away — we need some kind of regulation on many things — just stop the stuff that’s not pertinent or useful."

The environmentalists may have succeeded in stopping him opening the mine; but in doing so they'd also prevented him bringing millions of dollars into one of America's most economically depressed regions.

In all honesty, which would prove to be more harmful to the people of the region? Hypothetical health issues dismissed by the state environmental officials? Or continued unemployment, poverty and deprivation?

And that's really at the crux of America's current economic crisis. We're sinking into a black hole, in which this nation is slowly losing its capacity to sustain itself or its economy.

Yet even in the face of this crisis, the government seems to be determined to stifle anybody who shows the business savvy and guts to try and contribute to the economy and reverse the situation.

From proposed bills like "Cap and Trade" to inane rulings by federal bodies like the FCC and FDA, it seems innovation and entrepreneurialism are undesirable characteristics; and the self-motivated business mavens who once made this country great are quickly being turned into an endangered species.

This country will shrivel and die as long as government and politics force men like Robbie Bryant to quit. But perhaps the most scary thing about his story is what he's telling the rest of American's potential entrepreneurs and their plans to bring industry and enterprise back to this nation:

"What’s the use?"

Until we change that fundamental mindset - and give people the opportunity and liberty to start this country producing again - this current financial crisis is just the tip of a monstrous economic iceberg.

Ayn Rand and the American Supercar

The Pagani Huayra - not for kids

The Fed says "no" to six Italian supercars - but who are they really trying to protect?

A common criticism of Ayn Rand's seminal work, Atlas Shrugged, is that she laid it on a bit too thick. She wrote about an overly powerful federal government that worked to dismantle the business enterprises of America's most talented and entrepreneurial - a concept very difficult for more cynical readers to swallow.

Yet today, I read about federal interference that would have fit right in on the pages of an Ayn Rand novel: The federal government was refusing to allow Italian car manufacturer Pagani to sell their million dollar Huayra supercar in America because it didn't feature "child safe" airbags.

Forget the fact that only six of these million dollar cars were forecast to be sold in 2012 - easily below the number required for a federal exemption. Forget the fact that the two seat coupe was probably the least likely vehicle in America to ever be used to drive the kids to school - so arguably didn't need "kid safe" airbags in the first place.

All the federal regulators cared about was the fact that they had the ability to scupper a small business investing their money in the American market; so they did.

This is, to be honest, a great example of everything libertarians and free market advocates complain about in the United States. Just like in Europe, the federal government is forcing so many pointless regulations, rules and restrictions on entrepreneurs that it's increasingly unprofitable and unrewarding to make the effort to start a business in the first place.

This is why America is become dominated by corporations; and the hard working entrepreneur - arguably the driving force behind America's economic innovation - has become an endangered species.

Hey, I'll all for federal regulation when it involves real concerns about real safety. But to refuse hundreds of thousands of dollars of American investment because of a stupid and arbitrary safety regulation is indicative of everything that's tearing this country's economy asunder.

Is the New Deal a Broken Promise?

 by Roland Hulme

 

Denver Post, December '08

Will America default on the New Deal?

The venerable Siger forwarded an article to the Exchange Coffee House the other day by British journalist Janet Daley. In If We Are To Survive The Looming Catastrophe, We Need To Face The Truth she challenged not just America's recent response to the looming credit debt ceiling, but also the fundemental philosophy behind most first work nations: The concept that a capitalist economy could support a government funded welfare state.

And that's pretty much what exists in most European countries - and, to a slightly lesser extent, the United States. While ostensibly driven by the free market economy, the large governments of these countries provide a variety of taxpayer funded or subsidized services; from socialized medicine in the United Kingdom, to government-owned high speed railways in France. In the United States, the government has obligations to millions of senior citizens; providing social security payments and massively subsidized health care to those over the age of 65.

But the fundamental problem, as Janet Daley sees it, is that the ever-expanding costs of providing these government entitlements is being met by an ever shrinking pool of tax contributors.

Over promise. Under deliver.

In America, the problem is the so-called "baby boomers." They're the post-World War 2 babies who vastly outnumber the proceeding generations and are all hitting retirement age right about now. What had once been a large pool of taxpayers supporting a small pool of retirees is now the opposite - and it doesn't take Warren Buffett to work out that this is financially untenable.

The cold, hard fact this this: In a decade, medicare alone will be responsible for a $35 trillion deficit. There is no way, no how that the United States government will ever be able to meet that financial obligation; even if they render all taxpaying Americans into indentured servants.

As for social security - unfortunately that's passed the point of no return. Currently, the administration faces the problem of social security revenue (the payroll taxes workers pay into social security) being less than the amount they're obligated to pay out to retirees. It's untenable; and tax hikes or benefit cuts will provide only a temporary solution.

And what's really sad is how, as opposed to medicare, this situation should NEVER have arisen in the first place.

Social Security by Bernie Madoff
 
Back in FDR's day, when he proposed social security int he first place, it was a system already insulated against the current disparity between the numbers of workers and retirees. Over the course of their lifetime, American workers would pay a percentage of their income into the social security fund which would, with sound investment strategies, an accumulation of interest and consolidation of the different contribution rates, have enough in the bank to pay them what they were owed when they retired.

The problem was, successive US presidents started to treat social security like a Ponzi scheme; taking money out of the fund whenever they needed it because they realized that there were always more workers than retirees; so their contributions effectively "paid forward" to cover the costs of what they owed leaving the capital untouched.

That worked fine until, just like with Bernie Madoff's infamous scheme, they reached the tipping point at which revenue was outstripped by obligation and there was no more money in the kitty to cover the difference.

Quite frankly, if the government had just operated social security like it was intended to be run, we wouldn't be facing the crisis we are now. Instead they looted it - and unlike Bernie Madoff, who went to jail, most of the politicians who raided the social security funds are still incumbent in congress or the senate.


So where do we go from here?

The answer seems depressingly simple. Short of a miracle, the American taxpayer cannot pay for everything the government has promised them. The real issue is not that America will default on its loans, but that it will default on its obligations to social security and medicare recipients.

And it will. I don't see any other solution to this economic nightmare.

I fear the second decade of the 21st century will be remembered as when America's experiment with the welfare state finally came to a brutal, ignoble and bloody end.

Autocratic Asphyxiation: Or, the Myth of Democracy in the United Kingdom

 by Roland Hulme

The United Kingdom is no longer a democracy.

The Houses of Parliament

Some wag in Westminster recently came up with a chipper scheme to let the subjects of Great Britain let the government know what they wanted them to do.

Instead of forcing their Members of Parliament through the indignity of actually talking to them directly, voters can now join Facebook style 'groups' to sign online 'ePetitions' en masse.

Tellingly, 40 of these ePetitions call for the British government to reintroduce capital punishment. What's interesting about this is the fact that we will never see Parliament address this.

Why? Because no politician in Britain would ever want the reintroduction of capital punishment. Not so much for the moral implications - the question of whether or not society has the right to command life or death - but more because it's astonishingly politically inconvenient.

For a start, it would mean expulsion from the European Union - for which banning capital punishment is a requirement of membership. Next would come the wail of self-righteous anger from The Guardian. Then the sophomoric social commentary from the BBC. It would, quite frankly, be absurdly tedious. What elected representative would ever want to go through that rigamarole?

So they don't. They carry on as normal, with utter disregard for what the people of Britain - who they claim to represent - actually want. Which, in turn, reveals the real situation of politics in Britain - one in which the notion of democracy is nothing but a sham.

We really should just accept that the British government isn't run by elected representatives any more, but an interchangeable "political class" who thrive on the apathy of a poorly informed electorate.

They direct the county in any which way they please - in this respect, closer and closer towards a monolithic confederacy of European states - and even the greatest political upheaval in decades (the MP expenses scandal which bid adieu to eighteen years of Labor rule) failed to produce any tangible change in the way things work in Westminster.

But hey, the real issue is that I don't know if I have a problem with that!

I'm actually more sympathetic to the parasites in Parliament than the taxi drivers and landlords tut-tutting to their customers about how they should "string 'em up." I'm no fan of the death penalty.

But that being said, maybe we should introduce some sort of bill into the Houses of Parliament that at least acknowledges the fact that Britain is no longer a democracy - a name change, perhaps -  that informs the average voter that they no longer have a voice amongst those who make the decisions in Parliament.

No Tax, No Vote: A Bold New Vision of Democracy?

by Roland Hulme

A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. 

Alexander Fraser Tytler, Cycle Of Democracy (1770)

In Great Britain, an astonishing 25% of people live on some form of government benefit. In fact, a significant number receive all their income from the government; with their living expenses essentially paid for by the beneficent taxpaying subjects of the nation.

No representation without taxation?

Understandably, come election time, these people passionately support candidates who will endeavor to maintain - or even increase - the stipend they receive from the government.

In many ways, this is proof positive that the situation Alexander Fraser Tytler warned us about two centuries ago has come to fruition. A quarter of the electorate vote for whichever candidate will continue redistributing other people's money into their pockets.

Over here in America, many conservatives fear that so-called "progressives" are pushing the United States closer and closer towards this European style of Democracy; and in their defense, they're not wrong. Thanks to the dire financial policies of Ronald Reagan and the two Bushes, more Americans than ever are on some kind of government financial support; and that number is increasing each and every year. Soon, just like in Britain, a significant number of voters will be partially or fully dependent on the government to supply their needs.

Which is why I've considered a controversial new form of democracy in America: No tax, no vote.

Think about it: One of the chief responsibilities of government is to spend tax revenue; on projects needed (national defense, education) and unneeded (bridges to nowhere, renovating empty malls, other pork barrel projects.)

Doesn't it make sense that the people who actually contribute to this tax revenue should be the ones who decide how to spend it? Because otherwise, you've giving people who don't pay tax the power to essentially spend other people's money (and, as per Britain's example, they'll sometimes choose to spend it on themselves.)

This is significant when you look at the statistics. Did you know that 40% of Americans don't pay federal income tax at all? This is because they don't earn enough to offset the amount they pay in other taxes (social security, FICA and state and local taxes.)

Now, I'm not suggesting that we disenfranchise 40% of Americans. In fact, I don't really care how much tax somebody pays; just the fact that they do. My "no tax, no vote" system works on the theory that any American - from a minimum-wage server to a CEO - who pays basic payroll taxes or any state or federal income tax should be allowed to march up to the polling station come election day and make their mark.

They warned us this situation would arise.

My complaint is with those that don't pay any form of tax at all - and before you complain, I'm not just talking about the poorest Americans. Some of the richest file zero-owed tax returns each April too.

The U.S. tax system is one of the most convoluted and bureaucratic monstrosities ever devised by man. Tax credits, exemptions, deductions and offsets make the role of a Certified Public Accountant more like a canny defense lawyer; wriggling their richest clients out of paying what they're due through the use of very creative bookkeeping.

Personally, I think that if you're a multi-billionaire who had a "bad year" (at least according to your accountant's books) you should lose the right to vote the moment you file a tax return claiming that your deductions outweigh your liability.

More than that, I think any person or corporation that claims a zero tax liability should be forbidden from contributing financially to any political party or candidate; basically removing them from the democratic process entirely.

I believe that if you don't pay tax, you shouldn't get to vote - because if you don't contribute to the running of this nation, you shouldn't have any say in how it's run. Nobody likes paying tax; but you should at least be rewarded for it if you do.

Personally, I feel the life blood of this nation and its economy are the working class and middle class American taxpayers - yet ever since Reagan was in office, it's been the working and middle classes who have been getting increasingly tightly squeezed by the government.

The Democrats are fighting to cultivate a "welfare state" like in Britain, in which more and more people are dependent on the government (and compliant with their votes.)

Meanwhile, the Republicans sell this nation's future away by shifting the burden of taxation away from the wealthiest corporations and individuals and onto the shoulders of the middle and working class (despite record profits, Exxon Mobile, General Electric and Bank of America didn't pay any federal taxes in 2009 and/or 2010.)

It's about time we turned the tables on a government who'd buy votes by selling freedom from taxation. No more free rides.

We need to return America to the hands of the hard working, leather-apron strings producers and contributors; the same stock that the founding fathers were drawn from.

We need to make paying tax actually mean something; and then maybe the government will think more seriously about how frivolously they spend our money.

Calling the Bluff on The Debt Ceiling

by Roland Hulme

Can America solve its financial crisis?

For the last few weeks, all eyes have been on the posturing between Republicans and Democrats over the much touted "debt ceiling." It's a little understood political issue; but that hasn't stopped pundits from both the right and left jumping on it to suit their own ends.

Essentially, the "debt ceiling" is the limit to what the United States is allowed to borrow. It's essentially like a credit card limit; except one the government has the limit to raise or lower it (wouldn't it be nice if we all had that power?)

Currently, the United States has borrowed so much money that we've reached our current "debt ceiling" of $14.3 trillion. In order to pay our bills and keep the government running, we need to raise that limit - Obama is pushing for another two trillion dollars.

Tea Party activists have rightly pointed out that this is quickly throwing America into insolvency. The government is already running at an annual deficit of two trillion dollars per year. They are calling for no raise on the debt limit until government sorts out it's massive spending/income mismatch so the nation doesn't need to keep sinking deeper and deeper into a pit of debt.

It's an admirable proposition; but an impractical one. If you look at the U.S. government budget, you're faced with an inconvenient truth: Currently there is no way to balance the budget. I did the math a while ago and discovered that even the most radical of spending cuts - eliminating the US Military, for example - wouldn't bring our budget under control.

Which makes the posturing from the Republicans on the issue rings resolutely hollow. Threatening to hold the country hostage to secure a couple of trillion worth of savings over the next ten years neatly ignores the fact that such radical cuts are chickenfeed. Last year, the Republicans fought to carve $100 billion from the federal budget through brutal cuts.

Their "savings" barely match the amount that gets "improperly spent" each and every year (i.e. the money nobody has any clue where it goes.) A hundred billion doesn't even pay half the interest on the U.S. federal debt.

Unless this nation's willing to slash its military budget by 90% (which would still leave it spending more on defense than any country on Earth) or scrap social security and medicare overnight, or some other absurd, inconceivable savings idea, the budget will never be balanced under the current economic climate.

Besides, the debt ceiling is a moot point. As a very wise friend of mine told me today; the debt ceiling debate isn't about spending, it's about paying. The spending has already been done. This is the awkward call to the credit card company to raise your limit. Republicans are a year too late to start their budget shrinking.

And anyway, the Republicans shouldn't feel so smug about fighting to derail Obama's debt deal. Their party is the king of oblivious spending. Ronald Reagan - the man who swept this country into its current economic crisis - raised the debt ceiling by 200%, through 17 separate hikes of the debt limit. President Bush raised it four times, adding another four billion to the debt ceiling.

In comparison, Obama's projections are actually quite conservative; yet again making him more of a moderate Republican than most card-carrying members of the GOP.

The fact is, making small cuts in spending or raising the borrowing limit is never going to get us out of this mess. Only one thing can save the American economy; as it did during President Clinton's presidency: An economic boom.

If America can get producing again, and raise everybody's income, then tax revenue might just lift enough to balance the budget. It's the only way this problem will ever come close to being solved (and that's ignoring the Ponzi schemes that are the military budget, medicare and social security.)

Republicans and Democrats need to stop worrying about political posturing, and start thinking about the long term; how there's going to lift this country out of a recession and make sure America isn't foreclosed on.