Gold Rush

“You’ll get nothing, and like it”!

            —Ted Knight as Judge Smails in Caddyshack

 

I told you this was coming.

The Obama administration yesterday—two months late, in violation of federal law (again)—released its proposed 2014 budget.  Among the highlights, it calls for total spending of $3.8 trillion.  Yet despite adding a new “Buffett Rule” tax requiring a minimum 30% contribution from those earning $1 million or more, and cutting (actually slowing the increases in) Social Security spending, still doesn’t balance.  As in 2012, and in 2011, I don’t expect this proposal to get any votes for passage from either Republicans or Democrats, so the likelihood of this coming to fruition this year is low.  But buried in there is a nugget I’ve warned you about and it bears watching.

You’ve probably seen the money grab over in Cyprus the last couple of weeks.  To recap, Cypriot banks—almost entirely government-owned—were over-exposed to Greek debt, such that the Cypriot economy was unable to withstand the negative impacts of European Union measures to deal with the debt crisis there.  Facing collapse, as a condition for a bailout the EU forced the closure of the second-largest bank, consolidation into the largest bank, with the result that depositors with holdings above the €100,000 cap may lose as much as 60% of their accounts.  In essence, the EU compelled the government of Cyprus to confiscate over half of many people’s savings.

Yeah, Rusty, but that’s Cyprus.  I can’t even find Cyprus on a map.  That kind of thing could never happen here.

Think again, Amigo.     

Among the proposals in the President’s budget is a cap on 401(K) savings.  Savings in retirement accounts like 401(K) and IRA devices above $3 million would no longer be eligible for tax advantaged treatment.  Currently, money deposited in those sorts of accounts—up to annual limits—is deposited on a pre-tax basis, and that money can sit there and accumulate interest or other investment growth tax free; the money then gets taxed as income as it is withdrawn in retirement.  What the President wants to do is go ahead and tax—read: take—that money now.

It’s an irresistible temptation.  U.S. savers have accumulated some $10 trillion in these retirement accounts based on the government’s promise that they could deposit it and let it grow tax free, and then it would be taxed down the road as ordinary income when they withdrew it in retirement.  But like a 3-year-old on Christmas Eve, Obama simply can’t wait until Christmas morning to open the presents under the tree.  The problem is that isn’t the government’s money, and it isn’t money Santa Clause has brought Obama or even to you.   It’s your money, earned through your labor and investment of time, skill, and expertise.  And Obama wants it.

But Rusty, I don’t have $3 million in my 401(K), and I’m never going to have $3 million in my 401(K), so why should I care?

Well, if you don’t and aren’t, I (depending on your age and lifestyle goals) submit you may want to re-think your retirement plan given that the monetization of our debt through the printing of fiat money is in fact already taxing your savings by devaluing it, but that’s another article for another time.  But regardless of whether you do or don’t (or will or won’t) have $3 million in retirement, you should care very much about the President’s proposal.

And it should scare the crap out of you.  

You see, that $3 million figure isn’t pulled completely from thin air.  It’s actually the amount you would need—under current economic conditions—to purchase an annuity paying you $205,000 per year.  Why that number?

Because that’s the amount the Obama administration, in its infinite wisdom, has decided is a reasonable amount for you to live comfortably in retirement.  In other words, they want you to work and save your whole life, and then in the end they will tell you how much of your own money you should have to live on and the rest of it is subject to the government taking it.

Rusty, that’s what any tax is.

Quite so.  But here we’re not talking about the government taxing your current income; we’re talking about it taking from you a substantial chunk of your money you’ve spent a lifetime saving.  Time you can never, ever replace.  Moreover, it’s taking from you out of accounts the very same government set up the tax breaks to encourage you to accumulate savings in the first place.  At a time when progressives are arguing that Americans already don’t save enough such that we need a second Social Security system, why would you start altering the tax advantages to discourage savings?!? 

What incentive do you have to keep working once you’ve saved $ 2,999,999, if the government can take some or even all of every dollar you save thereafter?  Why would a business owner stay in business—and keep employing his employees?

And it’s naïve to think that because you don’t expect ever to reach the $3 million threshold that you’re immune to the taking.  Once we’re in a universe where government gets to decide how much of your savings you actually get to have based on what government determines is a reasonable retirement income for you, then all bets are off.  Today that’s $205,000.  Tomorrow it might be pegged to the median U.S. income (currently about $50,000).  Next week it might be the median income tied to average life expectancy at retirement.  For a male at 65, today that’s about 13 years; the present value of a $50,000 annuity for 13 years is about $612,000, and anything in your 401(K) above that would be subject to the government taking it.  Furthermore, once they can tax your 401(K) or IRA, it’s only a small additional step for them to tax your regular savings, your checking account balance, or the value of any other investments you might have.

Still feel safe?

Keep this in mind as the Leftists are also looking to take your guns.  The people in Cyprus were already effectively disarmed before the government came to take their money.

I’m just saying.

Now, if Obama thinks his judgment that $205,000 is a reasonable income for you, let’s see him put his money where his mouth is.  I suggest we see legislation that reduces the Presidential salary to $205,000, provides ex-Presidents with a $205,000 annual lifetime stipend, and requires them to surrender all other assets to the U.S. Treasury.

I’ll bet you a million dollars this President would never sign such a bill.  And if he did, he’d never comply with it.  Because it’s never about what’s reasonable; it’s about taking as much from you as possible to buy enough votes to keep him and his ilk living like kings on your nickel.

 

Advertisements

Illustrating Government Inefficiency

 

“I don’t mind a parasite.  I object to a cut-rate one.”

            —Humphrey Bogart as Rick Blaine in Casablanca

 

My apologies for the extended absence.  I’ve been occupied with other things, and frankly the news just hasn’t been that interesting.

That said, a reader sent me a series of local news articles that, taken together, cast a neat light on the inherent inefficiency (or corruption) of government.  These articles happen to come out of Akron, Ohio, but they’re not unique and it is not my intent to single Akron out—you can find similar stories (I’ve seen some recently out of Newark and Philadelphia) just about anywhere.  It’s just that the collection makes for a convenient focus on a broader point.

In the first story, it seems that the City of Akron is giving its (largely unionized) employees raises despite a reduced overall budget and significantly decreased revenues.  The raises are to be funded mostly from “federal grant money.”  Meanwhile, as with many private sector employers, the looming specter of Obamacare is likely to produce layoffs and reductions in hours among the lowest-paid workers.  Case in point: Tim Wheeler, a sanitation worker currently working 40 hours a week—subject to regular  90 day furloughs—has been informed he will likely be cut back to 29 hours, specifically so he no longer qualifies as a full-time employee for whom the City would be obligated under Obamacare to provide with health care coverage.  

In the second story, we learn that the University of Akron is facing a nearly $27 million budget gap in 2014.  The shortfall is blamed largely on the loss of $14 million in federal “stimulus” funds.  This is on the heels of a retroactive 5% raise for faculty and top administrators approved by University Trustees last Fall.  Once again, those on the “in” will get theirs, even while the budget shows a deficit.

Notice that these two situations provide a sharp illustration of the inefficiency of government.  In both instances, public institutions facing fiscal headwinds—in the case of the University of Akron, an actual budget shortfall—are nevertheless handing out raises.  This, of course, is exactly the wrong behavior from an entity having trouble paying its bills; you don’t increase your fiscal obligations when you already don’t have enough money.  Unfortunately, however, it’s exactly what we’ve come to expect from bureaucrats whose sole real mission is not protecting the public interest but in preserving their own power base.

Then there’s the policy inefficiency that inevitably results when a perhaps well-intentioned, but nevertheless naïve and ill-informed government exceeds its charter in an attempt to solve every problem of every individual human being.  These efforts inevitably backfire, as those who assume the power/responsibility of crafting the supposed “solution” lack the expertise, foresight, and sometimes basic intelligence necessary to do the job properly (or to recognize that it can’t or shouldn’t be done at all).  In this case, the City of Akron provides us with yet another example of Obamacare directly imposing negative health care and employment effects on the very people it was supposed to help.  I’ll bet you a million dollars Mr. Wheeler voted for Obama and the other Democrats in large part because he thought Obamacare was going to help him; instead he finds his hours—and thus his income—cut by over 25%, and he’s without medical insurance, which is exactly the opposite of what he was promised.

Perhaps more interesting, though, is the common thread in the funding discussion.  The City of Akron is funding its pay hikes with money received through federal grants.  Meanwhile, the University of Akron’s budget shortfall is blamed on the loss of federal funding.  Both circumstances beg the same fundamental question:

Why is there any federal funding involved at all?

Taking the situations in reverse order, it should come as no surprise to the University of Akron that any stimulus money it received dried up.  By definition, that funding was intended to be a temporary boost, not a permanent addition to general revenues.  Yet one gets the impression that the University’s trustees failed to plan for the day when the stimulus funding went away and they would be left to make their way on their own revenue sources, as they had done before.  But like all government money, there’s a sort of ratchet mentality attached to it that assumes that, once granted, the funding represents a permanent floor, and that each subsequent raise only lifts that floor; future funding can increase, but it can never decrease.

More to the point, and germane to both contexts, there is no provision in the Constitution for federal funding of either a municipality or a state university.  Certainly, I understand that such funding has existed for decades, if not longer.  But there’s no constitutional basis for it.  You won’t find anything in Article I that authorizes Congress to appropriate money from the general public to then give to a city.  Nor will you find anything authorizing Congress to appropriate money to fund education (you can argue that the military academies are different, as a legitimate extension of the federal government’s authority to field an army and navy).  Yet there it is.

But here’s what gets me, and it’s the core illustration of the inherent inefficiency (if not outright corruption) of government:

Where does the money the federal government gives to the City of Akron and the University of Akron come from?

Of course the answer to that question is it comes from the government’s general revenues, which means it comes from your taxes.  The rub is in how the outlays are allocated.  There are only two (three, really) alternatives.  One is that they’re allocated proportionately to contribution, such that the people of Akron (and, in the University’s case, of Ohio) are receiving back in the form of federal grants the same proportion they contributed to the general revenue.  And that would seem fair, but it begs the question why it needed to be laundered through the IRS at all.  If we’re just giving Akron and Ohio back their proportionate share of what they put in, wouldn’t it have been far more efficient never to have taken that money in the first place, thus leaving it in Akron and Ohio for the City Council and State Legislature to tax it directly as they locally deem appropriate?

The other—more likely—alternative is that the allocation isn’t proportionate; Akron and Ohio receive back from the federal government grants and funding in greater proportion than their respective contribution to the general revenues.  What this means as a matter of mathematical necessity is that the federal government is taking money from people in, say, Texas, to give to Akron and Ohio.  Even if we indulge in the very unlikely third alternative that Akron and Ohio are receiving funding in a lesser proportion than their share of contribution you still end up with the inequitable situation that they’ve had their money taken from them to give to people somewhere else, say, California.

What we’re left with is a two-edged shaft, if you will.  Either the government is taking money only then to skim off the top and give it back—which is simply unnecessary—or the government is taking money then to skim off the top and give it to someone else—which is looting.  All at the behest of an alleged majority of Americans, but increasingly those who vote for and benefit from the federal largesse aren’t the ones who have to pay for it. 

Inefficiency/corruption at its finest.

*******************************

EDITOR’S NOTE:  Just as an aside, is there anyone who gives a crap what Dennis Rodman does?  I mean, honestly; CNN has been giving The Worm’s budding bromance with Kim Jong Un almost equal coverage with the now-ended conclave in Vatican City.  I could have sworn he became irrelevant a decade ago.

The New Obamacare Trap

“Relax,” said the night man, “we are programmed to receive.”

“You can check out any time you like, but you can never leave.”

            —Eagles, Hotel California

I know then-Speaker of the House Nancy Pelosi (D-CA) told us we’d have to pass Obamacare to find out what’s in it.

But wait ‘til you get a load of this.

Most of the discussion over the last couple of years about Obamacare has centered on the individual mandate and the contraception coverage requirement.  But while the public attention has been focused on those issues, somewhat under the radar most of the attention of the benefits professionals who have to understand and implement the mechanics of Obamacare has been focused on the obligations the new law places on the employers who will have to provide most of the mandated coverage.

Without getting too deep into the weeds, under Obamacare, all employers with 50 or more full time employees (“full time” defined for these purposes as 30 or more hours per week) must offer health care coverage meeting minimum federal standards.  Any that don’t must pay a fine of $2,000 per employee after the first 30.  This was always the first problem with Obamacare and the President’s outright lie that “if you like your coverage you can keep it,” because in many instances it’s cheaper for the employer to pay the fine than to provide the coverage.  With this as the new environment beginning in 2014, some businesses will make the very rational, and in some cases economically necessary, decision to drop coverage—coverage their employees may well have liked—in favor of simply paying the penalty.

But in some lower-margin industries like the restaurant business, even paying the penalty simply isn’t a viable financial option.  Well, if you’ll look again at the defining threshold for triggering the requirements, there are a pair of obvious alternatives for businesses that find themselves in that situation.  One is to lay off employees until they get below 50 (or, for a growing business, stop hiring at 49).  The other is to cut employee hours to a maximum of 29 hours a week so they’re not “full-time.”  Either option gets the business under the threshold of 50 full time employees such that the mandate doesn’t apply.  And many businesses—Dardens Restaurants (Olive Garden, Red Lobster), and some Wendy’s and Taco Bell franchises, among others—are now starting to do precisely that.

As an aside, notice the perverse “unintended” effect here.  Employees in these businesses are typically low-income people: fry cooks, waiters, etc.  These are the very people Obamacare was supposed to help by getting them employer-sponsored coverage.  Instead, as a direct consequence of Obamacare not only do they not get the employer-provided medical insurance they were promised, they’re having their already low incomes reduced by having their hours cut or losing their jobs altogether.  With lighter or nonexistent paychecks, they’ll then be shunted off into Medicaid under the individual mandate.  Of course the real irony here is you know the majority of these people voted for this crap.

Be careful what you wish for, ‘cause you just might get it all.

There’s a similar phenomenon happening in the medical device industry, which employs some 400,000 people in the U.S.  Now, these are typically higher income earners, but the essential problem is the same.  Medical technology companies are faced not only with the mandate to provide coverage or pay the penalty, but effective the first of this year they also must pay an additional 2.3% excise tax under Obamacare.  In response, publicly traded medical device companies cut 7,000 jobs in 2012.  A recent survey indicates that 62% of those surveyed plan additional layoffs or reduced hiring in 2013.  All to offset the tax.

Well, it appears that all this hasn’t been lost on the Obama administration, and it’s not going to let them get away with it.  The IRS has now released a 144 pages of new regulations that included an announcement that measures would be coming to stop employers from taking these steps to avoid the impact of the Obamacare employer mandate.  What does this mean?  It means the IRS will begin levying penalties against employers who initiate layoffs or reduce hours in order to get below the thresholds that trigger the mandate/penalty dilemma.

Of course, all of this only applies if you’re already over the 50 full-timer limit; if you have only 49, none of it matters to you (as long as you don’t grow your business).  As a result, you could see an Olive Garden with 50 employees facing tens of thousands of dollars in federally-mandated additional costs, while the Chili’s next door with only 49 employees incurs none of those costs, and the Olive Garden has no way to correct the competitive imbalance; once over 50, always over 50 (at least as far as the fines are concerned).

So here’s the trap in which some businesses will now find themselves caught:

  • The government requires them to provide health insurance they can’t afford.
  • If they don’t provide it, they’ll have to pay a penalty they can’t afford.
  • If they try to trim staff so the law doesn’t apply, they’ll have to pay a different penalty they can’t afford.

That doesn’t leave many options, and the simple fact is that some businesses won’t be able to afford any of it; they’ll be forced to close.  I expect more than a few business owners who could afford the penalty will refuse to pay it and close out of spite.

This is truly terrifying.

Many of us on the Right, like voices crying in the wilderness, tried to warn about this.  You now have a federal government that although it lacks the power under the Commerce Clause to compel you to engage in a commercial transaction, it can tax you if you don’t.  That same federal government is forcibly imposing costs on businesses, then threatening to impose fines if those businesses try to restructure themselves to get out of it.  We gotcha now.  And here’s the really sick part:  Obama and the Democrats created this Frankenstein’s monster of a health care law, and now the administration is sending the IRS after people to fine them for acting under the terms of the law as Obama and the Democrats wrote it.  Not only are they over-regulating, but now you can’t even avoid their laws/fines by complying with them.

Obamacare is a disaster.  It is a vicious assault on individual economic liberty and religious freedom.  It is an unconscionable abuse of the Constitution.  It will prove to be a strangling albatross around the neck of the economy.  And not only will it never achieve the stated objective of providing health care insurance to [pick your number] of uninsured Americans, it will actually be counter-productive to that end.

We’re caught in a trap; we can’t walk out.

Footing The Bill For Tax Cuts

 

When you greet a stranger, look at his shoes

Keep your money in your shoes, put your trouble behind

When you greet a stranger, look at their hands

Keep your money in your hands, put your trouble behind

            —R.E.M., Good Advices

This kind of stuff makes me crazy.

President Obama was in Ohio Wednesday blasting Governor Romney’s proposal to cut taxes for everyone, thus letting everyone keep more of their own money.  Citing a dubious report from the Tax Policy Center—a joint venture of those known independent and bipartisan thinktanks the Brookings Institution and the Urban Institute—Obama told a cheering crowd that all Romney’s plan would do is provide a giant tax break for the evil rich literally at the expense of everyone else:

Who do you think gets the bill for these $250,000 tax cuts?  You do!”

Um, no you don’t.

I confess I haven’t delved into the details of the TPC’s report, in large part because even they say up front they didn’t have enough details about Governor Romney’s plans to do any real analysis, so they made certain assumptions, and ignored other things.  I’ll leave it to others to get that deep in the weeds.  My point here is that you don’t even need to analyze the details of the TPC report, because its fundamental starting point is wrong.

The TPC paper is centered on studying the purported effects of Romney’s plan in a “revenue-neutral” environment.  That is, its core premise is that the U.S. federal government must take in at least the same amount of revenue today that it did yesterday.  And this core premise then leads the authors of the TPC paper to discuss repeatedly the necessary “tax expenditures”—their euphemism for tax credits and deductions—that must be eliminated in order for the government to pull in the same amount of money while reducing marginal tax rates.  Having set up this flawed construct, the conclusion was almost self-selecting; if we’re to generate the same amount of revenue while reducing tax rates for the wealthy, we have to eliminate credits and deductions to make up the difference, and since the wealthy already don’t get those, those eliminations necessarily fall on those at lesser income levels.  Thus, the study concludes, reducing taxes for the wealthy will raise taxes on everyone else.

Of course, the problem is this baseline starting point that requires “revenue neutrality.”  Why is that a requirement?  Will the world stop spinning on its axis if the federal government simply accepts the premise that it’s going to have to operate on less revenue next year than it did this year?

But Rusty, that just means you’re cutting federal programs for the poor, so you’re still putting the burden on them, just in a sneakier way.

Not necessarily.  I’ve written on this subject many times.  The Beast is so bloated with waste and duplicity that you could reduce the budget by $1 trillion or more overnight and no one outside of the unnecessary career bureaucrats you downsized would notice the difference.  It wouldn’t touch the poor at all.  Hell, the inspector general just reported that the IRS is losing over $4 billion a year in paying out fraudulent tax refunds alone.

But the real problem is this mindset that has gotten out of control.  Not only do we start with this assumption that the need for “revenue neutrality” is as sacrosanct as the theories of man-made global warming and evolution, but once again we see that the property ownership equation is stood on its head.  Tax credits and deductions are referred to as “expenditures,” as though it costs the government some of its money to allow those things.  That’s simply not so.  Tax reductions, whether in the form of credits, deductions, rebates, or outright rate reductions are not expenditures; the government isn’t giving the taxpayer the government’s money.  These mechanisms allow the taxpayer to keep money that’s already his.

And that really hits at the essence of Obama’s deceit.  No one is going to get a bill from the IRS for their personal share of this tax reduction for others.  That’s a lie.  The government isn’t going to write Warren Buffet a check drawn on some middle class plumber’s checking account.  No one is taking money from you and giving it to some rich guy.  What a tax decrease means is that the government is going to take less from the rich guy of what’s rightfully his than it otherwise would.

The only way Obama’s premise is true is if you have some claim to a portion of what that wealthy guy has, such that not taking it from him is depriving you of something that’s rightfully yours.  Well let me ask you:  are you entitled to live off another?  Do you have the right to take someone else’s stuff just because they have more than you do?  What if you really need it?  Does it also work the other way, such that someone else who has less than you do has a right to live off of you or to take your stuff?  Now, answer those questions honestly or not, I don’t care, because the real proof is in the answer to this next question (h/t my wife, who loves to pose it this way):

Do you lock your house and car when you leave them?

If someone with less has an entitlement to take from someone who has more, by what right do you lock your house and your car?  You do that, of course, to protect your things.  You would never accept the idea that by locking your door you’re somehow imposing a cost on the would-be thief, or that he’s somehow “footing the bill” for your selfish desire to be secure in your property.  And you’d be right, because it belongs to you.  So you are perfectly legitimate in protecting your property, and there is no cost or burden imputed to the thief in having his theft deterred, because he has no legitimate claim to your possessions.

Unless you simply reject the notion of private property—and there is exactly zero chance that you actually do—it cannot possibly “cost” you anything for someone else to get a tax reduction allowing him to keep more of what was already his to begin with.

It’s All About The O

 
Empty prayer, empty mouths,
Combien reaction?
Empty prayer, empty mouths,
Talk about the passion.
—R.E.M., Talk About The Passion
Sorry for my extended dry spell.  I just discovered that my Second Amendment rights afford me a new way to bankrupt myself for fun, so candidly my spare time has been occupied with internet shopping.  That, and nothing in the news has really grabbed me lately.
That said . . .
I see the President is going to force us once again to deal with this nonsense about raising taxes on the so-called wealthy.  Doubling down on a theme he began last Fall, Obama has resurrected his call for implementation of the “Buffett Rule,” intended to cure some alleged inequity in the tax system.  Apparently the most pressing issue now facing the country is the unfairness of our taxes (actually I think I may agree with the President on this point, but in the reverse of what he’s claiming).
How does he continue to get away with pushing the lie that the tax system unfairly allows millionaires to pay less in taxes than the middle class?  They don’t, as I’ve demonstrated here, here, and here.  If you’re talking about taxing wages, the top marginal tax rate—the rate charged on the amount earned above a certain threshold—is 33%, while the marginal tax rate for the median income of about $50,000 is 25%.  If you’re talking about taxing capital gains, that’s taxing risk rewards, not labor compensation.  In other words, capital gains taxes impose a burden on money that’s already at risk through investment; unlike wages, there is no guarantee of an income return at all.  More importantly, while the capital gains rate is 15%, that’s on top of the 35% tax imposed on the corporation in which the taxpayer invested his capital, meaning one who acquires his earnings through capital gains actually has his money taxed twice.  
 
The bottom line according to the IRS is that the average total tax liability—combined effective tax rate plus payroll and other taxes—is less than 7% for median wage earners, but it’s over 30% for the top earners.  There may be isolated exceptions, and I’ll be the first to agree the tax code needs a gross overhaul.  But taken as a group, the wealthy in fact do not pay less in taxes than the middle class, whether in total dollars, or as a percentage of income.  They just don’t, no matter how many times Obama or Warren Buffett say otherwise.
With the underlying premise itself a demonstrable lie, one has to wonder what it is the President thinks he’s accomplishing by continuing to push this, particularly when he and everyone else knows it has exactly zero chance of passing this Congress.  What dire national crisis is he trying to solve by taxing millionaires?  Clearly we have major problems in this country, so name your hot-button issue: is Obama’s “Buffett Rule” going to solve it?
Unemployment/Economy
Obama promised back in 2009 that his “stimulus” would prevent unemployment from rising above 8%.  When that failed and unemployment stagnated well above 9%, he repeatedly told us that he “will not rest until every American who wants one has a job.”  Well, today the official unemployment rate remains above 8%, and 12.7 million Americans are out of work (the real rate, once you include the underemployed and those who have simply given up, is 14.5%, or more like 22.5 million Americans). 
Is raising taxes on the wealthy going to give a single one of those Americans a job?  The answer, of course, is no.  Obama tells us that prosperity has never trickled down from the wealthy, but outward from the middle class; but where does he think those jobs that employ the middle class come from?  Some of the largest non-government U.S. employers include the likes of Wal-Mart (founded by Sam Walton), McDonald’s (built by Ray Kroc), General Electric (founded by Thomas Edison), and Ford Motor Company (Henry Ford).  Half of all non-government employees work for small businesses, the owners of which would be directly impacted by the “Buffett Rule.”   The middle class has jobs because somebody wealthier has hired them to work in their business.  Raising taxes on those people is only going to disincentivize investment in those businesses, which hurts job creation, not helps it.
Budget Deficits/Debt
The current budget deficit is over $1 trillion, a figure it has exceeded every year of this Administration.  The District’s debt is $15.5 trillion and climbing.  Clearly government and its spending habits are totally out of control, a fact to which the Administration is completely oblivious.  Obama submitted a budget this year that increased spending further, and was so bad that it failed in the House by a 414-0 vote.  Not even a single Democrat voted aye.  Not Nancy Pelosi.  Not Debbie Wasserman-Schultz.  Not Maxine Waters.  Not Henry Waxman.  Nobody.  One suspects even Obama himself may have signed the transmittal letter “present.”
With spending this out of control, is raising Warren Buffett’s taxes going to reduce the deficit or debt?  Again, the answer is no.  As I’ve covered a number of times, you can tax the millionaires at 100%—take everything—and it wouldn’t fund the District’s spending for even three months.  Even taxing everyone making more than $200,000 a year at 100% would still leave you nearly $2 trillion short of covering current federal spending, much less touching the debt.  No, the “Buffett Rule” isn’t going to touch the deficit/debt problem.
Belligerent Iran & North Korea
Iran refuses to give up its nuclear program; it pinky-swears that it’s only for peaceful electrical generation and not for weapons, but won’t let anyone see it.  North Korea this week attempted to launch what amounted to an ICBM—they said it was for a weather satellite; I guess they don’t have cable and can’t get The Weather Channel—over the Administration’s sternest possible finger-wagging, and will soon be conducting additional nuclear weapons testing.  I’m pretty sure nobody in Teheran or Pyongyang is sitting around saying if only Obama would raise Warren Buffett’s taxes, we’d be able to give up our nukes.
The truth is not only is the underlying premise that the rich pay less—or even less than their fair sharein taxes than everyone else pure fiction, but raising taxes even further does not move the ball one inch on any of the actual problems we currently face.  It doesn’t help us economically, fiscally, or defensively.  It doesn’t cure the apparent catastrophic crisis in women’s health.  It won’t reduce your pain at the pump.  It won’t make Social Security solvent, save Medicare, or pull Solyndra out of bankruptcy. 
Why, at a time when there are real substantive issues, would the President devote so much time and energy flogging an idea that doesn’t have anything to do with any of those issues?  Let’s leave aside policy debate over how best to solve the problems we face.  Obama’s pushing of this “Buffett Rule” should demonstrate to anyone who’s paying attention (and hasn’t already drowned in the kool-aid) something very disturbing about his character wholly apart from partisan agendas:
He’s not interested in solving real problems.
Obama’s sole interest is in keeping himself in power, and to do that he’s all about creating a pithy and convenient narrative he can use to posture his campaign as an “us vs. them” battle.  So rather than actually do the job he was hired to do, he’s spending his time—and your money—trying to divide and conquer with a meaningless and ultimately counter-productive message.  It makes for a good bumper sticker to stir up his Leftist base, but in the end the most it will do is benefit him, personally.  Our problems will remain.
It’s one thing to agree or disagree on matters of policy.  But it should really bother all of us when a President is more concerned with retaining power for power’s sake than he is with actually dealing with the concerns of the day.  This President likes the trappings of the officehob-nobbing with super-Hollywood types, taking his-and-her matching private 747s on exotic vacation jaunts, and plenty of golfbut he shirks the real responsibility of that office in favor of empty and deliberately divisive rhetoric.
Not everyone can carry the weight of the world.

Tell Me Lies, Tell Me Sweet Little Lies

 
“I think he’s quite ill, mentally, and with one half of his mind, he is able to fabricate evidence.  Then by some osmosis he is able to convince the other half that the fabrication is the truth.”
—Tommy Lee Jones as Clay Shaw in JFK
And back to Evil Big Oil.  Again.
 
I can’t figure out whether this President is simply an idiot, a lunatic, or overtly evil.  What I do know is he’s continuing to perpetuate a lie in his effort to push his populist class-warfare campaign narrative.  What’s frustrating to me is that no one on the conservative side in Congress or among the GOP nominee hopefuls seems able or willing to get out in front and call Obama out on this. 
Last Thursday, Obama—for the umpteenth time—upbraided Congress for not ending what he disingenuously refers to as billions in “subsidies” for Big Oil:
“[Congress] can either vote to spend billions of dollars on oil subsidies that keep us trapped in the past, or they can vote to end these taxpayer subsidies that aren’t needed to boost oil production so that we can invest in the future . . . It’s like hitting the American people twice.  You’re already paying a premium at the pump right now.  And on top of that, Congress up until this point has thought it’s a good idea to send billions more of your tax dollars to the oil industry.”
Taxpayer subsidies . . . send[ing] billions more of your tax dollars to the oil industry.
Obama makes it sound as though Congress is taking money from you, the taxpayer, and singlign out Exxon, Chevron, Shell, BP, and ConocoPhillips as special recipients of that money.  Now, the fair first question you might ask in that instance would be what is Congress doing with my money in the first place?  But leaving that aside, I want to focus on how the President is characterizing this.  He’s telling you—over, and over, and over again—that this is a “subsidy,” that Congress is choosing sides by taking money from you and giving it to Big Oil.  And if there were in fact such a subsidy, that’s what would be going on:
sub·si·dy (subʹ sǝ dē) n.  A grant of money, as from a government to a private enterprise.
The problem, as I’ve had to keep explaining over, and over, and over, is there is no subsidy for oil companies.  There just isn’t.  Congress isn’t taking money from you and giving it to Exxon.  The federal government isn’t writing the oil companies a huge check.  There is, in fact, NO money being given to Big Oil either by the taxpayers or by the United States.
What is happening is that oil companies—like any other industrial business in the U.S.—are permitted to deduct certain capital costs associated with drilling, and claim credits for taxes paid to other government on earnings generated abroad.  Nobody is giving oil companies money, and they’re not getting special treatment.  The government is simply not taking as much of the oil companies’ money as it otherwise might.
I’ve addressed this mental pathology before, but you need to understand that it’s no less dangerous just because in this instance it’s being applied to oil companies instead of to you.  The underlying assumption is that it’s all the government’s money in the first place; that’s the only way Obama can claim that by letting—in this case, oil companies—someone keep it, the government is actually “giving” them that money (which is what a “subsidy” is).
Notice also the quick twist Obama makes.  A cursory listen, and you’d think what he’s saying is taxpayers pay too much, and oil companies are making too much profit, so we’re going to reverse that by ending the subsidies.  In other words, he makes it sound like what he wants to do is take money from the oil companies and give it back to you. 
Right on!  People before profits!
But look a little closer.  He doesn’t want to end the “subsidies” and return that money to the taxpayers.  What he wants to do is end the “subsidies”—i.e., take more money from oil companies—and “invest” it in more green energy projects (you know, stuff like Solyndra, Ener1, Evergreen Solar, etc.).  The trouble is, the federal government isn’t supposed to operate as an investment bank.   
Also implicit in Obama’s message is that somehow oil companies are reaping huge profits while getting away with not paying any taxes.  According to the Tax Foundation, between 1981 and 2008, the oil industry paid over $388 billion in income taxes.  During that period, they also paid $1.1 trillion in sales and excise taxes, and $472 billion in severance, property, and windfall profits taxes.  That’s $1.96 trillion just in taxes; $70 billion a year, or about $192 million every single day.  In addition to direct taxes, oil companies also pay millions in bonuses to acquire leases on government lands ($754 million in 2011 to the federal government alone, according to the ONRR) and billions in royalties on production from those lands ($11.2 billion in 2011).
So, where does all that money already flowing to the government come from?  It comes from the oil companies’ shareholders, which include essentially anyone who has a share of a mutual fund in an IRA or 401K.  In other words, the odds are very good that that money is coming from you.  If government raises taxes on oil companies, the oil companies have two options.  They can eat it, which really means returning less to their shareholders—i.e., taking it from you.  Or they can add it to the cost of the crude oil used to make gasoline, which will, of course, increase the price you pay at the pump.  The government has got you coming or going; one way or another the additional money going to the government is ultimately coming from you.
Think and listen carefully when the President pontificates about ending “subsidies” for Big Oil.  At the end of the day, where is the exchange of money really taking place?  To whom is the money being given, and from whom is it being taken?
Come to think of it, maybe Obama’s right and there’s a subsidy here after all.

The Song Remains The Same

 
Shepherd:      What I did tonight was not about political gain.
Kodak:      Yes, sir.  But it can be, sir.  What you did tonight was very “presidential.”
            —Michael Douglas as President Andrew Shepherd, and David Paymer as Leon Kodak in The American President
Does everything down at Obama Manor have to be turned into a political gambit?
Last weekend, President Obama—trying to turn adverse news on rising gasoline prices to his political advantage—renewed his assault on Big Oil, once again calling for an end to what he characterizes as a century of taxpayer subsidies.  I’ve dealt with this tired lie that Evil Big Oil is unfairly raping the rest of society here, and here, and to a lesser extent here, but it appears I’ll have to address this yet again.
There are no “taxpayer subsidies” for Big Oil.  A “subsidy” is when a government gives money to a private enterprise; see Solyndra, Ener1, GM, Chrysler, and anyone else who received “green energy” no-recourse federal loans, “stimulus” money, or TARP bailouts.  If anyone should know what a subsidy is, you’d think it’d be Obama.  Oil companies don’t receive government grants.  None of the major oil companies has received federal loan money, “stimulus” funds, or any kind of bailout.  What oil companies do receive—as I’ve explained many times—are certain tax deductions and credits that are common to any industrial business.  That’s not giving taxpayer money to the oil companies; that’s taking less of the oil companies’ money away from them.  The idea that federal taxpayers are subsidizing oil companies is an outright lie.
The fact of the matter is, if you’re concerned about how much you pay for gasoline, taxes are not the solution, taxes (and other government taking) are a huge part of the problem.  Depending on where you live, at an average price of $3.83 a gallon, between $0.54 and $0.73 is made up of taxes.  That’s direct taxes on the gasoline itself, and doesn’t include the overhead cost of the income taxes already levied on the oil company, or secondary capital gains taxes levied on the company’s shareholders on top of that.  It also doesn’t include government royalties and excise taxes levied on the oil used to make the gasoline, which can be as much as 25%; at $107 for a barrel of West Texas Intermediate crude (which yields 19.5 gallons of gasoline from a 42 gallon barrel), that’s another $0.67 per gallon going to the government.  All told, somewhere around half of that $3.83 per gallon actually already goes to the government.
Obama says fossil fuels are the “energy of the past,” and that we need to be looking to the energy of the future.  Does he really think it hasn’t dawned on Big Oil to investigate future technologies?  Exxon has committed to investing $600 million in algae research.  Chevron is actively involved in researching geothermal, solar, and biofuels technologies.  Although it has scaled back recently—because the technology isn’t getting anywhere, a fact to which the current administration is apparently oblivious—Royal Dutch Shell invested over $1 billion on wind, solar, and hydrogen projects between 1999 and 2006.  BP’s alternative energy subsidiary is participating in a $1 billion wind project.  ConocoPhillips recently committed to participate in investing in $300 million worth of “clean energy” startups.  The major energy companies are keenly aware that if the future indeed belongs to “green energy,” the first one to get there stands to make massive, massive profits.  But it is neither necessary nor desirable to mortgage the present in order to do it.
Obama’s call to “end subsidies” is counterproductive to all of his stated goals.  Raising taxes on oil companies isn’t going to reduce the price of gasoline.  With the government’s take already consuming about half the price, raising taxes is 100% certain to increase it.  Oil companies aren’t going to pay that tax.  You are.  Obama complains about Big Oil’s profits and pontificates about stopping the subsidies as though he’s championing the little guy, but it’s more like Curt Bois in Casablanca warning naive refugees to beware of villains while he’s simultaneously lifting their wallets.
Watch yourself.  Be on guard.  This place is full of vultures, vultures everywhere.
 
And all of this is reducing the amount of capital available to those with the greatest profit incentive to push for the development of new energy technologies, thus compromising Obama’s stated goal of leading us—by the nose, if need be—into the “green energy” future.
He has to know all this.  Obama has to know that is proposed tax increase isn’t going to pass—he couldn’t even get it passed when the Democrats held supermajorities in both houses—and even if it did it isn’t going to do anything to help regular Americans at the pump.  So why carry on with it?  It’s about is perpetuating the false zero-sum campaign narrative that you’re either for middle America, or you’re for Evil Big Oil.  Sounds great, even though on any kind of grown-up examination it doesn’t hold any water. 
This man has no substance or depth whatsoever.  Everything is about the political dog-and-pony, setting up the sound bite or the bumper sticker catch phrase.  Consider:
  •     Crying “tax the oil companies!” when gas prices rise;
  •     Telephoning a law student who wants someone else to pay for her $1000 a year in birth control when Rush called her a “slut,” but remaining totally silent when Letterman called Governor Palin a “slutty flight attendant”;
  •     Routinely using artificial scheduling issues to pre-empt or upstage the GOP, whether it’s unilaterally summoning a joint session of Congress in conflict with a GOP Presidential debate, or scheduling a pointless press conference on top of a GOP primary;
  •     Apologizing to anyone and everyone for everything being America’s fault;
  •    Deliberately dropping “Creator” when quoting the Declaration, and mis-identifying the national motto as “E Pluribus Unum”—it isn’t, it’s “In  God We Trust” (see 36 U.S.C. § 302);
  •     Essentially voting “present” on Israel;
  •     Rushing to condemn the Cambridge police for “acting stupidly,” in arresting Harvard Professor Henry Louis Gates, when 911 tapes later revealed Gates ignored multiple warnings to calm down or he would be arrested for disorderly conduct.
And on and on it goes with the Panderer-in-Chief.  It’s always about creating the best TV optics and throwing bones to his Leftist base.  Claim credit, deflect blame, posture everything as “us vs. them,” but never deal with substantive issues on their relative merits like an adult.
I only hope this broken record ends come November.

Biblical Taxation

 
Roxie: God, that was beautiful.
Billy:   Cut out God.  Stay where you’re better acquainted.
—Roxie Hart and Billy Flynn in Chicago
Full disclosure:  I am not a theologian.  Truth be told, I’m not even a very good Catholic.
But I think I got this one.
Last week at the National Prayer Breakfast, President Obama invoked the Bible to support his recent calls for raising taxes on the wealthy in order to continue funding entitlement programs:
“For me as a Christian, it also coincides with Jesus’ teaching that, for unto whom much is given, much shall be required . . . It’s also about the biblical call to care for the least of these, for the poor, for those at the margins of our society . . . To answer the responsibility we’re given in Proverbs to speak up for those who cannot speak for themselves, for the rights of all who are destitute.”

 

One wonders where the hue and cry is from the ACLU and the atheist zealots who sue kindergarteners for putting a Nativity scene on a school grounds at Christmas.  After all, if what we’re going to do is base our tax policy on what the President believes are his instructions in the Bible, doesn’t that convert the government into a quasi-religious institution, and make taxes essentially a forced tithe?
How DARE the government intrude on the First Amendment’s freedom of religion clause!  Why, next thing we know they’re going to be making Catholic hospitals give out contraceptives!
 
Oh, yeah.  Oops.
I hear it a lot: folks on the Left appealing to common Christian catch-phrases or to their own selective quotation/interpretation of the Bible in order to justify Big Government programs, as though they are somehow beating me down with the ultimate trump card.  After all, if I’m a Christian conservative—not to leave out conservatives of other faiths, it’s just that this particular phenomenon appears to be reserved for Christians—how can I possibly object to an initiative that comes straight out of the Bible?   I believe I am my brother’s keeper.
Yeah?  Well keep him, then.
The problem when folks like Obama wax biblical in a transparent attempt to “demonstrate their faith”note the opportunistic Obama only does this at occasions like the National Prayer Breakfastthey rarely take the text as a whole, and they frequently get it wrong.  Take the President’s invocation of Jesus’ teaching about the burden upon those who have been blessed.  He has lifted the reference to Luke 12:48 out of context, and ignored the distinction between the service we owe to God, and the service we owe to the government (see Catechism of the Catholic Church, § 2242).  This distinction is itself biblical, as illustrated in, for example, Matthew 22:21, in which Jesus tells the Pharisees to “[g]ive to Caesar what is Caesar, and to God what is God’s.  Or Acts 5:29, where St. Peter and the Apostles answer charges from the Sanhedrin, “We must obey God rather than men.  
 
In discussing the expectations placed upon the blessed, Jesus wasn’t talking about a mandatory obligation to be extracted by the government.  If we back up and start reading the lead-in at Luke 12:35, we see He was talking about the unknown time of His return, and the kind of self-sacrifice necessary to enter into the Kingdom of Heaven.  This becomes more clear when you read Jesus’ teaching together with His instruction to the rich young man (Matthew 19:16-30; Mark 10:17-24; Luke 18:18-24) to give away everything he has and follow Him.  That is what is expected, and that is why He told the Apostles it is easier for a camel to pass through the eye of a needle than it is for a rich man to enter into the Kingdom of Heaven (Matthew 19:24; Luke 18:25).  But in his zeal to give his tax policy the superficial air of a biblical grounding, Obama missed that.
The Left also confuses their personal conviction with the ability and propriety of forcing someone else to act on that conviction.  They will claim they are their brother’s keeper, but they do so to justify a policy whereby it’s not them keeping their brother, but them forcing someone else to do it.  The problem with trying to ground this sort of thinking in the Bible as though it’s derived from God’s directives is that what God asks of us is voluntary.  God does not want us to love Him and follow His commandments because He makes us do it—He could have made us perfect sin-free followers had He so desired.  He wants us to do it because we choose to do so.  Abraham did not have to slay Isaac (yes, I know he ultimately doesn’t, but God allows him to go all the way to the last second, and he does so voluntarily).  Jesus did not have to die on the cross.
God gave us free will, and when we look at charitable contributions in a biblical context, it is the willingness to give that is the touchstone, not forcibly taking more from those who have more.  In Matthew 10:8, Jesus instructs the Apostles, “Freely you have received, freely give.”  In 2 Corinthians 8:12, St. Paul urged the Church at Corinth to be eager and willing givers:
“Last year you were the first not only to give but also to have the desire to do so.  Now finish the work, so that your eager willingness to do it may be matched by your completion of it, according to your means.  For if the willingness is there, the gift is acceptable according to what one has[.]”  
President Obama is correct that Jesus taught that much will be expected of those to whom much has been given, but that expectation was of free and voluntary giving.  He never spoke about forcibly extracting charity at the point of a Roman sword, yet that’s exactly what a tax policy aimed at increasing taxes on the wealthy in order to fund entitlement programs is.
If we’re going to have the Bible drive our tax policy, perhaps we should consider the entire document.  For example, maybe we should be looking to, say, Mark 12:41-44:
“Jesus sat down opposite the place where the offerings were put and watched the crowd putting their money into the temple treasury.  Many rich people threw in large amounts.  But a poor widow came and put in two very small copper coins, worth only a fraction of a penny. 
 
Calling his disciples to him, Jesus said, “I tell you the truth, this poor widow has put more into the treasury than all the others.  They all gave out of their wealth; but she, out of her poverty, put in everything—all she had to live on.”
Combine that with Matthew 13:12:
“Whoever has will be given more, and he will have an abundance.  Whoever does not have, even what he has will be taken from him.”
St. Mark tells us that although the rich were paying in much more than the poor—exactly our progressive tax system—rather than call for the rich to pay even more, Jesus is more interested in the poor widow contributing everything she had.  St. Matthew recounts Jesus teaching that those who have more will get more, and those who have less will have it all taken away.  Perhaps we should learn from this and adopt a purely regressive system where we tax the poor at 100%.
Obviously, that’s not what Jesus was getting at, but the absurdity of the extrapolation illustrates the danger in selectively lifting pieces of scripture out of context and using them to justify public policy.  We can debate the relative economic merits of progressive taxation and entitlements.  We can even debate whether they are the right thing to do. 
But the President better leave God and the Bible out of it until he has a better handle on what he’s talking about.

It’s Your Money, And You Can Cry If You Want To

“Here’s the deal: What I win, I keep. What you win, I keep.” 
—Dan Shor as Billy the Kid in Bill and Ted’s Excellent Adventure
  
During Tuesday’s class warfare campaign speech—er, State of the Union—President Obama complained about what the government was going to “spend” on a tax cut for the wealthy:
“Right now, we’re poised to spend nearly $1 trillion more on what was supposed to be a temporary tax break for the wealthiest 2 percent of Americans.
Let’s leave aside for this discussion the relative merits of tax cuts and whether the wealthy are or aren’t paying their “fair share,” whatever that is.  I want to look at the mentality of the statement itself.  The President says that cutting taxes equals spending, as though by cutting taxes the government is giving people the government’s money.  This kind of thinking was sadly illustrated by a widely circulated clip of a 2009 Interview conducted by WJR Detroit’s Ken Rogulski with people waiting in line to get “Obama money.”  Unfortunately, a large number of Americans, including this President, believe that the U.S. federal government is like the stone Moses struck at Rephidim, providing an endless flow of cash from no source other than itself. 
Well, let’s expose the dirty little secret: 
The United States federal government doesn’t own any money.
It’s true.  The United States as an entity does not have, and never has had, any money of its own.  The U.S. Treasury isn’t a giant piggy bank.  There is no stash of “Obama money.”  And it doesn’t really matter anymore whether you believe the gold is really still there at Fort Knox.  The pot at the end of the federal rainbow is, and always has been, empty.
The basic fact is the only money the United States government has is what it collects in the form of taxes.  In other words, what it has is what it has taken from its own citizens, literally at the point of a gun. When the government spends, it isn’t spending its money from some magic and bottomless treasure chest.  It’s spending your money, at least as to the 53% of us who actually have tax liability.    
This is the great lie about tax credits, rebates, and complaints that tax cuts cost the government money.  It’s not the government’s money to begin with.  So when it cuts taxes, or gives rebates or refunds, it isn’t giving you the government’s money; it’s giving you back money that was already yours and it took from you in the first place.  Worse, of your money the government isn’t giving back to you, chances are it’s giving it to someone else, somewhere else.  Let me give you an example.
Last week, the First Lady and Agriculture Secretary Tom Vilsack announced changes to the rules associated with the federally-funded school lunch program.  This story originally got my attention (yes, I know federally-funded school lunches have been around for a long timebecause of the federalism implications of the USDA dictating what schools can/cannot/must serve, which I’ll discuss another time.  But in digging into this issue, I learned that the regulations are tied to federal funding measures under the Healthy Hunger-Free Kids Act of 2010.  A January 19, 2011 memorandum from “Associate Administrator”—the title alone makes the hair stand up on the back of my neck—Jessica Shahin summarized how the USDA planned to implement it, and attached a state-by-state breakdown of how the federal funding for the program would be distributed. 
I was, to say the least, shocked when I got into the details.
The four states receiving the largest allocations—California, Michigan, Pennsylvania, and New York—accounted for $203,831,310, over half of the $375,000,000 total tab.  California alone accounted for $137,764,856, or just under 37%.
 
Well, those are big states with huge tax bases, and we’d expect to see more being spent there than in, say, Alaska and Montana.
Perhaps, but this is way out of proportion. Comparing to 2010 IRS data (the most recent available), of these four states, only New York received a school lunch allocation less than or equal to its contribution to total federal revenues (that’s all sources, including income, payroll, estate, and gift taxes).  The other three were nowhere close, with California and Michigan pulling in at a rate over 300% of their relative contribution to total revenues, and Pennsylvania at over 150%.  Collectively, the four states received 54.36% of the program, while contributing only 26.83% of total federal revenue.
Compare that with states like Texas, Florida, Ohio, and Virginia.  Combined, these four states contributed 19.83% of total federal revenue, while receiving 2011 school lunch allocations amounting to just 4.68% of total federal spending.
How’s that taste?
What this means is we are necessarily taking money from people in one state, and using it to fund state-administered programs—schools, and the lunches they provide, are still run by states—in other states.  I don’t want kids going hungry any more than anyone else.  And if the State of California wants to provide free lunches to huge numbers of children of illegal aliens, or if Detroit wants to provide free lunches to all children regardless of their parents’ income status, I suppose that’s their business.  But why should they get to take money from people in Texas, laundered through the federal government, to do it?
This is but one example of the massive redistribution racket the federal government has become.  It’s easy to sell people on feel-good platitudes like making sure we feed hungry babies—and to demonize opponents of such a program—and it’s easy to buy votes by taking money from one group and giving it to another.  But the federal government wasn’t designed to do these things.  It was intended to provide a discrete set of services that worked to the collective good of everybody—defense, foreign relations, etc.  It was never intended to provide services for some states at the expense of others, or for some individual people at the expense of others. 
Hamilton discussed state-to-state redistribution in Federalist Paper No. 22:
“The suffering States would not long consent to remain associated upon a principle which distributed public burdens with so unequal a hand, and which was calculated to impoverish and oppress the citizens of some States, while those of others would scarcely be conscious of the small proportion of the weight they bear.”
Ayne Rand covered person-to-person redistribution at length in Atlas Shrugged.  Both reached the same conclusion:  there is a limit to the burden the contributor will tolerate from the recipient.
 
We’re quickly replacing the work ethic that built this country with an entitlement ethic; an ethic that carries with it an embedded assumption that by not taking the entitlements, one is somehow leaving federal money on the table.  Commentators in California lament that the fact children don’t participate in free school breakfast programs at the same rate they participate in lunch programs is costing the State millions of dollars in additional federal largesse.  Somehow we should be wanting more and more kids to be on free school meals, because that means we get more federal money taken from someone else.  We have to sign up for as many federal freebies as possible, just to keep from getting ripped off by everyone else.  And the spiral never ends. 
 
This entitlement ethic breeds dependency, and weaning off a teat with diminishing capacity gets harder and harder as time goes on; look at the difficulties Europe is facing with rioting dependents as the last sane few try to pull back on the joystick before the whole thing crashes.  But the programs upon which more and more depend are not sustainable.  Eventually Old Napoleon collapses, Hank Rearden and Dagny Taggart drop out, and States revolt.  What then? 
 
We must reverse this trend now, get government out of the business of feeding people and into the business of getting out of the way of them feeding themselves.  If we don’t, it’s going to get really, really ugly.

Our NSF Government

On the outside, underneath the wall
All the money couldn’t buy
You’re mistaken, no one’s standing there
For the record, no one tried
Oh, I try to
What if we give it away?
—R.E.M., What if We Give It Away?
I know I’ve hit this before, but because I have yet to hear anyone, particularly among the GOP Presidential candidates, articulate and explain the point very clearly, I’ll keep banging away. 
Thomas Jefferson famously warned us:
A government big enough to give you everything you want is big enough to take everything you have.
Well, let’s just put that into practice for a second.
As a starting point, let’s recognize that the U.S. federal government currently spends at about a $3.6 trillion dollar annual clip.  That’s $3,600,000,000,000 spent per year.  Now, with all the haggling over the supercommittee and resolving the growing debt and annual spending deficit, there’s been considerable debate over whether, and to what extent, we should reduce spending vs. increasing revenues.  But what no one seems to be able to say out loud in this discussion is that the problem cannot be that we don’t raise enough revenue, because as a matter of basic mathematics there simply isn’t enough revenue to be raised, even if you allow the government to take it all.
Raise taxes on the rich!  We are the 99%!
OK.  Let’s say we do that, in the interest of making sure the rich pay their fair share.  Consider the following.  As I’ve pointed out previously, if you took those making $1 million and above—that’s the top 0.17% of tax returns, for you “occupiers”—and taxed them at 100%, according to the IRS you’d generate about $735 billion.  And just so we don’t get into any unnecessary debates over deductions and credits and loopholes, that’s based on 2009 total income figures.  In other words, I’m not talking about adjusted gross income (as I have in prior posts), and I’m not talking about taxing income above $1 million; I’m talking about taking every dime they made.  No credits.  No deductions.  Do that, take it all, and you’d fund a grand total of 20% of total federal spending.
Ah, but, Rusty, you know perfectly well that you don’t need $1 million to be rich!  You’re not making enough of the wealthy pay their fair share.
Quite right.  Let’s expand our experiment to everyone making $500,000 and above.  That more than doubles our base to the top roughly 0.5% of total tax returns.  Tax that total income at 100%—again, take very last nickel.  You’d generate less than $1.1 trillion, or less than 30% of total federal spending.  You’ll have to do better than that if you want to correct the deficit problem by increasing revenues.  We could drop down to everyone making $200,000 or more—that’s about 2.8% of total returns, so we’re now dipping into the upper income levels of the 99%.  The federal government could take every penny made by everyone making $200,000 or more, and still that would generate less than $2 trillion, or a little better than half of what it spends.  Taxing the rich ain’t gonna get you there, because they don’t make enough money, even if you take it all.
But, but, how can that be if we’re just making them pay their fair share?
How indeed.
Taking everything from the wealthy doesn’t get it done.  So we have to start dipping into the sacred “middle class.”  Clearly we can’t tax the middle class at 100%.  That would be unfair and just silly, right?  But what if we took, say, half of what they earn?  We could raise taxes to 50% on all income for those making between $50,000 and $200,000, and keep the tax at 100% for the “wealthy” as discussed above.  That would net you about $3.9 trillion, enough to cover current federal spending—but just barely, and just for now.  But this, of course, is a moot exercise, because nobody’s going to let you tax a unionized teacher or government clerk making $50,000 a year at 50%.  And taxing at those rates immediately adds about a third of the population to those already below the poverty level—over 4 million filers would go directly to ZERO income net of taxes, and even millionaires need something to live on.  Even for someone like Paul Krugman this is obviously not a practical solution to anything.
But what if we just dictated a livable wage and taxed everything above that?  For example, let’s say we decide in our infinite wisdom that the current median income of about $50,000 is really all anyone needs for a decent standard of living, and the rest they earn above that should be committed to the common good.  So, every dollar earned above $50,000 is taxed at 100%.  You could do that, and you’d generate about $3.6 trillion, or just enough to cover current spending. 
Of course, for 50 large a year you may be able to hire a barista at your local Starbucks, but good luck getting Jay-Z to cut a record.
Or Michael Moore to make a movie. 
Or a doctor to treat you (even if you have federally-funded health insurance).
Signing an NBA point guard?  Fuggheddaboudit. 
Most of us in professions where incomes tend to exceed the $50,000 threshold by any significant margin would quit altogether, or would work part of the year until we earned our $49,999, then take vacation for the rest (for those needing a more detailed explanation, read Atlas Shrugged), thus eliminating most if not all of the wealthy tax base altogether.  In other words, there would cease to be any high wage earners to tax, because there would no longer be anything to be gained by working more to earn more.  Real revenue under this system would end up being substantially less than I describe here, and certainly wouldn’t come anywhere near covering existing spending levels. 
That’s crazy talk.  You don’t need to tax the middle class, and you’re leaving out corporations.  Tax the millionaires and the evil corporations!  People before profits!
OK.  The most current IRS data for corporations is 2008, so it’s a bit of an apples to oranges comparison.  But for 2008, corporations had net income of not quite $1.9 trillion.  You could tax that at 100%, and add that to taxing all the million-dollar earners at 100% as discussed above.  You could take every red cent made by the corporations and millionaires, and it would only generate about $2.7 trillion, still leaving you nearly a trillion dollars short of covering everything the federal government spends.  Never mind what would happen to business development in the U.S. if the corporate tax rate went to 100%.  No, adding corporations to the mix doesn’t get you where you need to be, either.
Slice it however you want.  You can talk about raising taxes to close the deficit until the cows come home.  The basic point remains, and it’s not complicated:  At any practical level there simply isn’t enough revenue in this country to cover federal spending at its current levels, even if you taxed it all.  Like Monopoly, there’s only so much money in the box, and the District is waaaaaayyyy over the limit.
Apparently a government can be big enough to give you everything you want.  But it can’t pay for it all, even if it takes everything you and everybody else has.