Thursday, December 2, 2010

My View

Random thoughts from a warped and fevered mind...

One of the most contentious debates going on in the lame duck session of Congress is whether to extend the Bush tax cuts that were enacted in 2003 and which will expire at the end of this calendar year. More specifically, should tax cuts be extended to all individuals, regardless of income? The Democrats want to cap the cuts at $200,000 for individuals and $250,000. for families. Their argument is that in these tough economic times, the top 1% of earners should not get a break on their taxes.  "The rich," it is argued, should pay "their fair share". Here is news for the Democrats.  According to the National Taxpayers Union, the top 1% of earners pay 38% of all federal taxes. The top 5% of wage earners pay 58.7% of all taxes. And the Democrats know this. They have always known this fact. This is a straw argument to take the focus from their tired tactic of class warfare and envy. The reality is simply this: the top wage earners in society are not evil; they didn't take money from those less fortunate to achieve their economic status. The top wage earners in our society have taken risks to build businesses and employ others. They have worked incredibly hard over a long period of time to achieve their success. And, as the numbers show, they pay an incredible amount of taxes already. To attempt to take more from them in the guise of "fairness" is disingenuous and ultimately hurts our national economy.

Santa's helpers no longer want to be referred to as "elves". From here on, call them "subordinate clauses".

Remember all the hue and cry over global warming led by (Spotted) Al Gore? The earth is heating up and we are all going to die if we don't change our ways, we were all told. One of the effects of the scare tactics was to divert corn from agricultural uses to the production of ethanol as an additive to gasoline. Most grades of gasoline are now 15% ethanol. Ostensibly, this causes the U.S. to consume less gas and therefore create less greenhouse emissions. Here are two key things that you as a consumer should know about the ethanol subsidies. First, since corn has been diverted from the agricultural stream to the energy stream, food prices have been consistently going up. In 2010, corn hit an all time high on a per bushel price. You and I pay more at the grocery store because there is less corn production from farmers making it to the shelf. Secondly, ethanol reduces the useful life of a car's engine. So the citizens of this country are paying higher food prices and seeing less useful life from our autos because of the forced introduction of ethanol into the energy chain. And Spotted Al? Here is what he said at an energy conference in Europe, "One of the reasons that I made that mistake (originally supporting ethanol subsidies) is that I paid particular attention to the farmers in my home state of Tennessee, and I had a certain fondness for the farmers in Iowa because I was going to run for President." So there you have it, friends. The environmental "champion" knowing that he was not voting for what was best for us a nation, but what was best for him politically. Always follow the money- or the votes- when people start telling you the climate is getting out of control.

I caution all of you to be wary about dangerous religious cults. Remember, always practice safe sects.

Congress, at the urging of President Obama, is considering another stimulus bill in an attempt to revive our moribund economy. This is on top of the $814 billion that was spent in 2009. This is typical Keynesian economic thinking, where the government has to jolt the economy with massive amounts of spending to get it moving, and it is a position typically occupied by most in Washington. The only problem with this thinking is that it is wrong. Keynesians (so called because they follow the tenets of famed economist John Maynard Keynes) believe that if the government spends a dollar for, say, a road, then there is a multiplier effect. This simply means that the company that builds the road buys supplies and pays its employees, and those dollars, in turn, get spent in other areas of the economy. This theoretically lifts the entire economy. Keynesians are right, to a degree. A very small degree. According to a detailed statistical study by Andrew Mountford of the University of London and Harald Uhlig of the University of Chicago, the multiplier effect of government spending is non-existant by the second year after the initial stimulus. Studies by the firm of Volker, Weiland, and Tobias Cwik demonstrate that government spending at any level increased economic output by only .2% of GDP. So how do we grow our stagnant economy? Former Obama advisor Christina Romer suggests a tax cut. Her studies show that for every dollar of lower taxes, there is a corresponding $3 in increased output in our economy. So in this debate about how to jump start our economy, the decidedly favorable course of action is to lower the tax burden on the job creators and the producers in society. The corresponding fiscal growth would be outstanding.

Damn right I'm good in bed. I can sleep for days.

And that, my friends, is my view.


  1. Actually, Christine Romer offers up different solutions than extending the Bush tax cuts for the wealthiest Americans as a stimulus measure.

    But when it comes to fighting the deficit, it hardly seems prudent to give a tax break to the ones who are paying the lion's share of the bill, right? If only Washington had maintained the discipline that led to budget surpluses back in the 90's for a couple more years, then a truly permanent, structural reduction in taxes could have been achieved responsibly.

    And yes, corn-based ethanol has always been a boondoggle. One of the things that first drew me to John McCain was when he ran in a primary many, many years ago and told a hall full of Iowans straight to their faces that he didn't support ethanol subsidies. He got roundly booed, but he was straight with them.

    I always enjoy these columns, Mark, even if I disagree with you much of the time!

  2. Thanks, Dirk. Actually, Romer was involved in a study that concluded that the tax cuts have a much greater effect. That is not her explicit stance nor her preferred solution, as you point out.

  3. There really is a simple solution to all of this. Institute a flat tax rate and eliminate any kind of deductions. Businesses and individuals will know EXACTLY what their tax burden is at all times, and they can budget better. Of course, the lawyers and accountants that make a living on finding loopholes and interpreting the tax code will be out of work, but that might be a good thing.