Category Archives: Cato Institute

Bush tax cuts work? Is Clinton’s approach better? (Part 3)

February 6, 2012 – 7:03 am

The Laffer Curve, Part III: Dynamic Scoring

A video by CF&P Foundation that builds on the discussion of theory in Part I and evidence in Part II, this concluding video in the series on the Laffer Curve explains how the Joint Committee on Taxation’s revenue-estimating process is based on the absurd theory that changes in tax policy – even dramatic reforms such as a flat tax – do not effect economic growth. In other words, the current system assumes the Laffer Curve does not exist. Because of congressional budget rules, this leads to a bias for tax increases and against tax cuts. The video explains that “static scoring” should be replaced with “dynamic scoring” so that lawmakers will have more accurate information when making decisions about tax policy. For more information please visit the Center for Freedom and Prosperity’s web site: http://www.freedomandprosperity.org

_____________________________

Bush tax cuts work? This is a series of posts aimed at answering that question.

Setting the Tax Record Straight: Clinton Hikes Slowed Growth, Bush Cuts Promoted Recovery

By Curtis Dubay
September 6, 2011

Abstract: Despite evidence to the contrary, President Obama and his supporters insist that a tax increase will not impede economic recovery. They claim that the Clinton tax hikes spurred the boom of the 1990s and that the subsequent Bush tax cuts hurt the economy. Members of Congress must reject this faulty notion—and reject the President’s call for burdening Americans with higher taxes and an even slower economy.

President Barack Obama and his allies in Congress and elsewhere continue to press for tax increases, whether as part of a deal to raise the government’s debt ceiling, or for any other reason. Even though common sense would dictate not raising taxes in the face of a badly weakened economy and almost non-existent job growth, the President and his supporters argue that tax hikes will not imperil the still-nascent recovery because the economy grew during the 1990s after President Bill Clinton raised taxes. The inference being that today’s economy could also absorb the blow of tax hikes and grow despite them. They also argue the converse: that the tax cuts passed during President George W. Bush’s tenure slowed growth and cost jobs.

This cursory and errant analysis of recent history has serious implications for policymaking today. If Congress raises taxes based on the faulty notion that tax hikes have no ill effects on economic growth, it will impede the still-struggling recovery and keep millions of Americans on the unemployment rolls far too long.

Lessons for Today

It is vitally important for the millions of Americans looking for work today that Congress and President Obama learn and accept what really happened when President Clinton raised taxes and President Bush lowered them. The evidence is clear that the Clinton tax hikes stifled what should have been remarkable economic growth and the Bush tax cuts cleared the way for the economy to grow despite growing obstacles in its way.

President Obama insists that tax hikes must be part of a “balanced” approach to reducing the deficit. He defends his tax hike desires by pointing to the Clinton tax hikes as evidence that the economy can withstand higher taxes.

But if the Clinton tax hikes were powerful enough to slow an economy that had everything going in its favor, what would tax hikes today do to an economy that has everything working against it? The unemployment rate remains stuck over 9 percent and there appears to be little hope for it to fall in the near future.[10] The President should not be looking for policies the economy can withstand, but for policies that will encourage it to grow.

At best, tax increases would slow the already stalled recovery, and at worst, would reverse it altogether. A slowed recovery or double-dip recession would further reduce the chances that the more than 14 million Americans currently looking for work would find a job in the near future.[11]

The best way to grow revenues is to promote faster economic growth, which will increase the number of taxpayers and taxable income more rapidly. Tax hikes—whether through higher tax rates or slashing credits, deductions, and exemptions without offsetting reductions elsewhere—will not do the job. Under President Obama’s current policies, spending will continue to grow at a faster rate than can be paid for by tax hikes—even assuming the huge tax increases the President insists upon. To add insult to injury, as history has shown, tax hikes would slow economic growth and make it even harder for unemployed Americans to find a job.

—Curtis S. Dubay is a Senior Analyst in Tax Policy in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

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

Our Troubling Tax System

February 6, 2012 – 12:38 am

Our Troubling Tax System

Uploaded by  on Apr 13, 2009

This video was produced by Caleb Brown ( http://www.twitter.com/cobrown ) and Austin Bragg ( http://www.twitter.com/habragg ).
The U.S. tax code gets more complex every year. It violates civil liberties and, left unchanged, will leave the United States at a powerful competitive disadvantage in years to come. Chris Edwards, Director of Tax Policy Studies, Senior Fellow Daniel J. Mitchell and Director of Information Policy Studies Jim Harper dissect the troubling aspects of our tax system.

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

Bush tax cuts work? Is Clinton’s approach better? (Part 2)

February 5, 2012 – 12:46 pm

The Laffer Curve, Part II: Reviewing the Evidence

This video reviews real-world evidence showing that changes in marginal tax rates can have a significant impact on taxable income, thus leading to substantial amounts of revenue feedback. In a few cases, tax-rate reductions even “pay for themselves,” though the key lesson is the more modest point that pro-growth changes in tax policy will have a positive impact on economic performance and that good tax cuts therefore do not “cost” the government much in terms of foregone tax revenue.

This video is second installment of a three-part series. Part I reviews theoretical relationship between tax rates, taxable income, and tax revenue. Part III discusses how the revenue-estimating process in Washington can be improved. For more information please visit the Center for Freedom and Prosperity’s web site: www.freedomandprosperity.org.

_________________

Bush tax cuts work? This is a series of posts aimed at answering that question.

Setting the Tax Record Straight: Clinton Hikes Slowed Growth, Bush Cuts Promoted Recovery

By Curtis Dubay
September 6, 2011

Abstract: Despite evidence to the contrary, President Obama and his supporters insist that a tax increase will not impede economic recovery. They claim that the Clinton tax hikes spurred the boom of the 1990s and that the subsequent Bush tax cuts hurt the economy. Members of Congress must reject this faulty notion—and reject the President’s call for burdening Americans with higher taxes and an even slower economy.

President Barack Obama and his allies in Congress and elsewhere continue to press for tax increases, whether as part of a deal to raise the government’s debt ceiling, or for any other reason. Even though common sense would dictate not raising taxes in the face of a badly weakened economy and almost non-existent job growth, the President and his supporters argue that tax hikes will not imperil the still-nascent recovery because the economy grew during the 1990s after President Bill Clinton raised taxes. The inference being that today’s economy could also absorb the blow of tax hikes and grow despite them. They also argue the converse: that the tax cuts passed during President George W. Bush’s tenure slowed growth and cost jobs.

This cursory and errant analysis of recent history has serious implications for policymaking today. If Congress raises taxes based on the faulty notion that tax hikes have no ill effects on economic growth, it will impede the still-struggling recovery and keep millions of Americans on the unemployment rolls far too long.

Bush Tax Cuts Promoted Strong Growth

Liberals also like to argue that the Bush tax relief hurt the economy and cost jobs. Again, the evidence runs to the contrary.

Unlike President Clinton, who entered office with a strong economic wind at his back, President Bush came into office on the precipice of a recession caused by the bursting of the “dot-com” bubble. President Bush entered office in January 2001; the recession began in March.

In addition to the recession, the peaceful conditions President Clinton enjoyed reversed course. The terrorist attacks of 9/11 brought on the beginning of the war on terrorism. There was no growth-enhancing advancement comparable to the tech boom to further boost the economy; energy prices were creeping up. Instead of swimming with the current, the economy was now fighting squarely against it to achieve even modest growth.

Faced with this new reality, President Bush pushed for tax cuts to revive the economy and set it on a stronger foundation for economic growth.

In June 2001, President Bush signed into law the first wave of tax cuts. The relief included reductions of marginal income tax rates and tax relief for families, for example, doubling the child tax credit from $500 to $1,000. To reduce the budgetary impact, Congress phased in the tax cuts over several years.

Since the tax cuts were slow to go into effect, they were slow to help the economy. In fact, the economy continued to lose jobs after the tax cuts even though the recession officially ended in November 2001.

Realizing the error of its ways, in May 2003 Congress accelerated the tax cuts to make them effective immediately. In addition to reducing marginal income tax rates, Congress also lowered the tax rates on capital gains and dividends.

It was at this point that economic growth took off. From May 2003 until December 2007 (when the recession caused by the global financial meltdown occurred) the economy created 8.1 million jobs, or 145,000 a month. By comparison, after the beginning of the 2001 recession and before the 2003 tax cuts, the economy was losing 103,000 jobs a month.[7]

2003 Bush Tax Cuts Prompted Surge in Employment

Those opposed to the tax relief argue that it blew a hole in the budget and dramatically increased deficits. Again, a look at the numbers disproves that argument. While receipts were below the historical level of 18 percent of GDP in 2003 as a result of the sluggish economy, they rebounded to above their historical norm by 2006 and grew further above their historical level in 2007.[8] They clearly would have continued growing thereafter had it not been for the housing bust and global recession.

Tax revenue rebounded quickly because the tax cuts encouraged economic growth by increasing the incentives to work, save, invest, and take on new risk. These are the basic elements of economic growth. When those activities increase, tax revenues increase because more Americans work and earn more money. From 2003 to 2007, the number of tax filers rose by 9.6 percent, and taxable income, by 44 percent. By contrast, in the last four years of the previous expansion, from 1997 to 2001, these numbers grew by 6.4 percent and 23.6 percent, respectively.[9] With income and taxpayers growing at such a fast clip it is not hard to see why tax revenue did not suffer from the tax cuts.

Number of Taxpayers and Taxable Income Grew Faster During Bush's Expansion than Clinton's

To be clear: The Bush tax cuts did not pay for themselves. Revenues, on balance, are lower as a result of the Bush tax relief. However, the Bush tax cuts did accelerate the recovery markedly, and they did, and still do, create the possibility of a permanently stronger economy which, in turn, means the net revenue cost of the Bush tax cuts is far less than the traditional static score implies.

In 2008, the last full year of the Bush presidency, the economy entered a severe recession brought on by the global financial meltdown. The 2001 and 2003 tax relief packages had made the economy more resilient against economic shocks, but no tax policy can protect an economy against the storm that struck that year. The tax cuts certainly did not contribute in any way to recession, nor can anyone credibly claim that these policies had something to do with the financial implosion that was global in origin and impact.

Even with a recession at the beginning of his presidency and another severe recession at the end, the economy still created more than 1 million net jobs during President Bush’s tenure. The tax cuts he pushed Congress to pass are a major reason for that job growth.

—Curtis S. Dubay is a Senior Analyst in Tax Policy in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

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

We need to stop paying for Germany and Japan’s defense

February 3, 2012 – 3:53 pm

I used to think that we must double the defense budget when we were in the cold war, but I did wonder why we were not letting Germany and Japan (who are two of our biggest trade partners) build up their defenses. I was given the old tired answer that we could not trust them because of what happened in World War II. However, there is no reason that should be a factor now. Take a look at an excellent article below:

Why Does U.S. Pay to Protect Prosperous Allies?

by Christopher Preble

This article appeared in CNN.com on February 3, 2012.

For some time now, Republican hawks like Sen. John McCain and Rep. Howard P. “Buck” McKeon have been saying that our military budget is inadequate for the threats we face. They like to gripe that President Barack Obama is orchestrating the decline of American power.

Some of this is pure partisanship. Republicans criticize Democrats just as Democrats criticized President George W. Bush. The hawks, though, have a special devotion to the military budget. In their view, some military spending is good; more is even better. But if overspending on the military and promoting the United States as global policeman are benchmarks of approval, they should have little to complain about with our current president.

Contrary to his rhetoric of change, the president sounded like a neoconservative when he declared during his recent State of the Union address that the United States was, and would remain, the world’s “indispensable nation.” Obama’s proposed Pentagon budget, released last week, affirmed his intention to retain most of the U.S. military’s current missions, even when they aren’t needed to safeguard the United States’ vital security interests.

Our fiscal crisis has created an opportunity to revisit our commitments abroad.

Meanwhile, the Pentagon’s latest strategy document was carefully designed to convince allies and adversaries alike that the United States can continue to prosecute multiple armed conflicts in far-flung corners of the globe. Taken together, Obama’s strategy document, budget and State of the Union remarks articulate a coherent philosophy on military spending and global engagement that ought to hold a lot of appeal for the neoconservatives in the GOP.

But partisan politics aside, what our foreign policy leaders have consistently ignored is an argument that should have strong sway at a time of economic uncertainty: This country’s tax dollars can be better spent than on defending wealthy allies who are more than capable of protecting themselves.

Christopher Preble is vice president for defense and foreign policy studies at the Cato Institute and the author of The Power Problem: How American Military Dominance Makes Us Less Safe, Less Prosperous, and Less Free.

More by Christopher A. Preble

The administration plans to withdraw some U.S. troops from Europe, but as many as 70,000 are likely to remain. Meanwhile, the number of troops in Asia will be increased. These troops serve to reassure our allies of our commitment to defend them. It is working as designed: Other countries do not spend enough to satisfy their defense needs.

The end result is that Americans pay more. The Obama administration’s budget will cost every American nearly $2,000 next year. The figure rises by hundreds of dollars when one accounts for homeland security, payments to veterans, and the few billion dollars tucked away in the Department of Energy for the nation’s bloated nuclear arsenal. All told, every American will likely shell out more than $2,700 on spending classified as national defense. That is at least 2½ times what the British spend, five times more than what the Germans spend, and six times what the Japanese spend.

It is hard to see how that is good news for Americans struggling to make ends meet. Obama’s magnanimity is especially ironic given his emphasis on “fairness” and “shared sacrifice.” His rhetoric apparently does not apply to people living outside the United States. American troops will continue to be tasked with policing the world, and American taxpayers will be on the hook to pay for it.

The administration has proposed to restrain the growth of military spending. But total U.S. military spending will remain well above pre-9/11 levels. The Obama administration is requesting $525 billion for the Pentagon’s base budget in 2013, plus another $88.4 billion to pay for the war in Afghanistan. To put this in perspective, that is more than the annual average during Ronald Reagan’s time in office (about $526 billion in today’s dollars). One seldom hears GOP hawks speak of Reagan as a misguided dove who left the country vulnerable to attack.

Focusing only on budget numbers, however, misses the big picture. Instead, we must focus on what we will spend and why. The answer is clear: Our military budget is large by historical standards because Washington is unwilling to revisit the premise that Americans are responsible for everything that happens in the world, even things that have no connection to American security or prosperity.

Our fiscal crisis has created an opportunity to revisit our commitments abroad. We should focus American power on our core interests, and call on other countries to take responsibility for their own defense.

Intuitively, that exercise should satisfy both liberal demands that “everyone pay their fair share” and conservative demands that our government “live within its means.” But given the rhetoric we have heard so far, it is doubtful that this election cycle will produce a leader who will seriously contemplate how we can most prudently provide for our common defense.

By Everette Hatcher III | Comments (0)

Unborn babies lose out:Susan G. Komen reverses decison on Planned Parenthood

February 3, 2012 – 3:21 pm

Richard Dawkins comments on Tim Tebow pro-life commercial.

I am sad today because Susan G. Komen reversed their decision and will continue to supports Planned Parenthood which the USA’s largest abortion provider. The Arkansas Times Blog reported that the leader of Susan G. Komen apologized and explained that Planned Parenthood would be receiving funds from them. It is ironic to me that they basically are apologizing for that they actually even considered taking up for the unborn babies.

Two Thoughts on Susan G. Komen & Planned Parenthood

Posted by Michael F. Cannon

I’m sure that many of you are following the controversy over the Susan G. Komen for the Cure Foundation’s decision to suspend its partnership with and funding of Planned Parenthood. Two thoughts on this:

First, this controversy provides a delightful contrast to the Obama administration’s decision to force all Americans to purchase contraceptives and subsidize abortions.

The Susan G. Komen Foundation chose to stop providing grants to Planned Parenthood. Lots of people didn’t like (and/or don’t believe) Komen’s reasons. Some declared they would stop giving to Komen. Others approved of Komen’s decision and started giving to Komen. Many declared they would start donating to Planned Parenthood to show their disapproval of Komen’s decision.

Notice what didn’t happen. Nobody forced anybody to do anything that violated their conscience. People who don’t like Planned Parenthood’s mission can now support Komen without any misgivings. People who like Planned Parenthood’s mission can still support it, and can support other organizations that fight breast cancer. The whole episode may end up being a boon for both sides, if total contributions to the two organizations are any measure. Such are the blessings of liberty.

Contrast that to Obamacare, which forces people who don’t like Planned Parenthood’s mission to support it.

Second, there seems to be a bottomless well of delusion from which supporters of PlannedParenthood draw the idea that this decision shows Komen has injected politics into its grant-making.

Assume for the sake of argument that the Susan G. Komen Foundation has been hijacked by radical abortion opponents who forced the decision to stop funding Planned Parenthood. Even if that is true, that decision did not inject politics into a process previously devoid of politics.

Millions of Americans believe that Planned Parenthood routinely kills small, helpless human beings. Believe it or not, they have a problem with that. When Komen gives money to Planned Parenthood, it no doubt angers those Americans (and makes them less likely to contribute). When Komen decided that the good it would accomplish by funding Planned Parenthood’s provision of breast exams outweighed the concerns (and reaction) of those millions of Americans, Komen was making a political judgment.

Perhaps Planned Parenthood’s supporters didn’t notice the politics that was always there, since Komen had been making the same political judgment they themselves make. But if Planned Parenthood’s supporters are angry now, it’s not because Komen injected politics into its grant-making. It’s because Komen made a different political judgment and Planned Parenthood lost, for now anyway. (Then again, if donations to Planned Parenthood are the measure, the group may be winning by losing.)

I must confess to a little bit of Schadenfreude here, as those who are complaining about Komen’s decision to defund Planned Parenthood are largely the same folks who applaud President Obama’s decision to force everyone to fund it (and, without a trace of irony, describe themselves as “pro-choice”). I predict that when a future president reverses Obama’s decision, supporters of Obama’s policy will likewise delude themselves that the future president has “injected” politics into the dispute.

UPDATE: The Susan G. Komen Foundation has again adjusted its grant-making policies, and Planned Parenthood will once again be eligible for funding. A reporter asks me: “So what does it mean now that Komen’s reversed itself?” My reply:

It does not mean that politics has been banished from Komen’s decisions. It just means that Komen has again made a political decision that more closely reflects the values of Planned Parenthood’s supporters than its detractors. But that is how we should settle the question of who funds Planned Parenthood: with vigorous debate and by allowing individuals to follow their conscience. When Obamacare ‘settles’ the question by forcing taxpayers to fund Planned Parenthood, it violates everyone’s freedom and dignity.

Related prolife posts:

Ron Paul’s Pro-life view

Ron Paul’s Pro-life view Ron Paul’s Pro-Life Speech in Ames, Iowa Uploaded by RonPaul2008dotcom on Aug 13, 2011 Free email updates: http://www.RonPaul.com/welcome.php Please like, share, subscribe & comment! http://www.RonPaul.com 08/13/2011– Ron Paul is America’s leading voice for limited, constitutional government, low taxes, free markets, sound money, and a pro-America foreign policy. ___________________________________ Related posts: Crowd […]

Obama, Garry Smith, Jesus, Republicans and abortion (part 2)

This is the second of two posts. Here is the link to the first post. In this second post I will show that the pro-life Republicans hold the the Biblical pro-life view that Jesus would embrace if he were here today and the pro-choice view would be rejected (a minority of Republicans are pro-choice though and […]

Obama, Garry Smith, Jesus, the Republicans and Abortion (Part 1)

This is going to take two posts to cover. Jason Tolbert hit the nail on the head in his recent post: It seems Democratic Rep. Garry Smith of El Dorado stepped into a bit of a mess this week when speaking to the newly formed Union County Democratic Club. Perhaps he wasn’t aware that intrepid […]

Does human life begin at birth or conception?

On the Arkansas Times blog in the comment section the person using username “Hackett” asserted: Life begins when the fetus is viable outside the womb, prior to that it is parasitical and lives at the discretion of the host. I responded with this post today: It seems to me the real argument lies in the […]

Answering pro-abortion questions

Richard Dawkins comments on Tim Tebow pro-life commercial. _________________________ On the Arkansas Times Blog, a person with the username “November” posted: You dont have the “choice” to kill and innocent child in the womb. No one gave the child a trial before killing it. The child is innocent, and the U S Constitution says you […]

Prolife March in Little Rock has 20 to 1 ratio more than abortion march of previous day

PHOTO BY STATON BREIDENTHAL Marchers arrive at the state Capitol on Sunday after beginning the Arkansas March for Life in downtown Little Rock As in the past, the pr0-life March in Little Rock had at least twenty times the people in attendance that the pr0-abortion march did the previous day. In fact, last year Channel […]

Loretta Ross’ son: A case for pro-life position

Superbowl commercial with Tim Tebow and Mom. In Little Rock on January 21, 2012 in front of 100 pro-choice advocates met next to the Capitol to hear Loretta Ross speak. In that talk she pointed out something about her own experience. (Below is from another speech in which she recounts some of the same details.) […]

A man of pro-life convictions: Bernard Nathanson (part4)

ABORTION – THE SILENT SCREAM 1 / Extended, High-Resolution Version (with permission from APF). Republished with Permission from Roy Tidwell of American Portrait Films as long as the following credits are shown: VHS/DVDs Available American Portrait Films Call 1-800-736-4567 http://www.amport.com The Hand of God-Selected Quotes from Bernard N. Nathanson, M.D., Unjust laws exist. Shall we […]

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

Dan Mitchell demonstrates again that spending is our problem but it can be solved

February 3, 2012 – 10:46 am

Sometimes it appears that our problems are impossible to solve. Take a look at a good solution:

New Congressional Budget Office Numbers Once Again Show that Modest Spending Restraint Would Eliminate Red Ink

Posted by Daniel J. Mitchell

Back in 2010, I crunched the numbers from the Congressional Budget Office and reported that the budget could be balanced in just 10 years if politicians exercised a modicum of fiscal discipline and limited annual spending increases to about two percent yearly.

When CBO issued new numbers early last year, I repeated the exercise and again found that the same modest level of budgetary restraint would eliminate red ink in about 10 years.

And when CBO issued their update last summer, I did the same thing and once again confirmed that deficits would disappear in a decade if politicians didn’t let the overall budget rise by faster than two percent each year.

Well, the new CBO 10-year forecast was released this morning. I’m going to give you three guesses about what I discovered when I looked at the numbers, and the first two don’t count.

Yes, you guessed it. As the chart illustrates (click to enlarge), balancing the budget doesn’t require any tax increases. Nor does it require big spending cuts (though that would be a very good idea).

Even if we assume that the 2001 and 2003 tax cuts are made permanent, all that is needed is for politicians to put government on a modest diet so that overall spending grows by about two percent each year. In other words, make sure the budget doesn’t grow faster than inflation.

Tens of millions of households and businesses manage to meet this simple test every year. Surely it’s not asking too much to get the same minimum level of fiscal restraint from the crowd in Washington, right?

At this point, you may be asking yourself whether it’s really this simple. After all, you’ve probably heard politicians and journalists say that deficits are so big that we have no choice but to accept big tax increases and “draconian” spending cuts.

But that’s because politicians use dishonest Washington budget math. They begin each fiscal year by assuming that spending automatically will increase based on factors such as inflation, demographics, and previously legislated program changes.

This creates a “baseline,” and if they enact a budget that increases spending by less than the baseline, that increase magically becomes a cut. This is what allowed some politicians to say that last year’s Ryan budget cut spending by trillions of dollars even though spending actually would have increased by an average of 2.8 percent each year.

Needless to say, proponents of big government deliberately use dishonest budget math because it tilts the playing field in favor of bigger government and higher taxes.

There are two important caveats about these calculations.

1. We should be dramatically downsizing the federal government, not just restraining its growth. Even if he’s not your preferred presidential candidate, Ron Paul’s proposal for an immediate $1 trillion reduction in the burden of federal spending is a very good idea. Merely limiting the growth of spending is a tiny and timid step in the right direction.

2. We should be focusing on the underlying problem of excessive government, not the symptom of too much red ink. By pointing out the amount of spending restraint that would balance the budget, some people will incorrectly conclude that getting rid of deficits is the goal.

Last but not least, here is the video I narrated in 2010 showing how red ink would quickly disappear if politicians curtailed their profligacy and restrained spending growth.

___________________________

Other than updating the numbers, the video is just as accurate today as it was back in 2010. And the concluding message—that there is no good argument for tax increases—also is equally relevant today.

P.S. Some people will argue that it’s impossible to restrain spending because of entitlement programs, but this set of videos shows how to reform Social Security, Medicare, and Medicaid.

P.P.S. Some people will say that the CBO baseline is unrealistic because it assumes the sequester will take place. They may be right if they’re predicting politicians are too irresponsible and profligate to accept about $100 billion of annual reductions from a $4,000 billion-plus budget, but that underscores the core message that there needs to be a cap on total spending so that the crowd in Washington isn’t allowed to turn America into Greece.

 

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

How free is the USA?

February 3, 2012 – 7:33 am

Uploaded by on Jan 12, 2011

http://www.heritage.org/index Is the American Dream dead? How free is America’s economy? Check out the 2011 Index of Economic Freedom for all the answers.

______________________

Economic freedom is not heading the right direction in the USA. My son Wilson has been asking me if there are any other countries that are less socialistic then us and I have been painting a pretty bleak picture out there for him. This article and chart below show there are some countries heading the right direction. Unfortunately, the USA is not one of them.

Economic Freedom of the World: Lessons for the U.S.

by James D. Gwartney, Robert Lawson and Joshua Hall

James Gwartney is a professor at Florida State University. Robert Lawson is a professor at Southern Methodist University. Joshua Hall is a professor at Beloit College. They are co-authors of the Economic Freedom of the World report, which can be found at http://www.freetheworld.com, and is co-published by the Cato Institute.

Added to cato.org on September 26, 2011

This article appeared on The Huffington Post on September 25, 2011

Economic freedom in the United States is on the wane. Historically a standard bearer for freer markets, the United States has seen its economic freedom rating fall in the last decade according to the latest Economic Freedom of the World index, published by a world-wide network of institutes. In 2000, the U.S. was ranked 3rd in the world behind only Hong Kong and Singapore, but in the most recent report, the U.S. is ranked 10th behind countries like Canada, Chile, Australia, and the United Kingdom.

The index measures the degree to which people in a nation are free to pursue their own economic objectives without government taxes and regulations, as well as the extent to which government protects property rights and provides a sound monetary environment. The decline of the U.S. is the result of massively higher government spending and borrowing, increased regulation, and especially less secure property rights. Ballooning budget deficits are crowding out private credit causing the rating in this component to fall to 0.0 from 9.3 (out of 10) since 2000. Asset forfeiture laws, eminent domain abuse, the wars on drugs and terrorism, TSA, and warrantless wiretaps have apparently taken their toll on the security of property rights.

The so-called Washington Consensus of the 1990s — free trade, stable money, and privatization — appears dead. The housing bubbles, financial crises, bankruptcies, bailouts, stimulus, debt crises, and erratic markets of the past few years seem to have led to a new consensus. Policymakers now tell us that markets have failed, and government stimulus, subsidies and new regulations are needed to set things right.

James Gwartney is a professor at Florida State University. Robert Lawson is a professor at Southern Methodist University. Joshua Hall is a professor at Beloit College. They are co-authors of the Economic Freedom of the World report, which can be found at http://www.freetheworld.com, and is co-published by the Cato Institute.

More by James D. Gwartney

When evaluating such claims, it is important to remember the fundamental truth of economic life: Markets work. When people are free to buy, sell, produce, trade, and move they do a pretty good job of bettering themselves and others in the process. This is not just common sense or idle theory — there is tons of evidence.

Nations that score higher on the index tend to be richer, grow faster, have less poverty, live longer, be more educated, and on and on. On virtually every measure of the good life, we find that more economic freedom yields better results. Other research finds economic freedom corresponds with less warfare, greater human rights, more gender equity, less unemployment, improved democracy, more trust, and less corruption. The results of the Economic Freedom of the World project and the scholarly analysis it has facilitated are simply overwhelming. Economic freedom works.

Over the past decade, the rating of the United States has fallen almost a full point on the economic freedom scale. Prior research indicates that a decline of this magnitude will reduce a country’s long-term growth rate by at least a full percentage point. In the case of the United States, this will mean future average annual growth of real GDP of 2 percent rather than our 3 percent historical average.

While economic freedom has fallen in the United States, there is good news in the former communist world. A number of formerly centrally planned economies have made remarkable progress toward freer markets during the past decade. Eight of them, Slovakia, Estonia, Hungary, Lithuania, Bulgaria, Albania, Mongolia, and Georgia, now rank in the top 40. By way of comparison, only three Latin American countries, Chile, Panama, and Peru, place in the top 40. All of these countries now rank higher than Sweden and France, for example.

With economic freedom, profits and losses direct resources toward socially beneficial activities. When too many resources are allocated by politics, a system of crony capitalism emerges where politicians can reward the politically powerful. Unlike true entrepreneurs, crony capitalists do not create wealth; instead they plunder wealth from taxpayers and other citizens.

America has prospered historically because we have chosen economic freedom rather than political allocation and crony capitalism. To the extent we move away from economic freedom, our future prosperity will be diminished.

_________________

This article includes a List of countries by economic freedom.

2011 List by the Fraser Institute[1] 2011 List by The Heritage Foundation[2]
Rank↓ Country↓ Score↓
1  Hong Kong 9.01
2  Singapore 8.68
3  New Zealand 8.20
4  Switzerland 8.03
5  Australia 7.98
6  Canada 7.81
7  Chile 7.77
8  United Kingdom 7.71
9  Mauritius 7.67
10  United States 7.60
11  Bahrain 7.59
11  Finland 7.59
13  Slovakia 7.56
14  United Arab Emirates 7.54
15  Denmark 7.52
15  Estonia 7.52
15  Hungary 7.52
18  Cyprus 7.51
19  Austria 7.50
20  Luxembourg 7.49
21  Germany 7.45
22  Japan 7.44
23  Panama 7.41
24  Lithuania 7.40
25  Ireland 7.38
26  Taiwan 7.37
27  Georgia 7.36
28  Bulgaria 7.34
28  Oman 7.34
30  Albania 7.32
30  Netherlands 7.32
30  South Korea 7.32
Rank↓ Country↓ Score↓
1  Hong Kong 89.7
2  Singapore 87.2
3  Australia 82.5
4  New Zealand 82.3
5  Switzerland 81.9
6  Canada 80.8
7  Ireland 78.7
8  Denmark 78.6
9  United States 77.8
10  Bahrain 77.7
11  Chile 77.4
12  Mauritius 76.2
13  Luxembourg 76.2
14  Estonia 75.2
15  Netherlands 74.7
16  United Kingdom 74.5
17  Finland 74.0
18  Cyprus 73.3
19  Macau 73.1
20  Japan 72.8
21  Austria 71.9
22  Sweden 71.9
23  Germany 71.8
24  Lithuania 71.3
25  Taiwan 70.8
26  Saint Lucia 70.8
27  Qatar 70.5
28  Czech Republic 70.4
29  Georgia 70.4
30  Norway 70.3
By Everette Hatcher III | Also posted in Current Events, spending out of control, Taxes | Tagged , , , , | Comments (0)

Using permanently higher tax rates on income to pay for temporarily lower tax rates on payrolls is stupid

February 2, 2012 – 4:16 pm

The liberal Arkansas Times Blogger Max Brantley wrote on 12-1-11:

Senate Republicans tonight defeated the payroll tax break for working Americans. President Obama’s statement:

Tonight, Senate Republicans chose to raise taxes on nearly 160 million hardworking Americans because they refused to ask a few hundred thousand millionaires and billionaires to pay their fair share. They voted against a bill that would have not only extended the $1,000 tax cut for a typical family, but expanded that tax cut to put an extra $1,500 in their pockets next year, and given nearly six million small business owners new incentives to expand and hire. That is unacceptable.It makes absolutely no sense to raise taxes on the middle class at a time when so many are still trying to get back on their feet. Now is not the time to put the economy and the security of the middle class at risk. Now is the time to rebuild an economy where hard work and responsibility pay off, and everybody has a chance to succeed. Now is the time to put country before party and work together on behalf of the American people. And I will continue to urge Congress to stop playing politics with the security of millions of American families and small business owners and get this done.

Now the Republicans will offer their plan to give a cut by screwing working people.

___________________-

Brantley does not explain why the economy has not been stimulated at all by ANYTHING THAT PRESIDENT OBAMA HAS TRIED SO FAR!!! Then we should this payroll tax holiday be extended?

This article below from the Cato Institute does a good job of showing the Republicans were right to vote against Obama’s plan.

President Obama’s $447 Billion Tax Increase

Posted by Alan Reynolds

In his September 8 lecture to Congress, President Obama promised that “every proposal I’ve laid out tonight will be paid for.”  How?  By raising tax rates on “the wealthiest Americans and biggest corporations.” In other words, the President is proposing a $447 billion tax increase.

When the details are revealed on September 19, the President will be proposing large and permanent increases in the highest income tax rates − mainly to “pay for” a small and temporary cut in payroll taxes (which accounts for 54 percent of his $447 billion package).  The plan is likely to contain elements of the September 7 proposal of Congressional Democrats to the super-committee — such as a draconian “super-Pease” phase-out and cap on itemized deductions, and a top marginal tax rate of 48.8 percent in 2013.

Temporary payroll tax cuts and extended unemployment benefits are bait the President set out to trap House Republicans with their own debt ceiling demands.

“The agreement we passed in July,” said the President, “will cut government spending by about $1 trillion over the next 10 years. It also charges this Congress to come up with an additional $1.5 trillion in savings by Christmas. Tonight, I am asking you to increase that amount so that it covers the full cost of the American Jobs Act.”   But the $447 billion budgetary hit can’t be spread over 10 years without triggering another debt ceiling calamity.  Either the debt ceiling has to be promptly raised by an extra $447 billion or tax receipts somehow raised by that amount in fiscal 2012-2013.   Any “modest adjustments to health care” will be too distant and nebulous to help.

Using permanently higher tax rates on income to pay for temporarily lower tax rates on payrolls is no “stimulus” under either Keynesian or empirical economics.  Neither is a tax-financed extension of unemployment benefits, which clearly raises the unemployment rate by 0.8 to 1.8 percentage points.   Yet the one-year extension of payroll tax cuts and 99-week unemployment benefits is being held out as irresistible bait to gullible legislators.

By inviting House Republicans to stumble into this trap, the president is also hoping to preempt the congressional super-committee’s option of reducing deficits by trimming tax loopholes.  President Obama is trying to lay claim to any potential revenues from cutting loopholes (or legitimate deductions) for his own pet projects, which include grants to hire more state and local government workers and extended unemployment benefits for the private sector.

This is no “jobs plan.”  It’s a tax-and-spend plan, and a bad one.

By Everette Hatcher III | Also posted in Social Security | Tagged , , , , | Comments (0)

Norquist is right, Brantley is wrong

February 2, 2012 – 4:08 pm

Max Brantley went on another tyrade about raising taxes instead of cutting spending (“How to raise taxes,” Arkansas Times Blog, November 28, 2011). However, spending is the main problem and it appears that Democrats do not want to cut a dime. Instead, they blame Glover Norquist for all their problems.

Does Norquist deserve all the blame? Charles Krauthammer set the record straight below:

The Grover Norquist myth

Charles KrauthammerNovember 28, 2011

WASHINGTON — Democrats are unanimous in charging that the debt-reduction supercommittee collapsed because Republicans refused to raise taxes. Apparently, Republicans are in the thrall of one Grover Norquist, the anti-tax campaigner, whom Sen. John Kerry, D-Mass., called “the 13th member of this committee without being there.” Senate Majority Leader Harry Reid helpfully suggested “maybe they should impeach Grover Norquist.”

With that, Norquist officially replaces the Koch brothers as the great malevolent manipulator that controls the republic by pulling unseen strings on behalf of the plutocracy.

Nice theory. Except for the following facts:

•Sen. Tom Coburn last year signed on to the Simpson-Bowles tax reform that would have increased tax revenue by $1 trillion over a decade.

•During the debt-ceiling talks, House Speaker John Boehner agreed to an $800 billion revenue increase as part of a Grand Bargain.

•Supercommittee member Pat Toomey, a Club for Growth Republican, proposed increasing tax revenue by $300 billion as part of $1.2 trillion in debt reduction.

Leading, very conservative Republicans proposing tax increases. So why does the myth of the Norquist-controlled anti-tax monolith persist? You might suggest cynicism and perversity. Let me offer a more benign explanation: thickheadedness. Democrats simply can’t tell the difference between tax revenue and tax rates.

In deficit reduction, all that matters is tax revenue. The holders of our national debt care not a whit what tax rates yield the money to pay them back. They care about the sum.

The Republican proposals raise revenue, despite lowering rates, by opening a gusher of new income for the Treasury in the form of loophole elimination. For example, the Toomey plan eliminates deductions by $300 billion more than the reduction in tax rates “cost.” Result: $300 billion in new revenue.

The Simpson-Bowles commission — appointed by President Barack Obama and endorsed by Coburn — used the same formula. Its tax reform would lower tax rates at a “cost” of $1 trillion a year while eliminating loopholes that deprive the Treasury of $1.1 trillion a year. This would leave the Treasury with an excess — i.e., new tax revenue — of $100 billion a year, or $1 trillion over a decade.

Raising revenue through tax reform is better than simply raising rates, which Democrats insist upon with near religious fervor. It is more economically efficient because it eliminates credits, carve-outs and deductions that grossly misallocate capital. And it is more fair because it is the rich who can afford not only the sharp lawyers and accountants who exploit loopholes but the lobbyists who create them in the first place.

Yet the Democrats, who flatter themselves as the party of fairness, are instead obsessed with raising tax rates on the rich as a sign of civic virtue. This is perverse in three ways:

1) Raising rates gratuitously slows economic growth, i.e., expansion of the economic pie for everyone, by penalizing work and by retaining inefficiency-inducing loopholes.

2) We’re talking pennies on the dollar. Obama’s coveted Bush tax cut repeal would yield the Treasury, at the very most, $80 billion a year — offsetting 2 cents on the dollar of government spending ($3.6 trillion).

3) Hiking tax rates ignores the real drivers of debt, which, as Obama himself has acknowledged, are entitlements.

Has the president ever publicly proposed a single significant structural change in any entitlement? After Simpson-Bowles reported? No. In his February budget? No. In his April 13 budget “framework”? No. During the debt-ceiling crisis? No. During or after the supercommittee deliberations? No.

As regarding the supercommittee, Obama was AWOL — then immediately pounced on its failure by going on TV to repeat his incessantly repeated campaign theme of the do-nothing (Republican) Congress.

A swell slogan that fits nicely with the Norquist myth. Except for another inconvenient fact: It is the Republicans who passed — through the House, the only branch of government they control — a real budget that cut $5.8 trillion of spending over the next 10 years. Obama’s February budget, which would have increased spending, was laughed out of the Senate, voted down 97-0. As for the Democratic Senate, it has submitted no budget at all for 2 1/2 years.

Who, then, is do-nothing? Republicans should happily take on this absurd, and central, Democratic campaign plank. Bring Simpson-Bowles to the House floor and pass the most radical of its three deficit-reduction alternatives.

Dare the Senate Democrats to vote down the grandest of all bargains. Dare Obama to veto his own debt commission. Dare the Democrats to actually do something about debt.

Washington Post Writers Group

Charles Krauthammer is a syndicated columnist based in Washington.

letters@charleskrauthammer.com

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

Senator Obama’s ideas on Social Security

February 2, 2012 – 3:54 pm

Senator Obama’s Social Security Tax Plan

Uploaded by on Jul 23, 2008

In addition to several other tax increases, Senator Barack Obama wants to increase the Social Security payroll tax burden by imposing the tax on income above $250,000. This would be a sharp departure from current law, which only requires that the tax be imposed on the amount of income needed to “pay for” promised benefits. But more important, at least from an economic perspective, the Senator’s initiative would increase the top tax rate on productive behavior by as much as 12 percentage points – and this would be in addition to his proposal to kill the 2003 tax rate reductions and further boost the top rate by 4.6 percentage points. This mini-documentary explains why a big tax rate increase on highly productive people would be very damaging to America’s prosperity, especially in a competitive global economy. Simply stated, pushing top tax rates in the United States to French and German levels means at least some degree of French-style and German-style economic stagnation. Visit http://www.freedomandprosperity.org for more information.

By Everette Hatcher III | Also posted in President Obama, Social Security | Tagged , , , , , | Comments (0)