May 21, 2013

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Spending, not guns, on our minds

April 22, 2013 by Leave a Comment

barack_obama_gun_control_ap_328A funny thing happened to President Obama on his way to increasing federal regulation of firearms. Members of Congress noticed that gun control wasn’t a top priority for their constituents and handed the President his first major legislative loss.

Instead, Americans are still more concerned about the economy and the state of our fiscal house. From the “Editor-in-chief” over at Gallup:

Only 4% of Americans say that gun violence or gun issues constitute the most important problem facing the country today, based on our April 4-7 monthly update of the “most important problem” measure. This puts guns in the same 4% category as immigration issues, education, and the situation with North Korea.

To be clear, the 4% of Americans for whom gun violence is a top issue were no where to be found before Newport, Connecticut happened. Prior to the Sandy Hook massacre, gun violence didn’t register on the scale.

At all.

Instead, Americans’ top five issues are, in order:

  1. The economy (in general)
  2. Unemployment/jobs
  3. Dissatisfaction with government  (whatever this means)
  4. Federal budget deficit/federal debt, and
  5. Healthcare (which is declining in importance over the last three months)

You can’t see gun violence appear in the list for another four rows, and then it’s tied with worry about threats from North Korea, a country that is begging Mongolia to provide food aid for its starving people. The drug lords of Juarez, Mexico pose a greater threat to the United States.  (See the full chart below.)Gallup Issues

With worries about the economy, our ability to maintain a standard of living, provide for ourselves, and so on, weighing on us, why should anyone, let alone Obama who also has these polling numbers, be surprised that Congress, with lower approval ratings than the President, has no fear about thumbing their collective noses at his push to require universal background checks?

It’s still the economy, stupid. And it will be until we change how we’ve been doing things.

Not that I want to rely upon Hollywood for an example, or anything, but I’m going to do just that. I’ve been watching Andrew Sorkin’s West Wing lately, set in the bright years of the 1990s (or so). Repeatedly I hear the same talking points and arguments that are being made–today–by liberals and Democrats in favor of their pet programs and policies.  Whether it’s for gun control, expansion of governments role in healthcare, fiscal and tax policy, or the first amendment, the arguments have not changed.

The difference is that elected officials, all too often, act like our collective memory is too short to remember what they are doing now has been done before, has been said before, and, well, got us into the mess we’re in now. But does anyone remember? Are we going to keep doing the same thing and expect different results?

I can’t claim to understand the arcane workings of federal programs, but I do know the pinch on my pocketbook, on my family, when I look at my pay stub and the withholdings there. I do see the taxes I pay at the fuel pump when I look at my receipt. I do recognize how much cheaper and easier it is to buy a book online from Amazon compared to Barnes and Nobles’ brick and mortar and what will happen if the government starts taxing that purchase. I do see how difficult it is to buy a home, still, five years after the housing market collapsed, largely because of governmental meddling in the housing market. And I know that I am not in the minority–Americans think about the price of a home, of a car (remember what “cash for clunkers” did to all those perfectly fine used cars that we could still be driving?), of a meal, of a vacation…or the lack thereof.

And that’s on my mind more than is gun violence. Stop being so surprised and peeved that you didn’t get your way, Mr. President. It’s government for, by and of the people–and the people are concerned about the economy.

Publius Online is participating in the Blogging from A to Z Challenge, a month-long quest to post every day (I know…I’ve missed a few days). Each day should match a letter of the alphabet. Today is the letter S, as in Spending.

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From the WSJ: “The Magnitude of the Mess We’re In.”

September 18, 2012 by Leave a Comment

Simply put, the mess is far greater than you think.

Suppose you were offered the job of Treasury secretary a few months from now. Would you accept? You would confront problems that are so daunting even Alexander Hamilton would have trouble preserving the full faith and credit of the United States. Our first Treasury secretary famously argued that one of a nation’s greatest assets is its ability to issue debt, especially in a crisis. We needed to honor our Revolutionary War debt, he said, because the debt “foreign and domestic, was the price of liberty.”

History has reconfirmed Hamilton’s wisdom. As historian John Steele Gordon has written, our nation’s ability to issue debt helped preserve the Union in the 1860s and defeat totalitarian governments in the 1940s. Today, government officials are issuing debt to finance pet projects and payoffs to interest groups, not some vital, let alone existential, national purpose.

Read the entire (longish) piece by George P. Shultz, Michael J. Boskin, John F. Cogan, Allan H. Meltzer and John B. Taylor at the Wall Street Journal online here.

[WSJ]

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Financially, we’re not better off, says the US Census. Especially young workers.

September 12, 2012 by Leave a Comment

According to data in the US Census released today, most Americans are not better off financially after Barack Obama’s first term as President of the United States. Whether this will translate at the polls in November remains to be seen.

The median household income for families dropped 1.7 percent from 2010 to 2011 to $62,273. That’s 8.1 percent lower than in 2007, the year before a collapse in the housing market led to what has been the longest recession in a generation. According to the report, income rates among all race groups have not recovered from highs experienced previous to the 2001 recession caused by the collapse of the dot-com bubble.

Hardest hit by the slow growth are families led by women, with 31.2 percent of families with a female householder living under the poverty line while only 16.1 of families with a male householder living in poverty. Nationwide 46.2 million people, or 1 in 6 Americans, remain in poverty, the highest in the half century that records have been kept and at 15 percent at about the same rate as it was in 1993.

The effect of the recession has been felt in Utah, as well, despite weathering the recession better than most states.

“We compare favorably to other states,” said Utah state demographer Juliette Tennert in an article in the Salt Lake Tribune. “But compared to our history, our poverty rate is up.” Tennert noted that while Utah had lost 80,000 jobs since the beginning of the recession, 60,000 of those have returned.

However, warns Pam Perlich a senior research economist at the University of Utah, those jobs have not all been at the same wages as those lost.

“There have been tremendous job losses, and many of the new jobs that are being created are not at as high of a wage level as the jobs that were lost,” Perlich told the Salt Lake Tribune. “It’s more than a recession, it’s an economic restructuring.”

In a blog post, the White House noted there is more work to be done.

“While we have made progress digging our way out of the worst economic crisis since the Great Depression, too many families are still struggling and Congress must act on the policies President Obama has put forward to strengthen the middle class and those trying to get into it,” the White House post said.

How America’s continuing economic struggle will play out politically remains to be seen. After a slight bump in the polls after the Democratic National Convention, Obama and Republican challenger Mitt Romney are polling neck and neck.

With 53 percent of 18-24 year olds living back at home with their parents, it should come as no surprise that support among the young for Obama has fallen. Young voters between ages 18 and 29 have been among the groups hit hardest by the recession, with 12.7 percent unemployed and nearly a third underemployed. Support for Obama in this group has fallen from 49 percent to just 41%, a blow to a group that was important to the President’s 2008 win.

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Should the rich pay more taxes (than they already do)?

August 6, 2012 by Leave a Comment

What is your “fair share” of taxes?

President Obama’s plan to balancing the budget, if I don’t mistake it, is to raise taxes on the wealthy. His argument is that the wealthy are not paying their fair share of taxes. If they were, we could pay down our debt and put our fiscal house in order.

As I’ve cited before, this is the crux of his “You didn’t build that” speech, an attack on successful Americans everywhere.

“There are a lot of wealthy, successful Americans who agree with me because they want to give something back,” he said in a speech in Roanoke, Va., that set off dueling campaign ads. “Look, if you’ve been successful, you didn’t get there on your own.”

Private opinions can disagree, though, and they do. Says Joseph Thordike, a tax historian to the Wall Street Journal:

“Who’s right: Obama or Romney? Both. Or neither,” says Joseph Thorndike, a tax historian. “When it comes to taxing the rich, there is no single, objectively correct answer. You can talk all you want about asking rich people to pay ‘their fair’ share,’ but don’t kid yourself. You’re just trying to turn private opinions into public policy.”

“I’m struck” he adds, “how the facts can be used selectively by either side.”

[Emphasis added]

If where the “fair share” line is up to private opinion, what does it say about President Obama’s opinion that, when the economy is struggling and unemployment is high, he wants to take wealth out of our country to balance the debt? Wouldn’t it be better to grow the economy and lower the cost of government? Why would we soak the rich–most of them owners of businesses and investors in businesses–at the very time capital is most needed to grow business and expand?

____________________

INTERLUDE

I recall, in an election past, attending a fundraiser for a candidate for President. The candidate himself was there, and though I was only there to help (hand out name tags, direct traffic, etc), I shook his hand and got a picture with him.  While a good man and a patriot, he was not the person supported for the party nomination. However, he could be the next president of the United States and that, I thought, was cool.

The fundraiser was small–probably less than a hundred donors–and was held in one of those spacious homes up on Salt Lake Valley’s bench. The door knobs were probably worth more than my undergraduate education, and the chandelier might have funded law school. A stairway lifted out of the main room where the donors were gathered and the candidate climbed up a few steps to speak. Among other things, he said something that has stuck with me:

“This sure is a nice place,” he said, and donors chuckled at the understatement. “In fact, it’s part of why I am running for President. My opponent wants to take this away and spread out the wealth. I’m running because I think everyone in America should have a place like this.  But you don’t get a place like this by taking it away from those who have earned it.”

Hyperbole or rhetoric, or both, fast forward now a few years, or more, and we find ourselves with a President who appears increasingly out of touch with the reality of what it takes to increase wealth, and that’s what it’s all about, right? Increasing wealth?

We’re not talking just about the level of unemployment, though that’s a great indicator. We’re talking about our national wealth–as a country and as individuals.  Whether we are talking about how much debt the federal government is carrying or the average wealth of Americans, the high and lingering level of unemployment (anywhere between 12 and 23 million people, depending whether you include underemployed and those who have stopped looking, and whether you say it’s 8.3% or 8.254% unemployment) is a mark that our country is not growing.

In fact, economic growth was at only 1.5% from April to June. That’s abysmal. Even while the rest of the world is picking up, last year the US growth at only 1.7%, while China grew at 9.2% and India at 7.2%. Lest you blame it on cheap labor available to those developing countries, note that even Canada grew at 2.5% last year and Germany at 3.1%. If we’re going to turn the economy around, we’ve got to start growing again.  Growth won’t happen by taking the fruits of success away from those who earned them.

____________________

TAXES OVER TIME

David Wessel, in the same article that cites Thorndike above, makes a few salient points: How much are the successful (‘wealthy” in President Obama’s parlance)  paying in taxes now in comparison with past years?

  • The top 5%, top 1% and top 0.1% of Americans have been getting a bigger slice of all the income and paying a growing share of federal taxes,  and the corollary: the share of taxes paid by the bottom 40% of the population has been shrinking along with their share of income..

As my friend “Steve” would argue, the gap between the rich and the poor (or the rich and the middle-class) is getting bigger. Granted. But so is the share of taxes paid by the rich, too.

From Ronald Reagan to Barack Obama, the tax code has been tweaked and the economy has had its ups and downs, and the share of federal taxes paid by the top 5% and the top 1% has risen faster than their share of income:

In the 1980s, the top 5% averaged 22.6% of income and paid 28.5% of taxes.

In the 1990s, the top 5% averaged 25.3% of income and paid 34.3% of taxes

In the 2000s, the top 5% averaged 28.4% of the income and paid 40.3% of the taxes.

Do you see a pattern?

  • Average tax rates have come down for everyone. On average, the tax bite on the rich is bigger—except for those whose income mainly comes from capital gains and dividends.
Everyone is paying fewer taxes, but the wealthy are giving a bigger share of their income to the government. It’s why we call our tax system “graduated.” The higher on the income scale, the more taxes you pay, while the on the bottom (as much as half of Americans) pay almost no income taxes (though they pay a relatively higher share in sales tax…but that’s another story).

In 2011, according to the Tax Policy Center, about 46% of households didn’t pay any U.S. income taxes, a proportion swollen because so many have seen paychecks shrink or evaporate. But even in the better years of the mid-2000s, roughly 40% of households didn’t pay any federal income tax.

  • The tax system narrows the gap between economic winners and losers, but not enough to stop the gap from widening.

Our tax system does provide a safety net to those who do not succeed, but not as much as the Obama campaign wants it to.  Narrowing the gap is not enough, though; the Obama Presidency is aiming to eliminate it, not by lifting up the bottom, but by redistributing the property held by the top to those below them.

Unfortunately, we’re saddled with a President who is more concerned with a healthcare solution that will increase our taxes than an economic solution that will increase wealth so we can afford health care. It’s no unlike killing the golden goose to feed your family instead of just selling the golden eggs.

Golden eggs or rotten eggs, the question about fairness of taxes comes down to opinion resolvable only by a “show of hands.”

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Presidents ranked by job creation [infographic] [via Political Math]

June 18, 2012 by Leave a Comment

Hat tip to Matthias Shapiro, a friend and local policy wonk who’s got a penchant for making numbers make sense.

First, his infographic:

Second, the caveats (ask Matthias states them):

  • No, it’s not fair. President Obama hasn’t finished his first term, yet (but neither had Kennedy). On the other hand, if he’s going to get out of last place, the economy has to add 300k jobs per month until January.
  • President Obama started things in the hole.
  • Do Presidents’ really have that much control over economic growth? (No, but yes. Actually, maybe…)

Catch Matthias’ full post here and follow him on Twitter. He’s always entertaining, not to mention insightful.

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When the government picks winners, the applicants might already be losers

June 14, 2012 by 2 Comments

By the time lobbyists in Washington, D.C. (or at any of the state capitols  or local city governments across the country) convince lawmakers that a subsidy is needed for a particular industry, it might just be that the company is already taking a turn for the worse, says a new study.

The researchers looked at some $5 billion in spending from 1998 to 2008 in their study that will be published in the fall. Their findings showed that on average, the more a company shelled out for government affairs and political interests at the federal level, the worse it performed financially.

“If you look at most of the literature on business management and strategy, the implication is that these investments really pay off,” Doug Schuler, study co-author and professor of business and public policy at Rice, told Reuters.

“But we found a really persistent negative relationship” between political activity and market performance, he said.

The research also found that in terms of return on sales, higher political spending on average had either marginally negative, or statistically insignificant impacts.

The only exception? About 10 percent of the companies surveyed did better only when they were already highly regulated.

This isn’t just a problem for the federal government, either. When local and state governments shell out money to prop up a “pet industry,” the government must, of necessity, take from Peter to give to Paul. Every RDA, loan guarantee, or special tax treatment is just another way of propping up a private company at tax payer’s expense. It’s called “picking winners,” because the government is essentially guessing that this company is going to work, pay back the money, and the government will come out on top.

Unfortunately, more often than not (if not nine times out of ten) the government–city, state, or federal–picks that winner not based on market success but on lobbyist donations. As a result, often dubious enterprises are propped up beyond their useful life by taxpayer money, money that is frequently lost from productive use.

Want an example? The most glaring is Solyndra, mentioned above. Touted as a green energy company, in 2009 the Obama Administration provided it with $535 million in loan guarantees. Additionally, the California government gave it $25.1 million in tax breaks. Then, on August 31, 2011, Solyndra declared bankruptcy, laying off 1100 workers. Ouch.

Closer to home, you might look at UTOPIA, a consortium of 11 Utah cities that have formed to compete with the private sector to provide telecom services and a dubious project that, if it worked, would provide very high-speed internet to participating customers in participating cities across Utah. While not a company, it acts as one and has been set up by government to compete with private companies. There are those, such as myself, who do not believe government should subsidize competition with the private sector.  Further UTOPIA’s ongoing problem is that it requires participant cities to foot the initial cost of building the network until sufficient customers can be attracted to repay the costs. So far, the project has run over budget and has been unable to attract enough customers to meet targets. In fact, from 2010 to 2011, it started to lose customers. The cost was just too high for people to pay when sufficient internet bandwidth is available from private companies.

Inability to gain customers is one thing, and there are those that argue that UTOPIA has begun to gain customers, but regardless  UTOPIA has consistently been required to rely upon taxpayers to balance its budget when it has failed to meet its stated goals.  As the Utah Taxpayer’s Association  argues, after so many repeated failures to meet promises, perhaps local governments would face up and end the pain:

UTOPIA, and its enablers on the city councils in UTOPIA’s member cities, have heard these concerns repeatedly. Many even agree that these arguments should have persuaded their predecessors in the city  governments to not venture down this path at all. However, they feel compelled to pony up more money, to make sure taxpayers don’t lose the money already committed to back UTOPIA’s bonds. Unfortunately, that money is already gone.

Rather than cut their losses, though, and move on, cities continue to throw good money after bad.  Take West Valley City, for example. In 2010, to match its obligations to UTOPIA and help cover UTOPIA’s shortfall, In the 2011 budget year,

To cover their $3.5 million UTOPIA bill, West Valley City is proposing an 18% property tax increase. While West Valley City officials insist that the property tax increase is unrelated to the UTOPIA bill, it is no coincidence that the exact amount of revenue generated from the property tax increase is $3.5 million.

The tax increase would amount to $70.44 on the average home valued at $185,000 and $128.16 for businesses of the same value. West Valley City already has the second highest property tax burden in the state.

That budget passed, and West Valley residents, whether they use UTOPIA or not, saw an 18% increase in their taxes.  And guess what–UTOPIA seems to fit all the characteristics of a subsidized company that the market wouldn’t support otherwise.

Maybe it’s time to choose leaders who won’t subsidize private business and use the government to compete with the market?  Even the Chinese can make a city look good by pouring enough money into it. Just look at the Olympics. That doesn’t mean the economy will do better because of it.

Helping a company, or competing with a company using taxpayer dollars, only removes from the market resources that the market would have otherwise, and more efficiently, used to create more competitive products.

In Solyndra’s case, the Obama Administration picked the company they thought would last. They were wrong.

In UTOPIA’s case, eleven cities have opted to create a product that the private sector was unwilling to support on it’s own. If the private sector won’t support it, why should the government?

[MSN] [UTA]

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One does not simply lose 129,000 millionaires…

May 31, 2012 by Leave a Comment

The first thing that came to mind when I saw the headline was: “What? Where did we put them? Are they under the couch cushions?”

It’s no joke, though. Because of losses on the stock market, America is down 129,000 millionaires, while the rest of the world added 175,000 millionaires. Growth is happening, evidently, in the “emerging markets” of the world.  Just not here at home.

The population of U.S. millionaire households (households with investible assets of $1 million or more) fell to 5,134,000 from 5,263,000 in 2011, according to The Boston Consulting Group’s Global Wealth study.

Total private wealth in North America fell by 0.9 percent, to $38 trillion.

The ultra-rich were the largest losers in dollar terms. Households in North America with investible assets of more than $100 million saw their wealth decline 2.4 percent. Their population declined slightly to 2,928 from 2,989.

The main reason for all this wealth loss? Stocks.

Also, in case you were wondering, the highest population density of millionaires is in Singapore. Who knew?

[CNBC]

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