Monthly Archives: December 2010

Pat Lynch: Criticizes Social Security Privatization

HALT: Halting Arkansas Liberals with Truth

(Milton Friedman: The People did not want the Social Security Program)

Pat Lynch in his September 3, 2010 article in the Democrat Gazette article  notes that “Congressman John Boozman’s plan to privatize Social Security is similar to what President Bush proposed in 2005 and what Congressman Paul Ryan is advocating for this year.” Lynch uses this article to show how stupid this is for the financial future of the country. However, I will show how the free market could do a much better job than the government has in the past and will in the future.

In the October 27, 2010 Wall Street Journal in the article “Private Social Security Accounts: Still a Good Idea,” William Shipman lays out the facts:

Suppose a senior citizen — let’s call him “Joe the Plumber” — who retired at the end of 2009, at age 66, had been able to set up a personal account when he entered the work force in 1965, at the age of 21. Suppose that, paying into his personal account what he and his employer would have paid into Social Security, Joe was foolish enough to invest his entire portfolio in the stock market for all 45 years of his working career. How would he have fared in the recent financial crisis?

While working, Joe had earned the average income for full-time male workers. His wife Mary, also age 66, had earned the average income for full-time female workers. They invested together in an indexed portfolio of 90% large-cap stocks and 10% small-cap stocks, which earned the returns reported each year since 1965.

By the time of their retirement in 2009, Joe and Mary would have accumulated account funds, after administrative costs, of $855,175. Indeed, they would have been millionaires a few years earlier, but the financial crisis lost them 37% in 2008. They were unfortunate to retire just one year after the worst 10-year stock market performance since 1926. Yet their account, having earned a 6.75% return annually from 1965 to 2009, would still pay them about 75% more than Social Security would have.

What’s more, this model assumes that in retirement Joe and Mary switch to a lower-risk, conservative portfolio that averages a return of just 3%. Of course for young workers today, Social Security promises even lower returns of only 1.5% or less, given the actuarial value of all promised benefits. For many, the promised returns are zero or negative. And if Congress raises taxes or cuts benefits in order to close financial gaps — as everyone who rejects personal accounts effectively advocates — the eventual returns for young workers will be even lower.

It is a mathematical fact that the least expensive way to provide for an almost certain future liability is to save and invest in capital markets prior to the onset of the liability. That’s why state and local pension funds, corporate pension plans, federal employee retirement plans and Chile’s successful Social Security personal accounts (since copied by other countries) do so. It is sound practice.

And it’s why Mr. Obama is wrong to assert that personal Social Security accounts are “ill-conceived,” and why each of us should have the liberty to opt into one.

My father, Everette Hatcher Jr.,  has only once seen a presidential candidate.It was 1964 and it was the first time in his life that he was truly excited about a presidential candidate that did not play politics and said how it was. He drove down to downtown Memphis and heard Barry Goldwater speak at a train station.
My father later told me that he really was disappointed that the only  politician he ever got excited about lost by the largest landslide in the history of the nation up to that point.
One of the key issues in which the press mocked him on was his view to make Social Security voluntary and he also said that Social Security taxes would cost more than income taxes in most American households one day.  That day has come. I wish Goldwater’s idea had become law in 1964 which was less than three decades into Social Security. The next ten years the baby boomers will cause the amount of retirees on Social Security to go from 35 million to 70 million. If nothing is done now the system will eventually cause our taxes to climb from 15% to even higher levels. Barry knew what he was talking about.

More $ needed to make schools better?: Charter Schools Series pt 3

(Caroline Hoxby, Ph.D of Stanford explodes myth that public schools do not have enough money)

Max Brantley is always pointing out there is a billionaire boys club that is supporting the Charter School movement in Arkansas. In his article “Money talks in Charter School Debate,” (September 11, 2010), he lists these prominent gentleman. Liberals who follow Brantley in the Arkansas Times would tell you that the public schools need more money in order to do better. However, the facts do not back up that assertion.

Caroline Hoxby, Ph.D., the Scott and Donya Bommer Professor of Economics at Stanford University has noted:

The United States spends more money per pupil on public K-12 schooling than any other country in the world. Some of the school districts that are the most embarrassing for Americans like Newark, NJ or Washington D.C. are some of the most expensive in the world. So it is hard to make the case that the problem America has is just that it is not spending enough money… We have raised per pupil spending (in real inflation adjusted terms)  every single year for the last 40 years… (Not having enough money) is not the source of the problem for American education.

Hoxby is also a senior fellow of the Hoover Institution, the director of the Economics of Education Program at the National Bureau of Economic Research, and Senior Fellow of the Stanford Institute for Economic Policy Research.

Inner city kids suffer the most when there is no School Choice: Charter Series pt 2

(Milton Friedman shows in this 9 minute video below how inner city parents have lost their freedom to choose concerning schools and they have suffered because of it)

The Arkansas Times has always been on the warpath when the subject of school choice comes up. Paul Hewitt in the Ark Times April 22, 2010 wrote:

In Arkansas we call privately operated charter schools “open enrollment schools.” In reality, are these schools truly open enrollment? Does every child have an equal opportunity to enroll? The first ingredient is that the child must have a parent who truly cares and monitors his or her education. 

Liberals condemn Charter and Voucher programs, but it seems it is undeniable that parents  are a key part of the success of schools. The conservative Milton Friedman went even further when he noted that  when parents lose control over the school then the education suffers:

To go back to the beginning, it all started with the fine idea that every child should have a chance to learn his three R’s. Sometimes in June when it gets hot, the kids come out in the yard to do their lessons, all 15 of them, ages 5 to 13, along with their teacher. This is the last one-room schoolhouse still operating in the state of Vermont. That is the way it used to be. Parental control, parents choosing the teacher, parents monitoring the schooling, parents even getting together and chipping in to paint the schoolhouse as they did here just a few weeks ago. Parental concern is still here as much in the slums of the big cities as in Bucolic, Vermont. But control by parents over the schooling of their children is today the exception, not the rule.

Increasingly, schools have come under the control of centralized administration, professional educators deciding what shall be taught, who shall do the teaching, and even what children shall go to what school. The people who lose most from this system are the poor and the disadvantaged in the large cities. They are simply stuck. They have no alternative.

Of course, if you are well off you do have a choice. You can send your child to a private school or you can move to an area where the public schools are excellent, as the parents of many of these students have done. These students are graduating from Weston High School in one of Boston’s wealthier suburbs. Their parents pay taxes instead of tuition and they certainly get better value for their money than do the parents in Hyde Park. That is partly because they have kept a good deal of control over the local schools, and in the process, they have managed to retain many of the virtues of the one-room schoolhouse.


Brummett: Jack up Taxes of Wealthy to reduce Deficit

Halting Arkansas Liberals with Truth

(Candidate Obama wanted to raise capital gains tax for purposes of fairness)

John Brummett in his article “Punish Less and Persuade More,” (December 13), asserted, “…you do not raise much money toward reducing the deficit by a nickel-and-dime tax policy on the fellow sweating his checkbook balance with an income of $50,000 a year….You jack them (now referring to those making more than $250,000) up a little more and suddenly you have generated hundreds of billions of dollars towards deficit reduction. You tax the rich more because that is where the money is and they can spare it. This is not confiscation. This is not a fine. It is common sense.”

However, the figures do not seem to back up Brummett’s assertion. The tax figures for 2007 seem to indicate that by reversing the tax cuts on the rich you could possibly pick up $36 billion while if you did the same to the middle class you could pick up $114 billion.

I am responding to these liberal assertion with a portion from an article published January 29, 2007 called, “Ten Myths About the Bush Tax Cuts” by Brian Riedl. Riedl is the Grover Hermann Fellow in Federal Budgetary Affairs at the Heritage Foundation and Riedl’s budget research has been featured in front-page stories and editorials in The New York Times, The Wall Street Journal, The Washington Post and The Los Angeles Times.

Myth #7: Reversing the upper-income tax cuts would raise substantial revenues.

Fact: The low-income tax cuts reduced revenues the most.

Many critics of tax cuts nonetheless support extending the increased child tax credit, marriage penalty relief, and the 10 percent income tax bracket because these policies strongly benefit low-income tax families. They also support annually adjusting the alternative minimum tax exemption for inflation to prevent a massive broad-based tax increase. These critics assert that repealing the tax cuts for upper-income individuals and investors and bringing back the pre-2001 estate tax levels can raise substantial revenue. Once again, the numbers fail to support this claim.

In 2007, according to CBO and Joint Committee on Taxation data, the increased child tax credit, marriage penalty relief, 10 percent bracket, and AMT fix will have a combined budgetary effect of $114 billion. These policies do not have strong supply-side effects to minimize that effect.

By comparison, the more maligned capital gains, dividends, and estate tax cuts are projected to reduce 2007 revenues by just $36 billion even before the large and positive supply-side effects are incorporated. Thus, repealing these tax cuts would raise very little revenue and could possibly even reduce federal tax revenue. Such tax increases would certainly reduce the savings and investment vital to economic growth.

The individual income tax rate reductions come to $59 billion in 2007 and are not really a tax cut for the rich. All families with taxable incomes over $62,000 (and single filers over $31,000) benefit. Repealing this tax cut would reduce work incentives and raise taxes on millions of families and small businesses, thereby harming the economy and minimizing any new revenues.

Max Brantley is sharp critic of Charter and Voucher Proposals: Charter Schools Series pt 1

Halting Arkansas Liberals with Truth

(Glenn Beck story on DC Voucher program)

Max Brantley noted on the Arkansas Times Blog on Thursday, Decemer 16th that “the Milwaukee school voucher program is cheaper than the cost of regular Milwaukee public schools.” This kind of evidence also encouraged the proposals concerning voucher programs throughout the country. However, Brantley is a very sharp critic of both the charter and voucher schools through out the country. Therefore, I want to start a series of articles looking at what the liberals in Arkansas have to say about these schools, and then I will take a look at the evidence out in the real world.

Today I wanted to share an article and video concerning what President Obama did to kill the successful Washington D.C. voucher school program.

Obama’s Compromise on D.C.’s School Vouchers Program,” (Washington Post, May 10, 2009) was written by Andrew J. Coulson who is the Director of the Cato Institute’s Center for Educational Freedom. Below is that article:

President Obama’s decision isn’t much of a compromise. NEA President Dennis Van Roekel wrote to congressional Democrats demanding that they kill the D.C. voucher program, and they complied. Obama has merely tried to alter the manner of destruction — choosing attrition over summary execution.

During the campaign, Obama said that if vouchers worked he would support them. The Education Department recently revealed that students who joined the voucher program in 2004 are now more than two school years ahead of their public school peers in reading.

In his initial budget, Obama declared that when it comes to education, we cannot waste dollars on programs that are inefficient. Average tuition at the voucher schools is $6,620, while the District is spending $26,555 per pupil this year on K-12 education.

So contrary to his promises, the president has sacrificed a program he knows to be efficient and successful in order to appease the public school employee unions. If he will do this for the NEA, he will do anything.

America finally has an “education president,” and his name is Dennis Van Roekel (current President of the 3.2 million-member National Education Association).

Dumas: Bush Tax Cuts Hurt Economy

(Representative Todd Akin of St Louis talks about 2003 Bush Tax Cut and Obama’s recent tax compromise)
HALT: Halting Arkansas Liberals with Truth
This morning when I got up the news was reporting that “A massive bipartisan tax package preventing a big New Year’s Day tax hike for millions of Americans is on its way to President Barack Obama for his signature.” Evidently, in order to get some things that the Democrats wanted, they had to allow the Republicans to keep the rates down on the top tax bracket. I think that is good, but many liberals have a real problem with that, and many will contend that lowering the top rate in the past has never helped.
In his article “Tax work, not wealth,” ( Nov 25, Arkansas Times), Ernest Dumas asserts, “…the Bush tax cuts, which were to send the economy soaring and set off the greatest hiring rush in history. We know what happened. But what about specifically the capital gains cut of 2003, which was packaged with accelerated personal and corporate tax cuts and lowered the top capital gains rate to 15 percent? The economy continued to grow at a snail’s pace and then fell off the cliff.”
NOTICE TO LIBERALS: The facts show that the economy responded strongly to the 2003 tax cuts.

Like my last post, I am responding to these liberal assertions with a portion from an article published January 29, 2007 called, “Ten Myths About the Bush Tax Cuts” by Brian Riedl. Riedl is the Grover Hermann Fellow in Federal Budgetary Affairs at the Heritage Foundation and Riedl’s budget research has been featured in front-page stories and editorials in The New York Times, The Wall Street Journal, The Washington Post and The Los Angeles Times.
Myth #9: The Bush tax cuts have not helped the economy.
Fact: The economy responded strongly to the 2003 tax cuts.

The 2003 tax cuts lowered income, capital gains, and dividend tax rates. These policies were designed to increase market incentives to work, save, and invest, thus creating jobs and increasing economic growth. An analysis of the six quarters before and after the 2003 tax cuts (a short enough time frame to exclude the 2001 recession) shows that this is exactly what happened:
  • GDP grew at an annual rate of just 1.7 percent in the six quarters before the 2003 tax cuts. In the six quarters following the tax cuts, the growth rate was 4.1 percent.
  • Non-residential fixed investment declined for 13 consecutive quarters before the 2003 tax cuts. Since then, it has expanded for 13 consecutive quarters.
    The S&P 500 dropped 18 percent in the six quarters before the 2003 tax cuts but increased by 32 percent over the next six quarters. Dividend payouts increased as well.
  • The economy lost 267,000 jobs in the six quarters before the 2003 tax cuts. In the next six quarters, it added 307,000 jobs, followed by 5 million jobs in the next seven quarters.
  • The economy lost 267,000 jobs in the six quarters before the 2003 tax cuts. In the next six quarters, it added 307,000 jobs, followed by 5 million jobs in the next seven quarters.
Critics contend that the economy was already recovering and that this strong expansion would have occurred even without the tax cuts. While some growth was naturally occurring, critics do not explain why such a sudden and dramatic turnaround began at the exact moment that these pro-growth policies were enacted. They do not explain why business investment, the stock market, and job numbers suddenly turned around in spring 2003. It is no coincidence that the expansion was powered by strong investment growth, exactly as the tax cuts intended.
The 2003 tax cuts succeeded because of the supply-side policies that critics most oppose: cuts in marginal income tax rates and tax cuts on capital gains and dividends. The 2001 tax cuts that were based more on demand-side tax rebates and redistribution did not significantly increase economic growth.

Bill Clinton: Bush Tax Cuts too Big!!!

(Funny video about the Democrats who love to blame Bush)

HALT: Halting Arkansas Liberals with Truth

Currently I am reading “My Life” by Bill Clinton, and I must say that I am really getting into it. I did take notice of page 870 since President Clinton was talking about the Bush Tax Cuts which currently were due to expire on December 31, 2010. The book “My Life” was finished in  2004, so President Clinton had the advantage of commenting on these tax cuts that were passed in 2001 and 2003. They were the same across the board tax cuts that the Republicans proposed to him all during his presidency and this is what he thought of them:

“I vetoed the Republican tax cut because it was “too big, too bloated,” and put too great a burden on America’s economy. Under the budget rules, the bill would have forced large cuts on education, health care, and environmental protection. It would have prevented us from extending the Social Security trust funds, & from adding a prescription drug benefit to Medicare. We were going to have a surplus this year of about $100 billion, but the proposed GOP tax cut would cost nearly $1 trillion over a decade.”

You got to give President Bill Clinton a lot of credit for taking the bull by the horns and working to find the middle ground with the Republicans after the 1994 elections. The result was three surplus budgets from 1998 to 2001.

Were the Bush Tax Cuts too big? Were they the cause of later budget deficits? Many liberal Democrats besides President Clinton have made this same assertion over and over.

NOTICE TO LIBERALS: The problem was run away federal spending  and not the Bush Tax Cuts. Take a look at the historical evidence and you will see that the revenue actually went up during the years in question.

I am responding to this assertion with a portion from an article published January 29, 2007 called, “Ten Myths About the Bush Tax Cuts” by Brian Riedl.

Myth #2: The Bush tax cuts substantially reduced 2006 revenues and expanded the budget deficit.
Fact: Nearly all of the 2006 budget deficit resulted from additional spending above the baseline.

Critics tirelessly contend that America’s swing from budget surpluses in 1998-2001 to a $247 billion budget deficit in 2006 resulted chiefly from the “irresponsible” Bush tax cuts. This argument ignores the historic spending increases that pushed federal spending up from 18.5 percent of GDP in 2001 to 20.2 percent in 2006.

The best way to measure the swing from surplus to deficit is by comparing the pre-tax cut budget baseline of the Congressional Budget Office (CBO) with what actually happened. While the January 2000 baseline projected a 2006 budget surplus of $325 billion, the final 2006 numbers showed a $247 billion deficit-a net drop of $572 billion. This drop occurred because spending was $514 billion above projected levels, and revenues were $58 billion below (even after $188 billion in tax cuts). In other words, 90 percent of the swing from surplus to deficit resulted from higher-than-projected spending, and only 10 percent resulted from lower-than-projected revenues.

Furthermore, tax revenues in 2006 were actually above the levels projected before the 2003 tax cuts. Immediately before the 2003 tax cuts, the CBO projected a 2006 budget deficit of $57 billion, yet the final 2006 budget deficit was $247 billion. The $190 billion deficit increase resulted from federal spending that was $237 billion more than projected. Revenues were actually $47 billion above the projection, even after $75 billion in tax cuts enacted after the baseline was calculated. By that standard, new spending was responsible for 125 percent of the higher 2006 budget deficit, and expanding revenues actually offset 25 percent of the new spending.
The 2006 tax revenues were not substantially far from levels projected before the Bush tax cuts. Despite estimates that the tax cuts would reduce 2006 revenues by $188 billion, they came in just $58 billion below the pre-tax cut revenue level projected in January 2000.
The difference is even more dramatic with the pro-growth 2003 tax cuts. The CBO calculated that the post-March 2003 tax cuts would lower 2006 revenues by $75 billion, yet 2006 revenues came in $47 billion above the pre-tax cut baseline released in March 2003. This is not a coincidence. Tax cuts clearly played a significant role in the economy’s performing better than expected and recovering much of the lost revenue.

Dumas: Bush Tax cuts are tilted towards the Rich

HALT: Halting Arkansas Liberals with Truth

Ernest Dumas in his article “A Broken System,” (Arkansas Times, December 9) asserts that the Bush tax cuts favored the richest Americans and businesses. Dumas contends that the 2001 and 2003 Bush tax cuts have brought massive deficits and stymic economic growth.

NOTICE TO LIBERALS: The rich are now paying even more of the tax load than they did before this tax cuts were enacted and a tremendous increase in federal spending has been the cause of these massive deficits.

I am responding to these liberal assertions with a portion from an article published January 29, 2007 called, “Ten Myths About the Bush Tax Cuts” by Brian Riedl.He has discussed budget policy on NBC, CBS, PBS, CNN, FOX News, MSNBC, and C-SPAN.  He also participates in the bipartisan “Fiscal Wake-Up Tour,” which holds town hall meetings across America focusing on the looming crisis in Social Security, Medicare, and Medicaid.

Myth #10: The Bush tax cuts were tilted toward the rich.
Fact: The rich are now shouldering even more of the income tax burden.

Popular mythology also suggests that the 2001 and 2003 tax cuts shifted more of the tax burden toward the poor. While high-income households did save more in actual dollars than low-income households, they did so because low-income households pay so little in income taxes in the first place. The same 1 percent tax cut will save more dollars for a millionaire than it will for a middle-class worker simply because the millionaire paid more taxes before the tax cut.

In 2000, the top 60 percent of taxpayers paid 100 percent of all income taxes. The bottom 40 percent collectively paid no income taxes. Lawmakers writing the 2001 tax cuts faced quite a challenge in giving the bulk of the income tax savings to a population that was already paying no income taxes.

Rather than exclude these Americans, lawmakers used the tax code to subsidize them. (Some economists would say this made that group’s collective tax burden negative.)First, lawmakers lowered the initial tax brackets from 15 percent to 10 percent and then expanded the refundable child tax credit, which, along with the refundable earned income tax credit (EITC), reduced the typical low-income tax burden to well below zero. As a result, the U.S. Treasury now mails tax “refunds” to a large proportion of these Americans that exceed the amounts of tax that they actually paid. All in all, the number of tax filers with zero or negative income tax liability rose from 30 million to 40 million, or about 30 percent of all tax filers. The remaining 70 percent of tax filers received lower income tax rates, lower investment taxes, and lower estate taxes from the 2001 legislation.

Consequently, from 2000 to 2004, the share of all individual income taxes paid by the bottom 40 percent dropped from zero percent to –4 percent, meaning that the average family in those quintiles received a subsidy from the IRS. By contrast, the share paid by the top quintile of households (by income) increased from 81 percent to 85 percent.

Expanding the data to include all federal taxes, the share paid by the top quintile edged up from 66.6 percent in 2000 to 67.1 percent in 2004, while the bottom 40 percent’s share dipped from 5.9 percent to 5.4 percent. Clearly, the tax cuts have led to the rich shouldering more of the income tax burden and the poor shouldering less.

In 2008 the first of 77 million baby boomers received their first Social Security checks. The subsequent avalanche of Social Security, Medicare, and Medicaid costs for these baby boomers will be the greatest economic challenge of this era.

How to slow down this huge increase in federal spending should be the budgetary focus of  Congress rather than repealing Bush tax cuts or allowing them to expire. Repealing the tax cuts would not significantly increase revenues. It would, however, decrease investment, reduce work incentives, stifle entrepreneurialism, and reduce economic growth. Lawmakers should remember that America cannot tax itself to prosperity.

Above you will see a clip by Ron Paul that makes it clear that spending is the problem not the lack of taxes. Ron Paul is a favorite of the Tea Party movement and that because he is very good at defending liberty. When government tries to take over more power in our lives, then liberty suffers.

Mark Pryor supported Failed Stimulus

HALT: Halting Arkansas Liberals with Truth

(Paul Ryan outlines what has happened since the stimulus has been passed)

Will Rogers has a great quote that I love. He noted, “Lord, the money we do spend on Government and it’s not one bit better than the government we got for one-third the money twenty years ago”(Paula McSpadden Love, The Will Rogers Book, (1972) p. 20.)

Senator Mark Pryor voted for the American Recovery and Reinvestment Act of 2009 which was signed into law by President Obama on February 17, 2009. Both Pryor and Obama thought the economy could be jump started by more government spending. On January 10, 2009 President Obama claimed that the Stimulus would bring unemployment under 8% and create 4.1 million jobs.

NOTICE TO LIBERALS: Did the economy get stimulated by the Stimulus Bill? The verdict came in with the unemployment figures. Unemployment had gone from 8.1% (Feb 2009) to 9.8% (Nov 2010). The stimulus had failed just like every other stimulus that had ever been attempted by any government anywhere.

It is my view that the stimulus bill did nothing to stimulate the economy. Also how can President Obama claim that economists on “the right” approve of the stimulus when not one Republican voted for it? In 2009 The Cato Institute ran an ad in leading newspapers through out the country that seems to contradict this very claim and had it signed by 300 leading economists (several Nobel Prize Winners included) : “Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policy makers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.”
Now that the Democrats have lost their large majorities we have an opportunity  to duplicate the same political environment that existed the last three years of the Clinton presidency when we actually had three balanced budgets in his last three years (surplus of 69 billion in 98, 76 billion in 99, 46 billion in 2000). The Tea Party Republicans should help in that regard too.  Futhermore, President Obama faces real problems with China who is balking at buying up American currency and Treasury bonds at the pace it takes to sustain the current deficit of 1.35 trillion.
Deep down President Obama really does believe that more government is the answer. Back in 1980 I read a book called FREE TO CHOOSE by Milton Friedman and in it he said, “We’ve become increasing dependent on government. We’ve surrendered power to government, nobody has taken it from us. It’s our doing. The results, monumental government spending. Much of it wasted, little of it going to the people whom we would like to see helped. Burdensome taxes, high inflation, a welfare system under which neither those who receive help nor those who pay for it are satisfied. Trying to do good with other people’s money simply has not worked.” (The Free to Choose Film Series can be viewed at ).

I believe in returning social programs to private charities and churches where they would be privately funded. We can longer afford to allow government to interfere in our lives. Just imagine the expansion of private business and investment that will occur when our taxes are reduced dramatically because over half of our budget expenditures have been eliminated.

Politicians like Mark Pryor and President Obama need to realize that only jobs created by the private sector will stimulate the economy, and taking resources out of the private economy and putting them into temporary government jobs will only cause the debt to go up along with eventually our interest rates and inflation. Milton Friedman said it best: “There is no free lunch!!!”

Dumas: Unemployment Benefits will help stimulate Economy

HALT: Halting Arkansas Liberals with Truth

The Republicans have been made out to be the Grinch that stole Christmas because they did not want to extend unemployment benefits again. In fact, we have been told by the Democrats that unemployment benefits will help stimulate the economy, and we should not be trying to help the millionaires while the unemployed could help stimulate the economy so much faster.

Ernest Dumas in his article “Politics, tax policy converge,” (Arkansas Times) stated that “taxes on people of great wealth do not stunt demand like they do for the middle class, which spends, not saves, when taxes are cut.”

In his article “A Broken System,” (Arkansas Times, December 9), concerning the recent deal between the Republicans and President Obama, Dumas noted, “The compromise–sellout is a better description–includes some marginally hopeful parts. Obama won an extention of unemployment benefits and another stimulus benefit, a one-year reduction in payroll taxes that will give people another $120 billion to spend next year to see if it will stimulate demand.”

NOTICE TO LIBERALS: Government spending does not stimulate the economy because government must first tax or borrow that money out of the private economy which defeats the purpose in the first place.

Have you learned yet? Look at the stimulus that was supported (by Democrats only)when President Obama first came into office and the predictions made then. Did any of those predictions come true? Actually unemployment increased by almost two points!!!

I am responding to these liberal assertions with a portion from an article published January 29, 2007 called, “Ten Myths About the Bush Tax Cuts” by Brian Riedl. Riedl is the Grover Hermann Fellow in Federal Budgetary Affairs at the Heritage Foundation and Riedl’s budget research has been featured in front-page stories and editorials in The New York Times, The Wall Street Journal, The Washington Post and The Los Angeles Times

Myth #8: Tax cuts help the economy by “putting money in people’s pockets.”
Fact: Pro-growth tax cuts support incentives for productive behavior.

Government spending does not “pump new money into the economy” because government must first tax or borrow that money out of the economy. Claims that tax cuts benefit the economy by “putting money in people’s pockets” represent the flip side of the pump-priming fallacy. Instead, the right tax cuts help the economy by reducing government’s influence on economic decisions and allowing people to respond more to market mechanisms, thereby encouraging more productive behavior.

The Keynesian fallacy is that government spending injects new money into the economy, but the money that government spends must come from somewhere. Government must first tax or borrow that money out of the economy, so all the new spending just redistributes existing income. Similarly, the money for tax rebates—which are also touted as a way to inject money into the economy—must also come from somewhere, with government either spending less or borrowing more. In both cases, no new spending is added to the economy. Rather, the government has just transferred it from one group (e.g., investors) in the economy to another (e.g., consumers).

Some argue that certain tax cuts, such as tax rebates, can transfer money from savers to spenders and therefore increase demand. This argument assumes that the savers have been storing their savings in their mattresses, thereby removing it from the economy. In reality, nearly all Americans either invest their savings, thereby financing businesses investment, or deposit the money in banks, which quickly lend it to others to spend or invest. Therefore, the money is spent by someone whether it is initially consumed or saved. Thus, tax rebates create no additional economic activity and cannot “prime the pump.”

This does not mean tax policy cannot affect economic growth. The right tax cuts can add substantially to the economy’s supply side of productive resources: capital and labor. Economic growth requires that businesses efficiently produce increasing amounts of goods and services, and increased production requires consistent business investment and a motivated, productive workforce. Yet high marginal tax rates—defined as the tax on the next dollar earned—serve as a disincentive to engage in such activities. Reducing marginal tax rates on businesses and workers increases the return on working, saving, and investing, thereby creating more business investment and a more productive workforce, both of which add to the economy’s long-term capacity for growth.

Yet some propose demand-side tax cuts to “put money in people’s pockets” and “get people to spend money.” The 2001 tax rebates serve as an example: Washington borrowed billions from investors and then mailed that money to families in the form of $600 checks. Predictably, this simple transfer of existing wealth caused a temporary increase in consumer spending and a corresponding decrease in investment but led to no new economic growth. No new wealth was created because the tax rebate was unrelated to productive behavior. No one had to work, save, or invest more to receive a rebate. Simply redistributing existing wealth does not create new wealth.

In contrast, marginal tax rates were reduced throughout the 1920s, 1960s, and 1980s. In all three decades, investment increased, and higher economic growth followed. Real GDP increased by 59 percent from 1921 to 1929, by 42 percent from 1961 to 1968, and by 31 percent from 1982 to 1989. More recently, the 2003 tax cuts helped to bring about strong economic growth for the past three years.

Policies which best support work, saving, and investment are much more effective at expanding the economy’s long-term capacity for growth than those that aim to put money in consumers’ pockets.

(Below Senator John Thune interviewed by Sean Hannity on Dec 9th)