Sensible Ideas in a Senseless World: My ideas for stimulating the economy

Last week a discussion on the wall of the President’s Facebook townhall left an impression on me. I was speaking to another economist about the policies of the current Administration and we each had different opinions about the success of them. When we came to a wall, the question was asked: What are your ideas then? I had ideas, and I shared them, but it made me think about how much time is spent criticizing others without presenting alternatives. Most of the criticism isn’t even based upon logic, but a personal dislike for the owner of that thought. Well, this gave me the idea of starting a video series explaining the criticisms of the current Administration based simply on economics and presenting alternatives to them.


Now, I’ll warn you, the subject of economics probably wouldn’t be as exciting to you as it is to me, but because it is important enough to affect everyone’s lives than it should be important enough to try to have a better understanding of it. 

That being said, I would like to start with our tax code, specifically with the notion of “corporate taxes”. When asked who pays corporate taxes, many of us have been led to believe that the business pays those funds to the government, which is a serious misconception. Taxes are funded solely on an individual basis, and as such a corporation does not pay corporate taxes at all. Businesses are tax collectors on behalf of the government. Think about it. A business treats the tax as any other expense which gets passed down one of three ways: the consumer, employee, and shareholders (as explained in a piece I did in 2008). The pain of paying the higher taxes trickles down to one of the three beneficiaries of the business’ success as long as the business can remain competitive in the market. In a roundabout way, I’m basically saying that the idea of taxing businesses and corporations is another way for politicians to essentially tax the public (without the public being aware of it). Have you ever heard of a politician promising to lower the income taxes for the lower and middle classes, while also promising to get back at those greedy businesses and corporations by raising the corporate tax rates to fund social programs to benefit the growing poor and middle class? Ever notice how wages have stagnated as the cost of goods rise prior to the current recession as early as the 90s? Notice that as the world’s become globally connected, business has left this country to beneficial nations?

Retaining what I just pointed out, consider this idea to stimulate the economy: abolish the Corporate Tax rate completely. Doing so will allow business to have more revenue to play with, which would result in any of the following: stable stocks, expansion (jobs/wages/benefits), lower prices for the consumer. Business overseas will notice the friendly change and move to take advantage of the zero rate, making this country more appealing compared to other nations. If you want true stimuli, this purely economic based act would have an immediate (within a year) impact on the marketplace that would benefit the people. Yet, this act alone would not suffice….

The President recently called for the removal of federal subsidies to oil companies in retaliation to the steady increase in the price per barrel in a letter addressed to the Minority an Majority leaders of Congress with the intention of punishing the private oil companies for the increase in fuel prices. To his base and the uneducated, the idea of punishing big oil is considered a great idea. For the pain of paying at the pump, someone has to be blamed and punished. Just think about this for a second, and also consider what I said earlier about businesses and expenses. The initial shock of having those subsidies removed will dramatically increase the price we’d pay at the pump simply because what we pay at the pump has been subsidized by the government this whole time. In effect, the very people cheering this movement on will be hit the hardest once this action is taken. The trickle down effect will spread to every single industry that uses any product that comes from the oil industry, inflating the prices of food, clothing, housing, etc. Not to mention that when it comes to federal involvement in the marketplace, this is another example of the feds picking which industry wins/loses based on the political climate. In the quest for “fairness” in the marketplace, this is hardly fair business practice.

Couple the zero Corporate rate with a plan to end to all forms of Corporate Welfare. In 2006, the federal government allocated $92B subsidies to many companies including Boeing, Xerox, IBM, Motorola, Dow Chemical and General Electric. The state and local governments collectively paid out $40-50B. I just pointed out that the President is calling for the removal of subsidies to the oil industry simply because the political climate calls for it. I would agree with him, if he would take it further and completely remove all forms of corporate welfare as an economical gesture of good will. The government should be neutral in the choosing of which business receives an incentive over another. This practice of choosing who wins/loses has opened the doors for political corruption, lobbying, damaging policymaking, etc which hurts the average citizen and tainting the political process. By removing the practice, the average consumer has more say in the decisions a business makes and the future of the company. The company would no longer have to concern themselves with trying to obtain subsidies before their competitors by wasting time and money in lobbying efforts to that end, but would have to rely on catering to their customers in order to compete.

There are some concerns about the transition to such a system because there will be some of the same issues. Market influence into politics will never die unless the politicians themselves choose to make decisions that benefit the people they represent and not their campaign coffers. Regulation (a good thing, BTW) opens the door for lobbying/bribery as long as the restrictions are unnecessary, redundant and created for the purpose of assisting special interests. A reduction in some of the government programs that depend on the corporate tax system is a given, much of which can be sustained by removing waste fraud and abuse within them (no, really!) and the influx of jobs would reduce the number of Americans that are dependant on programs like WIC, Welfare, Section 8, etc.

These ideas aren’t perfect, but are simple and address the main concerns of the people in the country. The free market system works…..if the government reduces it’s influence to levels that benefit society as a whole.

For more ideas based on economic principles I've already covered (would coincide with the above):

Business
Social Security
Healthcare
Taxes
 
Acknowledgement: Michael Ramirez for the editorial cartoon

Keynesian Economics Is Wrong: Economic Growth Causes Consumer Spending, ...

Via Ed Morrissey @Hotair.com:

Think of it as a Cash for Clunkers economic plan on a larger scale. The intention is to fool people into spending money in order to give the illusion of growth, and have that illusion somehow become reality through a process best known as FM; the M stands for “magic,” and you can guess what the F means. The problem is that the interventions run out of steam quickly without addressing the actual issues of income and asset value that drives organic consumer spending. Instead of increasing the size of the pie, we just cut it in different shapes.
The policies implemented in the early 1980s, in contrast, focused on generating growth in investment and income by reducing the government’s role in the economy and their bite out of it. That approach succeeded in long-term growth and prosperity by increasing the size of the pie. Critics scoff at this as “trickle-down economics,” but as the last two years showed, the Reagan approach worked while Keynesian Obamanomics has mainly generated nothing but short-term gimmicks and long-term stagnation

What We Believe, Part 3: Wealth Creation

Part 3 of a Series, Bill Whittle covers the concept of being wealthy: what it is, how it is created, and how society progresses as a direct result of it. 

Dan Mitchell Breaks it Down: It's Simple to Balance The Budget Without Higher Taxes

Even at the current spending levels, tax hikes aren't needed.....





We can simply start cutting vast amounts of federal agencies in jurisdictions outside those granted the federal government by the Constitution.  But as Mitchell puts it, no one in Washington cares about the Constitution anyway.  If we just put a hard cap on spending, the budget would naturally balance itself in five years — with the Bush tax cuts still in place.  The only reason to raise taxes is to allow Congress to spend more … which is the real reason for our massive deficits.

Think We're Headed For a 2nd Collapse? You aren't alone...

In his new treatise published by Encounter for its Broadsides collection, Broadside No. 17: President Obama’s Tax Piracy, Ferrara notes that Barack Obama has chosen the opposite strategy in economic policy from Ronald Reagan. Reagan cut taxes, especially on capital gains and dividends, and broke down regulatory hurdles.  Obama wants not only to raise taxes on those who have the most capital, he wants to make it harder for them to use it as well, quoting a similar analysis by Arthur Laffer:

[W]hen the U.S. economy comes to 2011, the train’s going to come off the tracks. . . . The tax boundary that will occur on January 1 , 2011 tells me that GDP growth in 2010 will be some 6 percent to 8 percent higher than GDP growth in 2011 . A year on year decline from trend of some 6 percent to 8 percent in 2011 growth would represent a larger collapse than occurred in 2008 and early 2009 .

Ferrara includes this helpful and rather cheerless chart to emphasize what Laffer predicts:

On top of that, the government won’t see the revenues it expects, either:

President Obama’s budget projects that his tax increases on “the rich” (singles making more than $200,000 and couples making more than $250,000) would raise $678 billion in increased revenue during the next 10 years. The ObamaCare legislation projected another $210 billion from the increased payroll taxes on those workers for a total of nearly $1 trillion. But these tax increases won’t raise anywhere near the revenue projected. Obama will be lucky if this tax piracy doesn’t result in less revenue. …

The projections of higher revenues from the other tax rate increases all fail to take into account the negative incentive effects discussed above and the counterproductive interactions from all those effects. Since we know from experience that those incentive effects are powerful and real, the result at a minimum will be less revenue than expected, if not less revenue overall.

All of this is based on the assumption that the changes in tax policy sets up no other incentives or changes any behavior.  Of course it does, though, as do even threatened changes.  This is called a static analysis on tax policy.  Ferrara believes that the economy may actually look better than it is this year because capital holders are moving gains and income into 2010 to avoid higher taxes next year.  After we hit the tax boundary, all the incentives go the other direction, and that means negative growth across the board. Essentially, that is why capital is moving about the economy, albeit at a slow pace.  Businesses are shoring profits by selling assets, limiting hiring or sitting on savings.  All of this to be ahead of the potential costs
 
Congress left Washington without addressing the massive tax hikes that will come at the end of the year as the tax-rate reductions of 2001 and 2003 expire.  Absent action on Capitol Hill, those increases will take $4 trillion out of the economy over the next ten years — and even if the lower tax bracket reductions get extended, $700 billion of capital will get redirected from the private sector to Washington.  How do you think that will that impact economic growth in the US?

Dick Blumenthal Stumped On How To Create A Job

Man, I wish I could participate in the CT election this year.....



“Creative policies” don’t create jobs. Creative policies usually interfere with job creation. We’ve seen that clearly enough in this administration.
McMahon (in a shorter amount of time) describes how jobs get created, but also consider the role of government in the process. Government has no direct role in the process. Government has a role in creating an environment in which entrepreneurs can create jobs by doing the following:

• securing a stable, predictable market without bias or tilt
• with a reliable rule of law rather than arbitrary interventions for preconceived outcomes
• utilizing a tax policy that encourages people to keep the fruit of their labor and investments to the greatest degree possible.

This will offend many public servants in the political world, but you shouldn't create laws pertaining to the economy if you don't know squat about business.

Taxes and Small Business Job Creation: How to get it done

From Chris Edwards at the Cato Institute:

A little background first, Taxes and Small Business Job Creation to get you started.

• 
  
  The chart shows that the average top OECD rate fell from 46.7% in 2000 to 41.5% in 2009. If we let the Bush tax cuts expire, we won’t be simply going back to our situation in 2000—the world has changed since then as other countries have adopted more competitive tax rates.

• President Bush cut the top federal tax rate by 5 percentage points, but the average top rate in the 30 OECD nations has also fallen by 5 percentage points since 2000.
• Unless policymakers extend current tax relief, the combined U.S. federal-state top rate will increase from 41.9% to about 46.5%, based on OECD data. That will give us about the tenth highest rate among the 30 OECD nations.
• President Obama’s proposed top federal rate of 39.6 percent is 41-percent higher than the 28-percent top income rate achieved in the late 1980s after the bipartisan Tax Reform Act of 1986.

Chris has many bulletpoints on the case for extending the Bush tax cuts.  Be sure to read them all. In other news, forty-seven Democrats have publicly demanded that Pelosi acquiesce to an across-the-board extension of existing tax rates on capital gains and dividends:

The debate over what to do about the expiring Bush-era tax cuts has focused mainly on income tax rates and the fight between Democrats and Republicans over maintaining the tax breaks for the wealthiest Americans. But in a letter to the House speaker, Nancy Pelosi, 47 rank-and-file Democrats urged Congressional leaders to maintain lower tax rates on dividends and capital gains that are also due to expire on Dec. 31.
“Our fiscal policy should be one that maximizes economic growth and private sector job creation,” the lawmakers, led by Representative John Adler, Democrat of New Jersey, wrote.
“By keeping dividends and capital gains tax rates linked and low for everyone, we can help the private sector create jobs and allow seniors and middle class households to save and invest more,” the Democrats added in the letter.

Note the phrase for everyone.  A hike in capital gains tax rates will discourage both initial investments and turnover in capital, both of which are necessary to expand the economy.  It has to apply to those with the most capital on hand in order to have the maximum effect.  It doesn’t do a lot of good to penalize those with the most potential to expand the economy through new ventures and significant expansion of existing projects and companies. This also extends to income taxes as well, since many business owners file their business income as individual income  (pushing them over the $250,000 limit).  Taking more money from this class of entrepreneur means less capital for hiring and keeping employees, capital investment, and so on.  The exact same arguments apply to income tax rates, perhaps even more so since the very wealthy can usually structure their cash flow as income, dividends, or capital gains depending on which method provides the least amount of loss.

We're now 4th in Competitiveness Against Other Nations

"We're no longer "exceptional" Joe..."

Investors Business Daily places the blame on the Obama Administration, but this is the result of years of federal intrusion into the private sector in the lase few Administrations.  The current Administration's only sped up the process.  The World Economic Forum notes:

The United States now ranks fourth among all nations in competitiveness, down from first just two years ago. Not surprisingly, it’s government — not business — that’s to blame. …

Why did we lose our spot at the top? Broadly speaking, the Geneva-based forum report cites “a weakening of the United States’ public and private institutions, as well as lingering concerns about the state of its financial markets.”
The group stressed that the U.S. remains innovative with a flexible labor market and outstanding higher education. But its soaring deficits, burgeoning debts and declining public confidence in the nation’s leaders and businesses are dragging it down. Finding a way to end the massive federal stimulus of the last two years will help boost U.S. competitiveness, the WEF also said.
The report doesn’t come right out and say it, but it might as well: Not only is Obamanomics not working, it’s doing material damage to America’s economic well-being.

It certainly hasn’t helped that under Obama and Democrats, government has grown more confiscatory and intruded farther into private markets. Healthcare Refrom is the best example, but the proposed cap-and-trade system would have been worse, impacting every single home and industry directly with higher costs that eventually transfer massive amounts of capital back to Washington. Congress would have put itself into the task of picking winners and losers in energy markets instead of allowing the markets to work that out for themselves — in other words, using the competitive pressures of markets determine outcomes rather than political cronyism. That goes to the heart of competitiveness, and shows why we’re declining.
 
But that is really a symptom of a deeper ill, as Business Insider noted earlier in the week:
 
Take property rights. They’re at the essence of US capitalism. Last year, according to the WEF’s survey of executives, the US was the 30th best country. This year we’ve fallen to 40th.

And you’ll be stunned at the countries that our better than the US.

If you aren’t stunned by the nations listed, then be stunned by the length of the list, at least. No one will be terribly put out to see Canada (10), Austria (9), or Switzerland (1) ahead of the US. But what about Saudi Arabia (28)? China (38)? Jordan (30)? The US got edged out by Gambia, which relies on foreign aid to deal with high unemployment and underemployment, according to the CIA factbook.
 
If we want to improve our economy, we need to improve our competitiveness. If we want to improve competitiveness, we need to protect property rights and get the federal government out of the redistribution business. Property rights are the first rights mentioned in the Constitution (Article I, Section 8) for a reason. It’s the basis of prosperity and opportunity, and also the basis of a free, self-governing people.  China's doing better in property rights than we are.  That should be an emarassment.

Another "Surprise": The cost curve bends UPWARDS due to Healthcare Reform

Recall the time when President Obama and many Democrats promised that Healthcare Reform would "bend the cost curve downward" and cease the rapid increases in costs?  The Wall Street Journal has an advance look at a report from the federal government that shows no slowing in costs to the government as a result of the Healthcare Reform bill. In fact, the analysis will show that the bill’s passage actually results in an increase in future costs over what had been projected for the next decade:

The health-care overhaul enacted last spring won’t significantly change national health spending over the next decade compared with projections before the law was passed, according to government figures set to be released Thursday.

The report by federal number-crunchers casts fresh doubt on Democrats’ argument that the health-care law would curb the sharp increase in costs over the long term, the second setback this week for one of the party’s biggest legislative achievements. …
Regardless of the health law, national health spending has been rising in recent years and economists expect that to continue. In February, the federal Centers for Medicare and Medicaid Services projected that overall national health spending would increase an average of 6.1% a year over the next decade.
The center’s economists recalculated the numbers in light of the health bill and now project that the increase will average 6.3% a year, according to a report in the journal Health Affairs. Total U.S. health spending will reach $4.6 trillion by 2019, accounting for nearly one of every five U.S. dollars spent, the report says.
“The overall net impact is moderate,” said lead author Andrea Sisko, an economist at the Medicare agency. “The underlying impacts on coverage and financing are more pronounced.”

I present to you a chart directly from the Centers for Medicare &Medicaid Services; Health Affairs:
 

 
Earlier in the week, the Journal reported that insurers have already begun raising premiums in response to the front-loading of Healthcare Reform benefit mandates by the White House. That report sent Democrats into fits of anger, threatening to “ratchet up pressure” on insurers. Rep. Pete Stark (D-CA) blamed “greed” for price increases instead of the higher costs imposed by the mandates — all of which was the predicted consequence of adding more mandates and bureaucracy to insurance coverage.
 
I would like to hear the same Democrats attempt to explain once again how the higher costs in Healthcare Reform meets their promise of bending the cost curve downward. In addtion to this bit of news, it also consistently pushes the curve upwards for private insurance, and especially Medicaid. It only bends downward for Medicare and slightly downward for out-of-pocket costs for consumers. (Figures are on WSJ link above)
 
Medicare does look slightly better under Healthcare Reform due to the lower reimbursement rates for Medicare services, which means it comes out of the pockets of doctors. The predictable result will be fewer participating providers in Medicare, which will mean longer wait times, more difficulty in getting treatments, and most likely higher out-of-pocket payments as those consumers pay retail for their medical care more often.

Keynesian Economics haven't worked. Good news though, the White House has found Fiscal Conservatism

The left will forgive him if it helps to preserve the congressional majority in the Senate, and since the majority in the House is a lost cause, he’d probably be pushed by the GOP into doing something like this next year anyway. Might as well do it now and take as much of the credit as he can:

With the recovery faltering less than two months before the November congressional elections, President Obama’s economic team is considering another big dose of stimulus in the form of tax breaks for businesses – potentially worth hundreds of billions of dollars, according to two people familiar with the talks.

Among the options are a temporary payroll tax holiday and a permanent extension of the research and development tax credit, say people familiar with the talks who spoke on the condition of anonymity in order to describe private deliberations.
Permanently extending the research credit would cost roughly $100 billion over the next decade, tax experts said. And depending on its form and duration, a payroll tax holiday could let businesses keep more than $300 billion they would otherwise owe the Treasury.

Add that since some liberals like to remind us of how well Social Security is doing financially, there should be minimal screeching about a temporary revenue shortfall due to a payroll tax cut, no? But wait — what's this?
 
Worried about the fragile economy and their own upcoming elections, a growing number of Democrats are joining the rock-solid Republican opposition to President Barack Obama’s plans to let some of the Bush administration’s tax cuts expire…

“In my view this is no time to do anything that could be jarring to a fragile recovery,” said Rep. Gerry Connolly of Virginia, a first-term Democrat…
Another freshman Democrat, Rep. Bobby Bright of Alabama, said he would like to see all the tax cuts extended for two or three years, if lawmakers cannot agree on a more permanent plan…
Several Democratic candidates for Senate have also come out in favor of extending them all, including Robin Carnahan in Missouri and Jack Conway in Kentucky.

If Congress moves to extend the Bush tax cuts even for the rich, will Obama dare veto the bill at this point? Or will he break liberal hearts by going back on another oft-repeated campaign promise? We know that every campaign promise, thus far, has had an expiration date.  For the sake of saving the party this year, I don't see why he would stick to his promises now.
 
Two videos ephasizing that the economic team, up to this point, had NO IDEA what they were doing from day one.  Watch in the next few months as the spin on the Stimulus will be: we shouldn’t have sold the job-creation program known as the stimulus as … a job-creation program.  You can't make this up.
 
From last year; Christina Romer (now resigned from the Economic team) explaining how they had no clue how to handle the economy:


Anita Dunn making her case recently:

Economic Info for the Month of July

All is well....

Man...economic news isn't good:

• Yesterday, the news came out that existing home sales dropped 27% for the month of July.  In order to stabilize the residential markets, jobs have to return and prices have to stabilize. The Obama administration has gotten in the way of both processes. Thanks to ill-advised taxpayer-subsidized interventions, prices have remained unrealistically high, and no one wants to buy until they pay the right amount for the value of their investment. And until we quit penalizing capital and introducing massive ambiguities into regulatory regimes and expanding them, jobs won’t get created and new buyers won’t materialize anyway.
• Today, the Commerce Department noted that new home sales dropped 12% for the month of July; down 37% from last year. Expect more deflation in housing markets this year as sales dive to new lows
• Although the Commerce Department predicted a 3% growth, durable goods orders rose, but only slightly thanks to transportation industry by 0.3%.  Meanwhile the rest of the industry dropped 3.8% last month.  In other words, absent artificial stimulation, we had no growth at all in Q2. Depending on the final revision, due on Friday, we could be anywhere from -0.3% to -3.4% excluding Porkulus in Q2. Recovery Summer, my ass.
• Thanks to last year's Cash for Clunkers, used car prices have JUMPED 10% overall due to a lower supply in inventory.  As predicted last year, the people most hurt by the price increases are those who can least afford them. The used-car market usually attracts people who need transportation on a budget, who cannot afford to buy new. By destroying a quarter’s worth of trade-ins in three weeks and permanently taking them off the market, the Obama administration has forced an artificial inflation by supply restriction. Moreover, they did so by subsidizing new-car sales that would have occurred anyway, eating up three billion dollars in taxpayer money. In other words, the White House spent $3 billion to make used cars more expensive for working-class families. Nice work.

Keep in mind that our entire economic recovery has been in the hands of a Democratic Administration and Congress with little to no experience in running a business in the private sector.  In the examples above, each have been directly affected by the laws passed since 2009 under their watch.  Businesses are sitting on 2 Trillion just to collect interest instead of spending to hire and expand because of the policies passed by the current party in power. Nobody knows what's to come of the new legislations that have been passed. I mean this with the utmost respect.....Wake the fuck up people.

A Little on the Economy and Jobless Claims

Great video about the number of jobs lost under the Pelosi-Reid Congress since 2007:



By the way:

• Initial jobless claims today jumped to their highest level in almost 6 months.
• The Department of Housing and Urban Development have begun issuing emergency $50,000 loans at zero interest to unemployed homeowners in an attempt to stall foreclosures, using $1 billion of Porkulus funds for the effort and $2 billion from the same source for indirect aid through state governments.
• foreclosure seizures have increased by 6% over last year
• Home foreclosures are spreading in areas that didn't have problems before, like in the Northwest and Midwest
• The US bailout of financial institutions, and in particular AIG, wound up rescuing foreign firms, according to a new report from the Congressional Oversight Panel.
• That $26.1 Billion Jobs package for public servants?  There's already waste and abuse, reported a day after its passage.  States that don't need the money are recieving it.

But this is the "Recovery Summer"!!

Michael P. Fleischer: Why I'm Not Hiring (Rehash on How Businesses Work)

Straight from the Wall Street Journal Opinion page

Why I'm Not Hiring
When you add it all up, it costs $74,000 to put $44,000 in Sally's pocket and to give her $12,000 in benefits.
By MICHAEL P. FLEISCHER
With unemployment just under 10% and companies sitting on their cash, you would think that sooner or later job growth would take off. I think it's going to be later—much later. Here's why.
Meet Sally (not her real name; details changed to preserve privacy). Sally is a terrific employee, and she happens to be the median person in terms of base pay among the 83 people at my little company in New Jersey, where we provide audio systems for use in educational, commercial and industrial settings. She's been with us for over 15 years. She's a high school graduate with some specialized training. She makes $59,000 a year—on paper. In reality, she makes only $44,000 a year because $15,000 is taken from her thanks to various deductions and taxes, all of which form the steep, sad slope between gross and net pay.
Before that money hits her bank, it is reduced by the $2,376 she pays as her share of the medical and dental insurance that my company provides. And then the government takes its due. She pays $126 for state unemployment insurance, $149 for disability insurance and $856 for Medicare. That's the small stuff. New Jersey takes $1,893 in income taxes. The federal government gets $3,661 for Social Security and another $6,250 for income tax withholding. The roughly $13,000 taken from her by various government entities means that some 22% of her gross pay goes to Washington or Trenton. She's lucky she doesn't live in New York City, where the toll would be even higher.
Employing Sally costs plenty too. My company has to write checks for $74,000 so Sally can receive her nominal $59,000 in base pay. Health insurance is a big, added cost: While Sally pays nearly $2,400 for coverage, my company pays the rest—$9,561 for employee/spouse medical and dental. We also provide company-paid life and other insurance premiums amounting to $153. Altogether, company-paid benefits add $9,714 to the cost of employing Sally.
Then the federal and state governments want a little something extra. They take $56 for federal unemployment coverage, $149 for disability insurance, $300 for workers' comp and $505 for state unemployment insurance. Finally, the feds make me pay $856 for Sally's Medicare and $3,661 for her Social Security.
When you add it all up, it costs $74,000 to put $44,000 in Sally's pocket and to give her $12,000 in benefits. Bottom line: Governments impose a 33% surtax on Sally's job each year.
Because my company has been conscripted by the government and forced to serve as a tax collector, we have lost control of a big chunk of our cost structure. Tax increases, whether cloaked as changes in unemployment or disability insurance, Medicare increases or in any other form can dramatically alter our financial situation. With government spending and deficits growing as fast as they have been, you know that more tax increases are coming—for my company, and even for Sally too.
Companies have also been pressed into serving as providers of health insurance. In a saner world, health insurance would be something that individuals buy for themselves and their families, just as they do with auto insurance. Now, adding to the insanity, there is ObamaCare.
Every year, we negotiate a renewal to our health coverage. This year, our provider demanded a 28% increase in premiums—for a lesser plan. This is in part a tax increase that the federal government has co-opted insurance providers to collect. We had never faced an increase anywhere near this large; in each of the last two years, the increase was under 10%.
To offset tax increases and steepening rises in health-insurance premiums, my company needs sustainably higher profits and sales—something unlikely in this "summer of recovery." We can't pass the additional costs onto our customers, because the market is too tight and we'd lose sales. Only governments can raise prices repeatedly and pretend there will be no consequences.
And even if the economic outlook were more encouraging, increasing revenues is always uncertain and expensive. As much as I might want to hire new salespeople, engineers and marketing staff in an effort to grow, I would be increasing my company's vulnerability to government decisions to raise taxes, to policies that make health insurance more expensive, and to the difficulties of this economic environment.
A life in business is filled with uncertainties, but I can be quite sure that every time I hire someone my obligations to the government go up. From where I sit, the government's message is unmistakable: Creating a new job carries a punishing price.


Mr. Fleischer is president of Bogen Communications Inc. in Ramsey, N.J.

For every dime taken directly out of business, it's another dime taken from you.  This will be one of the hardest lessons that most of us will have to learn because we've been conditioned to dislike the system.  It used to be that you get rewarded for doing the right things, but the current administration (and the last) have put out the message that bad behavior trumps all others. 

This is the wake up call.

Schwarzenegger's learned an Important lesson AFTER 7 YEARS

This is just a shame. He had seven years to make this happen for his state, and instead, he's passed laws that punished business through tax and regulation in order to pay for California's bureaucracy and social programs. His message is mixed too, he claims that taxation is the sole problem, but gives examples of overregulation.



The key point here made by Schwarzenegger (and good for him for recognizing it) is that if it takes California eight months to approve a business for opening while only 30 days in Colorado and 22 days in Texas, businesses will invest first in those states and put California far down their list — especially when considering the high taxes California also imposes along with its regulatory burdens.
Take this seriously, our Federal Administration is headed down the same path as California.

Economic Info for the Month of June

From the NAR: Pending Home Sales ease in Post Tax Credit Market:

The Pending Home Sales Index, a forward-looking indicator, declined 2.6 percent to 75.7 based on contracts signed in June from an upwardly revised level of 77.7 in May [revised from 77.6], and is 18.6 percent below June 2009 when it was 93.0. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Manufacturing fell 1.2%, which followed a 1.8% decrease in May. New orders, shipments, and unfilled orders all fell, while inventories rose. From the Commerce Department:

New orders for manufactured goods in June, down two consecutive months, decreased $5.1 billion or 1.2 percent to $406.4 billion, the U.S. Census Bureau reported today. This followed a 1.8 percent May decrease. Excluding transportation, new orders decreased 1.1 percent. Shipments, also down two consecutive months, decreased $3.5 billion or 0.8 percent to $411.2 billion. This followed a 1.8 percent May decrease. Unfilled orders, down slightly following two consecutive monthly increases, decreased $0.3 billion to $802.8 billion. This followed a 0.3 percent May increase. The unfilled orders-to-shipments ratio was 5.60, down from 5.61 in May. Inventories, down two consecutive months, decreased $0.5 billion or 0.1 percent to $520.0 billion. This followed a 0.4 percent May decrease. The inventories-to-shipments ratio was unchanged at 1.26.

Private sector wages fell, while overall wages remained stagnant:

Personal income increased $3.0 billion, or less than 0.1 percent, and disposable personal income (DPI) increased $5.1 billion, or less than 0.1 percent, in June, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $2.9 billion, or less than 0.1 percent. In May, personal income increased $40.5 billion, or 0.3 percent, DPI increased $36.9 billion, or 0.3 percent, and PCE increased $8.6 billion, or 0.1 percent, based on revised estimates.

Real disposable income increased 0.2 percent in June, compared with an increase of 0.4 percent in May. Real PCE increased 0.1 percent, compared with an increase of 0.2 percent.

Things were worse for the private sector:
 
Private wage and salary disbursements decreased $5.2 billion in June, in contrast to an increase of $19.2 billion in May. Goods-producing industries’ payrolls decreased $8.9 billion, in contrast to an increase of $10.4 billion; manufacturing payrolls decreased $6.0 billion, in contrast to an increase of $7.8 billion. Services-producing industries’ payrolls increased $3.7 billion, compared with an increase of $8.8 billion. Government wage and salary disbursements decreased $0.6 billion, in contrast to an increase of $7.0 billion. The decline in the number of temporary workers for Census 2010 subtracted $3.4 billion at an annual rate from federal civilian payrolls in June; the hiring of additional temporary workers had added $5.7 billion at an annual rate in May. …

Proprietors’ income decreased $4.4 billion in June, in contrast to an increase of $2.2 billion in May.

This follows on the last unemployment report from June (July’s report is due on Friday), which showed a gain of 83,000 private-sector jobs — not enough to keep up with population growth — while 225,000 temporary Census workers lost their jobs. More of the latter were shed in July, which means that the numbers will probably look poor on Friday anyway. However, the drop in private-sector compensation belies the idea that the jobs market expanded in any meaningful way in June. And that means bad news for the government as well:
 
Personal current taxes decreased $2.0 billion in June, in contrast to an increase of $3.6 billion in May. Disposable personal income (DPI) — personal income less personal current taxes — increased $5.1 billion, or less than 0.1 percent, in June, compared with an increase of $36.9 billion, or 0.3 percent, in May.
 
By almost all measures, the economy has slowed considerably from what was already an anemic pace. Moreover, wage earners are losing ground. Small wonder, then, that demand and consumption have stalled and started to decline.

Atlas Shrugged Monologue - Money is the Root of All Evil

An exerpt from Ayn Rand's "Atlas Shrugged", the monologue of Francisco d'Aconia speaking of the root of all evil....money. Setting the scene, he's speaking to a group of people that can be described as the modern progressive of today.  Mind you, this book was written in 1957. It's a bit long, but worth the read.

Rearden heard Bertram Scudder, outside the group, say to a girl who made some sound of indignation, "Don't let him disturb you. You know, money is the root of all evil – and he's the typical product of money."


Rearden did not think that Francisco could have heard it, but he saw Francisco turning to them with a gravely courteous smile.

"So you think that money is the root of all evil?" said Francisco d'Aconia. "Have you ever asked what is the root of money? Money is a tool of exchange, which can't exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?

"When you accept money in payment for your effort, you do so only on the conviction that you will exchange it for the product of the effort of others. It is not the moochers or the looters who give value to money. Not an ocean of tears nor all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow. Those pieces of paper, which should have been gold, are a token of honor – your claim upon the energy of the men who produce. Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle which is the root of money. Is this what you consider evil?

"Have you ever looked for the root of production? Take a look at an electric generator and dare tell yourself that it was created by the muscular effort of unthinking brutes. Try to grow a seed of wheat without the knowledge left to you by men who had to discover it for the first time. Try to obtain your food by means of nothing but physical motions – and you'll learn that man's mind is the root of all the goods produced and of all the wealth that has ever existed on earth.

"But you say that money is made by the strong at the expense of the weak? What strength do you mean? It is not the strength of guns or muscles. Wealth is the product of man's capacity to think. Then is money made by the man who invents a motor at the expense of those who did not invent it? Is money made by the intelligent at the expense of the fools? By the able at the expense of the incompetent? By the ambitious at the expense of the lazy? Money is made – before it can be looted or mooched – made by the effort of every honest man, each to the extent of his ability. An honest man is one who knows that he can't consume more than he has produced.

"To trade by means of money is the code of the men of good will. Money rests on the axiom that every man is the owner of his mind and his effort. Money allows no power to prescribe the value of your effort except by the voluntary choice of the man who is willing to trade you his effort in return. Money permits you to obtain for your goods and your labor that which they are worth to the men who buy them, but no more. Money permits no deals except those to mutual benefit by the unforced judgment of the traders. Money demands of you the recognition that men must work for their own benefit, not for their own injury, for their gain, not their loss – the recognition that they are not beasts of burden, born to carry the weight of your misery – that you must offer them values, not wounds – that the common bond among men is not the exchange of suffering, but the exchange of goods. Money demands that you sell, not your weakness to men's stupidity, but your talent to their reason; it demands that you buy, not the shoddiest they offer, but the best your money can find. And when men live by trade – with reason, not force, as their final arbiter – it is the best product that wins, the best performance, then man of best judgment and highest ability – and the degree of a man's productiveness is the degree of his reward. This is the code of existence whose tool and symbol is money. Is this what you consider evil?

"But money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. It will give you the means for the satisfaction of your desires, but it will not provide you with desires. Money is the scourge of the men who attempt to reverse the law of causality – the men who seek to replace the mind by seizing the products of the mind.

"Money will not purchase happiness for the man who has no concept of what he wants; money will not give him a code of values, if he's evaded the knowledge of what to value, and it will not provide him with a purpose, if he's evaded the choice of what to seek. Money will not buy intelligence for the fool, or admiration for the coward, or respect for the incompetent. The man who attempts to purchase the brains of his superiors to serve him, with his money replacing his judgment, ends up by becoming the victim of his inferiors. The men of intelligence desert him, but the cheats and the frauds come flocking to him, drawn by a law which he has not discovered: that no man may be smaller than his money. Is this the reason why you call it evil?

"Only the man who does not need it, is fit to inherit wealth – the man who would make his own fortune no matter where he started. If an heir is equal to his money, it serves him; if not, it destroys him. But you look on and you cry that money corrupted him. Did it? Or did he corrupt his money? Do not envy a worthless heir; his wealth is not yours and you would have done no better with it. Do not think that it should have been distributed among you; loading the world with fifty parasites instead of one would not bring back the dead virtue which was the fortune. Money is a living power that dies without its root. Money will not serve that mind that cannot match it. Is this the reason why you call it evil?

"Money is your means of survival. The verdict which you pronounce upon the source of your livelihood is the verdict you pronounce upon your life. If the source is corrupt, you have damned your own existence. Did you get your money by fraud? By pandering to men's vices or men's stupidity? By catering to fools, in the hope of getting more than your ability deserves? By lowering your standards? By doing work you despise for purchasers you scorn? If so, then your money will not give you a moment's or a penny's worth of joy. Then all the things you buy will become, not a tribute to you, but a reproach; not an achievement, but a reminder of shame. Then you'll scream that money is evil. Evil, because it would not pinch-hit for your self-respect? Evil, because it would not let you enjoy your depravity? Is this the root of your hatred of money?

"Money will always remain an effect and refuse to replace you as the cause. Money is the product of virtue, but it will not give you virtue and it will not redeem your vices. Money will not give you the unearned, neither in matter nor in spirit. Is this the root of your hatred of money?

"Or did you say it's the love of money that's the root of all evil? To love a thing is to know and love its nature. To love money is to know and love the fact that money is the creation of the best power within you, and your passkey to trade your effort for the effort of the best among men. It's the person who would sell his soul for a nickel, who is the loudest in proclaiming his hatred of money – and he has good reason to hate it. The lovers of money are willing to work for it. They know they are able to deserve it.

"Let me give you a tip on a clue to men's characters: the man who damns money has obtained it dishonorably; the man who respects it has earned it.

"Run for your life from any man who tells you that money is evil. That sentence is the leper's bell of an approaching looter. So long as men live together on earth and need means to deal with one another – their only substitute, if they abandon money, is the muzzle of a gun.

"But money demands of you the highest virtues, if you wish to make it or to keep it. Men who have no courage, pride, or self-esteem, men who have no moral sense of their right to their money and are not willing to defend it as they defend their life, men who apologize for being rich – will not remain rich for long. They are the natural bait for the swarms of looters that stay under rocks for centuries, but come crawling out at the first smell of a man who begs to be forgiven for the guilt of owning wealth. They will hasten to relieve him of the guilt – and of his life, as he deserves.

"Then you will see the rise of the double standard – the men who live by force, yet count on those who live by trade to create the value of their looted money – the men who are the hitchhikers of virtue. In a moral society, these are the criminals, and the statutes are written to protect you against them. But when a society establishes criminals-by-right and looters-by-law – men who use force to seize the wealth of disarmed victims – then money becomes its creators' avenger. Such looters believe it safe to rob defenseless men, once they've passed a law to disarm them. But their loot becomes the magnet for other looters, who get it from them as they got it. Then the race goes, not to the ablest at production, but to those most ruthless at brutality. When force is the standard, the murderer wins over the pickpocket. And then that society vanishes, in a spread of ruins and slaughter.

"Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion – when you see that in order to produce, you need to obtain permission from men who produce nothing – when you see that money is flowing to those who deal, not in goods, but in favors – when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you – when you see corruption being rewarded and honesty becoming a self-sacrifice – you may know that your society is doomed. Money is so noble a medium that it does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.

"Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it becomes, marked: 'Account overdrawn.'

"When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded. Do not ask, 'Who is destroying the world?' You are.

"You stand in the midst of the greatest achievements of the greatest productive civilization and you wonder why it's crumbling around you, while you're damning its life-blood – money. You look upon money as the savages did before you, and you wonder why the jungle is creeping back to the edge of your cities. Throughout men's history, money was always seized by looters of one brand or another, but whose method remained the same: to seize wealth by force and to keep the producers bound, demeaned, defamed, deprived of honor. That phrase about the evil of money, which you mouth with such righteous recklessness, comes from a time when wealth was produced by the labor of slaves – slaves who repeated the motions once discovered by somebody's mind and left unimproved for centuries. So long as production was ruled by force, and wealth was obtained by conquest, there was little to conquer. Yet through all the centuries of stagnation and starvation, men exalted the looters, as aristocrats of the sword, as aristocrats of birth, as aristocrats of the bureau, and despised the producers, as slaves, as traders, as shopkeepers – as industrialists.

"To the glory of mankind, there was, for the first and only time in history, a country of money – and I have no higher, more reverent tribute to pay to America, for this means: a country of reason, justice, freedom, production, achievement. For the first time, man's mind and money were set free, and there were no fortunes-by-conquest, but only fortunes-by-work, and instead of swordsmen and slaves, there appeared the real maker of wealth, the greatest worker, the highest type of human being – the self-made man – the American industrialist.

"If you ask me to name the proudest distinction of Americans, I would choose – because it contains all the others – the fact that they were the people who created the phrase 'to make money'. No other language or nation had ever used these words before; men had always thought of wealth as a static quantity – to be seized, begged, inherited, shared, looted, or obtained as a favor. Americans were the first to understand that wealth has to be created. The words 'to make money' hold the essence of human morality.

"Yet these were the words for which Americans were denounced by the rotted cultures of the looters' continents. Now the looters' credo has brought you to regard your proudest achievements as a hallmark of shame, your prosperity as guilt, your greatest men, the industrialists, as blackguards, and your magnificent factories as the product and property of muscular labor, the labor of whip-driven slaves, like the pyramids of Egypt. The rotter who simpers that he sees no difference between the power of the dollar and the power of the whip, ought to learn the difference on his own hide – as, I think, he will.

"Until and unless you discover that money is the root of all good, you ask for your own destruction. When money ceases to be the tool by which men deal with one another, then men become the tools of men. Blood, whips and guns – or dollars. Take your choice – there is no other – and your time is running out."

Ryan suggests GOP playing politics by not discussing Roadmap

Simply put, the GOP is acting stupidly. A commitment is needed to fix the system for the public and private sectors.  Examples of successful conservative principles working?  Look no further than NJ, VA, Germany, etc. Listen to this guy explain economics:



For more information about Paul Ryan's Roadmap for America, visit the website.  The guy has planned out economic policies for just about everything.....and it makes sense!

TARP audit on dealer shutdowns: Ethnic, gender issues trumped economics

(via Hotair)
The difference between private-sector decisions on business consolidation and those under government supervision gets exposed in a portion of Neil Barofsky’s audit of the government-driven closures of GM auto dealerships during the $62 billion bailout. There may be a question of whether the automakers needed to consolidate in order to shed poorly performing dealerships at all, but we’ll get back to that. The plan to consolidate dealerships that resulted from the push by the car czar and TARP used rational, objective measures to select the target outlets. In practice, those often got ignored in favor of politics, according to the audit:

GM determined that dealerships with a DPS Score of 100 were average performers; those below 70 were considered poor performers and would not be retained. SIGTARP noted, however, that GM did not uniformly apply the phase one criteria to the entire network. For example, our analysis found that two of the wind-down dealers did not meet either criterion. Furthermore, we found that, of the dealerships that met only one of the two criteria:

GM retained 355 (or approximately 41 percent) of the 858 dealerships that had a DPS score below 70.16
GM retained 9 of the 394 dealerships that sold fewer than 50 new vehicles in 2008.17
An additional 10 dealerships with a DPS score below 70 were in phase two wind-downs.
GM officials attributed these inconsistencies primarily to a desire to maintain coverage in certain rural areas where they have a competitive advantage over import auto companies that are not typically located in rural areas, although ultimately close to half of all of the GM dealerships identified for termination were in rural areas. Other dealerships were retained because they were recently appointed, were key wholesale parts dealers, or were minority- or woman-owned dealerships (emphasis mine).
On June 1, 2009, GM filed for bankruptcy. As indicated earlier in this report, bankruptcy would permit GM to accelerate the process without the restriction of state franchise laws. Bankruptcy laws supersede various state franchise laws, which could have required litigation or arbitration. GM management had also determined that the company would need to wind down more dealerships than those designated in phase one to get close enough to the “ideal network size” of 3,380 dealerships.

A couple of points should be made clear on this. Nothing in the report says that the Obama administration forced GM into these specific decisions, and apparently this didn’t happen with Chrysler’s closures. Nevertheless, it seems certain that GM would have been particularly sensitive to political considerations after begging for an receiving tens of billions of dollars to unwind its collapsing finances. If the point was saving money through the closures, GM didn’t act as if they had so much need for that to trump political considerations.


There’s a reason for that, too. The American Thinker points out that Barofsky actually found that closing dealerships wouldn’t save the automakers all that much money, anyway. A Chrysler exec told the Special Inspector General for TARP that at best it each closure would save less than $46,000, although GM put the savings at $1.1 million. But the issue was scalable, as lower performing dealerships ate up less resources anyway. One GM exec said closures weren’t going to make much difference at all:

GM would usually save ‘not one damn cent’ by closing any particular dealership. … Furthermore, a GM official stated that removing a dealership from the network does not save money for GM — it might even cost GM money — and that savings cannot be attributed or assigned to any one dealership.
 
So why close them if doing so would not save any real money? After all, both automakers need a substantial retail network to maintain their sales output. Michelle Malikin explains why politics trumped business concerns:
 
In search of the rationale for Team Obama’s bizarre, job-killing exercise of power over thousands of small car dealerships, the TARP inspector general may have stumbled onto the truth from Bloom. On page 33 of its report, Barofsky writes that “no one from Treasury, the manufacturers or from anywhere else indicated that implementing a smaller or more gradual dealership termination plan would have resulted in the cataclysmic scenario spelled out in Treasury’s response; indeed, when asked explicitly whether the Auto Team could have left the dealerships out of the restructurings, Mr. Bloom, the current head of the Auto Team, confirmed that the Auto Team ‘could have left any one component (of the restructuring plan) alone,’ but that doing so would have been inconsistent with the President’s mandate for ‘shared sacrifice.’”
 
In other words,we destroyed tens of thousands of jobs in the private sector for a soundbite about sacrifice. In doing so, we weakened the economy and handicapped the automakers’ ability to push sales through their network of dealerships. A board that made those kinds of decisions in the private sector would get sacked by its shareholders — which is why those decisions should have stayed in the private sector in the first place, and taxpayers shouldn’t have had to shoulder the risk.
 
I swear I'm getting that Ayn Rand "social goodness" vibe.....

Obama Blames GOP for upholding Congressional Law (UPDATE: 60 Votes Found)

Showing a lack of knowledge about the concept of governance, the Democrats counter the GOP's call to pay for unemployment by comparing the times when the GOP gave tax credits to businesses.  So let's straighten this out now. 

The government gets funded by two sources:  loans from other nations and taxes (people and Corporations).  Printing money is another way of writing an I.O.U. of which will become some sort of tax in the future.
Banks are funded by the people and backed by the Government (funded by the people and loans)
Corporations are funded by the people when you pay for products or services.  (Refresher course)
Small businesses are funded by the people and banks (funded by the people and Government). 
Getting the picture here?  We, through the private sector, fund the economic engine that feeds the government.
Tax credits/cuts is less money being taken from the businesses or corporations and therefore are not a cost. It's a relief on the businesses that will benefit the consumers (people). This is regardless of budget concerns.

Unemployment benefits are cost regardless of the Federal Budget's status.  In this case, we are in a deficit.  The President signed into law PayGo (Feb 2010), where if any costs had to be added to the budget, Congress MUST find a way to pay for it.  It was to show how responsible the Democrats were and the seriousness about tackling the deficit.  The GOP have been willing to vote for the passage of this bill and have found a way to pay for Unemployment benefits, using part of the $400+Billion of unsed Stimulus to pay for it.  The Democrats are playing politics by selling the idea that the GOP hates the people, etc. while people have been cut off from their benefits in the last month.  They've refused paying for the benefits, using the entitlement program to stir political anger.

This seems like a punk move to me.

Update: Republicans Snow and Collins have signed on to pass the measure, and interim Senator of WV, Goodwin will provide the final vote.  Looks like it's going through (finally!!), but it's tainted with political gaming.

Health Insurance Mandate a Tax after all, who knew?!

Not forgetting that people are not guaranteed to keep their health insurance per the President's foolish promise, the New York Times reports that the Obama administration will defend the ObamaCare mandates as part of its power to tax, despite Barack Obama’s contentious debate with George Stephanopoulos when Obama denied it was a tax at all:

When Congress required most Americans to obtain health insurance or pay a penalty, Democrats denied that they were creating a new tax. But in court, the Obama administration and its allies now defend the requirement as an exercise of the government’s “power to lay and collect taxes.”
And that power, they say, is even more sweeping than the federal power to regulate interstate commerce.
Administration officials say the tax argument is a linchpin of their legal case in defense of the health care overhaul and its individual mandate, now being challenged in court by more than 20 states and several private organizations.

Remember when asked about the mandate, President Obama's response:



That is exactly what the mandates do — regulate individual behavior in an area where the federal government has no jurisdiction and punish those who don’t exhibit favored choices, in this case buying comprehensive health insurance regardless of whether it makes sense for anyone. This court will almost certainly take a dim view of the same attempt that the 1922 court struck down as a gross overreach by the government.