Math Challenged Democrats

I just saw a news article on MSNBC relating to the Senate vote which failed to pass legislation which would have extended tax cuts for 'all but the highest' income levels. Accompanying the story was a picture of Democrats standing next to a big poster with the headling 'GOP Plan'. The poster was supposed to show how unfair the Republicans are being to the middle class and said the following:

Middle class family making $60,000 ... get $2,500 Make $1 million ... get $43,000 Make $100 million ... get $3,800,000

This information is supposed to show you how unfair the Republicans are to working people. However, if you think about this information for more than a few seconds you would actually see that all three income groups are being treated fairly equally. Unfortunately there is a large percentage of the population, including most of the media, who would simply look at these raw numbers without actually thinking about what they represent. Naturally Democrats would rather pander to laziness or ignorance than to have an honest debate about the subject. There are two things to consider with the information presented by Democrats. First is the notion that any taxpayer is getting anything from the government. Taxpayers don't get money from the government when they get a tax break, they get to send less money to the government. Obama and Democrats continue to act as if all income belongs to them and they get to decide how much each person gets to keep. Since this isn't the case, a more honest wording would be:

Middle class family making $60,000 ... send the government $2,500 less Make $1 million ... send the government $43,000 less Make $100 million ... send the government $3,800,000 less

This still leaves us with the second problem that the uninitiated would still have the impression that high income earners are somehow getting a better deal than middle class workers. As usual, the Democrats, and those involved in class warfare, like to fool people with big numbers. However, if you break down the chart by percentage a different story would be told:

Make $60,000, send the government 4.17% less in taxes. Make $1,000,000, send the government 4.3% less in taxes. Make $100,000,000, send the government 3.8% less in taxes.

Doesn't quite have the same 'evil' ring to it, does it?

Obama really does believe Americans are idiots

I've always found President Obama to be arrogant and condescending. Watch any speech he gives and he is always pointing and lecturing as if he knows all. My opinion of his attitude was reinforced when I read this quote of his given at a recent fundraiser:

"And so part of the reason that our [Democrat] politics seems so tough right now, and facts and science and argument does not seem to be winning the day all the time, is because we're hard-wired not to always think clearly when we are scared." (emphasis mine)

We are in an anti-Democratic mood because of

"having gone through this trauma."

So, what our dear leader is telling us is that those who oppose his policies are just scared, and scared people don't think straight. What other reason could there be for America to reject his wise and grand vision? Can you say 'arrogant and condescending'? I thought you could. Actually, the President may be on to something. I do believe that people are scared. We're scared that his health care monstrosity is going to swallow up the medical field and reduce quality and quantity. We're scared that his grand spending programs are going to bankrupt the country, turning us into Greece. We're scared that his support of public sector unions and the European style corporate state is going to turn us into France. In short, were scared that his policies are going to make us all worse off. Unlike our President, however, I don't think being 'scared' is making us think less clearly. Instead, I think we are starting to think more clearly. More people are seeing the destruction caused by Washington, by both Democrats and Republicans. We still have a ways to go, however. Too many people are still swayed by politicians who claim they can 'fix' things. Government cannot 'fix' things, it typically makes things worse. The Founders had the right idea in creating a government with a limited set of powers. They saw first hand the destruction of freedom that government power causes. I believe we are starting to learn what the Founders knew. What this country needs are representatives (I refuse to call them 'leaders') who understand that government is force, and as such it should only be applied in very specific circumstances. We don't need a bunch of technocrats in office who believe they can harness the power of government to do their definition of 'good'. Instead, we need representatives who recognize that the true power that drives this country is freedom, not government command and control. A free society has no place for arrogant technocrats like our President and most members of Congress. Time to vote them all out. Then maybe we can all be less scared.

Outsourcing

We're coming into the final stretch on the mid-term elections and it seems that not a day goes by that I don't receive some mailing from the Democratic party denouncing the other candidate for the crime of supporting 'outsourcing' or having had worked for a company which 'ships jobs overseas'. You can see the same narrative coming out of our so-called leaders in Washington as well. Outsourcing is one of those tough topics, like foreign trade, which requires careful thought rather than a knee-jerk reaction. On the surface, opposing outsourcing seems rational, after all some jobs are lost here while others are gained in a foreign country. When our country is going through tough economic times it seems wrong to be 'shipping' these jobs overseas. Of course, those who are opposed to outsourcing are guilty of only looking at what is seen, not what is not seen. What is seen are jobs that have disappeared from this country. What is not seen are the benefits of outsourcing. Companies outsource as a way to manage costs. If a company can save costs by moving some activity off shore they are going to do it. By lowering costs, they increase their profit. This gives the company more resources to grow. When the company can grow, it can afford to hire additional workers in different parts of the business. In the end, outsourcing creates increased and better job opportunities in this country. According to a 2007 study by Matthew Slaughter, an economist at Dartmouth's Tuck School of Business, when U.S. firms hired lower-cost labor overseas through foreign subsidiaries, the parent companies in the U.S. hired even more people in the US to support expanded operations. For example, between 1991 and 2001, foreign employment of U.S. subsidiaries grew by 2.8 million jobs, but during the same time frame, the parent firms in the U.S. increased employment by 5.5 million jobs. Effectively, for every outsourced job, two new jobs were created in the U.S. There is no doubt that if you lose your job because it is outsourced to another country it is bad for you. However, this really isn't any different than if your job was 'outsourced' to another state, or if your job was eliminated due to automation. Companies will always find ways to lower costs and on aggregate this is a good thing for everybody. It lowers the costs of goods and services, freeing resources to be applied to other goods and services, driving their costs down as well. This 'creative destruction', as described by economist Joseph Schumpeter, is the engine behind increased prosperity. If Democrats, and those who mindlessly oppose 'outsourcing' , succeed in impeding outsourcing, we will all be worse off. Rather than opposing a candidate who understands the benefits of outsourcing, they should be supported. We need people in Congress who actually understand business and economics, not a bunch of lawyers who think they can control the world at the stroke of a pen.

Stimulate Consumer Spending? Why?

In an excellent article in the Sacramento Bee, Robert Higgs discusses some interesting facts about spending in the economy. We are told by politicians that we need to stimulate consumer spending so the economy can get back on track. Yet, according to data presented by Higgs, consumer spending during the downturn actually increased and is currently at 71% of GDP. However, investment spending fell some 36% from a peak in 2006 and has yet to recover. From the article:

When private domestic investment last peaked, in the first quarter (January-March) of 2006, it was nearly $2.3 trillion (in dollars of 2005 purchasing power), or 17.5 percent of GDP. When it hit bottom in the second quarter of 2009, it had fallen by 36 percent to $1.45 trillion, or 11.3 percent of GDP. It is still far below the 2006 peak. By contrast, in the second quarter of this year, personal consumption was actually at an all-time high, at nearly $9.3 trillion (in 2005 inflation-adjusted dollars). If stimulating consumption were the key to an economic recovery, we would have achieved one already.

Investment is crucial to growing an economy and it is lagging. Consumer spending, while important, is already at an all-time high. But what do our brilliant solons keep pushing? More consumer stimulus. What else are they pushing? Higher taxes on investment. At the same time they wonder why the economy isn't performing better. It's far past the time to send these idiots packing.

Stimulus?

Regardless of whether or not you believe that an economy can be 'stimulated' by government spending, it would seem that if you are trying to get out of a recession, you would spend the stimulus money now, not later. However, according to the Congressional Budget Office, of the $787 billion appropriated in the final bill, $236 billion won't be spent until 2011. That's 41% of this monster. If the true nature of this bill was to stimulate the economy, $236 billion could have been cut and still provided the necessary stimulus. The truth is that this bill is a sham and will burden current and future generations with a mountain of debt. George Bush and Congress (both parties) took 8 years to dig a deep deficit hole, it has only taken Obama and Congressional Democrats days to dig a deeper one.

I Fear for the Future

On the front page of The Ann Arbor News today there was a little box with a letter to incoming President Obama. In part the letter said:

[...]I think you deserve to be the president because you are going to do smart and good stuff, like give poor people homes and a life.

Granted this letter was from an 8 year old, but this thinking of the President as some sort of Superman is pretty pervasive, and to some degree represents the type of thinking taught in our schools today. I've seen similar comments from adults as well, which is also pretty scary. I really hope that Obama does well as President, but based on concepts and policies coming out during the transition I can't say that I'm very hopeful. Couple many bad ideas with a Congress that is even worse and I fear that a return of the Carter era 70's is quite likely, and possibly something much worse.

Wishonomics

It's really disappointing that the McCain campaign isn't doing a better job exposing Obama's economic plans for the sham that they are. They should be pointing out wherever they can that raising taxes, particularly during an economic slowdown, is a recipe for failure. Spending money you don't have compounds the problem. I call this 'wishonomics' because you have to wish that economic realities don't exist in order to believe it will work.

Obama wants to raise taxes on dividends and capital gains. History has shown that when you raise these taxes you get less revenue. Obama knows this, but is on record as saying he doesn't care. He will do this to impose his notion of 'fairness'. Raising taxes on investment will result in less investment, or misallocated investment. Instead of investing in higher risk, perhaps a new business or idea, investors will stick with safer investments. Capital which has gains, will stay locked up as people avoid paying the higher tax rate in the hopes that down the road saner heads will prevail. The net effect of raising taxes on dividends and capital gains is to reduce revenue to the government at a time when it will certainly be needed, and to reduce investment in productive economic activity, again, at a time when we desperately need it.

Obama also wants to raise taxes on people earning over $250,000. IRS data shows that the majority of individual filers who report income over $250,000 are actually people who own businesses and are reporting business income on their personal return. Raising rates effectively reduces the amount of money that these business owners can use to invest in making their business grow. Small businesses are the largest employers and hurting them seems counter productive. People who cheer the idea of making the rich 'pay their fair share' should realize that they are simply shooting themselves in the foot. People like to mock 'trickle down' economics, but the simple fact is that if you hurt the ability of small businesses to grow, by reducing their access to operating capital, you will cause businesses to either fail or grow slowly or not at all.

In the face of a recession, where tax revenue will naturally decline, and with the almost certainty that his tax policies will futher reduce revenue, Obama then proposes spending even more money than Bush. Everywhere he appears, he is promising that he will have a refundable tax credit for this, that or the other thing. If these promises are kept, all that will be accomplished is an explosion of debt. I really fear that we are entering a period very similar to the 1930's. I don't think we will go into a deep depression, but I feel that the poor economics of our current president (playing the role of Herbert Hoover) will lead to the election and destructive policies of Obama (playing the role of FDR). I expect that there will be plenty of stupid laws passed and further restrictions of freedom that will take decades to repair.