Category Archives: Taxes

“Friedman Friday” Friedman on BBA

Mark Levin “I feel that we can do great things.”

Uploaded by on Mar 26, 2011

Mark Levin “I feel that we can do great things.” Mark is excited by the proposed Balanced Budget Amendment. He states that this would be a great thing for America to pass. He believes the Balanced Budget Amendment will help bring the nation back to it’s Constitutional roots. Mark explains what the amendment is and how it will work. In his February 1983 classic essay, Nobel Prize-winning economist Milton Friedman gives his opinion on a balanced budget amendment that requires a super majority to raise taxes. Friedman states, “The purpose of the balanced-budget-and-tax-limitation amendment is to limit the government in order to free the people—this time from excessive taxation. Its passage would go a long way to remedy the defect that has developed in our budgetary process.” Part #1 3-25-2011

The best article I have ever read on the Balanced Budget Amendment was written by my favorite economist Milton Friedman. Here is the first portion below:

Washington: Less Red Ink

An argument that the balanced-budget amendment would be a rare merging of public and private interests.

Our elected representatives in Congress have been voting larger expenditures year after year—larger not only in dollars but as a fraction of the national income. Tax revenue has been rising as well, but nothing like so rapidly. As a result, deficits have grown and grown.

At the same time, the public has demonstrated increasing resistance to higher spending, higher taxes, and higher deficits. Every survey of public opinion shows a large majority that believes that government is spending too much money, and that the government budget should be balanced.

How is it that a government of the majority produces results that the majority opposes?

The paradox reflects a defect in our political structure. We are ruled by a majority—but it is a majority composed of a coalition of minorities representing special interests. A particular minority may lose more from programs benefiting other minorities than it gains from programs benefiting itself. It might be willing to give up its own programs as part of a package deal eliminating all programs—but, currently, there is no way it can express that preference.

Similarly, it is not in the interest of a legislator to vote against a particular appropriation bill if that vote would create strong enemies while a vote in its favor would alienate few supporters. That is why simply electing the right people is not a solution. Each of us will be favorably inclined toward a legislator who has voted for a bill that confers a large benefit on us, as we perceive it. Yet who among us will oppose a legislator because he has voted for a measure that, while requiring a large expenditure, will increase the taxes on each of us by a few cents or a few dollars? When we are among the few who benefit, it pays us to keep track of the vote. When we are among the many who bear the cost, it does not pay us even to read about it.

The result is a major defect in the legislative procedure whereby a budget is enacted: each measure is considered separately, and the final budget is the sum of the separate items, limited by no effective, overriding total. That defect will not be remedied by Congress itself—as the failure of one attempt after another at reforming the budget process has demonstrated. It simply is not in the self-interest of legislators to remedy it—at least not as they have perceived their self-interest.

Dissatisfaction with ever-increasing spending and taxes first took the form of pressure on legislators to discipline themselves. When it became clear that they could not or would not do so, the dissatisfaction took the form of a drive for constitutional amendments at both the state and the federal levels. The drive captured national attention when Proposition 13, reducing property taxes, was passed in California; it has held public attention since, scoring successes in state after state. The constitutional route remains the only one by which the general interest of the public can be expressed, by which package deals, as it were, can be realized.

Two national organizations have led this drive: the National Tax Limitation Committee (NTLC), founded in 1975 as a single-issue, nonpartisan organization to serve as a clearinghouse for information on attempts to limit taxes at a local, state, or federal level, and to assist such attempts; and the National Taxpayers Union (NTU), which led the drive to persuade state legislatures to pass resolutions calling for a constitutional convention to enact an amendment requiring the federal government to balance its budget. Thirty-one states have already passed resolutions calling for a convention. If three more pass similar resolutions, the Constitution requires Congress to call such a convention—a major reason Congress has been active in producing its own amendment.

The amendment that was passed by the Senate last August 4, by a vote of 69 to 31 (two more than the two thirds required for approval of a constitutional amendment), had its origin in 1973 in a California proposition that failed at the time but passed in 1979 in improved form (not Proposition 13). A drafting committee organized by the NTLC produced a draft amendment applicable to the federal government in late 1978. The NTU contributed its own version. The Senate Judiciary Committee approved a final version on May 19, 1981, after lengthy hearings and with the cooperation of all the major contributors to the earlier work. In my opinion, the committee’s final version was better than any earlier draft. That version was adopted by the Senate except for the addition of section 6, proposed by Senator William Armstrong, of Colorado, a Republican. Approval by the Senate, like the sponsorship of the amendment, was bipartisan: forty-seven Republicans, twenty-one Democrats, and one Independent voted for the amendment.

The House Democratic leadership tried to prevent a vote on the amendment in the House before last November’s elections. However, a discharge petition forced a vote on it on October 1, the last full day of the regular session. The amendment was approved by a majority (236 to 187), but not by the necessary two thirds. Again, the majority was bipartisan: 167 Republicans, 69 Democrats. In view of its near passage and the widespread public support for it, the amendment is sure to be reintroduced in the current session of Congress. Hence it remains a very live issue.

The amendment as adopted by the Senate would achieve two related objectives: first, it would increase the likelihood that the federal budget would be brought into balance, not by prohibiting an unbalanced budget but by making it more difficult to enact a budget calling for a deficit; second, it would check the growth of government spending—again, not by prohibiting such growth but by making it more difficult.

The amendment is very much in the spirit of the first ten amendments—the Bill of Rights. Their purpose was to limit the government in order to free the people. Similarly, the purpose of the balanced-budget-and-tax-limitation amendment is to limit the government in order to free the people—this time from excessive taxation. Its passage would go a long way to remedy the defect that has developed in our budgetary process. By the same token, it would make it more difficult for supporters of ever-bigger government to attain their goals.

It is no surprise, therefore, that a torrent of criticism has been loosed against the proposed amendment by people who believe that our problems arise not from excessive government but from our failure to give government enough power, enough control over us as individuals. It is no surprise that Tip O’Neill and his fellow advocates of big government tried to prevent a vote in the House on the amendment, and used all the pressure at their command to prevent its receiving a two-thirds majority.

It is no surprise, either, that when the amendment did come to a vote in the House, a substantial majority voted for it. After all, in repeated opinion polls, more than three quarters of the public have favored such an amendment. Their representatives do not find it easy to disregard that sentiment in an open vote—which is why Democratic leaders tried to prevent the amendment from coming to a vote. When their hand was forced, they quickly introduced a meaningless substitute that was overwhelmingly defeated (346 to 77) but gave some representatives an opportunity to cast a recorded vote for a token budget-balancing amendment while at the same time voting against the real thing.

Milton Friedman received the Nobel Prize in economics in 1976. He is the Paul Snowden Russell Distinguished Service Professor Emeritus of Economics at the University of Chicago and a senior research fellow at the Hoover Institution at Stanford University.

Simpson-Bowles commission plan wants to expand the federal government by raising taxes!!!

Dan Mitchell Commenting on Obama’s Failure to Propose a Fiscal Plan

Published on Aug 16, 2012 by

No description available.

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For the first 150 years our federal government lived on about 4% of our GDP  (except in wartime) but now federal spending has risen to over 24%. We need to lower spending now and not raise taxes. The problem isn’t that we don’t have enough taxes, but it is that we spend too much.

Many people want to believe in Unicorns, the Loch Ness Monster, and Bigfoot. I think those people are rational and reasonable compared to the folks in Washington that spend their days dreaming of “bipartisan” and “balanced” plans to fix the budget mess.

Here are the two things you should understand. First, you need to grab your Washingtonese-to-English dictionary so you can learn that “bipartisan” and “balanced” are almost always code words for “higher taxes.” Second, budget deals with higher taxes (as the New York Times accidentally admitted) don’t “fix” anything.

The Simpson-Bowles budget plan is a good example of why taxpayers should be quite skeptical. Put together by a former Republican Senator from Wyoming and Bill Clinton’s former Chief of Staff as part of President Obama’s Fiscal Commission, the Simpson-Bowles proposal is viewed by the inside-the-beltway crowd as fiscal Nirvana.

Unsurprisingly, Simpson and Bowles are quite fond of their plan. Here’s their key assertion from a column they recently wrote for USA Today.

The Simpson-Bowles commission offered a reasonable, responsible, comprehensive and bipartisan solution that won the support of a majority of Democrats and Republicans on the commission. Most importantly, it would reduce the deficit by $4 trillion over the next decade — enough to put the debt on a clear downward path relative to the economy.

Gee, sounds nice, but let’s look at the details, all of which can be seen by downloading their report.

A main problem is that Simpson and Bowles misdiagnose the problem. I think it’s fair to say that their focus, as they explicitly state in their report, is to “…stabilize and then reduce the national debt.” But as I explain in this video, the real problem is a federal government that is too big and spending too much. Red ink is just a symptom of that problem.

Moreover, the report even includes Keynesian policy, stating that “…budget cuts should start gradually so they don’t interfere with the ongoing economic recovery.”

But let’s set aside rhetorical sins and grade the plan.

Restraining Spending: C+

The plan does impose some restraint on the budget, but the plan – even after being in place for 10 years – assumes that the federal government should grow by about $1.5 trillion and consume nearly 22 percent of economic output. This is far above the 18.2 percent of GDP when Clinton left office, which should be the minimum target for policymakers.

But the components of the plan make me think they won’t even achieve the plan’s anemic targets.

Eliminating Departments and Programs: D

  • The Simpson-Bowles plan does not call for shutting down a single program, agency, or department. Not even cesspools of waste and inefficiency such as the Department of Education or Department of Housing and Urban Development.

Reforming Entitlements: C-

Reducing Bureaucratic Bloat: B

  • In terms of controlling spending, this is the part of the report that is most admirable. It calls for a three-year freeze on excessive compensation and urges reductions in bureaucratic bloat – albeit only through attrition.

Controlling the Tax Burden and Reforming the Tax Code: C-

The best policy, needless to say, is getting rid of the corrupt tax system and replacing it with a simple and fair flat tax. That obviously wasn’t what Simpson and Bowles decided to propose, but the flat tax is a benchmark that allows us to judge the components of their plan.

They basically get two policies right and two policies wrong. If they were major league baseball players, a .500 average would make them superstars. In Dan Mitchell’s policy world, they’re below average.

Lowering Tax Rates: A-

  • This is the best feature of all the revenue provisions. The Simpson-Bowles report proposes a top tax rate of between 23 percent-28 percent, significantly below the current top rate of 35 percent (and well below the 39.6 percent top rate that is part of President Obama’s class-warfare proposal). The corporate tax rate also would be reduced.

Reducing Double Taxation: D

  • The plan would increase the double taxation of dividends and capital gains. The U.S. already has a very anti-competitive system and this would be a step in the wrong direction (though ameliorated by a lower corporate tax rate).

Limiting the Tax Burden: D-

  • The plan assumes that laws should be changed to increase the federal tax burden to 21 percent of GDP from the long-run average of 18 percent of economic output. That’s unfortunate, but it’s even worse than it seems since the tax burden already is scheduled to rise to record levels because of what’s called “real bracket creep.” The Simpson-Bowles tax hikes would be an additional burden on taxpayers.

Eliminating Corrupt Loopholes: B

  • The good news is that some deductions are curtailed and a few are eliminated. The best components are the repeal of the deduction for state and local income and property taxes. So no more indirect preferences that reward profligate states such as California and Illinois. The healthcare exclusion also is capped, which would be a nice step on the long – but important – task of dealing with the third-party payer crisis in the healthcare sector.

I’m not a fan of the Simpson-Bowles plan, but I do give them credit. They decided to focus on the wrong variable and they have some bad policies, but at least it’s a real proposal.

It’s not anywhere close to the Ryan budget, but it’s a heck of a lot better than what the Senate Democrats have produced (nothing) and what the President has proposed (kicking the can down the road).

But doing a better job than the remedial students is damning with faint praise. Just in case you’re tempted to grade them on a curve, just remember that balancing the budget without tax increases doesn’t require any heavy lifting. All policymakers have to do is limit the growth of spending so it grows by an average of 2.5 percent annually over the next decade.

Other nations, such as New Zealand and Canada, got great results when imposing multi-year periods of fiscal restraint. Certainly it’s not asking too much to expect American lawmakers to exercise similar levels of prudence?

Open letter to President Obama (Part 453) (Laughing at Obama’s Fumbled Attempt to Extort More Taxes with FAA Flight Delays)

Open letter to President Obama (Part 453)

(Emailed to White House on 5-4-13.)

President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500

Dear Mr. President,

I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on what is going on out here.

______________

When Governments Cut Spending

Uploaded on Sep 28, 2011

Do governments ever cut spending? According to Dr. Stephen Davies, there are historical examples of government spending cuts in Canada, New Zealand, Sweden, and America. In these cases, despite popular belief, the government spending cuts did not cause economic stagnation. In fact, the spending cuts often accelerated economic growth by freeing up resources for the private sector.

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Why did you act like the Sequester cuts would bring the world to an end!!! It clearly hasn’t.

You don’t enjoy many victories when you fight for liberty, so I’m not averse to spiking the football on those rare occasions when we win.

That’s why I shared this very funny cartoon last week to celebrate Obama’s belly flop on gun control.

Now we have another cartoon, this one by Henry Payne, mocking the Administration’s shameful effort to force a tax increase by deliberately making air travel less convenient.

Sequester Tax FAA

No wonder the President is behaving in such a petulant fashion. The sequester is an embarrassing defeat for Obama and other proponents of bigger government.

He thought he could bully Republicans into a class-warfare tax hike. Now he’s resorting to pathetic gimmicks.

And he lost on that issue now that Congress has made explicit that the FAA has authority to reallocate funds.

Let’s not just spike the football. Let’s do a dance in the end zone.

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Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com

Related posts:

Sequester did not hurt job growth!!!!!

If you blame the Sequester for blaming job growth then you don’t have a good grasp on economics. The Overlooked Jobs Tragedy April 9, 2013 by Dan Mitchell When the monthly job numbers are released, most people focus on the unemployment rate. On many occasions, I’ve cited that number, usually to point out that the unemployment [...]

Sequester not so bad after all (includes cartoons)

I have put up lots of cartoons from Dan Mitchell’s blog before and they have got lots of hits before. Many of them have dealt with the economy, eternal unemployment benefits, socialism,  Greece,  welfare state or on gun control. Sequester was not so bad after all. Since the Sequester Has Been in Place for More than One [...]

Another funny sequester cartoon from Dan Mitchell’s blog

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Sequester Cartoons from Dan Mitchell’s blog Part 4

I have put up lots of cartoons from Dan Mitchell’s blog before and they have got lots of hits before. Many of them have dealt with the economy, eternal unemployment benefits, socialism,  Greece,  welfare state or on gun control. These sequester cartoons from Dan Mitchell’s blog have been great but today he has about 4 cartoons that are [...]

Sequester Cartoons from Dan Mitchell’s blog Part 3

I have put up lots of cartoons from Dan Mitchell’s blog before and they have got lots of hits before. Many of them have dealt with the economy, eternal unemployment benefits, socialism,  Greece,  welfare state or on gun control. These sequester cartoons from Dan Mitchell’s blog have been great but today he has about 1/2 cartoons that [...]

Sequester Cartoons from Dan Mitchell’s blog Part 2

I have put up lots of cartoons from Dan Mitchell’s blog before and they have got lots of hits before. Many of them have dealt with the economy, eternal unemployment benefits, socialism,  Greece,  welfare state or on gun control. What a bunch of wimps we have on Capitol Hill. They can’t even cut 2% out of this [...]

Sequester Cartoons from Dan Mitchell’s blog Part 1

I have put up lots of cartoons from Dan Mitchell’s blog before and they have got lots of hits before. Many of them have dealt with the economy, eternal unemployment benefits, socialism,  Greece,  welfare state or on gun control. Here is a couple of cartoons below I thought you would enjoy. Debunking Sequester Hysteria from the Big [...]

We got to cut the budget and not just pretend to cut the budget

We got to cut the budget and not just pretend to cut the budget. Reid Suggests Exploiting Budget Gimmicks for Sequestration Romina Boccia April 25, 2013 at 3:30 pm     Senate Majority Leader Harry Reid (D–NV) is proposing not one but two old budget gimmicks to spend $85 billion more in 2013 than allowed [...]

White House’s political motivated chicanery with the FAA

Obama is up to his old tricks again and here comes the White House’s political motivated chicanery with the FAA Privatization Is the Best Response to the FAA’s Deliberate Attempt to Inconvenience Air Passengers April 24, 2013 by Dan Mitchell In an interview with Neil Cavuto earlier this month, I mocked proponents of big government for [...]

A closer look at the Boston Marathon terrorists

Sad case indeed. Immigration, Terrorism, and Welfare Tourism April 24, 2013 by Dan Mitchell So we’ve now learned that the Boston Marathon terrorists were welfare bums. Why am I not surprised? “Thanks for the handouts, suckers!” Heck, it was only a couple of days ago that I announced the Moocher Hall of Fame and included terrorists from theUnited Kingdom and Australia (and [...]

Open letter to President Obama (Part 450) Economist Antony Davies’ video “Will Higher Tax Rates Balance the Budget?” (includes editorial cartoon)

 

 

(Emailed to White House on 3-20-13.)

President Obama c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear Mr. President,

I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on what is going on out here.

I don’t think we should keep raising taxes.

Will Higher Tax Rates Balance the Budget?

Published on Apr 11, 2012

As the U.S. debt and deficit grows, some politicians and economist have called for higher tax rates in order to balance the budget. The question becomes: when the government raises taxes, does it actually collect a larger portion of the US economy?

Professor Antony Davies examines 50 years of economic data and finds that regardless of tax rates, the percentage of GDP that the government collects has remained relatively constant. In other words, no matter how high government sets tax rates, the government gets about the same portion. According to Davies, if we’re concerned about balancing the budget, we should worry less about raising tax revenue and more about growing the economy. The recipe for growth? Lower tax rates and a simplified tax code.

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We are taxed too high and raising taxes at this point will not help.

I suppose I should write something serious about Obama’s class-warfare agenda, but I’m in Iceland and it’s almost time to head into Reykjavik for dinner. So let’s simply enjoy some humor that gets across the points I would make anyhow.

We’ll start with this great cartoon from Lisa Benson. In a perfect world, this monster would be named “Big Government.” But I’m not complaining too much since the obvious implication of the cartoon is that the soak-the-rich tax hikes will make the deficit worse – which implies that politicians will spend the money and/or that there will be a Laffer Curve response leading to less revenue than politicians predict.

You can see some of my favorite Benson cartoons here, herehereherehereherehere, hereherehere, and here.

Here’s a similar cartoon. But instead of feeding a deficit monster, it shows that a tax hike will enable a bunch of politicians to continue their binging at our expense.

Holbert is relatively new to me. The only other cartoon of his that I’ve used (at least than I can remember) can be seen here.

Our final cartoon isn’t about Obama’s class-warfare proposal, but it does show where we’re going if we allow the politicians to continue down the path of tax-and-spend dependency.

You can see two additional Glenn Foden cartoons by clicking here and here.

I especially like the “spa” comment in the basket cartoon. Sort of reminds me of the “frog” story showing how it would be impossible to impose statism in one fell swoop. People would recognize the danger and immediately revolt, much as a frog would immediately hop out if you tried to drop it in boiling water. But just as you can lure a frog into danger by putting it in lukewarm water and slowing turning up the heat until it’s been too weakened to escape, you can also slowly but surely hook people on dependency by creating little programs and eventually turning them into big programs.

That’s sort of where we are today. The burden of government spending has exploded and will get even worse if we don’t enact serious entitlement reform. But too many people now can’t envision a world other than the status quo and they are fearful of change – even though inaction eventually means a Greek-style fiscal crisis.

P.S. Given the theme of this post, you will probably enjoy this Chuck Asay cartoon and this Henry Payne cartoon. Or perhaps you won’t enjoy them if you stop and think about what they’re really saying. But they are both gems, so try to focus only on the humor.

____________

Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com

 

Government interference has not allowed the USA to experience low price candy and it has cost the American consumer more and more and that program costs American taxpayers about $1.4 billion each year!!!

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Government interference has not allowed the USA to experience low price candy and it has cost the American consumer more and more and that program costs American taxpayers about $1.4 billion each year.

Happy Halloween: Candy-Crushing Cronyism

October 30, 2013 at 10:00 am

candy

Newscom

This Halloween, millions of Americans will, as every year, be handing out candy. But this year, the real trick could be finding treats made in the U.S.A. Because of government cronyism aimed at protecting big sugar producers, much of the candy in your child’s bag will come from overseas.

According to the U.S. Department of Agriculture, in 2012, the price of raw sugar was 40 percent higher in the United States than in the rest of the world. And, while an international sugar glut is expected to send prices tumbling everywhere else later this year, U.S. prices will remain about the same. That’s because of a U.S. government program that guarantees sugar processors a minimum price.

That program costs American taxpayers about $1.4 billion each year, while directly benefitting fewer than 5,000 beet and sugar cane farmers. Most of them, like most big farmers, are fairly well off to begin with. Meanwhile, the U.S. Commerce Department’s International Trade Administration says that U.S. consumers pay an extra $826,000 for each sugar-production job saved.

According to the U.S. International Trade Commission (yes, there is an International Trade Administration and an International Trade Commission), the sugar program imposes a $49 million net cost on the economy. That’s enough to buy 8.8 million five-pound bags of sugar. A study commissioned by the Sweetener Users Association sets the direct price even higher: between $2.9 billion to $3.5 billion per year.

The sugar program costs jobs as well.

The Hershey chocolate company has cut 1,500 jobs. Atkinson Candy Co. now makes 80 percent of its peppermint-flavored products at a factory in Guatemala that opened in 2010.

According to a 2006 U.S. Department of Commerce report, the U.S. has lost more than 10,000 candy-making jobs since 1997. The report adds that three candy-making jobs are lost for each sugar-growing and processing job saved by higher domestic sugar prices. “As long as the government has the ability to hand out favors to some industries and punish others, resources will be diverted away from productive private-sector activities to fund lobbying campaigns in Washington, D.C.,” notes Heritage’s Bryan Riley. “This Depression-era program, which was supposed to end in 1940, has outlived its intended lifespan by 72 years. It should be abolished.”

Until it is, the trick’s on American food consumers.

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Senator Pryor pictured below:  Why do I keep writing and email Senator Pryor suggestions on how to cut our budget? I gave him hundreds of ideas about how to cut spending and as far as I can tell he has taken none of my suggestions. You can find some of my suggestions here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here,  here, and  here, and they […]

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The Dysfunction in Washington is Republicans and Democrats that are unwilling to cut spending in order to vote for more programs (Democrats want more food stamps etc but Republicans vote for their pet programs and wars too like No Child Left Behind Act, the Iraq war, the prescription drug entitlement, and the TARP bailout).

The Dysfunction in Washington is Republicans and Democrats that are unwilling to cut spending in order to vote for more programs (Democrats want more food stamps etc but Republicans vote for their pet programs and wars too like No Child Left Behind Act, the Iraq war, the prescription drug entitlement, and the TARP bailout). If […]

Dear Senator Pryor, here are some spending cut suggestions (“Thirsty Thursday”, Open letter to Senator Pryor)

Senator Pryor pictured below:  Why do I keep writing and email Senator Pryor suggestions on how to cut our budget? I gave him hundreds of ideas about how to cut spending and as far as I can tell he has taken none of my suggestions. You can find some of my suggestions here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here,  here, and  here, and they […]

If you want to cut wasteful spending then the disability program must be reformed radically!!!

If you want to cut wasteful spending then the disability program must be reformed radically!!! October 7, 2013 1:19PM 60 Minutes Disability Investigation By Chris Edwards Share The abuse and overspending in government disability programs is so bad that even National Public Radio and 60 Minutes have taken notice. On the heels of this excellent […]

If you really want to cut wasteful spending then why not shut down Dept of Housing and Urban Development, Dept of Education and SBA?

If you really want to cut wasteful spending then why not shut down Dept of Housing and Urban Development, Dept of Education and SBA? There are many other areas that should be cut but these should be shut down!!!   October 7, 2013 4:57PM Close Washington to Dismantle the Welfare-Warfare State By Doug Bandow Share […]

Dear Senator Pryor, here are some spending cut suggestions (“Thirsty Thursday”, Open letter to Senator Pryor)

Senator Pryor pictured below:  Why do I keep writing and email Senator Pryor suggestions on how to cut our budget? I gave him hundreds of ideas about how to cut spending and as far as I can tell he has taken none of my suggestions. You can find some of my suggestions here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here,  here, and  here, and they […]

We need to stop wasteful government spending by privatizing the post office!!

We need to stop wasteful government spending by privatizing the post office!! Postal Service Won’t Shut Down but Will Default on Its Debt James Gattuso October 1, 2013 at 9:30 am Newscom The U.S. Postal Service (USPS) defaulted on its debt last night. No, it has nothing to do with the partial shutdown of the […]

We need to stop the stupid spending by Bureaucrats!!!

We need to stop the stupid spending by Bureaucrats!!!   Bureaucrats Gone Wild: Government Spends Recklessly as Fiscal Year Ends Rob Bluey September 29, 2013 at 1:55 pm Credit: Tetra Images/Newscom Washington’s reckless spending is driving America into debt — and yet federal bureaucrats continue their wasteful and frivolous ways. The latest example comes courtesy […]

By Everette Hatcher III | Posted in spending out of control | Edit | Comments (0)

If you want to cut Welfare fraud then go to Flat Tax!!!

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If you want to cut Welfare fraud then go to Flat Tax!!!

One of my missions in life is fundamental tax reform. I would like to replace the corrupt internal revenue code with a simple and fair flat tax.

Though what I really want is a tax system that minimizes the damage of extracting money from the productive sector of the economy, so I’ll take any system with a low rate, no double taxation, and no distortionary loopholes.

The national sales tax, for instance, also would be a good option if we can first repeal the 16th Amendment so there’s no risk that politicians would pull a bait and switch and saddle us with both an income tax and a sales tax (and in my ultimate fantasy world, we would shrink the federal government to the size envisioned by the Founding Fathers, in which case we probably wouldn’t need any broad-based tax at all).

While I normally make the economic case for tax reform, there are many reasons to fix our broken tax code.

Many Americans, for instance, are rightfully upset that the tax code is a 76.000-page monstrosity that enables the politically well connected to benefit from special provisions.

So we don’t know if the rich are paying an appropriate amount. Some of them are paying too much because of high rates and double taxation, while some of them are paying too little because they have clever lawyers, lobbyists, and accountants.

In an ideal world, if someone like Bill Gates earns 10,000 times as much as I do, then he should pay 10,000 times as much in tax. That’s a core principle of the flat tax.

But this post isn’t about why we need tax reform to promote economic growth or fairness. Instead, I want to focus on tax reform as a way of reducing welfare fraud. The Treasury Department just released a report acknowledging that the IRS made more than $100 billion of improper “earned income credit” payments over the past decade and that about one-fourth of all such payments are in error.

This Fox News article is a good summary. Here are the key details.

The Internal Revenue Service paid out more than $110 billion in tax credits over the past decade to people who didn’t qualify for them, according to a Treasury report released Tuesday. …IRS inspector general J. Russell George said more than one-fifth of all credits paid under the program went to people who didn’t qualify. …George said in a statement. “Unfortunately, it is still distributing more than $11 billion in improper EITC payments each year and that is disturbing.” …The agency said it prevents “nearly $4 billion in improper claims each year and is committed to continuing to work to reduce improper claims.” The EITC is one of the nation’s largest anti-poverty programs. In 2011, more than 27 million families received nearly $62 billion in credits.

Now some background. The “earned income credit” or “earned income tax credit” is actually an income redistribution scheme operated by the IRS. It’s basically a wage subsidy. If someone earns money (the “earned income” part), the law says the IRS should augment that money with a payment from the government (the “credit” or “tax credit” part).

The key thing to understand, though, is that the EITC is “refundable,” which is the government’s term for payments to people who don’t earn enough to owe any income tax. That’s why it’s primarily an income redistribution program. Only it’s operated by the IRS rather than the Department of Health and Human Service or some other welfare agency.

And when government is giving away other people’s money, there are those who will try to abuse the program. That’s true for corporate welfare, and it’s true for traditional welfare like food stamps. And, as we see from the Treasury report, it’s true for the EITC.

That’s the bad news.

The good news is that the EITC has a redeeming feature. Some lawmakers realized traditional welfare programs were very destructive because they paid people not to work. The EITC supposedly offsets that perverse incentive because you get the money only because you earn some income.

But now let’s share some additional bad news. The government takes away the EITC once your income reaches a certain level, and this is equivalent to a big increase in the marginal tax rate on earning additional income.

And when you combine the EITC with all the other redistribution programs operated by government, you create a huge dependency trap. Indeed, the chart shows that many of these programs can be larger than the EITC (which is called “negative income tax”).

So let’s adopt a flat tax and get rid of all the bad features of the tax system, including the EITC. Welfare and income redistribution are not proper roles of the federal government.

We’re far more likely to get good results – both for poor people and taxpayers – if we let state and local governments experiment and learn from each other on what actually helps people climb out of poverty.

P.S. I can’t overlook an opportunity to point out that today’s complicated and convoluted tax code is the reason why we have a powerful and intrusive Internal Revenue Service. And never forget that the IRS has a long record of abusive actions.

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The Dysfunction in Washington is Republicans and Democrats that are unwilling to cut spending in order to vote for more programs (Democrats want more food stamps etc but Republicans vote for their pet programs and wars too like No Child Left Behind Act, the Iraq war, the prescription drug entitlement, and the TARP bailout).

The Dysfunction in Washington is Republicans and Democrats that are unwilling to cut spending in order to vote for more programs (Democrats want more food stamps etc but Republicans vote for their pet programs and wars too like No Child Left Behind Act, the Iraq war, the prescription drug entitlement, and the TARP bailout). If […]

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If you want to cut wasteful spending then the disability program must be reformed radically!!!

If you want to cut wasteful spending then the disability program must be reformed radically!!! October 7, 2013 1:19PM 60 Minutes Disability Investigation By Chris Edwards Share The abuse and overspending in government disability programs is so bad that even National Public Radio and 60 Minutes have taken notice. On the heels of this excellent […]

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If you really want to cut wasteful spending then why not shut down Dept of Housing and Urban Development, Dept of Education and SBA? There are many other areas that should be cut but these should be shut down!!!   October 7, 2013 4:57PM Close Washington to Dismantle the Welfare-Warfare State By Doug Bandow Share […]

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We need to stop wasteful government spending by privatizing the post office!!

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Open letter to President Obama (Part 420) Bailouts are legal corruption

(Emailed to White House on 1-14-13.)

President Obama c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear Mr. President,

I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on what is going on out here.

There is no free money out there. Somebody has to always pay.

Bailout Nation

January 13, 2013 by Dan Mitchell

I have a serious question for readers. What’s worse, bailouts for government or bailouts for the private sector?

Yes, both are bad, but is it worse to bail out a bankrupt entitlement program, such as Social Security, or it is worse to bail out an industry, such as the financial sector?

Bailout gravy train cartoonTo bail out the housing sector, or to bail out Medicare? Fannie and Freddie, or GM and Chrysler?

All these examples involve huge amounts of money, and both private-sector and public-sector bailouts have perverse long-run effects, but which is worse?

And don’t forget there are lots of other bailouts in our future, as discussed on this interview for Fox Business News.

The interview took place before Christmas, but the topic is even more relevant today since the budget season is about to begin.

Most of the discussion was about government agencies and programs that may get more handouts, though bailouts for the Federal Housing Administration and the Pension Benefit Guaranty Corporation would be indirect bailouts for big business and housing.

So we’d get the worst of all worlds, more government spending and more cronyism.

Or, as they call it in Washington, a win-win situation.

But I call it legal corruption.

Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com

Open letter to President Obama (Part 414)Let’s spend someone else’s money to solve our problems!!! That is the number one reason we have a national debt so high!!!

(Emailed to White House on 1-14-13.)

President Obama c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear Mr. President,

I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on what is going on out here.

Please explain to me if you ever do plan to balance the budget while you are President? I have written these things below about you and I really do think that you don’t want to cut spending in order to balance the budget. It seems you ever are daring the Congress to stop you from spending more.

President Barack Obama speaks about the debt limit in the East Room of the White House in Washington. | AP Photo

“The credit of the United States ‘is not a bargaining chip,’ Obama said on 1-14-13. However, President Obama keeps getting our country’s credit rating downgraded as he raises the debt ceiling higher and higher!!!!

Washington Could Learn a Lot from a Drug Addict

Just spend more, don’t know how to cut!!! Really!!! That is not living in the real world is it?

Making more dependent on government is not the way to go!!

Why is our government in over 16 trillion dollars in debt? There are many reasons for this but the biggest reason is people say “Let’s spend someone else’s money to solve our problems.” Liberals like Max Brantley have talked this way for years. Brantley will say that conservatives are being harsh when they don’t want the government out encouraging people to be dependent on the government. The Obama adminstration has even promoted a plan for young people to follow like Julia the Moocher.  

David Ramsey demonstrates in his Arkansas Times Blog post of 1-14-13 that very point:

Arkansas Politics / Health Care Arkansas’s share of Medicaid expansion and the national debt

Posted by on Mon, Jan 14, 2013 at 1:02 PM

Baby carrot Arkansas Medicaid expansion image

Imagine standing a baby carrot up next to the 25-story Stephens building in Little Rock. That gives you a picture of the impact on the national debt that federal spending in Arkansas on Medicaid expansion would have, while here at home expansion would give coverage to more than 200,000 of our neediest citizens, create jobs, and save money for the state.

Here’s the thing: while more than a billion dollars a year in federal spending would represent a big-time stimulus for Arkansas, it’s not even a drop in the bucket when it comes to the national debt.

Currently, the national debt is around $16.4 trillion. In fiscal year 2015, the federal government would spend somewhere in the neighborhood of $1.2 billion to fund Medicaid expansion in Arkansas if we say yes. That’s about 1/13,700th of the debt.

It’s hard to get a handle on numbers that big, so to put that in perspective, let’s get back to the baby carrot. Imagine that the height of the Stephens building (365 feet) is the $16 trillion national debt. That $1.2 billion would be the length of a ladybug. Of course, we’re not just talking about one year if we expand. Between now and 2021, the federal government projects to contribute around $10 billion. The federal debt is projected to be around $25 trillion by then, so we’re talking about 1/2,500th of the debt. Compared to the Stephens building? That’s a baby carrot.

______________

Here is how it will all end if everyone feels they should be allowed to have their “baby carrot.”

How sad it is that liberals just don’t get this reality.

Here is what the Founding Fathers had to say about welfare. David Weinberger noted:

While living in Europe in the 1760s, Franklin observed: “in different countries … the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”

Alexander Fraser Tytler, Lord Woodhouselee (15 October 1747 – 5 January 1813) was a Scottish lawyer, writer, and professor. Tytler was also a historian, and he noted, “A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy.”

Thomas Jefferson to Joseph Milligan

April 6, 1816

[Jefferson affirms that the main purpose of society is to enable human beings to keep the fruits of their labor. — TGW]
 

To take from one, because it is thought that his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, “the guarantee to every one of a free exercise of his industry, and the fruits acquired by it.” If the overgrown wealth of an individual be deemed dangerous to the State, the best corrective is the law of equal inheritance to all in equal degree; and the better, as this enforces a law of nature, while extra taxation violates it.

[From Writings of Thomas Jefferson, ed. Albert E. Bergh (Washington: Thomas Jefferson Memorial Association, 1904), 14:466.]

_______

Jefferson pointed out that to take from the rich and give to the poor through government is just wrong. Franklin knew the poor would have a better path upward without government welfare coming their way. Milton Friedman’s negative income tax is the best method for doing that and by taking away all welfare programs and letting them go to the churches for charity.

_____________

_________

Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com

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Welfare reform part 3

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Uploaded by ForaTv on May 29, 2009 Complete video at: http://fora.tv/2009/05/18/James_Bartholomew_The_Welfare_State_Were_In Author James Bartholomew argues that welfare benefits actually increase government handouts by ‘ruining’ ambition. He compares welfare to a humane mousetrap. —– Welfare reform was working so good. Why did we have to abandon it? Look at this article from 2003. In the controversial [...]

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Dan Mitchell destroys Max Brantley’s contention that tax rates don’t put feet in motion!!!!

Dan Mitchell destroys Max Brantley’s contention that tax rates don’t put feet in motion!!!!

___________

Max Brantley should be commended for admitting that tax rates do enter into the decision making process for many people when they decide to move. However, he falls short of admitting their full impact on these decisions.

Here is what the Washington Examiner  wrote about tax competition and tax migration inside the United States.

States like California…can’t afford to be hospitable to business while also funding massive public employee entitlements. …job-creating businesses flee big-government Blue States for limited-government Red States. In short order, Blue States find themselves in financial straits. …between 2000 and 2010, the big Blue States of New York, California, and Illinois chased off hundreds of thousands of residents taking billions in income with them ($45.6 billion, $29.4 billion, and $20.4 billion respectively). Each of these states have highly progressive, high-marginal rate tax codes. California, for example, has 10 income tax brackets and a top rate of 13.3 percent. New York has eight brackets and an 8.82 percent top rate. Where did all those formerly Blue State income go? To low-tax, Red State jurisdictions, including Florida (no income tax), Texas (no income tax), and Arizona (4.54 percent top rate). Those three alone raked in $67.3 billion, $17.7 billion, and $17.6 billion, respectively.

Dan Mitchell of the Cato Institute noted:

Indeed, there have been studies looking at how specific states are driving high-income taxpayers to emigrate. And that means big Laffer-Curve effects.

Which is good news because even politicians are probably capable of learning – sooner or later – that high tax rates won’t raise much revenue if the geese that lay the golden eggs decide to fly away.

_____________

In light of these facts some of Max Brantley comments just look off a little bit:

Here’s something fun to noodle with if you have time. A Jefferson County native was fascinated withthis website, How Money Walks, and I agree there’s some interesting stuff there.

The map (flash player required) uses IRS figures to show movement of wealth, as measured by adjusted gross income, from one place to another — broken down by state and metropolitan area. There’s an ideological angle,  naturally. It’s meant to show that rich people have walked away from high-tax places like California. I’m not ready to accept the premise entirely. Taxes alone don’t explain decisions to move. Arkansas, with a high income tax rate that has flattened over the years, still manages to be a “growth” state. Louisiana, where no tax break is off the table, was a loser over the time period.

I think you can see some other forces at work in just this one slice above, on Pulaski County. A huge amount of income here moved to suburban counties over the period studied, for a giant net loss. Pulaski did gain a nice chunk of income from people leaving Jefferson County. I don’t believe it was tax rates that put those feet in motion.

_____________

Here is the complete article from Dan Mitchell below:

Why Tax Migration and Federalism Mean Doom for Left-Wing States such as New York, California, and Illinois

Maybe this means I’m not a nice person (notwithstanding my high score for tenderness in a recent test), but I can’t help but be happy when I read bad news about fiscal policy in high-tax welfare states.

And because I’m a huge fan of tax competition, I get even happier when I find out that bloated governments are in trouble because people are escaping to places where government isn’t quite so greedy.

With that in mind, I smiled when I read what the Washington Examiner just wrote about tax competition and tax migration inside the United States.

States like California…can’t afford to be hospitable to business while also funding massive public employee entitlements. …job-creating businesses flee big-government Blue States for limited-government Red States. In short order, Blue States find themselves in financial straits. …between 2000 and 2010, the big Blue States of New York, California, and Illinois chased off hundreds of thousands of residents taking billions in income with them ($45.6 billion, $29.4 billion, and $20.4 billion respectively). Each of these states have highly progressive, high-marginal rate tax codes. California, for example, has 10 income tax brackets and a top rate of 13.3 percent. New York has eight brackets and an 8.82 percent top rate. Where did all those formerly Blue State income go? To low-tax, Red State jurisdictions, including Florida (no income tax), Texas (no income tax), and Arizona (4.54 percent top rate). Those three alone raked in $67.3 billion, $17.7 billion, and $17.6 billion, respectively.

Indeed, there have been studies looking at how specific states are driving high-income taxpayers to emigrate. And that means big Laffer-Curve effects.

Which is good news because even politicians are probably capable of learning – sooner or later – that high tax rates won’t raise much revenue if the geese that lay the golden eggs decide to fly away.

And since a picture tells a thousand words, here’s the map of taxable income migration put together by the Tax Foundation using IRS data.

Tax Foundation Income Migration Map

Before closing, I want to highlight one other passage from the Examiner column that touches on a very critical point.

Thanks to the few federalist principles that are still protected in the Constitution, Americans remain free to vote with their feet and escape economically suffocating places like California in order to move to the vastly more hospital economic climates found in Red States like Texas.

Amen. Federalism is a very valuable way of protecting people from statism. We see it when people move from New York. We see it when they escape from California. We see it from a big-picture perspective in the Tax Foundation map.

Federalism enables to producers to escape the looters and moochers.

But federalism has been weakened over the years by the expansion of federal government. If we want to bolster competition among the states – and therefore constrain the greed of the political class, we need to devolve programs from Washington.

This is why welfare reform during the Clinton years was such a good idea. And it’s why block-granting Medicaid is so desirable (above and beyond the fiscal need to implement good entitlement reform).

P.S. It’s rather appropriate that I’m writing about federalism since I’m now in Lausanne, Switzerland, for the 2013 Liberty Conference and Switzerland is probably the world’s best example of genuine federalism.

P.P.S. One small correction to the Examiner’s piece. Illinois is a high-tax state. Illinois is a big-government state. Illinois is a state heading toward fiscal collapse. There are many things wrong with the Land of Lincoln, but it hasn’t compounded those other mistakes with a “progressive” tax that discriminates against those who add more to economic output. Indeed, the fact that Illinois has a flat tax helps to explain why politicians had such a hard time pushing through a tax hike a couple of  years ago. They eventually succeeded, but the politicians faced an uphill battle because they couldn’t play the divide-and-conquer game of raising taxes on a limited segments of the population.

The Laffer Curve, Part III: Dynamic Scoring

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Funding Government by the Minute

Published on Mar 28, 2012

At the rate the federal government spends, it runs out of money on July 31. What programs should be cut to balance the budget and fund the government for the remaining five months of the year? Cutting NASA might buy two days; cutting the Navy could buy fifteen. It seems that balancing the budget may require more than just cutting government programs. What should be done?

___________________________

It is truly sad to me that so much of our money is taken by the federal government. Our founding fathers believed in small limited government. It seems that our President wants to play Santa Claus.
January 11, 2013 9:31AM

How Washington Grows Rich

I see that I’m quoted in Annie Lowrey’s New York Times Magazine story, “Washington’s Economic Boom, Financed by You”:

David Boaz, executive vice president of the Cato Institute, told me: “Washington’s economy is based on the confiscation and transfer of wealth produced elsewhere. Out in the country they’re growing food, building cars and designing software — all these things that raise our standard of living. Here in Washington, everyone is writing memos to each other about how to take some of that money and which special interest should get it.” I asked him if he liked living in the city, which has become undeniably nicer. Boaz sputtered a bit. “I can’t walk to lunch from my office without having to avoid the construction projects!” he said. “For Washington, it does mean better restaurants and better entertainment, and the potholes get filled faster. But for the country as a whole? I don’t think it’s a good thing for America.”

I’m confident I didn’t sputter, but otherwise this sounds right. I’ve been writing about the wealth of the Washington area and where it comes from for years.

In 2005 I wrote about – yes – the construction projects that block my way to lunch in a “big-government building boom.”

In 2006 I leaned on Waymon and Willie to offer some advice to parents:

Mammas, don’t let your babies grow up to be cowboys,

Don’t let ’em make software and sell people trucks,

Make ’em be bureaucrats and fed’rals and such.

Here are a few other links to discussions of Washington’s wealth, starting with the most recent news:

http://www.cato.org/blog/happy-new-year-washington

http://www.cato.org/blog/its-fall-washington-livin-still-good

http://www.cato.org/blog/lobbying-booming-business-politicized-economy

http://www.cato.org/blog/obamas-k-street-recovery-plan

http://www.cato.org/blog/no-recession-washington

http://www.cato.org/blog/washington-booming-bush-obama-years

I focused on why money flows to Washington way back in 1983 in the Wall Street Journal:

Business people know that you have to invest to make money. Businesses invest in factories, labor, research and development, marketing, and all the other processes that bring goods to consumers and, they hope, lead to profits. They also invest in political processes that may yield profits.

If more money can be made by investing in Washington than by drilling another oil well, money will be spent there.

Nobel laureate F.A. Hayek explained the process 40 years ago in his prophetic book The Road to Serfdom: “As the coercive power of the state will alone decide who is to have what, the only power worth having will be a share in the exercise of this directing power.”

As the size and power of government increase, we can expect more of society’s resources to be directed toward influencing government.

And all of this relates to an idea I discussed in Libertarianism: A Primer:

Libertarians developed a pre-Marxist class analysis that divided society into two basic classes: those who produced wealth and those who took it by force from others.  Thomas Paine, for instance, wrote, “There are two distinct classes of men in the nation, those who pay taxes, and those who receive and live upon the taxes.”  Similarly, Jefferson wrote in 1824, “We have more machinery of government than is necessary, too many parasites living on the labor of the industrious.”  Modern libertarians defend the right of productive people to keep what they earn, against a New Class of politicians and bureaucrats who would seize their earnings to transfer them to nonproducers.

Sheldon Richman has more on this libertarian class analysis that focused on “conflict between producers, no matter their station, and the parasitic political classes, both inside and outside the formal state,” or “between the tax-payers and tax-eaters.”

________________

President Obama plays Santa Claus but you played for the presents!!!

During previous Christmas seasons, I’ve shared some holiday humor.

This year, let’s enjoy a bunch of good cartoons.

Lisa Benson start our list, with this recognition of Time’s Man of the year. It’s so nice of the President to give away other’s people’s money.

Cartoon Christmas 1

And since Obama’s currently threatening to take the nation over the fiscal cliff unless he gets some class warfare tax policy, this Lisa Benson holiday cartoon from last year is worth sharing as well.

The second cartoon has the same theme.

Cartoon Christmas 2

The magnificent Chuck Asay offers this gem, with a message similar to one he produced earlier this year.

Cartoon Christmas 3

Asay also did a Christmas-themed cartoon last year.

Jerry Holbert provides this funny – but not so funny if you think about it – cartoon.

Cartoon Christmas 4

Here’s a good one from Glenn McCoy. This cartoon is a pretty good summary of how politics really works.

Cartoon Christmas 5

P.S. Here’s a bonus section. I can’t resist being a proud dad and sharing this family photo. It was taken while we had a meal break during some Christmas shopping.

December 2012

Not a bad brood, if I can offer an unbiased assessment.

My kids have made other appearances on the blog – here, here, here, here, and here.

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