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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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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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McNaughton’s “One Nation Under Socialism” Harms Political Discourse

March 26, 2012 by 6 Comments

I’m embarrassed that the likes of Jon McNaughton are helping raise Utah‘s profile nationally.  Depicting Barack Obama in terms that are just short of demonic, McNaughton is harming more than hurting. Perhaps the purpose of art is to shock and persuade, but subtlety is lost on McNaughton as he uses art like a 2×4 to hit his viewers over the head with his opinions.  Playing on fears and anxieties that are real, McNaughton distracts from the important educational process that is necessary to create an informed public.  From the Washington Post.

McNaughton, who is described by Salon as “the right’s Shepard Fairey”and who also creates Thomas Kinkade-esque landscapes and holiday paintings, has gained notoriety for some of his previous anti-Obama paintings: He has depicted the president trampling the Constitution andenslaving Americans in chains. In response to an article on the Blazeasking whether his work was free speech or offensive, McNaughton replied on his Facebook page, “I for one am deeply offended. I can’t believe I had to paint this in our own country. Stand up and be heard America!!”

Simply put, he creates a straw man out of Barack Obama and sets the straw man on fire.  What a way to put Utah on the map. Where Shepard Fairey channeled the hope  of  America (however misplaced those hopes were), McNaughton slaps people in the face with dark, ominous images of Barack Obama stomping on or burning the Constitution.  You might as well just depict the President in a mug shot wearing an orange jumpsuit. It couldn’t be a more damning depiction.

It does little to educate or inform. It appeals to our lowest, and least informed, qualities, pandering without raising our level of discourse. It obstructs any opportunity to form reasoned and educated opinions. And it makes it hard to meet our opponents on grounds where we can make a persuasive argument.

There’s a lot at stake. Our country is facing serious issue. We grapple with a health system that is expensive and wasteful, a government that costs more than it can afford, and an economy that is struggling to recover. Boiling that all down to the fault of one man, painting him in the most demonic of shades, and calling it “socialism” does little to move the American public to the qualities our country must readopt if we are to change.  As Charles Murray argued in last week’s Wall Street Journal, our country is facing a multitude of problems, none of which can be solved by a government program. Just as the solution cannot be the government, neither can the fault be laid solely at one man’s feet. Instead, we should be focused on shifting how Americans view government, understand their government, and the level to which they participate in government. If it matters, it merits the time to understand and learn how it works.

[Washington Post] [Salt Lake Tribune] [Wall Street Journal]

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Obama’s 2012 Budget Proposal is a Trip to La-la Land.

February 21, 2012 by Leave a Comment

What would you say if I told you that the Obama Administration is proposing a budget that cuts spending  in an amount about the equivalent to coupon for a penny off of your Wendy’s value meal?

Let’s be clear: for an administration that has had to deal with the worst economy in decades, the Obama Administration has proven an uncanny ability to live in La-la Land when it comes time to make a budget. Each year it submits a dreamily out of reality budget, and each year, both Democrats and Republicans in Congress vote it down.

I don’t say this to attack the Obama Administration on its handling of the economy…at least not directly. Rather, I point it out because the federal budget is how the executive branch sets its priorities for the coming year. As yet, over the course of his tenure in the White House, the President has not had a budget survive Congress, even when his party controlled both the Senate and House.  This is unprecedented in American history.

It is widely accepted by economists that once national debt exceeds 90% of GDP (gross domestic product or the value of everything a country produces in a year),  ”annual economic growth tends to be about one percentage point lower.”  As of this writing, the current GDP for the US is about $14.58 Trillion. Our national debt? $15.087 Trillion, or about 103.45% of GDP.

That’s right. We’re in the territory where the debt starts to slow economic growth.

Just how much money is $15 Trillion, anyway? That’s the equivalent of one person spending almost $20 Million a day since Jesus was born.

Where has all that money even gone to? How did we get so deep in the hole without building every American a palatial home complete with a Rolls Royce and driver?

But I digress. The budget.

So, without having yet passed a budget during his Presidential career, a weak  economy, national debt higher than the market value of everything Americans will create this year, and his reelection campaign all on the docket for 2012, what does the President propose in his 2012 budget?Barack Obama - Caricature

Does he tact to the right to find a middle place where the Republicans can compromise? Does he propose solutions that can strengthen the economy?

NOPE.  Senator Sessions of Alabama and budget hawk Congressman Paul Ryan of Wisconsin recently said that

Although it claims to include $4 trillion in deficit reduction, the president’s budget actually contains virtually no credible deficit reduction at all. Under his plan, the government is projected to borrow $11.2 trillion over the next 10 years. This is roughly the same amount of debt we are expected to incur under realistic projections of current policy. The budget does not change our debt trajectory.

In other words, the President is doing a lot of talking, but not a lot of walking. He’s promising a fiscally responsible budget from the the lectern, but hoping no one will notice that the budget he submitted to Congress actually adds to the national debt.

But Senator Sessions and Congressman Ryan are just Republicans doing what Republicans do when the guy in the White House is a Democrat, right? They’re just the party in opposition.

They aren’t alone in their analysis.

Enter the Wall Street Journal which said that the President’s budgeting skills earned him a “fiscal record [that]  is the worst in modern American history[]” and that he is pointing to a “mirage” when setting projections for growth.  Want more gory details?

  • One CATO analysis says that the budget proposed only gives savings of “$24 billion in a $3.8 trillion budget.” That’s 1/158.333333th of the budget. Kind of like going to buy a $2.99 value meal at Wendy’s with a coupon for about $.02 off of your meal. Actually, even less than that.
  • According to the WSJ, “[f]our years of spending of more than 24% of GDP, the four highest spending years since 1946. In the current fiscal year of 2012, despite talk of austerity, Mr. Obama predicts spending will increase by $193 billion to $3.8 trillion, or 24.3% of GDP.”
  • And “[a]nother deficit of $1.327 trillion in 2012, also an increase from 2011, and making four years in a row above $1.29 trillion. The last time that happened? Never.”  Ouch.
  • Tax “[r]evenues at historic lows because of the mediocre recovery and temporary tax cuts that are deadweight revenue losses because they do so little for economic growth. The White House budget office estimates that for the fourth year in a row revenues won’t reach 16% of GDP. The last time they were below 16% for any year was 1950.”

PS. None of that debt includes what current tax payers will have to pay out to current and future retirees for Social Security.

How does the Obama Administration think this budget is possible? How can they A) raise spending and B) cut the deficit?

Easy. Raise taxes on anyone making more than $200,000 (see my analysis of the so-called “Buffett Rule” here) and economic growth at 17.8% of GDP.  Tax rates will increase, in some cases very dramatically. “[C]apital gains to 30% from 15% today; dividends to 30% from 15%; the estate tax to 45% from 35%.” Even the payroll tax cut, which is probably the only thing going for employers, is only slated to last another 10 months, at which point President Obama wants it to end.

According to Michael Tanner at CATO, that’s not going to help the economy, not by a long shot:

Instead, what the budget does contain is a renewed call for tax increases on people and small businesses making as little as $200,000 per year. In addition, there’s the usual panoply of tax hikes on energy products, businesses, investment, and pretty much anything else the president can think of. The budget also helpfully points out that 2013 is the year in which most of the new taxes under Obamacare will take effect. Overall, the president would increase tax revenue to 20.1 percent of GDP. That’s a huge increase from the current 15.4 percent, and higher than the post–World War II average of 18.0 percent. Tax increases of that magnitude cannot help but slow economic growth and job creation.

 Furthermore, ”even if the President were to get every penny of the tax hikes he wants, his budget would never balance. The closest he would ever come would be in 2018, when the deficit would be only $575 billion. After that, deficits begin rising again, reaching $704 billion by 2022.”  (Deficits are the difference between what we raise in tax revenues and what we spend beyond that. Think of it like credit card debt you incur when you spend more in a given month than you earn. Pretty much, we’ve spent more than we earn for so long that we owe more than we are will earn in any given year…and that’s not taking account that we need to pay it all back).

Democrats denounced George W. Bush for allowing so much red ink, but his deficits averaged only 3.5% of GDP if you don’t count 2001 but do include the 10.1% of 2009. Mr. Obama’s deficits have averaged 9.1% of GDP if you count 2009, as you should because his $800 billion stimulus passed that February.

Let me sum it up: budget = President’s plans, and President’s plans = status quo. Because, as one friend put it, “why pass a budget that causes you to compromise when you can pass a bunch of continuing resolutions that keep the Republican controlled House out of the picture?”

That’s playing politics, not good policy, and its bad government policy, bad for our economy, and bad for America.  With the national debt proving to be a giant drag on the economy, the Obama Administration is living in a dream where taxes are high and the economy grows at rates it hasn’t seen–ever.

APROPOS: Did I say that the President was planning on paying for his budget increase with taxes on the rich through the Buffett Rule? Oops. My mistake. Just kidding. Turns out, according to this guy, he doesn’t even put the Buffett Rule into the budget, despite devoting substantial space to it in his State of the Union speech. Grandstanding, much?

[The Washington Post] [Wall Street Journal] [CATO]

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The death of boredom, the doom of creativity, and the fall of Western Civilization.

August 22, 2011 by 3 Comments

Do you know what America’s problem is?

No, it’s not the economy. It’s not even the politicians. No, it’s something worse.

It’s your iPhone/Android. And your iPad. And your Kindle. And every other gadget that’s keeping you from getting bored. According to Scott Adams, America’s problem isn’t the economy: it’s that we don’t get bored, anymore. As a result, we just don’t have the time to be creative, to innovate, or the mind numbing boredom that inspires creation and innovation.

That’s right. I just said that boredom inspires creativity. If I ever write something that sounds more like Orwellian doublespeak, I’ll buy the first person to point it out lunch. (Offer good for one time only…)

In a column for the Wall Street Journal, Adams–who you know better by his syndicated comic “Dilbert” and his protagonist’s perpetually upturned tie–argues that creativity has taken a beating due to the perpetuation of gadgets and gizmos that allows us to keep ourselves constantly occupied. He harks back to another day (one that I remember), when kids made guns out of sticks, monsters out of decapitated Barbies, and spent hours outside. On bicycles. Playing.

We didn’t have many toys by modern standards. But I discovered that if you have a blob of clay and some Lincoln Logs, you can make your own toy rifle. You can use those same materials to create a FrankenBarbie doll with body-image issues and a G.I. Joe that looks like an angry starfish with snow shoes. I’d take turns shooting at both of them, sometimes using the Lincoln Log rifle and sometimes the handgun that I whittled out of a block of wood. I blame society for all of that.

When I wasn’t making something inappropriate out of nothing, I would stare out the window into the frosty tundra and watch birds freeze to death in midflight. In the summers I rode my bike for hours every day, imagining fantastic worlds in which ice cream was free and farm dogs didn’t attack kids on bicycles just because biting is fun.

Weird.

And yet, maybe not so much. I remember those days myself. I grew up on on five acres on a plateau just east of the Rockies (and by “just east” I mean, I was two miles down a dirt road from the first slopes). I spent summers making forts from fallen branches  and winters making sled trails through the gullies and ravines that ran behind the house. There was stream just large enough to encourage beavers, and I spent entire afternoons watching to see the dam builders show their head above the water, just for a few seconds.  My first Nintendo didn’t make a showing in the house until I was old enough to take drivers ed, and by then I had far more interesting things to spend my time on, namely, girls.

In short, I had a lot of time to be bored.

Today, however, I am constantly carrying my phone, a device that’s powerful enough to be a computer,  a jukebox of thousands of songs, a high quality camera or camcorder, or, in a pinch, act as a phone. My biggest worry is not what it can do, but that the battery will run out. It can do everything.

That’s the problem, says Adams (not the battery, but that it can do everything). We always have something to do.

Lately I’ve started worrying that I’m not getting enough boredom in my life. If I’m watching TV, I can fast-forward through commercials. If I’m standing in line at the store, I can check email or play “Angry Birds.” When I run on the treadmill, I listen to my iPod while reading the closed captions on the TV. I’ve eliminated boredom from my life.

But why is that a problem? What does it look like when we don’t have time to be bored? Downtime, if you will.

What might such a world, a world lacking in sufficient boredom look like?

For starters, you might see people acting more dogmatic than usual. If you don’t have the option of thinking creatively, the easiest path is to adopt the default position of your political party, religion or culture. Yup, we see that.

You might see more movies that seem derivative or are sequels. Check.

You might see more reality shows and fewer scripted shows. Right.

You might see the best-seller lists dominated by fiction “factories” in which ghostwriters churn out familiar-feeling work under the brands of famous authors. Got it.

You might see the economy flat-line for lack of industry-changing innovation. Uh-oh.

You might see the headlines start to repeat, like the movie “Groundhog Day,” with nothing but the names changed. We’re there.

You might find that bloggers are spending most of their energy writing about other bloggers. OK, maybe I do that. Shut up.

You might find that people seem almost incapable of even understanding new ideas. Yes.

Bloggers writing about other bloggers? Ouch! Guilty, as charged.

But to the point– Well, he has made the point. We’re so busy surfing, Facebooking, downloading, uploading, and, heck, maybe even reading [gasp!] that maybe there isn’t enough free time, as in free time for our brains, to wonder, day-dream, and, yes, create.

Reminds me of something I once read that Albert Einstein said: “Reading, after a certain age, diverts the mind too much from its creative pursuits. Any man who reads too much and uses his own brain too little falls into lazy habits of thinking.”

Hmmm…

Do you take time to be bored?

I know I don’t. But I’m going to try it. I’m going to find an hour, and I’m going to turn it off. The iPod, the phone, the laptop, the tv, and the myriad of other devices. All of it. And just be bored.

Maybe I will go for a hike while I am bored. I hear it’s quiet out there. Maybe I can get my kids to come, and, as we hike,  I can tell them what it was like “back in the day” before boredom died and creativity still flourished in those quiet moments when we had nothing else to do.

Go read Scott Adams’ full column “The Heady Thrill of Having Nothing to Do.” It’s witty, insightful, and fun, and, really, an interesting perspective on what why we less time on our devices and more time in our own heads.

[WSJ]

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Big Brother: not just the government, anymore.

April 26, 2011 by Leave a Comment

As sure “as the day follows night,” Apple has been sued for its iPhone location tracking.

Whether the suit survives a summary judgment motion is another question.

[Read more...]

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Own an Android? An iPhone? Google & Apple may be tracking you.

April 21, 2011 by 3 Comments

Scarier than the government: Is Steve Jobs the real "big brother" that is watching you?

In fact, no maybe about it. They are.

It’s scary to think, but there it is, in the Wall Street Journal:

Google and Apple are gathering location information as part of their race to build massive databases capable of pinpointing people’s locations via their cellphones. These databases could help them tap the $2.9 billion market for location-based services—expected to rise to $8.3 billion in 2014, according to research firm Gartner Inc.

In the case of Google, according to new research by security analyst Samy Kamkar, an HTC Android phone collected its location every few seconds and transmitted the data to Google at least several times an hour. It also transmitted the name, location and signal strength of any nearby Wi-Fi networks, as well as a unique phone identifier.

Google declined to comment on the findings.

via Apple, Google Send Cellphone Location – WSJ.com.

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