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Posts Tagged ‘News Appearance’

What’s America’s main fiscal policy challenge, particularly in the long run?

Most sensible people will agree that our greatest threat is the rising burden of entitlement spending.

More specifically, demographic changes and ill-designed programs will combine to dramatically expand the size of the public sector over the next few decades.

So it’s really amazing that some politicians, led by the clownish Elizabeth Warren, want to dig the hole deeper.

Here are some excerpts from a recent article in the Washington Examiner.

Elizabeth Warren is pushing Democrats to expand Social Security rather than cut it, a move that could pressure presumed party frontrunner Hillary Clinton to move left. …”What Elizabeth Warren has done on pushing the ball forward on Social Security is another example of why she’s a bold progressive hero,” said T.J. Helmstetter, a representative for the Progressive Change Campaign Committee, an outside group that pushes for progressive causes. …In March, almost all Democratic senators voted for a symbolic budget amendment to express support for expanding Social Security. …The messaging amendment approved by most Senate Democrats also did not specify how benefits were to be expanded.

I discussed this topic in a recent interview.

Though I’m surprised that my head didn’t explode while discussing such a reckless idea.

I closed the interview by expressing a modest bit of optimism.

Surely (at least I hope) politicians won’t dig the hole deeper when we can see right before our eyes the fiscal chaos and economic disarray in Greece, right?!?

I’m surprised demagogues such as Elizabeth Warren haven’t rallied behind a plan to simply add a bunch of zeroes to the IOUs already sitting in the so-called Social Security Trust Fund.

Fortunately, not all politicians think it’s smart to accelerate as you’re driving toward a cliff.

Writing in the Washington Post, Charles Lane explains Governor Christie’s proposal.

New Jersey Gov. Chris Christie…wants to campaign on a sweeping proposal to rein in federal entitlement spending on the elderly. …he urged a phaseout of Social Security benefits for retirees with $80,000 or more in other income and backed a gradual upward adjustment of the retirement ages for Medicare and Social Security, which is also appropriate, given increased life expectancy. …Social Security…remains a non-trivial cause of the government’s long-term fiscal imbalance. Its trust fund, admittedly an accounting fiction of sorts, is on course to run out of cash by the early 2030s. Christie’s plan would provide three-fifths of the resources necessary to guarantee Social Security’s solvency for 75 years

Kudos to Governor Christie for recognizing that you can’t repeal mathematics with politics.

And this modest bit of praise isn’t based on policy. I’m not a big fan of means testing, which has some unfortunate economic effects.

And I also think that raising the retirement age is sub-optimal since it forces people to pay longer into an inferior system that already is giving them a very low rate of return.

The right approach is to transition to a system of personal retirement accounts, but at least Christie has an adult proposal based on real-world considerations.

Though, to be fair, many leftists claim we can afford higher benefits and also “fix” the system with a giant tax increase. So they sometimes recognize that math exists, even if they want us to believe that 2 + 2 = 7.

P.S. If Hillary winds up endorsing Warren’s reckless plan, it will give us another data point for our I-can’t-believe-she-said-that collection.

P.P.S. Is Elizabeth Warren more of a faux populist or more of a faux American Indian?

P.P.P.S. You can enjoy some previous Social Security cartoons here, here, and here. And we also have a Social Security joke if you appreciate grim humor.

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With tax day looming, let’s wallow in misery by contemplating the burden on America’s taxpayers.

But we’ll ignore the angst caused be dealing with an indecipherable tax code and an oppressive IRS and simply focus on the amount of money that gets extracted from our income each year.

The bad news is that the federal government is collecting a record amount of money, even after adjusting for inflation. Here’s a chart, based on the latest numbers from the Office of Management and Budget.

But there is some good news. This isn’t a record tax burden when measured as a share of economic output.

Federal taxes are projected to consume 17.7 percent of GDP this year. That’s higher than the post-WWII average of 17.2 percent of GDP, but there have been several years in which the federal tax burden has been higher than 17.7 percent, most recently in 2007, when it reached 17.9 percent of economic output.

So while it’s bad news that the IRS is collecting a record amount of revenue in inflation-adjusted dollars, I guess we should consider ourselves lucky that it’s not a record share of GDP.

I discuss the growing federal tax burden in this CNBC debate with Jared Bernstein.

A few points are worth emphasizing from the interview, two of which deal with corporate taxation.

First, it’s silly to talk to compare “taxes by individuals” to “taxes paid by corporations.” That’s because all taxes on business ultimately are paid by individuals, whether as workers, consumers, or shareholders. To be blunt, corporations may collect taxes, but the burden inevitably falls on people.

Second, the fact that corporate tax receipts are lagging is a sign that tax rates are too high rather than too low. In other words, there’s a Laffer Curve effect, and there’s lots of evidence that a lower corporate rate will generate more revenue. Which is precisely what happened when personal tax rates were reduced on the “rich” in the 1980s.

Third, if we want a balanced budget, the only responsible approach is spending restraint. As I’ve noted before, our long-run fiscal challenge is because of a rising burden of spending. Indeed, spending is more than 100 percent of the long-run problem.

By the way, let’s not forget about the role of state and local governments. WalletHub just released a report on state and local tax burdens.

Here are the 10 best states.

I’m mystified to see California in the top 10.

Though maybe this is a Laffer Curve-based result. In other words, perhaps taxes are so high that people are paying less?

Moreover, the Golden State drops to 30 if you adjust for the cost of living (see column on far right).

Now here are the 10 worst states.

I’m not surprised to see Illinois in last place, but who knew that Nebraska was a hotbed of taxaholism?

And if you look at the right-most column, you’ll see that New York and Connecticut could be considered the worst states. Both jurisdictions are richly deserving of that designation.

P.S. Don’t forget that Puerto Rico is a secret tax haven for American citizens, particularly when considering federal taxes, so it deserves honorary first place recognition.

P.P.S. The best (i.e., least worst or least destructive) approach to taxation is the flat tax.

P.P.P.S. Though the ideal scenario is to have a very small federal government so that there’s no need for any broad-based tax whatsoever. Our nation enjoyed strong growth before that dark day in 1913 when the income tax was imposed.

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With tax day fast approaching, it’s time to write about our good friends at the Internal Revenue Service.

One of the new traditions at the IRS is an annual release of tax scams. It’s know as the “dirty dozen” list, and while it may exist mostly as a publicity stunt, it does contain some useful advice.

And that’s true of this year’s version. But I worry that the IRS is looking at a few trees and missing the forest.

The Washington Examiner was kind enough to let me write a cover story on the “dirty dozen” list. Here’s my effort to add some context to the discussion.

…our friends at the Internal Revenue Service have a relatively new tradition of providing an annual list of 12 “tax scams” that taxpayers should avoid. It’s an odd collection, comprised of both recommendations that taxpayers protect themselves from fraud, as well as admonitions that taxpayers should be fully obedient to all IRS demands. Unsurprisingly, the list contains no warnings about the needless complexity and punitive nature of the tax code. Nor does the IRS say anything about how taxpayers lose the presumption of innocence if there’s any sort of conflict with the tax agency. Perhaps most important, there’s no acknowledgement from the IRS that many of the dirty dozen scams only exist because of bad tax policy.

In the article, I list each scam and make a few observations.

But I think my most useful comments came at the end of my piece.

…maybe the tax system wouldn’t engender so much hostility and disrespect if it was simple, transparent, fair, and conducive to growth. And that may be the big-picture lesson to learn as we conclude our analysis. When the income tax was first imposed back in 1913, the top tax rate was only 7 percent, the tax form was only two pages, and the tax code was easily understandable. But now that 100 years have gone by, the tax system has become a mess, like a ship encrusted with so many barnacles that it can no longer function. …the bottom line is that the biggest scam is the entire internal revenue code. The winners are the lobbyists, politicians, bureaucrats and insiders. The losers are America’s workers, investors, and consumers.

In other words, if we actually want a humane and sensible system, we should throw the current tax code in the garbage and replace it with a simple and fair flat tax.

And that’s exactly the message I shared in this interview with C-Span.

Here are a few of the points from the discussion that are worth emphasizing.

The current tax code benefits Washington insiders, not the American people.

But I’m not optimistic about fixing the tax code, in part because the crowd in DC would lose some power.

We’ll never get good tax reform unless there’s genuine entitlement reform to restrain the growing burden of government spending.

The flat tax and national sales tax are basically different sides of the same coin.

If you want class-warfare tax rates on the rich, keep in mind that high rates don’t necessarily translate into more revenue.

The no-tax-hike pledge is a vital and necessary component of a strategy to restrain government.

Itemized deductions benefit the rich, not the poor.

If you care about poor people, focus on growth rather than inequality.

We should mimic Hong Kong and Singapore, not France and Greece.

P.S. I wrote last week that the Senate GOP put together a budget that is surprisingly good, both in content and presentation. A reader since reminded me that the Chairman of the Senate Budget Committee was a sponsor of the “Penny Plan,” which would lower non-interest outlays by 1 percent per year.

Since Mitchell’s Golden Rule simply requires that spending grow by less than the private sector, Senator Enzi’s Penny Plan obviously passes with flying colors.

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I’m not reflexively opposed to executive orders and other unilateral actions by the White House. A president and his appointees, after all, have a lot of regulatory authority.

This is because, for better or worse, many of the laws approved in Washington basically express a goal and identify some tools. It’s then up to the relevant agency or agencies to promulgate regulations to enforce and implement those tools in order to supposedly achieve those goals.

But here’s the catch. The executive branch has to make at least a semi-plausible case that any given action is consistent with the law.

And the problem with this White House is that it has been using regulations and executive orders to change laws, thwart laws, and ignore laws.

There have been several instances of the White House arbitrarily deciding to ignore or alter major parts of Obamacare.

The Obama Administration has decided a law giving the federal government authority over the “navigable waterways” of the United States also means the federal government can regulate ponds on private land.

President Obama’s Treasury Department not only used a regulation to force American banks to put foreign law above American law, it also dealt with the unworkability of FATCA by creating an intergovernmental agreement mechanism that isn’t even mentioned in the law.

And don’t forget, regardless of what you think about immigration, the President also unilaterally decided to grant amnesty to millions of illegal aliens.

And that issue served as a springboard for a discussion with Fox News about a possible White House scheme to unilaterally impose big tax hikes on the business sector.

I’m surprised that I didn’t splutter with outrage during the interview. You don’t need to be a constitutional scholar, or even a lawyer, to be able to read Article 1, Section 7, of the Constitution.

And while Obama may not have a problem with the notion of America becoming a banana republic, we actually have co-equal branches of government, each with specific roles and powers.

Here’s the relevant text from the Constitution, as contained in the official repository at the National Archives.

All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills. Every Bill which shall have passed the House of Representatives and the Senate, shall, before it become a Law, be presented to the President of the United States.

Maybe I’m not very careful reader, but I don’t see anything in that passage about “unless President Obama feels otherwise” or “with the exception of unilateral tax hikes on companies.”

Though I imagine Ruth Bader Ginsburg could rationalize that such hidden clauses actually exist.

For additional background, here’s some of what The Hill has reported.

The Obama administration is not ruling out using executive powers to also address the tax code. With Senate Democrats openly pushing the administration to take its own action on the tax front, the White House is not shooting down the idea. …Earnest noted that the president has told lawmakers what he is interested in on taxes — closing loopholes for the wealthy and corporations… Earnest said he was not “ruling anything in or out,” when it came to specific executive steps. “This is related to the president’s ability to use his executive authority to do what he thinks is the right thing for the country,” he said.

By the way, my opposition to unilateral changes is based on principle.

So I’d be opposed even if a pro-freedom President wanted to suspend bad parts of the tax code or use “prosecutorial discretion” to provide de facto amnesty to taxpayers who refused to comply with an immoral part of the tax code, such as the death tax.

Though you won’t be surprised to learn that Obama isn’t contemplating any good unilateral changes. Instead, the policies being examined would exacerbate double taxation and extend worldwide taxation.

So we may get the worst of all worlds. Unilateral action on taxes that makes a mockery of our Constitution and rule of law while also making an already terrible business tax system even worse.

P.S. The United States only ranks #19 in an international comparison of what nations do a good job of upholding the rule of law. Makes you wonder where we’ll rank by the time Obama leaves office.

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Last week, I shared a TV interview about Obama’s budget, but much of the discussion was routine and didn’t warrant special attention.

But there was one small part of the interview, dealing with the silly claim that America became a rich nation because of socialism, that got me all agitated.

Well, to quote the great Yogi Berra, it’s deja vu all over again. Here’s an interview I did with CNBC about labor unrest. As you might expect, I made the standard libertarian argument that it’s not the job of government to pick sides when labor and management have squabbles.

That’s a point I’ve made before (here, here, here, here, here, and here), so there’s no need to elaborate on that issue.

But if you pay attention at the 3:00 mark of the video, you’ll notice that the discussion shifts to income inequality. And this is what got me agitated. I’m completely baffled that some people think that redistribution is more important than growth.

As I point out in the interview, nobody wins in the long run if you have a stagnant economy and politicians are fixated on re-slicing a shrinking pie.

The goal of everyone – including unions and leftist politicians – should be growth. If we get robust growth, that will mean tight labor markets, and that’s a big cause of rising wages.

But here’s my hypothesis to explain why statists don’t support good policies. Simply stated, I think they hate the rich more than they like the poor.

That sounds like a rather bold claim, but is there any other explanation for why they reject the types of tax policies (such as lower corporate rates, reduced double taxation, and expensing) that will increase investment, thus boosting productivity and wages?

Heck, look at this chart showing the relationship between capital formation and labor compensation.

Any decent person, after looking at the link between capital and wages, should be clamoring for the flat tax.

Yet Obama wants to move the tax code in the opposite direction!

I confess that I have no idea if this is because of malice or ignorance, but I do know that no nation has ever generated faster growth with class warfare.

I realize I’m ranting, but the more I think about this topic, the more upset I get. Politicians and their allies are making life harder for workers, and I hope I never stop being outraged when that happens.

P.S. On a totally separate subject, here’s a good joke forwarded to me by a friend this morning. It definitely belongs in my collection of gun control humor.

A state trooper in Kansas made a traffic stop of an elderly lady for speeding on U.S. 166 just East of Sedan, KS. He asked for her driver’s license, registration, and proof of insurance. The lady took out the required information and handed it to him.

In with the cards, he was somewhat surprised (due to her advanced age) to see she had a concealed carry permit. He looked at her and asked if she had a weapon in her possession at this time. She responded that she indeed had a .45 automatic in her glove box.

Something, body language, or the way she said it, made him want to ask if she had any other firearms. She did admit to also having a 9mm Glock in her center console. Now he had to ask one more time if that was all. She responded once again that she did have just one more, a .38 special in her purse.

He then asked her “Ma’am, you sure carry a lot of guns. What are you so afraid of?”

She looked him right in the eye and said, “Not a damn thing!”

You can enjoy other examples of gun control humor by clicking here, here, here, here, here, and here.

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Back in 2013, I actually wrote something vaguely nice about HBO’s Bill Maher. Or at least I expressed approval for a point he made about the limits of class-warfare taxation.

It’s now time to compensate for that action.

Check out this interview. It’s about Obama’s new tax-and-spend budget, but pay particular attention at the 5:15 mark of the video and you’ll hear Maher asserting that “socialism” deserves the credit for the development of a thriving middle class in America.

Wow. Maher’s comments are astonishingly illiterate.

As I remarked in the interview, the United States (like other western nations) had a tiny public sector during the period when it transitioned from agricultural poverty to middle-class prosperity.

Federal spending averaged only about 3 percent of economic output, and overall government spending (including state and local governments) was only about 10 percent of GDP.

If that was socialism, then sign me up!

This isn’t to say we have laissez-faire paradise in the 1800s and early 1900s. Some of the so-called Robber Barons were cronyists who used government favoritism to line their pockets. Monetary policy oftentimes was a mess because of government regulation and control of banks. Tariffs were very onerous. And Jim Crow laws were an odious example of government power being used to oppress an entire class of citizens and hamper their ability to participate in the market economy.

But the one thing we didn’t have back then was socialism, whether you use the right definition (government ownership of the means of production) or the sloppy definition (a redistributive welfare state).

Sigh.

Enough on that topic. The bulk of the interview, of course, focused on Obama’s budget. I got in my main point, which is that we need to focus on restraining the growth of government spending.

So rather than recycle my thoughts, let’s cite comments by two wise observers.

Here’s how Dan Henninger of the Wall Street Journal described the President’s plan.

The president’s annual budget reminds the Beltway tribes of what they do—tax the country, distribute revenues to their allies, and euphemize it as a budget. With his 2015 budget, Barack Obama at last makes clear his presidency’s reason for being: to establish an empire of taxation. …In six years, the Obama Democrats have abandoned any belief in the idea that the private sector is the primary cause of American prosperity. Instead, they seem to see the private sector as a kind of tax sump-pump, a dumb machine whose only purpose is tax flow. …That is the empire of taxation. It is an isolated system, based in Washington, which allocates what it exacts from the private sector.

And here’s some of what George Will wrote about the poisonous spiral of more government leading to more stagnation leading to more demands for more government.

The progressive project of maximizing the number of people dependent on government is also aided by the acid of insecurity that grows rapidly when the economy does not. Anxious and disappointed people are susceptible to progressives’ blandishments about the political allocation of wealth and opportunity — “free” this and that. By making slow growth normal, iatrogenic government serves the progressive program of defining economic failure down.

I fully agree. Not only the points about the weakness of the Obama “recovery,” but also the concerns about more and more people being lured into government dependency, which sabotages American exceptionalism.

Jerry Holbert has a nice summary of the President’s worldview.

Hmmm…I think we’ve seen this bookstore before.

Though I’m surprised Obama is bothering to shop when he can just go to the library for his favorite books.

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There’s a lot of navel-gazing analysis in Washington about whether to expect some sort of bipartisanship over the next two years.

I find such discussions very irritating because they assume that you automatically get good results when Republicans and Democrats both agree on a policy. My reaction, to put it mildly, is “these people are f@*&#^@g crazy!!!”

Was it progress when Republicans and Democrats conspired to bail out their contributors on Wall Street with TARP?

Was it progress when Republicans and Democrats joined hands to impose Bush’s no-bureaucrat-left-behind education scheme?

Was it progress when the first President Bush broke his read-my-lips promise and sided with Democrats to boost taxes and spending in 1990?

So you can see why I instinctively like gridlock. Simply stated, it’s better to do nothing if the alternative is to have more bad laws that expand the burden of government.

But perhaps I’m being too cynical. After all, sometimes bipartisanship accidentally produces good policies. Like when we got the Budget Control Act as part of the 2011 debt limit fight, which then led to the sequester.

Though I’m not holding my breath expecting similar good results over the next two years.

Why? Because as I said in my first comments during last week’s John Stossel show, the President is simply too far to the left to expect any progress.

I do acknowledge in the interview that you have to give Obama credit for ideological consistency, but his agenda of bigger government and more dependency doesn’t lead me to think we’ll get any good policy in the near future.

Here are a few additional points from the interview that are worth highlighting.

*This is still a weak recovery, perhaps most compelling illustrated by comparing what happened under Reagan with what’s been happening under Obama.

*But things have improved in the past couple of years, in part because there’s been progress in restraining the burden of government spending.

*Ironically, the President bragged that America’s been creating more jobs than Europe even though he wants to copy European policies.

*It’s also galling that the President says he wants to make America more competitive even though he’s pushing class-warfare taxation.

*Republicans also deserve criticism since some of them are advocating for higher gas taxes rather than the federalist approach of decentralization.

*On tax reform, if you give politicians a new tax, it’s very likely they will use the money to finance bigger government instead of abolishing an existing tax.

*My final comment from the interview brings us back to the central point of today’s post. Simply stated, bipartisanship isn’t good if it means more government.

P.S. I goofed last week when I wrote that median household income fell every year under Obama, and I repeated that mistake in the Stossel interview, which took place before I discovered that there was a very small increase in 2013. Well, I also made another mistake in the interview. I said that Kate Upton was the daughter of Congressman Fred Upton. That’s wrong. She’s actually his niece. Alas, yet another sign that I’m clueless about popular culture. I guess that means Kate won’t date me after the PotL finds another boyfriend.

P.P.S. Since we’re still debating over the issues Obama raised in his speech, I may as well call attention once again to my contribution to the U.S. News and World Report online debate on whether the State of the Union is strong. I’m doing okay in the overall reader rankings, but (as I write these words) I do have the third-highest number of “down” votes, so I gather that some of our leftist friends must not like what I wrote. So feel free to go to the article and click on the “up” arrow if you want to help me out.

P.P.P.S. Shifting to a less narcissistic topic, I wrote in 2013 that the Ohio Governor should be known as John “Barack” Kasich because he chose to expand Obamacare in his state. Now, as explained by Philip Klein of the Washington Examiner, we have Mike “Barack” Pence from Indiana.

…on Tuesday, he betrayed taxpayers when he embraced an expansion of Medicaid through President Obama’s healthcare law. …Pence buckled under pressure from hospital lobbyists who are eager to receive more federal money… Myopic Republican governors think they can fool conservatives by gaining token concessions on what remains a government-run healthcare program and calling it “free market reform.” But the Obama administration is playing the long game, realizing that if it keeps adding beneficiaries to the books, big government liberalism wins.

How disappointing. Yes, GOP governors are getting pressured by in-state lobbyists because of the lure of “free” federal money, but that’s no excuse for adopting a policy that will hurt federal taxpayers in the short run and state taxpayers in the long run.

This is yet another reason why we need to replace the federal Medicaid entitlement with a block grant.

P.P.P.P.S. I don’t want to close on a dour note, so let’s shift to sequestration, which was one of the topics in the Stossel interview. That was not only an unambiguous victory over big government, but it also resulted in some great political humor. You can see some of my favorite cartoons on the topic by clicking herehere, here, here, here, and here.

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