Milton Friedman on Libertarianism

More from Milton Friedman about the principles of Libertarianism. Just felt like I had to share this four part series.

FBI to access our Internet data w/o probable cause?

The new rule wouldn’t reach the content of e-mail messages, but it would let them find out whom you’re e-mailing, when you’re e-mailing, and, er, “possibly” which websites you’re looking at and which Google searches you’re running.

Senior administration officials said the proposal was prompted by a desire to overcome concerns and resistance from Internet and other companies that the existing statute did not allow them to provide such data without a court-approved order. “The statute as written causes confusion and the potential for unnecessary litigation,” Justice Department spokesman Dean Boyd said. “This clarification will not allow the government to obtain or collect new categories of information, but it seeks to clarify what Congress intended when the statute was amended in 1993.”…

Administration officials noted that the act specifies in one clause that Internet and other companies have a duty to provide electronic communication transactional records to the FBI in response to a national security letter.
But the next clause specifies only four categories of basic subscriber data that the FBI may seek: name, address, length of service and toll billing records. There is no reference to electronic communication transactional records.
The officials said the transactional information at issue, which does not include Internet search queries, is the functional equivalent of telephone toll billing records, which the FBI can obtain without court authorization. Learning the e-mail addresses to which an Internet user sends messages, they said, is no different than obtaining a list of numbers called by a telephone user.

They can be more revealing, of course: A call made to a pay phone won’t identify who’s on the other end of the line whereas an e-mail sent to an address that contains someone’s name tells you right away whom it’s meant for. But of course, the opposite scenario’s also possible: A call made to someone’s home phone or cell phone points to the identity of the recipient whereas a message sent to an e-mail address with no identifying info in the address reveals little at first glance about who owns it. Exit question: Should e-mail identifiers be given greater protection? And if so, is that simply in order to draw a line on the slope before the feds slip any further downward?

How the Government is Funded

The government does not “create” wealth or print money. It takes loans out from its bank. Contrary to popular belief, it’s the Federal Reserve that retains the ability to print money for the United States and is completely separate from the orders of our government. Kind of like how you can’t tell your bank what to do when you are the one asking for a loan. For every dollar printed by the Reserve, our government must pay that back plus interest. When a request is made for more money (printing money) the value of our dollar decreases for every new dollar printed.  (Remember that for later)

Since the government doesn’t make money, how does it pay for the loan? The United States Government obtains its money from 2 sources:

1. Intergovernmental Loans : The following countries own 40% total of our debt through loans (not including interest):
• China (30.7%)
• Japan (20.5%)
• UK (6.2%)
• Foreign Oil (5.8%)
• Brazil (4.6%)
• Russia (3.2%)
2. Public Debt: 60% of our debt is paid for by individual Americans through taxation. Methods of taxation on individuals include:
• Federal Income: the U.S. uses citizenship in addition to residency in determining whether a person's income is subject to U.S. taxation.
• Payroll: taxes taken from every paycheck of every person in the U.S.
• Social Security
• Medicare
• Unemployment
• Corporate Income
• Transfer: Otherwise known as the “death” tax
• Gift: levied on wealth transfers during the transferor's life
• Estate: levied on transfers made after the transferor's death.
• Generation Skipping Transfer: levied on transfers made during life or after death to individuals removed by more than one generation from the transferor, for example, from a grandmother to a grandson
• Excise: Social “sin” tax on items/services like gasoline, tobacco, firearms, airfare and alcohol, tanning, etc

Realistically, the only income that the government does have to pay for the loans through the Federal Reserve and Intergovernmental Loans is through taxation. So the bottom line is that the money comes from us as individual citizens. Hopefully I didn’t lose you.

So let’s break down the different taxes that affect the middle and lower classes, since that’s most of the general public. Side note: currently, 49% of the general public does not pay income tax because they don’t make more than the poverty level. That being said, the average person and business will pay a payroll tax (if they are receiving any paychecks) and excise taxes. What most of the general public doesn’t know (and most politicians and public figures don’t want you to know) is that we are also paying corporate taxes as well. I’ve explained this in my economic model for a business; you can review that at any time.  Businesses are another way for the government to tax the public without directly saying they are taxing the public.

Everytime a politician explains that they will raise the taxes from Corporations, they are in effect, raising taxes on the public as a whole.  Especially if the Company provides a service or product that most of us use, like oil for example.  From the economic business model, we know that a tax is treated like an expense, which means that a business has to compensate for that loss in some way.  Employment, stocks, job benefits and the cost of goods are the choices businesses have to adjust as a result of the added expense. 

Part of the reason why the price of goods go up is because taxes are raised. If any of a companies expenses can't be cut, usually the price of their service does to make up that loss. In addition, when money is printed, the devaluing of the dollar also raises the price of goods since it takes more money to equal the "true" value of a dollar. The consumer, or individual, ends up paying.  Since we make up the majority of the country, its the middle and lower classes paying.

So, in short, our government makes money by taking money from the people they serve.  Businesess are essentially tax collectors by transferring the money they collect from the public to pay the government.  Add the excise taxes and we're footing the bill.  Adding government programs without streamlining or fixing the ones we have, means a new tax.  More funding for broken systems means a new tax.  As the deficit increases, and talk of raising taxes on businesses come up, you now know what that means.

Mind you, I covered the Federal level; remember the State taxes you as well.

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 looking to end CRA? Hell is about to freeze over

For most of a decade, the US government manipulated lending markets and pressured banks to get mortgages for lower-income families under both the Clinton and Bush administrations, and with Democratic and Republican Congresses. Now, the Washington Post reports that the Obama administration wants to end the social engineering that created the housing bubble and subsequent collapse as its next target for reform:

Responding to the collapse in home prices and the huge number of foreclosures, the Obama administration is pursuing an overhaul of government policy that could diverge from the emphasis on homeownership embraced by former administrations.

“In previous eras, we haven’t seen people question whether homeownership was the right decision. It was just assumed that’s where you want to go,” said Raphael Bostic, a senior official in the Department of Housing and Urban Development. “You’re not going to hear us say that.”
Bostic, who has published leading scholarship on homeownership, added that owning a home has a lot of value, but “what we’ve seen in the last four years is that there really is an underside to homeownership.”
The administration’s narrower view of who should own a home and what the government should to do to support them could have major implications for the economy as well as borrowers. Broadly, the administration may wind down some government backing for home loans, but increase the focus on affordable rentals.
The shift in approach could mean higher down payments and interest rates on loans, more barriers to lower-income people buying houses, and fewer homeowners overall, government officials said. But it could also pave the way for a more stable housing market, one with fewer taxpayer dollars on the line and less of a risk that homeowners will not be able to pay their mortgages. And it could spell changes throughout the financial markets, as investors choose new places to put their money if the government withdraws some incentives for investing in the U.S. mortgage market.

Let’s hope Obama commits to this reform. If he does, it will easily be the most significant economic reform of his tenure, and would represent a significant retreat from the government interventions and social engineering that have ruined the American economy, and could set the stage for even further constraints on federal power. That would show actual leadership and strength.

Something to think about concerning the Illegal Immigration debate

• Arizona passes a law saying that Arizona will codify and enforce the federal immigration laws the federal government doesn't wish to enforce. The federal government sues Arizona.

• San Francisco passes a law saying that San Francisco will NOT enforce the federal immigration laws. The federal government has nothing to say to San Francisco on the issue.

Something's wrong with this picture....

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.

Paul Ryan: A Time for Choosing

Young Gun Rep. Paul Ryan (R-WI) is extremely bright and informed. He is also and an excellent communicator.Recently he appeared on CNBC to discuss his Roadmap For America’s Future.


Via GatewayPundit :
Are we going to reclaim the American idea?
An entrepreneurial economy where you make the most of your life, you can maximize your potential; reinvigorate the principles of liberty, freedom, free enterprise – and defend its morality – or – are we going to abandon the American idea, and become a stagnant European-style cradle-to-grave welfare state, where we drain people of their incentive and will to make the most of their lives, and become more dependent on the government? The President and the people that run Congress are dedicated progressives. They believe that we ought to have the government so much more involved in our lives, with the government – not ourselves – as the determining factor of our destiny. The country must answer the question: do we want an entrepreneurial society that gets the prosperity turned back on in the 21st century, where individual merit and entrepreneurial activity defines the American economy – or – are we going to have more and more people dependent on the government for their livelihoods? That is the fork in the road – and the urgency of the time for choosing is being precipitated by the current direction of our government and the looming debt crisis, driven by the explosion in entitlement spending. We must decide what kind of a country we are going to be in the 21st century.

Keeping Up with the Unemployment Rate

Here we go..

The light blue line represents what unemployment would be had nothing been done to stimulate the economy.  Notice, we stay around 9%.
The dark blue line represents what unemployment would be after the stimulus passed. You know the promise that unemployment would be under 8%, yada, yada....
We went past that percentage.  The maroon dots represent the ACTUAL unemployment data, peaking above 10%.  A lot of factors led to this happening. Geithner's prediction (March 2010) to Congress is that unemployment will not drop to 8% until the 4th quarter of 2012.
Just prepare.  Starting next year, a range of tax cuts expire, new taxes begin and government spending increases.  The IRS reported that they do not have the manpower or resources to enforce the mandate for the new Healthcare bill, new tax to pay for that (via Hotair).  The President has now changed his stance on the mandate and is admitting that it's a tax.  A very hostile environment for economic growth and the unemployment situation.  Numbers are my thing, and I'm tired of being right

Wake Up Call of the Day

Via (Ed Morrissey; Hotair)

Ezra Klein calls this “the scariest jobs graph you’ve seen yet,” and for good reason. The center-left Brookings Institute calculated what kind of job growth it would take to reach pre-recession employment levels, and how long it would take. Brookings takes into account population growth and therefore calculates that in this month, the total employment gap has expanded to 11.2 million jobs. According to their analysis, adding jobs at a rate equal to the best average monthly rate for any one year in the past decade will mean we won’t catch up to pre-recession employment until 2022 (via Newsalert):

Looking ahead, there are several challenges to sustained job growth. The boost to economic activity from the American Recovery and Reinvestment Act is winding down and job losses related to temporary Census workers will continue in July. Further, the four-week moving average of initial claims for unemployment insurance have hit their highest level since March and have remained above 450,000 all year.
The “job gap” underlying these numbers is daunting. In recent months, on this blog, we described the job gap — the number of jobs it would take to return to employment levels from before the Great Recession, while also accounting for the 125,000 people who enter the labor force in a typical month. After today’s employment numbers, the job gap stands at almost 11.3 million jobs.
How long will it take to erase this gap? If future job growth continues at a rate of roughly 208,000 jobs per month, the average monthly job creation for the best year for job creation in the 2000s, it would take 136 months (more than 11 years). In a more optimistic scenario, with 321,000 jobs created per month, the average monthly job creation for the best year in the 1990s, it would take over 57 months (almost 5 years).

If we start in 2009Q4, when Obama argued that Porkulus and his other economic policies started taking effect, the rate of job creation under his policies has been … +39,000. Bear in mind that this includes the massive Census Bureau hires made by the Obama administration in 2010.
 
How about just the private sector? The Brookings calculation isn’t limited to the private sector, so it’s a bit like comparing apples and oranges, but few people doubt that private sector jobs have to return in force to close the jobs gap. The average monthly growth in the private sector during the entire Obama term has been -192,000, and the average growth since the beginning of 2009Q4 has been +14,000. In other words, two-thirds of the growth numbers from Porkulus come from government hiring, not private-sector growth.
 
How long will it take to close the employment gap with a growth rate of +14K in the private sector? It’s flat-out impossible, because we’re digging the hole deeper each month at that rate. Under the failed Keynesian policies of the Democrats in Congress and the Obama administration, 2022 looks like a pipe dream instead of a nightmare.

Guess who pays in the new Financial Regulation Bill

Barack Obama celebrated the passage of the new financial regulation bill yesterday. So did Chris Dodd and Barney Frank. And why not? It’s not as though they’ll have to pay for the new bureaucracies and regulation imposed on the American financial system. For that matter, it won’t be the bankers, either. Who pays? Three guesses, and the first two don’t count:

Big banks facing big drops in revenue are looking to Main Street to make up the difference.
Checking accounts, bank statements, even popping into your local bank branch could carry a hefty cost as the nation’s mega-banks scramble to offset expected damage from the sweeping financial overhaul. The uncertain future has overshadowed otherwise strong second-quarter earnings at JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp.
All three companies beat expectations this week with profitable results. Yet their stocks tumbled, helping send the wider market sharply lower Friday.

This is so basic that people inside the Beltway never learn it. Costs imposed on businesses get passed to consumers. It doesn’t matter where those costs originate, whether they come from materials, labor, rent, taxes, or regulation. All of those figure into the price paid by consumers for the product or service provided.
 
How will consumers get hit with these new regulations? Expect more fees on more transactions, including paying premium prices for doing business face to face with bank tellers and other employees. Banks will start demanding higher minimum balances and start charging higher fees on accounts that don’t make the cut. Bank of America will lose between $7 and $10 billion just on charges for debit and credit cards alone, money that will get made up by its customers somewhere.
 
That's the big secret that most of the public fails to realize when Democrats continually issue the battle cry calling for raising taxes and fees on big business. Consumers may not pay the entire price, however, at least not directly. If you like your local branch, better get used to the idea that it may disappear. With billions of dollars in new costs landing with a thud on their balance sheets, we can expect to see branches close up entirely — and the jobs that exist disappear along with them.
 
In short, the bill will erode consumer buying power, harm retirement accounts that rely on the performance of financial institutions, and create more unemployment. What exactly did we get in return for all of this?
 
If you want a refresher course on business, I've done the legwork.  Pay attention!

My Version of Social Security Reform (January 2009)

Social Security is a legalized pyramid/ponzi scheme, similar to what Madoff pulled off for so many years in that new investors are promised a return at a later date as long as they pay into the promised return for the earlier investors. The only difference is that it’s transparent (meaning we know where our money is going), but that doesn’t change the fact that it is what it is. You are unwillingly MADE to invest into the system as soon as you get your first paycheck. (Got to love freedom of choice, huh?) The reason why it shouldn’t fail is because the supply of new investors should always exceed the number of investors before them (following the birth rate models, more born every generation). The problem is that the Government can take from this fund when they see fit, which depletes the amount that is supposed to be supplied to future retirees. Like Madoff, some of the investors are being paid back, but the Government is using that same money ($5 trillion) to fund its own endeavors. Notice the hypocrisy?

I’m putting a suggestion out there, further explaining/expanding how to wean us off of the current system in place.

For right now, we’ll call this program the Personal Retirement Account (PRA). Similar to the Social Security system, the PRA will take a percentage of your paycheck and hold it into a holding account of your choice (IRA, IRA Roth, savings account, etc). The idea is that the money would be “locked” until one’s retirement. One could also designate beneficiaries to this account in case of incident through a personal will or by power of attorney. 100% of your account would be able to be distributed at your discretion instead of being absorbed back into Government.

Key points:

1. The percentage transferred into your PRA is adjustable. As long as you do not go below the pre-determined minimum contribution (more research and discussion needed), you can deposit as much as you’d like into the account
2. Beneficiaries would be designated at your initial introduction into the PRA. This can be changed at anytime (as wills can be adjusted)
3. Government intervention is taken out of the equation. That’s less tax dollars used on enforcing the current system, thus putting the needed tax dollars on more important affairs
4. Distribution among multiple PRA accounts is open for discussion

Those from ages 16 to 25 would take part in a new system where the minimum amount that would normally be taken and placed into the Social Security system, would go into the PRA. Additionally, this age group will no longer contribute into the Social Security system as it’s now fixed.

Age 26 - 39 would get a portion of both the old and new programs (based upon age of course): a portion of the Social Security fund and the PRA program. The Social Security fund would be distributed based upon age in that, the closer you are to retirement, the more of the fund is set aside for your retirement. In addition, you will have your PRA just as the younger age group. Conversely, the further you are from retirement, the more you will have saved in your PRA. There would no longer be any contribution into the Social Security system.

Over time, the current Social Security system would dry up and everyone (after a generation or two) PRAs would have replaced it. It’s Social Security within your personal control.

This takes care of a few things:

1. The government can no longer dip into the Social Security funds that should be set aside for us because there would no longer be a fund to steal from
2. Politics would no longer use this as a means to use fear to obtain the elderly vote
3. The individual citizen can actually see that they have a retirement secured for their future. In addition, there is more of an incentive to work when a citizen can actually see how much one can set aside for the future. (The more you work, the more is set aside for retirement). This may aid in decreasing unemployment and increasing self-drive/motivation
   
4. This may inadvertently replace the burden of life insurance for those that can’t afford it. For those that can afford life insurance, it may become an additional security blanket to go towards beneficiaries

I probably missed something here. Any suggestions, needed additions, questions? I’ll open the floor to you.

My Rant about the Healtcare Debate (August 2009)

I'm all for reform but based on the crap they've tried to pass thus far, they may end up making things worse rather than better. By no means am I advocating that healthcare is a human right. I believe that everyone, who is able, should be responsible for the choices they’ve made especially regarding their well-being. That being said I’m going to attempt to explain how health insurance works before tackling the Public and Private solutions (Took me all day to write this up. Missing quite a bit so far, but its worth a look/discussion. It is a bit long, so bear with me….):


We know the basics of what insurance is. Whether it is for your car/home/health/etc. it is coverage “in case” something bad happens. Obtaining coverage, you must go through a screening in order for the insurance investor (lets be real, they are investing that nothing will happen to you while you are paying them, that’s how businesses make money). Your rate is determined by “pre-existing” factors. For cars: your driving history, tickets, accidents, etc. For homes: environmental factors (flood, earthquakes, etc), condition of home, etc. For health: lifestyle habits (smoking, eating, drinking), family history, etc. Let’s be clear, you can be denied access to coverage for any type of insurance if you present that you will cost the investor. You can be denied auto insurance. You can be denied home insurance. You can be denied life insurance. You can be denied health insurance. That being said if you ARE covered, you are essentially in a pool with other individuals being covered. The cost you pay for covered is based on the information you’ve given plus the cost of the goods and services required for keeping you healthy. When someone in your pool becomes sick, the cost for covering that person is spread amongst the other members of the pool. There are ways to drive costs down, and all it takes is volunteering to adjust your lifestyle by living healthier. That means: exercise, eating habits, smoking, drinking, sexual habits, etc would have to lean towards improving your personal health. If we each take a little more care in how we take care of OURSELVES and instill those habits into our children, prices are more than likely to drop. There are other factors (prescription costs, inflation, etc), but I’ll try to cover them ahead.

We do have a public (Government) plan in place. Medicare and Medicaid. Medicaid and Medicare have its shortcomings. There are cases of the government rationing benefits in order to save money but at the cost of your health. It should not be that way. Imagine cases like this on a national scale and you can see why the opponents to the Healthcare Bill are worried. (Hint: it isn’t about color of the skin of our President) For this government system to work, EVERYONE who works and collects a paycheck has to pay into the system (which you already do for Medicaid, Medicare & Social Security by the way and are set to increase for everyone for the program to work. No taxes on the middle class my ass…). Similar to how the insurance system works, everyone is a part of the pool. This program should work as a “safety net” for the public. It should cover those people who could not be covered by the private system, which it does, but it LIMITS COVERAGE to keep costs down. The more people in the pool needing coverage, the more costly it is to cover them, which means the more money will be needed to cover the people needing help. A board looks at your case and determines if you should have that operation. They don’t care if you pay them back, but they care if this operation will affect the national deficit. Another credible reason why opposition to the Government plan fears it: increasing the deficit. Ways to keep the costs down are similar to the private option. Changing your personal lifestyle is the first step. The difference is, the Government can “force” you to change your habits by influencing you. The cigarette and sugar taxes aren’t just for revenue people. It is just the beginning of controlling lifestyle habits through taxation. Also, it is one of the ways that the middle and poor classes will be affected. The second, of which we covered earlier, is by limiting coverage. (You should wonder why some hospitals don’t accept Medicaid as a form of coverage: it doesn’t cover costly procedures)

The private plans are your “evil” insurance companies. Let’s get this straight; businesses are in it for making profit. Similar to the Government plan, the private companies are trying to save money anyway they can by rationing coverage (yes, we already have a system where coverage is rationed…lets be real Republicans). A board looks at your case and determines if you should have that operation. They look at the type of career you have and determine if you have the ability to pay them back if the procedure has been approved. (I’m going to get chewed out for this next one) The business has a right to deny coverage because they are investing in you NOT to get sick. The empathic part of me understands the anger towards the private market because a lot of the problems stem from greed, plain and simple. The bad kind. (There is such thing as good greed) This is where decisions are made to make the company profit, but at the cost the service it supplies to its customers. Companies should follow suit as we should as individuals, stated in our Bill of Rights and our Constitution: you have the freedom to do whatever you like, with the exception that it does not infringe upon the welfare of others.

Another negative aspect of the private system falls upon private practices run by doctors whose duty it is to help their patients, have been clouded by "bad greed". There are cases in which certain doctors will authorize unnecessary procedures/test because of the finacial gain it brings to the practice. The motives could range from personal debts, cost of supplies, malpractice insurance rates, etc. So how do we control this? The options are being floated around: lowering the inflated cost of the supplies, doing away with the no-limit malpractice suits, subsidizing/lowering the costs for medical school, etc. (Quick way: FairTax baby...) Of course there will be some that will seek to take advantage, even if these problems didn't exist, but we shouldn't need the Government to step in to find a solution on how to deal with criminals, or do we?

Washington has recently pulled the public option from their draft of the Healthcare Bill. The Democrats control all three branches of government and have removed the public option the day before our President said he’d sign what ever they bring him a week ago. The Republicans were not responsible for the defeat of the Healthcare Bill back in 1994, despite what the President said last night. The people in this country read the bill the Democrats (they ran ALL three branches of Government in 1994) attempted to pass during that time and called their representatives to demand that it doesn’t pass. the people then knew the danger and so should you here in 2009. Democratic Senators have said in the last few weeks that they don’t even know what’s in this bill because it’s too confusing. Do you feel safe that they AREN'T READING/COMPREHENDING THE BILLS THEY PASS?! You think this is about helping you? You aren’t worried of the future implications?

We need real discussion before passage of ANY bill of this magnitude. Plowing forward and making “bold” moves can shackle future generations to a possible mistake that we know NOTHING about because our leaders know less about it than we do.

Help to pass HR 25 (the FairTax): Replacement to our tax system (July 2008)

The FairTax Book (Synopsis)
Saying Goodbye to the Income Tax and the IRS
By Neil Boortz and John Linder

1. The History of Our Tax System
• 1776 - No National Taxation, Only Local Govt - Alcohol, Carriages, Consumer Items (Sugar and Tobacco)
• 1812 - Luxury Items Taxed due to war of 1812
• 1817 - Tax system abolished, Govt Funded by Tariffs on Imports
• 1861 - Union passes bill assessing 3% income tax on earnings btwn $600-$10,000 and 5% plus and inheritance tax on earnings +$10,000 (+$166,700 today) – Confederate states adopted similar system
• 1872 - Feds remove tax system after Civil War due to the displeasure of American Citizens. Returned to taxing tobacco and alcohol
• 1894 – After Panic of 1893 (Railroad and dependant banks fell into receivership) 2% tax on income +$4,000/year (+$50,000 today) – State and local govt officials are EXEMPT from this tax – became law without signature of President Grover Cleveland who found it unconstitutional. This split the govt into the Democratic (pro tax) and Republican (anti tax) parties
• 1896 to 1908 – public told the income tax would “soak the rich” by Democrats and would leave middle class alone. Joseph Bailey (D) hoped to show Republicans as hostile to poor by introducing a bill calling for the income tax. Liberal Republicans voted for the bill in hopes to derail it with the condition that an amendment had to be passed as a result of an amendment to the Constitution. Democrats pushed idea that any income tax would be directed ONLY at the wealthy and that ordinary Americans would be left virtually untaxed (tobacco and alcohol).
• 1913 – 16th Amendment Ratified with very little objection
2. …Then Came Withholding
• The 1913 law that established the income tax also allowed the federal govt to withhold taxes from paychecks
• 1917 – American citizens complained to their representatives and a law was passed barring the practice of withholding taxes
• Taxpayers would calculate the full amount of income taxes they owed for the previous tax year and write one check to the IRS in one lump sum. (This meant no Medicare, social security, etc was withheld for every paycheck during the year)
• Withholding was a means to camouflage the actual tax burden pressed upon the American people and under the guise of patriotism and propaganda during World War II, the funding needs of the federal government could no longer be sustained by the wealthy, everyone had to chip in.
• 1942 – Walt Disney creates “The New Spirit”, a cartoon, at the urging of the Treasury Department, in which Donald Duck telling the public “it is your privilege to help your government paying your tax and paying it promptly.”
• 1943 – The Ruml Plan (Current Tax Payment Act of 1943) was created to gain more supporters of the withholding tax. If individuals supported the plan, they were told they would not have to pay taxes for 1942 in March 15th, 1943. In reality, during the course of the year of 1943, they would be paying the previous year’s taxes paycheck by paycheck. 
• 1970’s – President Jimmy Carter attempts to have withholding extended to interest and dividend earnings. The public cried foul and the effort failed.
• 1982 – The interest and dividend idea was brought up again during President Ronald Reagan, in which Congress authorized the additional withholding measure. It was repealed a month later due to public outcry
3. The Myth of Corporate Taxes
• Myth : We pay less as individuals when taxes are transferred to businesses and corporations
• In reality, corporations have never paid or ever will pay taxes. The burden will always fall to the individual
• Businesses and corporations merely collect taxes from individuals and pass them on to the government. Taxes are paid from wages, and in America, only individuals pay taxes
• For example, a fictional company, Gilco, has 100 shareholders, and fifty employees who make 200 widgets per year. The company sells the product at $100,000 each. Gilco’s gross revenues in $20 million per year. It costs the company $18 million a year (labor cost, federal taxes, marketing and production) to make the widgets. This leaves $2 million in profit.
• If the federal government decides to create a 5% corporate tax increase, this means that Gilco will owe $100,000 more in federal income taxes where will that money come from?
1. It can come from the $2 million profit. This profit, though, belongs to the shareholders who, when receiving their dividend checks will see a decrease. The corporation hasn’t paid the tax in this scenario
2. Raise the price of widgets to cover the tax increase. The customers end up paying for the tax increase. The corporation doesn’t pay here either
3. Cut costs of running Gilco to cover the additional tax. This will most likely mean either cutting employee benefits, lay off some employees and increase productivity on the remaining employees. The individual employee ends up paying for the tax increase. The corporation pays nothing.
4. Cut costs of running Gilco to cover the additional tax. You can buy cheaper components to make the widgets. Cheaper components come from Company X who can afford to sell cheap because they’ve had to cut back by paying their employees less or cutting benefits. Your supplier takes a beating and passes it down to their employees and suppliers. The corporation doesn’t pay here too.
4. Our Current Tax Code: The Cost of Compliance
• 52.8% of tax compliance costs are paid by businesses, 2.8% are paid by nonprofit organizations, and 44.4% are paid by individual American citizens (Remember that the taxes paid by businesses come from the individual)
• Opportunity Cost – money lost as a result of business decisions that prevented you from exploiting certain opportunities
• In 2002, $950 billion in individual income taxes were collected from the government by withheld taxes from individual paychecks. Should the taxpayers had been able to keep that money when it was due – and invested that money in T-bills – nearly $24 billion dollars in interest payments could have been pocketed by the American taxpayers. The $24 billion is the opportunity cost.
• Under the FairTax, there would be no income tax, meaning that the estimated $950 billion collected from the taxpayers paychecks would have stayed in the hands of those individuals who earned it.
5. The Embedded Costs of Our Tax Code
• When a consumer item is purchased (bread, car, house, eggs, etc.) part of the cost goes to the people who had a hand in producing and selling you that item. Part of that cost is given to the Federal Government as taxes
• 22% of the price paid for a consumer item represents embedded taxes. That 22% of what you spend supports the Federal Government in addition to the money taken out of your check in income taxes and payroll taxes!!
• The embedded tax exists also in services as well (cable, electric, doctors visits, etc)
• Under the FairTax, only 23% of the price paid for consumer items and services will go to the government, but that is all. There wouldn’t be anything withheld from income and payroll taxes because there would be no taxes!
6. Bringing American Business Back Home
• American corporations are moving overseas to escape the punishing tax structure here in America, acting on the best interests of their shareholders, employees and customers.
• For example, if DaimlerChrysler were headquartered in the United States, they would face a 67.5% tax rate, while the actual company is located in Germany, pays 44%. Under the current tax system, moving a corporation overseas is better for the stockholders and customers. Unfortunately, the American employees would be more likely to suffer.
• The FairTax would completely remove corporate income taxes, thus eliminating the need for American businesses to move out of the country. This will also give incentive for foreign companies to move into America. The end result would be more jobs, better opportunities and higher wages for the American individual.
7. The Birth of the FairTax
• • Began by a group of Americans who formed the Americans for Fair Taxation (AFFT) whose goal was to develop a new tax system that would raise the same amount of revenue for the government as our current tax system, but would be less intrusive, abusive, coercive and corrosive. This is after researching other tax systems (the flat tax, VAT (value added tax) and consumption tax)
• The FairTax (www.fairtax.org) is a method of taxation that would be totally voluntary, that would allow citizens to pay what they choose, when they choose, by how they choose to spend their money. It is a national sales tax on goods and services sold at the retail level.
8. The FairTax Explained
• The Fairtax will repeal (remove)
• The individual income tax
• The alternative minimum tax (AMT)
• Corporate and business income taxes
• Capital gains taxes
• Social Security taxes
• Medicare taxes (along with other federal payroll taxes)
• The self-employment tax
• Estate taxes
• Gift taxes
• The FairTax is not a Value-Added Tax (VAT) as in Europe. VATs are added at every stage of production and hide tax costs in the price of goods. In contrast, the FairTax is levied once, and only once, at the retail cash register and is printed on the receipt for all to see.
• The FairTax is a replacement for, not an addition to, our current federal taxes. It is not at tax cut nor is it a tax increase.
• The FairTax abolishes all taxes on income. Consumers will way an embedded personal consumption tax in the amount of 23% on all goods and services sold at the retail level. (This also includes doctors visits, dentists, lawyers, accountants, and internet sales) The 23% tax will not be imposed on the sale of used or previously owned items (including used cars, homes). It is a ONE time tax on new items.
• True, this is a 1% increase to the current embedded taxes for our goods today. Yet consider this: if a company doesn’t have to pay a federal tax on their product, they could sell that product at the same price and make a profit. Because of competition with other products, prices will eventually decrease because one company will find that they can get more business will lower prices. Eventually, the other companies will follow suit. It is estimated that the price of goods and services may fall 20%.
• The FairTax is revenue neutral. This means the sales tax rate will be set to ensure that the federal government, and all the programs within it, will receive from the national retail sales tax exactly what they have been receiving under the current tax system. It will also treat government purchases as taxable purchases. State, local, and federal government purchases will also pay the tax.
• The FairTax will eliminate the tax burden on the middle- and lower-income Americans, allowing them to save money and judge for themselves when and how they’re comfortable making taxable purchases.
• The FairTax allows everyone to be treated fairly because it provides that the federal government will send every family in America a prebate (advanced rebate) to cover taxes on the basic necessities of life. Every head of household will receive this prebate every single month, to reimburse every American family for the sales tax that family will pay on all spending up to the federal poverty level, plus extra to prevent any marriage penalty. The end result? Low-income and many middle-income families would be exempted from paying the national retail sales tax on all or most of their spending.
9. The FairTax Prebate: The Key to Fairness
• The Earned Income Tax Credit (EITC) was passed to relieve lower-income Americans of the tax they pay for Social Security and Medicare. This also includes the income tax paid for our defense, parks, courts, FBI, housing, education, etc. The budget to pay for this (which comes from American taxpayers) has grown to $38 billion.
• Under the FairTax, the poor—along with everyone else—will no longer have Social Security or Medicare taxes withheld from their paychecks. Whatever they earn, they get on payday. This would mean an immediate 25-30% increase in take-home pay.
• 22% is already inflating the retail sales prices we all pay in the form of embedded taxes buried in the cost of all consumer goods. The price of goods will fall 20% on transportation, food, clothing, and shelter once the embedded taxes have been removed. (I.e. if groceries cost $45 a week under the current system, once the 22% embedded tax has been removed, the price falls to $35.10. Add the FairTax 23% and the groceries would cost $45.58—a few pennies more. But remember, you also get to take home 100% of your paycheck, does this sound bad to you?)
• The FairTax prebate (monthly check from the government towards basic necessities) will be based on the government’s published poverty levels for various sized households. This number would be updated every year to keep up with inflation. (i.e. in 2005, a household of a married couple with two children would be granted a consumption allowance—a government estimate of what a household of that size would spend for that year to buy the basic necessities of life for that family—of $25,660. The sales tax on this amount would equal $5,902. This amount would be rebated back to the household in 12 equal monthly installments of just under $492.) Therefore, the tax that would have been paid for the basic necessities of life for that year would be returned during the course of that year (meaning no tax for the goods needed to survive!)
• The purpose of the FairTax prebate is that no American has to pay the FairTax on the basic necessities of life. This covers all Americans, poor and rich alike, unlike our current tax system eliminating the need for class envy.
• To prevent scams on the system, the name and social security number for everyone under your household must be provided every year to collect the prebate. This includes households as small as one person up to however many you can claim as dependants.
• In the end, everyone would receive 100% (given that the individual state governments adopt this system, otherwise, its more like 90-95%) of their paychecks and a prebate check every month in addition, and lower prices on goods and services.
10. Underground and Offshore Economy…Taxed at Last!
• There is a “shadow economy”—the world of legal activities that are not reported for tax purposes. Add to this figure the “underground economy,” the world of illegal activities—drug dealers, hookers, and the like—and the magnitude of the problem becomes clear. In 2000, a survey concluded that our shadow economy counts for more than 10% ($355 billion) of America’s GDP that isn’t getting taxed
• The problem is, this loss is made up by the people who pay their taxes. Each of the 150 million American taxpayers pays an average of $2,000 extra every year to the IRS to cover the missing revenue
• Trillions of dollars are sent into offshore financial centers (OFCs) in places like Switzerland and the Cayman Islands:
• OFCs are used to set up international business corporations (IBCs), which are popular (tax and regulation free) vehicles for managing investment funds
• Insurance companies use OFCs for reinsuring catastrophic risks, which often have lower actuarial requirements and capital standards.
• Wealthy individuals use OFCs to protect assets and for tax planning
• Foreign wealth is often kept in OFCs, to be protected from weak banking systems Tax evasion and money laundering schemes are difficult to track down in OFCs
• With the FairTax in place the trillions of dollars in those OFCs would flow back home to America for the very reason they found themselves offshore to start with. Even more so, trillions more from foreign nations would flow into the United States because of the same reasons.
• The shadow economy, under the FairTax, would be paying into the federal tax system every time a purchase is made in the United States. Illegal immigrants and foreign visitors would even be contributing to the tax system under the FairTax.

In closing, there are an additional 6 chapters which covers the main opposition to H.R. 25 (The FairTax bill), IRS horror stories, a question/answer section, and a chapter on what you can do to get this passed. I urge all who’ve read this to spread the word, talk to your representative, newspapers, friends and family and get this movement going! The website for more information is http://www.fairtax.org/ .