Category Archives: Cato Institute

Cato Institute:Spending is our problem Part 3

March 12, 2012 – 11:26 pm

Uploaded by on Feb 15, 2011

Dan Mitchell, Senior Fellow at the Cato Institute, speaks at Moving Forward on Entitlements: Practical Steps to Reform, NTUF’s entitlement reform event at CPAC, on Feb. 11, 2011.

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People think that we need to raise more revenue but I say we need to cut spending. Take a look at a portion of this article from the Cato Institute:

The Damaging Rise in Federal Spending and Debt

by Chris Edwards

Joint Economic Committee
United States Congress

Joint Economic CommitteeUnited States Congress

Added to cato.org on September 20, 2011

This testimony was delivered on September 20, 2011.

Harmful Effects of Deficit Spending

Federal deficit spending has exploded. Even with the recent passage of the Budget Control Act, the deficit is still expected to be about $1 trillion next year. The damage caused by this spending includes:

1. Transferring resources from higher-valued private activities to lower-valued government activities. With government spending already at 41 percent of GDP, new spending will likely have a negative return, which will reduce output.
2. Creating pressure to increase taxes in the future, which would reduce growth. Higher taxes impose “deadweight losses” on the economy of at least $1 for every $2 of added revenues, as discussed below.
3. Increasing federal debt, which creates economic uncertainty and a higher risk of financial crises, as Europe’s woes illustrate. Research indicates that economic growth tends to fall as debt rises above about 90 percent of GDP, as discussed below.

Economists in the Keynesian tradition dispute the first point. They believe that the demand-side “stimulus” benefits of spending are so important that they outweigh the problems of microeconomic distortions and misallocations caused by federal programs. However, it is very difficult to see any economic boost from the huge deficit spending of recent years.

The total Keynesian stimulus in recent years includes not only the 2009 stimulus package of more than $800 billion, but the total amount of federal deficit spending. We’ve had deficit spending of $459 billion in fiscal 2008, $1.4 trillion in fiscal 2009, $1.3 trillion in fiscal 2010, and $1.3 trillion in fiscal 2011. Despite that huge supposed stimulus, U.S. unemployment remains at high levels and the current recovery has been the slowest since World War II.5

The Obama administration claimed that there are large “multiplier” benefits of federal spending, but the recent spending spree seems to have mainly just suppressed private-sector activities.6 Stanford University’s John Taylor took a detailed look at GDP data over recent years, and he found little evidence of any benefits from the 2009 stimulus bill.7 Any “sugar high” to the economy from spending increases was apparently small and short-lived. Harvard University’s Robert Barro estimates that any small multiplier benefits that the stimulus bill may have had is greatly outweighed by the future damage caused by higher taxes and debt.8

John Taylor recently testified that deficit-spending stimulus actions “have not only been ineffective, they have lowered investment and consumption demand by increasing concerns about the federal debt, another financial crisis, threats of inflation or deflation, higher taxes, or simply more interventions. Most businesses have plenty of cash to invest and create jobs. They’re sitting on it because of these concerns.”9

As federal debt grows larger, the problems caused by fiscal uncertainty will get magnified. The CBO notes that “growing federal debt also would increase the probability of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget and the government would thereby lose its ability to borrow at affordable rates. Such a crisis would . . . probably have a very significant negative impact on the country.”10

Research by economists Kenneth Rogoff and Carmen Reinhart found that government debt burdens above 90 percent of GDP are associated with lower economic growth.11 After examining data on dozens of countries, they concluded that “high debt is associated with slower growth; a relationship which is robust across advanced and emerging markets.”12 High debt can also be associated with inflation crises, “financial repression,” and other problems. Furthermore, high public and private debt acts as a “contagion amplifier” in the globalized economy.

A new paper by economists at the Bank for International Settlements (BIS) similarly found that when government debt in OECD countries rises above a threshold of about 85 percent of GDP, economic growth is slower.13 As debt rises, borrowers become increasingly sensitive to changes in interest rates and other shocks. “Higher nominal debt raises real volatility, increases financial fragility, and reduces average growth,” the authors note.14

The BIS economists conclude that countries should build a “fiscal buffer” by keeping its debt well below the danger threshold. They note that without major reforms, debt-to-GDP levels will soar in coming decades in most advanced economies due to population aging. Thus, one more reason for the United States to cut its spending and debt is to help it weather future financial crises spilling over from countries that are in even worse shape than we are.
5 See Joint Economic Committee, “Uncharted Depths: Welcome to Barack Obama’s ‘Recover Bummer,'” Republican Staff, June 23, 2011. And see the comments of economists Robert Gordon and Robert Hall at http://www.cato-at-liberty.org/biggest-keynesian-stimulus-slowest-recovery.
6 See Robert J. Barro, “Government Spending Is No Free Lunch,” Wall Street Journal, January 22, 2009; John F. Cogan and John B. Taylor, “The Obama Stimulus Impact? Zero,” Wall Street Journal, December 9, 2010; John H. Cochrane, “Fiscal Stimulus, Fiscal Inflation, or Fiscal Fallacies,” University of Chicago Booth School of Business, February 27, 2009.
7 John Taylor, Testimony to the House Committee on Oversight and Government Reform, Subcommittee on Regulatory Affairs, Stimulus Oversight, and Government Spending, February 16, 2011.
8 Robert J. Barro, “The Stimulus Evidence One Year Later,” Wall Street Journal, February 23, 2010.
9 John Taylor, Testimony to the Senate Finance Committee, Subcommittee on Fiscal Responsibility and Economic Growth, September 13, 2011.
10 Congressional Budget Office, “Long-Term Budget Outlook,” June 2011, p. 22.
11 The authors summarize their findings in Carmen Reinhart and Kenneth Rogoff, “A Decade of Debt,” National Bureau of Economic Research, Working Paper 16827, February 2011.
12 Carmen Reinhart and Kenneth Rogoff, “A Decade of Debt,” National Bureau of Economic Research, Working Paper 16827, February 2011, p. 5.
13 Stephen Cecchetti, M.S. Mohanty, and Fabrizio Zampolli, “The Real Effects of Debt,” Bureau for International Settlements, September 2011.
14 Stephen Cecchetti, M.S. Mohanty, and Fabrizio Zampolli, “The Real Effects of Debt,” Bureau for International Settlements, September 2011, p. 4.

By Everette Hatcher III | Also posted in spending out of control | Tagged , , , , | Comments (0)

An open letter to President Obama (Part 31 of my response to State of Union Speech 1-24-12)

March 12, 2012 – 9:11 am

Leader Cantor On CNN Responding To President Obama’s State of the Union Address

Uploaded by on Jan 25, 2012

President Obama’s state of the union speech Jan 24, 2012

Barack Obama (Photo by Saul Loeb-Pool/Getty Images)

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 am an avid reader of the National Review and I remember watching those famous debates at Harvard between John Kenneth Galbraith and William Buckley. You probably were at some of those debates. Below is a portion of an article that talks about your recent State of the Union address:

NATIONAL REVIEW ONLINE          www.nationalreview.com           PRINT

TEVI TROY
Three things struck me about President Obama’s lengthy State of the Union address. First, this concept of “an economy that’s built to last” is a fatally flawed view of how an economy works. When market advocates talk about the economy, they discuss the economy in terms of its fluidity, its variability, or, most famously, its creative destructiveness. Obama’s view, in contrast, seems to be one of building a hard immovable structure, as if one could pin down a moving, breathing economy at one mythical point in time.

In addition, Obama devoted only 44 words out of 7,000 to his expensive and unpopular health-care law, his so-called signature achievement. He made the claim that “our health-care law relies on a reformed private market, not a government program,” which an AP fact check called only “half true.” Even that may have been generous. The law does in fact create a new program, with multiple new government bureaucracies to administer its subsidies, exchanges, and new insurance regulations.

Finally, I was distressed by the fact that the president mostly ignored our looming debt crisis, a topic Governor Daniels covered at far greater length in his significantly shorter remarks. The president can say all he wants that we can solve our problems if we would just work together, but he must first recognize the problems before that can happen.

— Tevi Troy is a senior fellow at the Hudson Institute

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

Sincerely,

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

By Everette Hatcher III | Also posted in Current Events, President Obama | Comments (0)

Videos by Cato Institute on failed stimulus plans

March 9, 2012 – 7:43 am

In this post I have gathered several videos from the Cato Institute concerning the subject of failed stimulus plans.

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Government Spending Doesn’t Create Jobs

Uploaded by on Sep 7, 2011

Share this on Facebook: http://on.fb.me/qnjkn9 Tweet it: http://tiny.cc/o9v9t

In the debate of job creation and how best to pursue it as a policy goal, one point is forgotten: Government doesn’t create jobs. Government only diverts resources from one use to another, which doesn’t create new employment.

Video produced by Caleb Brown and Austin Bragg.

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Keynesian Catastrophe: Big Money, Big Government & Big Lies

Uploaded by on Jan 19, 2012

The Cato Institute’s Dan Mitchell explains why Obama’s stimulus was a flop! With Glenn Reynolds.

See more at http://www.pjtv.com and http://www.cato.org

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Keynesian Economics Is Wrong: Bigger Gov’t Is Not Stimulus

Uploaded by on Dec 15, 2008

Based on a theory known as Keynesianism, politicians are resuscitating the notion that more government spending can stimulate an economy. This mini-documentary produced by the Center for Freedom and Prosperity Foundation examines both theory and evidence and finds that allowing politicians to spend more money is not a recipe for better economic performance.

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Obama’s So-Called Stimulus: Good For Government, Bad For the Economy

Uploaded by on Jan 26, 2009

President Obama wants Congress to dramatically expand the burden of government spending. This CF&P Foundation mini-documentary explains why such a policy, based on the discredited Keynesian theory of economics, will not be successful. Indeed, the video demonstrates that Obama is proposing – for all intents and purposes – to repeat Bush’s mistakes. Government will be bigger, even though global evidence shows that nations with small governments are more prosperous.

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Big Government Is Not Stimulus: Why Keynes Was Wrong (The Condensed Version)

Uploaded by on Jan 13, 2009

The CF&P Foundation has released a condensed version of our successful mini-documentary explaining why so-called stimulus schemes do not work. Based on a theory known as Keynesianism, politicians are resuscitating the notion that more government spending can stimulate an economy. This mini-documentary produced by the Center for Freedom and Prosperity Foundation examines both theory and evidence and finds that allowing politicians to spend more money is not a recipe for better economic performance.

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Eight Reasons Why Big Government Hurts Economic Growth

Uploaded by on Aug 17, 2009

This Center for Freedom and Prosperity Foundation video analyzes how excessive government spending undermines economic performance. While acknowledging that a very modest level of government spending on things such as “public goods” can facilitate growth, the video outlines eight different ways that that big government hinders prosperity. This video focuses on theory and will be augmented by a second video looking at the empirical evidence favoring smaller government.

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Keynesian Economics Is Wrong: Economic Growth Causes Consumer Spending, Not the Other Way

Uploaded by on Nov 29, 2010

Politicians and journalists who fixate on consumer spending are putting the cart before the horse. Consumer spending generally is a consequence of growth, not the cause of growth. This Center for Freedom and Prosperity video helps explain how to achieve more prosperity by looking at the differences between gross domestic product and gross domestic income. www.freedomandprosperity.org

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Deficits, Debts and Unfunded Liabilities: The Consequences of Excessive Government Spending

Uploaded by on May 10, 2010

Huge budget deficits and record levels of national debt are getting a lot of attention, but this video explains that unfunded liabilities for entitlement programs are Americas real red-ink challenge. More important, this CF&P mini-documentary reveals that deficits and debt are symptoms of the real problem of an excessive burden of government spending. www.freedomandprosperity.org

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Now that I have been critical of the Democrat President, I wanted to show that I am not concerned about taking up for Republicans but looking at the facts. President Clinton did increase government spending at a slower rate than many other presidents. Here are two  videos that praise both Reagan and Clinton for both accomplished this feat.

Spending Restraint, Part I: Lessons from Ronald Reagan and Bill Clinton

Uploaded by on Feb 14, 2011

Ronald Reagan and Bill Clinton both reduced the relative burden of government, largely because they were able to restrain the growth of domestic spending. The mini-documentary from the Center for Freedom and Prosperity uses data from the Historical Tables of the Budget to show how Reagan and Clinton succeeded and compares their record to the fiscal profligacy of the Bush-Obama years.

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Spending Restraint, Part II: Lessons from Canada, Ireland, Slovakia, and New Zealand

Uploaded by on Feb 22, 2011

Nations can make remarkable fiscal progress if policy makers simply limit the growth of government spending. This video, which is Part II of a series, uses examples from recent history in Canada, Ireland, Slovakia, and New Zealand to demonstrate how it is possible to achieve rapid improvements in fiscal policy by restraining the burden of government spending. Part I of the series examined how Ronald Reagan and Bill Clinton were successful in controlling government outlays — particularly the burden of domestic spending programs. www.freedomandprosperity.org

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It seems that liberals will never wake up. On 3-8-12 a Arkansas Times blogger pointed out that Obama’s stimulus in 2009 was not made up of just increased but also tax cuts. That is true but the real truth is that there have been about 1/2 dozen stimulus efforts by President Obama and all of them have failed.  Over and over they have tried stimulus plans but they don’t work. Take a look at this excellent article from the Cato Institute:

Keynesian Policies Have Failed

by Chris Edwards

Chris Edwards is the director of tax policy studies at the Cato Institute and the editor of Downsizing Government.org.

Added to cato.org on December 2, 2011

This article appeared on U.S. News & World Report Online on December 2, 2011

Lawmakers are considering extending temporary payroll tax cuts. But the policy is based on faulty Keynesian theories and misplaced confidence in the government’s ability to micromanage short-run growth.

In textbook Keynesian terms, federal deficits stimulate growth by goosing “aggregate demand,” or consumer spending. Since the recession began, we’ve had a lot of goosing — deficits were $459 billion in 2008, $1.4 trillion in 2009, $1.3 trillion in 2010, and $1.3 trillion in 2011. Despite that huge supposed stimulus, unemployment remains remarkably high and the recovery has been the slowest since World War II.

Policymakers should ignore the Keynesians and their faulty models, and instead focus on reforms to aid long-run growth…

Yet supporters of extending payroll tax cuts think that adding another $265 billion to the deficit next year will somehow spur growth. That “stimulus” would be on top of the $1 trillion in deficit spending that is already expected in 2012. Far from helping the economy, all this deficit spending is destabilizing financial markets, scaring businesses away from investing, and imposing crushing debt burdens on young people.

For three years, policymakers have tried to manipulate short-run economic growth, and they have failed. They have put too much trust in macroeconomists, who are frankly lousy at modeling the complex workings of the short-run economy. In early 2008, the Congressional Budget Office projected that economic growth would strengthen in subsequent years, and thus completely missed the deep recession that had already begun. And then there was the infamously bad projection by Obama’s macroeconomists that unemployment would peak at 8 percent and then fall steadily if the 2009 stimulus plan was passed.

Chris Edwards is the director of tax policy studies at the Cato Institute and the editor of Downsizing Government.org.

 

More by Chris Edwards

Some of the same Keynesian macroeconomists who got it wrong on the recession and stimulus are now claiming that a temporary payroll tax break would boost growth. But as Stanford University economist John Taylor has argued, the supposed benefits of government stimulus have been “built in” or predetermined by the underlying assumptions of the Keynesian models.

Policymakers should ignore the Keynesians and their faulty models, and instead focus on reforms to aid long-run growth, which economists know a lot more about. Cutting the corporate tax rate, for example, is an overdue reform with bipartisan support that would enhance America’s long-run productivity and competitiveness.

If Congress is intent on cutting payroll taxes, it should do so within the context of long-run fiscal reforms. One idea is to allow workers to steer a portion of their payroll taxes into personal retirement accounts, as Chile and other nations have done. That reform would feel like a tax cut to workers because they would retain ownership of the funds, and it would begin solving the long-term budget crisis that looms over the economy.

Related posts:

Stimulus plans do not work (part 2)

Dan Mitchell discusses the effectiveness of the stimulus Uploaded by catoinstitutevideo on Nov 3, 2009 11-2-09 When I think of all our hard earned money that has been wasted on stimulus programs it makes me sad. It has never worked and will not in the future too. Take a look at a few thoughts from […]

Stimulus plans do not work (Part 1)

Government Spending Doesn’t Create Jobs Uploaded by catoinstitutevideo on Sep 7, 2011 Share this on Facebook: http://on.fb.me/qnjkn9 Tweet it: http://tiny.cc/o9v9t In the debate of job creation and how best to pursue it as a policy goal, one point is forgotten: Government doesn’t create jobs. Government only diverts resources from one use to another, which doesn’t […]

Dumas thinks we don’t need Balanced Budget Amendment but should balance it on our own

In his recent article Ernie Dumas sticks to his guns that we should balance the budget without being forced to with a “Balanced Budget Amendment,” but I wonder how well that has worked so far? I have made this a key issue for this blog in the past as you can tell below: Dear Senator […]

Maybe the “Occupy Wall Street” crowd should be angry at Obama

(Picture from Arkansas Times Blog) When I think about all the anger and hate coming from the Occupy Wall Street crowd, I wonder if they have read this story below? Solyndra: Crooked Politics or Just Bad Economics? Posted by David Boaz Amy Harder has a good take on the Solyndra issue in National Journal Daily […]

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 13 Thirsty Thursday, Open letter to Senator Pryor)

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 13 Thirsty Thursday, Open letter to Senator Pryor) Office of the Majority Whip | Balanced Budget Amendment Video In 1995, Congress nearly passed a constitutional amendment mandating a balanced budget. The Balanced Budget Amendment would have forced the federal government to live within its […]

Mark Pryor not for President’s job bill even though he voted for it

Andrew Demillo pointed this out  and also Jason Tolbert noted: PRYOR OPPOSES THE OBAMA JOBS BILL THAT HE VOTED TO ADVANCE  Sen. Mark Pryor has been traveling around the state touting a six-part jobs plan that he says “includes a number of bipartisan initiatives, is aimed at creating jobs by setting the table for growth, encouraging new […]

Is a lack of money the problem for our public schools?

Is a lack of money the problem for our public schools? Everything You Need to Know About Public School Spending in Less Than 2½ Minutes Posted by Adam Schaeffer Neal McCluskey gutted the President’s new “Save the Teachers” American Jobs Act sales pitch a good while back, as did Andrew Coulson here. Thankfully, it seems […]

By Everette Hatcher III | Also posted in President Obama, spending out of control, Taxes | Comments (0)

Cato Institute:Spending is our problem Part 2

March 8, 2012 – 3:09 pm

But we also know that it is difficult to convince politicians to do what’s right for the nation. And if they don’t change the course of fiscal policy, and we leave the federal government on autopilot, then America is doomed to become another Greece.

The combination of poorly designed entitlement programs (mostly Medicare and Medicaid) and an aging population will lead to America’s fiscal collapse.

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People think that we need to raise more revenue but I say we need to cut spending. Take a look at a portion of this article from the Cato Institute:

The Damaging Rise in Federal Spending and Debt

by Chris Edwards

Joint Economic Committee
United States Congress

Joint Economic CommitteeUnited States Congress

Added to cato.org on September 20, 2011

This testimony was delivered on September 20, 2011.

America Has a High-Spending and High-Debt Government

Some analysts say that America can afford to increase taxes and spending because it is a uniquely small-government country. Alas, that is no longer the case. Data from the Organization for Economic Cooperation and Development (OECD) show that federal, state, and local government spending in the United States this year is a huge 41 percent of GDP.

Figure 2 shows that government in the United States used to be about 10 percentage points of GDP smaller than the average government in the OECD. But that size advantage has fallen to just 4 percentage points. A few high-income nations — such as Australia — now have smaller governments and much lower government debt than the United States.

Historically, America’s strong growth and high living standards were built on our relatively smaller government. The ongoing surge in federal spending is undoing this competitive advantage we had enjoyed in the world economy. CBO projections show that without reforms federal spending will rise by about 10 percentage points of GDP by 2035. If that happens, spending by American governments will be more than half of GDP by that year. That would doom young people to unbearable levels of taxation and a stagnant economy with fewer opportunities.

American government debt has also soared to abnormally high levels. Figure 3 shows OECD data for gross government debt as a share of GDP.3 (The data include debt for federal, state, and local governments). In 2011, gross government debt is 101 percent of GDP in the United States, substantially above the OECD average of 78 percent.4

3 Organization for Economic Cooperation and Development, “Economic Outlook Database,” September 2011, Annex Table 32.
4 This is a simple average of OECD countries. The OECD publishes a weighted average, but that figure is, of course, heavily influenced by the United States.

By Everette Hatcher III | Also posted in spending out of control | Tagged , , , , | Comments (0)

Cato Institute:Spending is our problem Part 1

March 7, 2012 – 11:23 pm

Uploaded by on Feb 15, 2011

Dan Mitchell, Senior Fellow at the Cato Institute, speaks at Moving Forward on Entitlements: Practical Steps to Reform, NTUF’s entitlement reform event at CPAC, on Feb. 11, 2011.

People think that we need to raise more revenue but I say we need to cut spending. Take a look at a portion of this article from the Cato Institute:

The Damaging Rise in Federal Spending and Debt

by Chris Edwards

Joint Economic Committee
United States Congress

Joint Economic CommitteeUnited States Congress

Added to cato.org on September 20, 2011

This testimony was delivered on September 20, 2011.

Mr. Chairman and members of the committee, thank you for inviting me to testify today. My comments will examine the likely damage to the economy if federal spending and debt keep spiraling upward.

Rising Spending and Debt

Federal spending and debt have soared over the past decade. As a share of gross domestic product, spending grew from 18 percent in 2001 to 24 percent in 2011, while debt held by the public jumped from 33 percent to 67 percent. The causes of this expansion include the costs of wars, growing entitlement programs, rising spending on discretionary programs, and the 2009 economic stimulus bill.

Projections from the Congressional Budget Office show that without reforms spending and debt will keep on rising for decades to come.1 Under the CBO’s “alternative fiscal scenario,” spending will grow to about 34 percent of GDP by 2035, as shown in Figure 1, and debt held by the public will increase to at least 187 percent of GDP.2

Hopefully, we will never reach anywhere near those levels of spending and debt. Going down that path would surely trigger major financial crises, as the ongoing debt problems in Europe illustrate. It is also very unlikely that Americans would support such a huge expansion of the government. The results of the 2010 elections suggest that the public has already started to revolt against excessive federal spending and debt.

Some policymakers are calling for a “balanced” package of spending cuts and tax increases to reduce federal deficits. But CBO projections show that the long-term debt problem is not a balanced one — it is caused by historic increases in spending, not shortages of revenues. Revenues have fallen in recent years due to the poor economy, but when growth returns, revenues are expected to rise to the normal level of about 18 percent of GDP — even with all current tax cuts in place. It is spending that is expected to far exceed normal levels in the future, and thus spending is behind the huge increases in debt that are projected.

1 Congressional Budget Office, “Long-Term Budget Outlook,” June 2011.
2 Organization for Economic Cooperation and Development, “Economic Outlook Database,” September 2011, Annex Table 25, http://www.oecd.org/dataoecd/5/51/2483816.xls.

By Everette Hatcher III | Also posted in spending out of control | Tagged , , , , , | Comments (0)

Bill Clinton condemns class-warfare and engages in it in same speech

March 6, 2012 – 11:21 pm

President Bill Clinton’s Speech Oct 1, 2011 with Joshua & Anna at Little Rock Arkansas

Uploaded by on Oct 2, 2011

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In this speech in Little Rock on October 1, 2011 former President Bill Clinton noted:

There is no example of a country in the fix we are in that can balance the budget without a combination of spending cuts, the people who can afford it paying more and growing the economy.

What was the secret of the Clinton Presidency? Clinton tells us in the same speech:

We decided to stop the politics of pitting one American against another by race…income, by anything else.

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President Obama and other politicians are advocating higher taxes, with a particular emphasis on class-warfare taxes targeting the so-called rich. This Center for Freedom and Prosperity Foundation video explains why fiscal policy based on hate and envy is fundamentally misguided. For more information please visit our web page: www.freedomandprosperity.org.

I just don’t understand how a politician can say two things in the same speech that cancel each other out? John Brummett and Max Brantley love to try to act like all of our problems would be solved if we could take the money from the rich guy. Below is an article that makes some great points concerning class-warfare:

Soaking the Rich Is Not Fair

by Jeffrey A. Miron

Jeffrey A. Miron is Senior Lecturer and Director of Undergraduate Studies at Harvard University and Senior Fellow at the Cato Institute. Miron blogs at JeffreyMiron.com and is the author of Libertarianism, from A to Z.

Added to cato.org on September 2, 2011

This article appeared on The Huffington Post on September 2, 2011.

What is the “fair” amount of taxation on high-income taxpayers?

To liberals, the answer is always “more.” Liberals view high income — meaning any income that exceeds their own — as the result of luck or anti-social behavior. Hence liberals believe “fairness” justifies government-imposed transfers from the rich to everyone else. Many conservatives accept this view implicitly. They oppose soak-the-rich policies because of concern over growth, but they do not dispute whether such policies are fair.

But high tax rates on the rich are not fair or desirable for any other reason; they are an expression of America’s worst instincts, and their adverse consequences go beyond their negatives for economic growth.

The liberal hatred of the rich is a minority view, not a widely shared American value.

Consider first the view that differences in income result from luck rather than hard work: some people are born with big trust funds or innate skill and talent, and these fortuitous differences explain much of why some people have higher incomes than others.

Never mind that such a characterization is grossly incomplete. Luck undoubtedly explains some income differences, but this is not the whole story. Many trust fund babies have squandered their wealth, and inborn skill or talent means little unless combined with hard work.

But even if all income differences reflect luck, why are government-imposed “corrections” fair? The fact that liberals assert this does not make it true, any more than assertions to the contrary make it false. Fairness is an ill-defined, infinitely malleable concept, readily tailored to suit the ends of those asserting fairness, independent of facts or reason.

Worse, if liberals can assert a right to the wealth of the rich, why cannot others assert the right to similar transfers, such as from blacks to whites, Catholics to Protestants, or Sunni to Shia? Government coercion based on one group’s view of fairness is a first step toward arbitrary transfers of all kinds.

Now consider the claim that income differences result from illegal, unethical, or otherwise inappropriate behavior. This claim has an element of truth: some wealth results from illegal acts, and policies that punish such acts are appropriate.

But most inappropriate wealth accumulations results from bad government policies: those that restrict competition, enable crony capitalism, and hand large tax breaks to politically connected interest groups. These differences in wealth are a social ill, but the right response is removing the policies that promote them, not targeting everyone with high income.

The claim that soaking the rich is fair, therefore, has no basis in logic or in generating desirable outcomes; instead, it represents envy and hatred.

Why do liberals hate the rich? Perhaps because liberals were the “smart” but nerdy and socially awkward kids in high school, the ones who aced the SATs but did not excel at sports and rarely got asked to the prom. Some of their “dumber” classmates, meanwhile, went on to make more money, marry better-looking spouses, and have more fun.

Liberals find all this unjust because it rekindles their emotional insecurities from long ago. They do not have the honesty to accept that those with less SAT smarts might have other skills that the marketplace values. Instead, they resent wealth and convince themselves that large financial gains are ill-gotten.

Jeffrey A. Miron is Senior Lecturer and Director of Undergraduate Studies at Harvard University and Senior Fellow at the Cato Institute. Miron blogs at JeffreyMiron.com and is the author of Libertarianism, from A to Z.

More by Jeffrey A. Miron

The liberal views on fairness and redistribution are far more defensible, of course, when it comes to providing for the truly needy. Reasonable people can criticize the structure of current anti-poverty programs, or argue that the system is overly generous, or suggest that private charity would be more effective at caring for the least vulnerable.

The desire to help the poor, however, represents a generous instinct: giving to those in desperate situations, where bad luck undoubtedly plays a major role. Soaking the rich is a selfish instinct, one that undermines good will generally.

And most Americans share this perspective. They are enthusiastic about public and private attempt to help the poor, but they do not agree that soaking the rich is fair. That is why U.S. policy has rarely embraced punitive income taxation or an aggressive estate tax. Instead, Americans are happy to celebrate well-earned success. The liberal hatred of the rich is a minority view, not a widely shared American value.

For America to restore its economic greatness, it must put aside the liberal hatred of the rich and embrace anew its deeply held respect for success. If it does, America will have enough for everyone.

Related posts:

Warren Buffett does not endorse Obama’s plan

Addington, McConaghy Debate Obama’s Jobs Plan Published on Sep 9, 2011 by Bloomberg Sept. 9 (Bloomberg) — David Addington, vice president at the Heritage Foundation, and Ryan McConaghy, economic director at Third Way, discuss President Barack Obama’s $447 billion jobs plan. They speak with Deirdre Bolton and Erik Schatzker on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg) […]

Is soaking the rich fair?

Is soaking the rich fair? Five Key Reasons to Reject Class-Warfare Tax Policy Uploaded by afq2007 on Jun 15, 2009 President Obama and other politicians are advocating higher taxes, with a particular emphasis on class-warfare taxes targeting the so-called rich. This Center for Freedom and Prosperity Foundation video explains why fiscal policy based on hate […]

Is it class warfare? Brummett says no

Take a look above at this clip. In his article “Class Warfare versus Pay it forward,” Sept 26, 2011, Arkansas News Bureau, John Brummett tries to make the case that Obama is not involved in class warefare. He quotes Elizabeth Warren to prove his point. Unfortunately, logically this argument fails because although we all benefit […]

Obama’s tax plan would not work even if tried

The Flat Tax: How it Works and Why it is Good for America Uploaded by afq2007 on Mar 29, 2010 This Center for Freedom and Prosperity Foundation video shows how the flat tax would benefit families and businesses, and also explains how this simple and fair system would boost economic growth and eliminate the special-interest […]

Three points where Brummett misses the boat in discussion versus Charlie Collins

Five Key Reasons to Reject Class-Warfare Tax Policy Uploaded by afq2007 on Jun 15, 2009 President Obama and other politicians are advocating higher taxes, with a particular emphasis on class-warfare taxes targeting the so-called rich. This Center for Freedom and Prosperity Foundation video explains why fiscal policy based on hate and envy is fundamentally misguided. […]

President Obama and Alternative Minimum Tax

President Obama and Alternative Minimum Tax Dan Mitchell does it again. He is always right on the mark. CPAs Celebrate as Obama Proposes to Create a Turbo-Charged Alternative Minimum Tax Posted by Daniel J. Mitchell Wow, this is remarkable. The alternative minimum tax (AMT) is one of the most-hated features of the tax code. It […]

Buffett wants the rich soaked but that will not solve our problem in the budget

Max Brantley on the Arkansas Times Blog, August 15, 2011, asserted: Billionaire Warren Buffett laments, again, in a New York Times op-ed how the rich don’t share the sacrifices made by others in the U.S.. He notes his effectiie tax rate of 17 percent is lower than that of many of the working people in his office on account of preferences for […]

Brummett touts Buffett’s math, but it is wrong

Five Key Reasons to Reject Class-Warfare Tax Policy Max Brantley on the Arkansas Times Blog, August 15, 2011, asserted:   Billionaire Warren Buffett laments, again, in a New York Times op-ed how the rich don’t share the sacrifices made by others in the U.S.. He notes his effectiie tax rate of 17 percent is lower than […]

By Everette Hatcher III | Also posted in Bill Clinton, Taxes | Tagged , , , | Comments (0)

An open letter to President Obama (Part 26 of my response to State of Union Speech 1-24-12)

March 5, 2012 – 6:39 am

Congressman Rick Crawford State of the Union Response 2012

Uploaded by on Jan 24, 2012

Rep. Rick Crawford responds to the State of the Union address January 24, 2012

Sen. Paul Delivers State of the Union Response – Jan. 24, 2012

Uploaded by on Jan 24, 2012

Sen. Rand Paul delivered the following Republican response to President Barack Obama’s State of the Union Address this evening

President Obama’s state of the union speech Jan 24, 2012

Barack Obama (Photo by Saul Loeb-Pool/Getty Images)

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 am an avid reader of the National Review and I remember watching those famous debates at Harvard between John Kenneth Galbraith and William Buckley. You probably were at some of those debates. Below is a portion of an article that talks about your recent State of the Union address:

NATIONAL REVIEW ONLINE          www.nationalreview.com           PRINT

Obama’s Final SOTU?

WILLIAM W. BEACH
The president wants an economy that’s built to last, as he said repeatedly in tonight’s State of the Union speech. However, among the litany of programs he announced, he promised little action on the driver of economic decay: the blooming debt of governments at all levels, but particularly the government that President Obama runs. Total government debt is chewing away at innovation and economic growth by squeezing credit markets for private borrowers; it is spreading fear and uncertainty among investors about this country’s future; and it is condemning an entire generation to an economic life well below their potential.

If you are under 30 years of age, you belong to the Debt-Paying Generation. This enormous, growing federal debt will have to be repaid across your lifetime. Higher taxes will almost certainly be imposed to pay down this debt, thus reducing your income and increasing your cost of living. You are likely to marry later, as you will have trouble saving up to start a family. If you marry later, you are likely to have fewer children, which further hurts the economy by reducing the future labor force. Higher interest rates from higher federal debt will mean that the Debt-Paying Generation will start their home mortgages later in life, which may mean that they will never own a home. A slower economy means not only slower income growth for the Debt-Paying Generation, but also less savings for retirement, education, and health care.

The real tragedy of the president’s litany of economic-policy changes is its failure to address federal debt. Why? Simple: The failure to reduce debt condemns an entire generation to the least prosperous life in U.S. history relative to the generation that preceded it. That’s not the way to build an economy that lasts.

― William W. Beach is director of the Center for Data Analysis at the Heritage Foundation.

____________________

We have got to lower the federal spending or else this country will go bankrupt.

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

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
By Everette Hatcher III | Also posted in President Obama, spending out of control, Taxes | Comments (0)

An open letter to President Obama (Part 24 of my response to State of Union Speech 1-24-12)

March 3, 2012 – 1:34 am

Leader Cantor On CNN Responding To President Obama’s State of the Union Address

Uploaded by  on Jan 25, 2012

President Obama’s state of the union speech Jan 24, 2012

Barack Obama (Photo by Saul Loeb-Pool/Getty Images)

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 am an avid reader of the National Review and I remember watching those famous debates at Harvard between John Kenneth Galbraith and William Buckley. You probably were at some of those debates. Below is a portion of an article that talks about your recent State of the Union address:

JAMES C. CAPRETTA
Let’s hope Republicans everywhere took the time to listen to Governor Mitch Daniels’ Republican rebuttal to the president’s state of the union address.

It was a masterpiece. Concise, direct, optimistic, and tough. It framed the issues facing this country exactly as they need to be framed. He pulled no punches, going directly at the president for his failures on promoting growth and for exacerbating rather than solving the nation’s mounting debt crisis. And, unlike other Republicans, he forcefully articulated why a strategy of “taxing the rich” within the current tax code is a dead-end of slower growth and fewer jobs.

By contrast, President Obama’s speech was an exercise in misdirection, intended to create the impression that he has a plan for growth and solvency, when in fact the policies he trumpeted in earlier years have either done little to solve the problems or made them demonstrably worse.

As Governor Daniels said, this year is a crucial one for the nation. While he won’t be at the top of the national ticket, he can still make very valuable contributions to the effort, as he did tonight by giving us the kind of language that can help win the public argument.

— James C. Capretta is a fellow at the Ethics and Public Policy Center. He was an associate director at the Office of Management and Budget from 2001 to 2004.

_______________________

Cutting spending is the answer and Mitch Daniels said that. Maybe you should listen to what he had to say.

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

Sincerely,

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

By Everette Hatcher III | Also posted in President Obama | Comments (0)

An open letter to President Obama (Part 23 of my response to State of Union Speech 1-24-12)

March 3, 2012 – 12:30 am

Sen. Toomey responds to State of the Union address 2012

President Obama’s state of the union speech Jan 24, 2012

Barack Obama (Photo by Saul Loeb-Pool/Getty Images)

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.

SOTU and Trade: the Good, the Bad and the Ugly

Posted by Sallie James

President Obama’s State of the Union address last night was, in my opinion, pretty awful (although James Pethokoukis at the American Enterprise Institute thinks it could have been worse). I know SOTUs are political theater at its worst, and I watch them always with something not unlike disgust, but I found almost nothing to like in the substance last night. The electioneering, partisan, self-aggrandizing tone didn’t help.

Let me turn specifically to trade policy, which was more thoroughly covered last night than in recent SOTUs. In an election year, and from a president who is ambivalent (at best) on trade, a trade-heavy speech is not always a good thing: trade policy can get caught up in broader political arguments about inequality, unemployment and economic growth. And rarely does that combination work well for those of us who want and promote free trade between people regardless of the political borders behind which those people happen to live.

But first, the Good news from last night’s speech. President Obama did make a passing and veiled reference to the need for Congress to extend Permanent Normal Trade Relations to Russia, necessary for the United States to treat Russia as any other member of the World Trade Organization when it joins the body later this year (i.e., allowing Americans to access Russian goods and services more readily). And at least he painted the recent passage of the trade agreements with Colombia, South Korea and Panama as a positive development, albeit on mercantilist grounds (more on this later).

The Bad? The president said precisely nothing about the Trans Pacific Partnership negotiations currently underway with nine other Asia-Pacific countries (with Canada, Mexico and Japan interested in joining in the future). The TPP is supposedly the crowning achievement of his administration’s trade efforts and a deal that he was itching to complete in 2012. What does it say about his priorities that it warrants not a mention in his main speech of the year? Maybe his political supporters in organized labor aren’t buying this “21st century trade agreement” stuff any more than I am and he sees merit in keeping it quiet. But that then raises worrying questions about the ability of the negotiations to be completed on schedule if they don’t have full-throated political support at the highest level. The president made no mention of the World Trade Organization or its struggling Doha round of trade liberalization negotiations, either, although maybe there he is simply showing acceptance of the round’s (near) death, an assessment he would share with most trade watchers.

And the Ugly? Once again the president displays no appreciation for the true benefits of free trade – the benefits from specialization and exchange. They include the economic benefits that come from increased competition, and from access to cheaper and more variable goods and services for Americans. From his silly (and, I suspect, futile) goal to “double exports in five years” to his rhetoric about how America can “win” if the playing field is level (what does “winning” mean in that context anyway?), the speech was peppered with nationalistic, misguided and quite frankly inflammatory rhetoric that will not help trade relations – let alone lead to enhanced trading opportunities for Americans – one bit. Creating yet another government agency, this time to “investigat[e] unfair trade practices in countries like China”, will just add to tensions. Claiming the tires debacle as a model of trade enforcement success is yet another example of how the concept of unintended consequences is apparently lost on this president.

Matthew Yglesias has some excellent things to say on the mercantilist nonsense in Obama’s message, and the ill-conceived manufacturing fetish he conveyed. And Obama managed to combine both economic illiterate concepts when wailing about the unfairness of having to compete with “foreign manufacturers [who] have a leg up on ours only because they’re heavily subsidized.” (He then, inevitably, went on to include all sorts of subsidies or tax breaks that he would like to extend to certain American firms/industries – Chris Edwards has amply covered the tax stuff here). Overall, I give this speech a “D” on trade. Must try harder.

_____________________
Free Trade is the way to go and it would be great if you would push for even more trade deals that opened up markets. Milton Friedman’s film series “Free to Choose” has an excellent episode on that.

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

Sincerely,

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

By Everette Hatcher III | Also posted in President Obama | Comments (0)

Federal government loves to eat up our money: “Yum Yum Eat em up”

March 2, 2012 – 11:19 pm

The federal government loves to eat up more and more of our money. Back in the first few years of the 20th century our federal government usually spent about 3% of our money per year unless we were involved in a war, but now the percentage of GDP is up to almost 25%. It reminds me of the “Yum Yum Eat em up” short film I saw many years ago.

Federal Spending Is Outpacing Inflation

Everyone wants to know more about the budget and here is some key information with a chart from the Heritage Foundation and a video from the Cato Institute.

Prices of goods and services normally rise year to year, but federal spending has risen even faster. Although spending grew substantially after 9/11, less than half of the increase can be attributed to defense and homeland security spending.

YEAR-TO-YEAR PERCENTAGE CHANGE

Download

Federal Spending Is Outpacing Inflation

Source: U.S. Bureau of Labor Statistics and White House Office of Management and Budget.

Chart 4 of 42

In Depth

  • Policy Papers for Researchers

  • Technical Notes

    The charts in this book are based primarily on data available as of March 2011 from the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO). The charts using OMB data display the historical growth of the federal government to 2010 while the charts using CBO data display both historical and projected growth from as early as 1940 to 2084. Projections based on OMB data are taken from the White House Fiscal Year 2012 budget. The charts provide data on an annual basis except… Read More

  • Authors

    Emily GoffResearch Assistant
    Thomas A. Roe Institute for Economic Policy StudiesKathryn NixPolicy Analyst
    Center for Health Policy StudiesJohn FlemingSenior Data Graphics Editor

Wild Man From Borneo – YUM YUM EEAAAAT EM UP!

By Everette Hatcher III | Also posted in spending out of control | Tagged , , , | Comments (0)