Eric Schurenberg is Editor-in-Chief of BNET.com and Editorial Director of CBS MoneyWatch.com. Previously, Eric was managing editor of MONEY. As managing editor, he expanded the editorial focus to new interests including real estate, family finance, health, retirement, and the workplace. Prior to MONEY, Eric was deputy editor of Business 2.0. He was also the managing editor of goldman.com, a Web site for Goldman Sachs Group’s personal wealth management business, and an assistant managing editor at Fortune magazine. Schurenberg has won a Gerald Loeb Award for distinguished business journalism, a National Magazine Award, and a Page One Award.
Social Security isn’t the only cause of America’s fiscal problems, but it is Exhibit A in why it is so hard to fix them. No serious solution to our debt can ignore a program that will tax and spend about 4.8% of GDP this year and account for about 20% of all federal spending-and that within a few decades will count almost a third of the population as beneficiaries. But whenever I write about Social Security here at CBS MoneyWatch, I’m always struck by how much disagreement there is about how the system really works.
A handful of misconceptions tend to crop up repeatedly-often having to do with that fiscal fun-house mirror, the Social Security trust fund. And despite the efforts of writers like Allan Sloan and experts like the Urban Institute’s Eugene Steuerle, the myths won’t die. This column won’t kill them either, but that doesn’t mean we shouldn’t take a whack. Here goes:
Myth: Social Security didn’t create the deficit and shouldn’t be cut to fix it
This is a much loved progressive slogan. “Blaming Social Security for the deficit is like blaming Iraq for 9/11,” writes Dave Johnson of OurFuture.org in one of the cleverer examples of the genre.
Technically, the first part of the myth is true-or rather, used to be true. From 1983 until last year, Social Security revenues actually lowered the Treasury’s need to borrow in the public markets, as excess payroll taxes collected under Social Security’s flag helped fund other government programs.
The surplus years are over, however. The Social Security trustees’ report estimates that last year payroll taxes fell short of the sums paid out to beneficiaries. Small surpluses will return for a few years; then the red ink will return for good in 2015. To make up the annual shortfall, Social Security will have to draw on revenues from the general budget. In other words, from here on out, year after year, Social Security only makes the deficit larger.
__________________________________________
Milton Friedman
Using Social Security as his prime example, Professor Friedman explodes the myth that the major expansions in government resulted from popular demand. In a speech delivered more than 30 years ago, he directly relates this dynamic to today’s health care debate.
The disagreement is over the solutions — on what spending to cut; what taxes to raise (basically none ever, according to Boozman); whether or not to enact a balanced budget amendment (Boozman says yes; Pryor no); and on what policies would promote the kind of economic growth that would make this a little easier.
I am going to continue this series and mainly include the opinions of Milton Friedman concerning these matters. Today I have included some comments from Milton Friedman from his Film Series “Free to Choose: Episode 10 How to Stay Free,” which addresses several issues concerning how to control our spending. This is part 1 of this series concerning Milton Friedman’s thoughts from this video clip.
“We are at a crossroads in our country,” said the freshman Republican from Rogers. “The ‘tax, borrow, spend’ philosophy is not creating jobs; it’s only creating more debt for our children and grandchildren.”
Boozman has signed on as a co-sponsor to a resolution introduced last month by Sen. Richard Shelby, R-Ala., seeking a constitutional amendment requiring a balanced budget not to exceed 20 percent of Gross Domestic Product, a level that has been exceeded since 1941.
Shelby’s resolution, which he has introduced in every session of Congress since 1987, would exempt the balanced budget during wartime.
“Imagine what the country would look like if it had passed when he first proposed it. Now, more than ever, it is an idea that’s time has come,” Boozman said.
Boozman, who was sworn into office in January, spoke for the first time Monday on the Senate floor, following a Senate tradition that freshmen wait several months before delivering their “maiden” address.
Dressed in a blue suit, Boozman stood at his Senate desk and read his prepared address to a nearly empty chamber. Senate Minority Leader Mitch McConnell listened from his desk, legs crossed and head tilted toward Boozman through the speech that lasted less than 15 minutes.
About 150 people, on public tours of the U.S. Capitol, sat quietly in the gallery above the Senate floor. The press gallery was nearly empty save for a single seated reporter and another who walked in briefly during the address.
Aside from calling for fiscal restraint, Boozman offered how inspired he is by the “service, dedication and commitment” of the Arkansas politicians who preceded him such as William Sebastian, who served in the Senate from 1848 until 1861.
“Growing up in Fort Smith, in Sebastian County, we were taught at an early age about William Sebastian. At thirty-six, he was the youngest senator in the 30th U.S. Congress after leading an already distinguished career as a cotton farmer, judge and state legislator,” Boozman said.
Boozman also spoke about the need for the Arkansas delegation to continue its tradition of working together — across party lines — for the good of the state.
“I really believe that our delegation working together will be able to make a difference for the people of Arkansas,” he said.
After the speech, McConnell congratulated Boozman for delivering his first address.
“I was particularly interested in the history lesson of all those who served from Arkansas,” McConnell said.
Boozman left the floor looking a little relieved.
“That’s over,” he said.
Boozman confessed to having a few pre-speech jitters given the weight of Senate tradition.
“It’s a big deal and a tremendous honor to be in that situation,” he said.
Ep. 10 – How to Stay Free [7/7]. Milton Friedman’s Free to Choose (1980)
Milton Friedman served as economic advisor for two American Presidents – Richard Nixon and Ronald Reagan. Although Friedman was inevitably drawn into the national political spotlight, he never held public office.
Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 1
Mike Huckabee recently moved to Florida? Why? The answer is easy. Huckabee wants to avoid Arkansas’ high state income tax. Max Brantley of the Arkansas Times wants to call Huckabee a tax fugative, but who can blame him.
Liberals like Brantley and Ernie Dumas want to praise former Arkansas governor Dale Bumpers for raising the state income tax to 7%, but that is the reason our state has the highest state income tax in the area (all bordering states have either lower state income taxes or no state income tax).
Is it any suprise that during the last census that the seven states that do not have an income tax grew in population? Arkansas has suffered from bracket creep and in 1929 you had to make 5 times the average wage to pay any state income tax at all, but now over 66% of tax payers in Arkansas pay at least some of their income at the 7% level.
Take a look at all the Milton Friedman clips that I have posted today. These liberals I mentioned above have truly forgotten how powerful the market is if not interferred with by the government.
Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 2
Until Gov. Dale Bumpers raised income-tax rates and other taxes in 1971, Arkansas had by far the lowest per-capita state and local taxes in the United States. Afterward, we were still 50th but within shouting distance of 49th.
(June 2006) Democratic Gov. Dale Bumpers and the General Assembly raised Arkansas’ top income tax rate to “broaden the tax base” in 1971(1). Yet Arkansas’ per capita income, expressed as a percentage of the U.S. total, has barely improved, moving from 71 (1971) to 77.7 percent (2005) over the 34-year period, according to data from the U.S. Bureau of Economic Analysis. The 1971 income tax increase reversed a decades-long strong growth trend and left Arkansas with the highest income tax rate among bordering states (Mississippi, Missouri, Louisiana, Oklahoma, Tennessee and Texas).
Income Stagnation: The 1930s
One has to turn to the 1930s-the decade of the Great Depression-to find weaker income growth than in recent years.
Arkansas per capita personal income was 44 percent of the U.S. in 1929, the first year data was compiled in the BEA time series. The Great Depression started that year, and by the time it ended in 1933 Arkansas per capita income had fallen to 41 percent of the U.S. By decade’s end (1939) it had returned to 44 percent.
Growth Decades: The 1940s, 1950s & 1960s
Arkansas per capita income increased as a percentage of the U.S. in the next three decades.
In 1941, at the onset of World War II, Arkansas per capita income was 47 percent of the U.S. It was 59 percent at war’s end in 1945 and again in 1949. It was 56 percent in 1950, 62 percent a decade later in 1960, and 68 percent in 1969. If this growth rate had continued Arkansas would have exceeded 100 percent of the U.S. average in the current decade (2000-2009).
To summarize, Arkansas per capita income increased from 44 to 71 percent of the U.S. total between 1939 and 1971.
Anemic Income Growth (1971-2005)
The trend in recent decades is anemic growth in Arkansas per capita personal income. Fiscal policy changes effect economic behavior with a time lag. Arkansas per capita income was 71 percent of the U.S. in 1971 and 76 percent in 1973. Income growth stagnated for the rest of the decade, reaching 77 percent of the U.S. in 1979. It fell to 75 percent in 1989, and was 76 percent in 1999. Today, Arkansas per capita income, at 77.7 percent of the U.S., is barely above its high point of the 1970s.
Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 3
Since its introduction in 1929, Arkansas‘ statutory incometax structure has changed very little. However, due to changes in the economy and in inflation, the real effects of that tax structure have changed substantially. This report looks at the effects that rising incomes and inflation have had on the Arkansasincometax structure. In addition, the report looks at the changing profile of Arkansas taxpayers in recent years, and provides a brief comparison of Arkansas taxes in relation to other states and the federal tax system.
Arkansas‘ IncomeTax Structure: Original and Revised
In 1929 Arkansas became 12th among the states to adopt an individual incometax. The structure contained five rates and net income brackets with a top rate of five percent applying to net income over $25,000. That original structure remained in place until 1971 when a new middle income bracket was added and the rate on net income over $25,000 was increased to 7.0 percent. The rates and brackets revised in 1971 remain in place today. The 1929 original and the revised current tax structure are shown in Table 1.
Table 1 Arkansas Individual IncomeTax Structure
1929 Original Net Income Rate first $3,000 1.0% next$3,001 to $6,000 2.0% next$6,001 to $11,000 3.0% next $11,001 to $25,000 4.0% over $25,000 5.0% 1971 Revision (Current) Net Income Rate first $2,999 1.0% next$3,000 to $5,999 2.5% next$6,000 to $8,999 3.5% next$9,000 to $14,999 4.5% next $15,000 to $24,999 6.0% over $25,000 7.0%
Source: Arkansas Legislative Tax Handbook, 1992, Bureau of Legislative Research.
In 1975, the earliest year for which records on income tax collections by income group is available, only the top 4.0 percent of Arkansas taxpayers would have had any of their income subjected to the top 7.0 percent rate. By 1991, around 66.0 percent of the state’s taxpayers would have had some of their income subjected to this top rate–a rate once reserved for only the highest income earners.
The 1929 tax structure provided for exemptions of $1,500 for a single person and $2,500 for married individuals. In 1947 the state raised the exemption to $2,500 for singles and $3,500 for married persons. In 1957 the personal exemption was converted to a credit of $17.50 for singles and $35.00 for married persons. In 1987 the credits were increased to $20 per person. Finally, in 1991, low income Arkansans were exempted from paying incometax if their gross income did not exceed $5,500 for an individual or $10,000 for a married couple. For most taxpayers, the $20.00 credit remains in effect today.
The Value of Exemptions as a Share of Per Capita Income
Table 2 shows how the value of the personal tax exemption or credit has diminished over time. The figures shown represent the personal exemption or credit for a single individual as a ratio of the per capita personal income in the year in which the credit was first enacted. In 1929, for instance, an individual would have been exempted from any tax until their income reached a level which was equal to 490 percent of the Arkansas per capita income for that year. In 1947 with the first statutory change in the exemption, that individual would have still been exempted up to an amount equal to 340 percent of the per capita income level. By 1957 the value of the exemption (which was changed to a tax credit that year) had declined substantially, falling to 130 percent of per capita income. At the time of the next change in the personal credit (1987), the value of that credit was only 17 percent of the per capita income level. For most taxpayers (all those not officially classified as low income) in 1992, the value of the personal credit was only 13 percent of per capita income.
Table 2 Personal Exemptions and Credits As a Percent of Per Capita Income
Arkansas Year of Value of Per Capita Enactment ExemptionIncome Ratio 1929 $1,500 $ 308 490% 19472,500 737 340% 19571,6001,247 130% 19872,000 11,980 17% 19922,000 15,439 13%
Source: Arkansas Legislative Tax Handbook, 1992, Bureau of Legislative Research; Per capita personal income data is from the Bureau of Economic Analysis, unpublished data, April, 1993.
In other words, whereas in the first year of enactment of the incometax, the personal exemption would have allowed an Arkansan to earn almost five times the average per capita income before paying any tax.
Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 4
For those of us who are demographic buffs, Christmas came four days early when Census Bureau director Robert Groves announced on Tuesday the first results of the 2010 census and the reapportionment of House seats (and therefore electoral votes) among the states.
The resident population of the United States, he told us in a webcast, was 308,745,538. That’s an increase of 9.7 percent from the 281,421,906 in the 2000 census — the smallest proportional increase than in any decade other than the Depression 1930s but a pretty robust increase for an advanced nation. It’s hard to get a grasp on such large numbers. So let me share a few observations on what they mean.
First, the great engine of growth in America is not the Northeast Megalopolis, which was growing faster than average in the mid-20th century, or California, which grew lustily in the succeeding half-century. It is Texas.
Its population grew 21 percent in the past decade, from nearly 21 million to more than 25 million. That was more rapid growth than in any states except for four much smaller ones (Nevada, Arizona, Utah and Idaho).
Texas’ diversified economy, business-friendly regulations and low taxes have attracted not only immigrants but substantial inflow from the other 49 states. As a result, the 2010 reapportionment gives Texas four additional House seats. In contrast, California gets no new House seats, for the first time since it was admitted to the Union in 1850.
There’s a similar lesson in the fact that Florida gains two seats in the reapportionment and New York loses two.
This leads to a second point, which is that growth tends to be stronger where taxes are lower. Seven of the nine states that do not levy an income tax grew faster than the national average. The other two, South Dakota and New Hampshire, had the fastest growth in their regions, the Midwest and New England.
Altogether, 35 percent of the nation’s total population growth occurred in these nine non-taxing states, which accounted for just 19 percent of total population at the beginning of the decade.
Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 5
The liberal Pat Lynch in his article “Worry Inc.” Arkansas Democrat- Gazette, April 4, 2011 commented:
While the budget cutters are busy going after programs that help mere citizens, any notion of bringing taxrates for the wealthy back to the levels of the Clinton era, when there was a federal surplus, is off the table.
Liberals always think they can raise the taxes on the rich and everything else will take care of itself. The problem with our deficit is not that the politicians need more money but they need to spend less. I heard Congressman Tim Griffin say that at a townhall meeting a couple of weeks ago.
Before coming to Heritage in 2001, Riedl worked for then-Gov. Tommy Thompson, former Rep. Mark Green (R-WI)., and the Speaker of the Wisconsin Assembly. Riedl holds a bachelor’s degree in economics and political science from the University of Wisconsin, and a master’s degree in public affairs from Princeton University.
Growing long-term budget deficits are exclusively the result of rising spending, not declining revenues. Thus, common sense suggests that most reforms should occur on the spending side. Given the magnitude of the long-term spending increase, even splitting the difference between spending cuts and tax increases would leave the highest sustained spending—and tax burden—in American history. Permanently transforming the federal government in this manner would slow economic growth and harm families and businesses.
Rapid growth in Social Security, Medicare, and Medicaid costs and interest payments on the national debt will cause virtually all of this new spending. The annual cost of these four expenditures will surge from $1.6 trillion this year to $3.5 trillion in 2020. This will cause massive budget deficits in the next decade and must be the focus of any serious effort to reduce the budget deficit.
Obviously the real problem is spending and not that taxes are not high enough!!!! Take a look at this clip from Milton Friedman:
An ever-combative champion of freedom, Milton Friedman’s career and contributions in defense of individual liberty are unique in our time
Dr. Friedman and his wife, Rose, attend the Nobel Ball in 1976.
Ep. 10 – How to Stay Free [4/7]. Milton Friedman’s Free to Choose (1980)
I really enjoy responding to Gene Lyons’ articles. He is very entertaining with his articles and he is a good respresentative of the liberal point of view. Since I am a conservative, it is rare when we agree.
Also contrary to Republican mythology, the infamous Bush tax cuts did anything but increase revenue, as tax cuts never do. As Fiscal Times columnist Bruce Bartlett shows, federal revenues dropped from 20.6 percent of GDP in 2000 to 18.5 percent in 2007.
I am starting a new series that breaks down Lyon’s claims and take a look at the cold hard facts.
In every case over the last 60 years, major tax cuts have more than paid for themselves. In fact, every major tax cut since JFK has been followed by substantial increases in revenue, not to mention solid economic growth. Moreover, total federal revenue rose at a faster rate after each of those tax cuts than it did before them. Anyone can confirm these basic facts for themselves by checking federal budget data and economic indicators before and after major tax cuts (see, for example, Federal Budget Data, Data 360 Unemployment U.S., andTotal Economy Database). Let’s take a closer look at the results of the last four major tax cuts (and then for good measure we’ll examine the Mellon tax cuts of the 1920s).
Reagan Tax Cuts: In 1994 President Clinton’s own Council of Economic Advisers stated: “It is undeniable that the sharp reduction in taxes in the early 1980s was a strong impetus to economic growth.”
The Reagan tax cuts were followed by a sharp increase in revenue. Total federal revenue, including income tax revenue, rose every year from 1983 to 1988, after a dip in 1982 (due at least in part to the recession of that year–the recession began in December 1980 and ended in November 1982). From 1982 to 1989, i.e., when Reagan budgets were in operation, total federal revenue rose from $618 billion to $991 billion. (And herein by “in operation” I mean in effect for at least 10 months of a given year.)
Let’s look at what happened to federal income tax revenue under Reagan from 1983 to 1989, bearing in mind that Reagan slashed income tax rates across the board:
Senator Mark Pryor wants our ideas on how to cut federal spending. Take a look at this video clip below:
Milton Friedman nails the problem in this short video clip. No one wants their program cut but just the other guy’s.
Senator Pryor has asked us to send our ideas to him at cutspending@pryor.senate.gov and I have done so in the past and will continue to do so in the future. Here are a few more I just emailed to him myself at 1:15pm CST on May 2, 2011.
Last month I introduced legislation to do just that. And though it seems extreme to some—containing over $500 billion in spending cuts enacted over one year—it is a necessary first step toward ending our fiscal crisis.
My proposal would first roll back almost all federal spending to 2008 levels, then initiate reductions at various levels nearly across the board. Cuts to the Departments of Agriculture and Transportation would create over $42 billion in savings each, while cuts to the Departments of Energy and Housing and Urban Development would save about $50 billion each. Removing education from the federal government’s jurisdiction would create almost $80 billion in savings alone. Add to that my proposed reductions in international aid, the Departments of Health and Human Services, Homeland Security and other federal agencies, and we arrive at over $500 billion.
The Department of Agriculture is one of the largest agencies of the federal government. With fewer than 1 million farmers in the United States, the USDA employs over 110,000 employees, or roughly one federal employee for every nine farmers. Although farm and crop subsidies cost tens of billions of dollars each year, the largest USDA program continues to be funding for food stamps.
The program was originally created as a temporary program from 1939 to 1943, but became permanent in 1964 under President Lyndon Johnson. After the program swelled to more than 15 million recipients in 1974, and continued to increase in scope with the expanded benefits provided by Congress in 1993, Congress and the President finally decided to address the food stamp program through welfare reform in 1996. Food stamps were ultimately turned into a block grant program, which decreased the number of food stamp recipients, and helped lower costs. It wasn’t until 2002, under the direction of both a Republican President and Congress that the food stamp program was once again expanded.
In 2001, the food stamp program cost taxpayers $18 billion, but has since increased by more than 289 percent (FY2010 cost of $70 billion), and the Congressional Budget Office estimates that this entitlement program will cost nearly $700 billion over the next 10 years.
While many automatic spending entitlement programs like food stamps will need to once again be re-evaluated for reform, including eliminating the more than $1 billion in annual erroneous and fraudulent food stamp payments, the proposal only recommends taking the food stamp program back to FY2008 levels
. This level of funding still represents a 122 percent increase over the 2000 levels. In addition, the proposal would take farm and crop subsidies back to 2008 levels as well.
Additional
Eligibility is based on income and assets, with the gross income cutoff set at 130 percent of the poverty level
(28,665 for a family of four). The maximum monthly benefit in 2009 for a household of four was $668 –
$8,016 per year.
According to the CDC, obesity rates are actually higher for adults and children who are below the poverty level or on food stamps. Because individuals tend to buy cheap, high calorie processed foods, the food stamp subsidy program continues to support an out-dated model of health standards and balanced meals.
Food stamps are not conditioned on work status and contribute to long-term dependence on the federalgovernment.
Ep. 7 – Who Protects the Consumer [1/7]. Milton Friedman’s Free to Choose (1980)
Milton Friedman served as economic advisor for two American Presidents – Richard Nixon and Ronald Reagan. Although Friedman was inevitably drawn into the national political spotlight, he never held public office.
In the clip above you can see Milton Friedman attack those who are always trying to get government to “protect the consumer” or protect “the environment.” Many people are always trying to protect people by getting government to limit their right to choose. Below is a very interesting story concerning California that I heard about recently by reading an article by John Fund.
Ep. 7 – Who Protects the Consumer [2/7]. Milton Friedman’s Free to Choose (1980)
On April 27, 2011 I got to hear John Fund of the Wall Street Journal speak at the first ever “Conservative Lunch Series” presented by KARN and Americans for Prosperity Foundation at the Little Rock Hilton on University Avenue. This monthly luncheon will be held the fourth Wednesday of every month.
After the luncheon I got to briefly talk to Mr. Fund and I told him that I have been getting some great numbers on the days that I blog about his Wall Street Journal articles. He asked the name of my blog and instead of telling him it was www.HaltingArkansasLiberalswithTruth.com I told him to just google “Arkansas Milton Friedman” and he will pull up my website. Today I am showing why that phrase will identify my website. There are 4 video clips of Milton Friedman on this subject of protecting the consumer through government against which prohibits our freedom to choose.
Ep. 7 – Who Protects the Consumer [3/7]. Milton Friedman’s Free to Choose (1980)
In his speech he mentioned the struggle that Arnold Schwarzenegger had with the envirnomentalists in California. Below is an excerpt from an article that Mr. Fund wrote for the Wall Street Journal in Feb of 2010:
Governor Arnold Schwarzenegger is as green as any governor, from promoting alternative fuels to imposing carbon limits on California to fight climate change.
But even he’s had enough of the mindless interference with development that characterizes the actions of many environmentalists. In a state where one out of eight workers is unemployed, Mr. Schwarzenegger is asking the legislature for more authority to fast-track projects after they have undergone an environmental impact study.
“Right now the way it’s written, a lot of those laws, it’s an invitation to misuse them,” he told reporters last week. “And it holds up projects for too long a period of time, especially now.”
Mr. Schwarzenegger singled out environmental obstacles that are blocking construction of alternative energy farms in the Mojave Desert. Some of his green allies have become “fanatics,” he said, and “go overboard.” He then launched an extended riff explaining why he thought environmental objections to the Mojave Desert projects on the grounds they could hurt endangered species were, well, specious.
“So the environmentalists . . . are confused because they want to have renewable energy but then when it comes to the permitting process, creating that renewable energy and building the solar plants, they are then in the way. And they then talk about, ‘You cannot go and destroy this squirrel.'”
“I say, ‘What squirrel? I was out there, I didn’t see a squirrel.’
“They say, ‘Well, there could be a squirrel coming very soon.’
“So I say, ‘But there’s no squirrel there right now.’
“‘But you’ve got to protect things that could be there.'”
When Mr. Schwarzenegger was first elected in 2003, he promised to “blow up the boxes” of California’s government. He lost his enthusiasm for reform after a while, so it’s good to see him once again fighting the absurd constraints that California’s political class has imposed on job creation.
Ep. 7 – Who Protects the Consumer [4/7]. Milton Friedman’s Free to Choose (1980)
Dr. Friedman gives a speech at the 1976 Nobel ceremony.
The disagreement is over the solutions — on what spending to cut; what taxes to raise (basically none ever, according to Boozman); whether or not to enact a balanced budget amendment (Boozman says yes; Pryor no); and on what policies would promote the kind of economic growth that would make this a little easier.
In Feb of 1983 Milton Friedman wrote the article “Washington:Less Red Ink (An argument that the balanced-budget amendent would be a rare merging of public and private interests),” and here is a portion of that article:
Here, for their consideration, are my answers to the principal objections to the proposed amendment that I have come across, other than those that arise from a desire to have a still-bigger government:
**7. The amendment introduces a near economic theory into the Constitution.**
It does nothing of the kind–unless the idea that there should be some connection between receipts and outlays is a new economic theory. The amendment does not even change the present budget process, if Congress enacts a balanced budget that rises by no greater a percentage than does national income. But it does significantly stiffen the requirement for passing a budget that is in deficit or for raising the fraction of our income spent on our behalf by the government.
The amendment recommended by the Senate Judiciary Committee deserves the wholehearted backing of every believer in a limited government and maximum freedom for the individual.
Ep. 10 – How to Stay Free [5/7]. Milton Friedman’s Free to Choose (1980)
Nicknamed “Mars”, Edwin M. Stanton was a pro-Breckinridge Democrat who was Attorney General under President James Buchanan (1860-61) and Secretary of War under Abraham Lincoln and Andrew Johnson(1862-68). Stanton succeeded Simon Cameron to whom he had given legal advice (some of which helped get Cameron fired). Stanton was a sharp and abusive critic at the beginning of the war, calling Mr. Lincoln ‘the original gorilla. Only later, he became a strong supporter of President Lincoln. Six months before Stanton’s appointment to the Cabinet, he wrote former President Buchanan: “The dreadful disaster of Sunday [Battle of Bull Run] can scarcely be mentioned. The imbecility of this administration has culminated in that catastrophe, and irretrievable misfortune and national disgrace are to be added to the ruin of all peaceful pursuits and national bankruptcy as the result of Lincoln’s ‘running the machine’ for five months.”1 However, he sometimes bridled at the President’s directions and occasionally refused to obey them. At times, he conspired with Salmon Chase behind the President’s back. The President valued his tenacity and organizational abilities—if not his arrogance and duplicity, both of which Stanton had honed to virtual art forms.
“Henry Dawes of the Dawes Committee dropped in on the President after the appointment was announced to congratulate him on getting such a man as Stanton for his Cabinet, in the next breath making some remark that led Lincoln to say, yes, there were those who had warned him that the new Secretary of War would run away with the whole concern. ‘We may have to treat him as they are sometimes obliged to treat a Methodist minister I know of out West. He gets wrought to so high a pitch of excitement in his prayers and exhortations that they are obliged to put bricks in his pockets to keep him down. We may be obliged to serve Stanton in the same way, but I guess we’ll let him jump a while first. Besides, bricks in his pockets would be better than bricks in his hat.'”2
Stanton was transformed during 1862 from ardent friend to zealous foe of General George McClellan. He conspired with other cabinet members at the end of August 1862 to block McClellan from command of the Union army. The effort failed when President Lincoln met with McClellan and Halleck without Stanton and appointed him first to command Washington’s defenses and then as overall commander of the Army of the Potomac on September 5. According to biographers Benjamin P. Thomas and Harold Hyman, at a critical Cabinet meeting on September 2, “Stanton joined with Chase in leading a chorus of complaint. Lincoln, clearly distressed to find himself at odds with most of the cabinet, explained that he had acted on his own responsibility for what he considered the country’s best interest. He held no brief for McClellan; he admitted the general had the ‘slows.’ But he also knew the ground around Washington and was qualified beyond anyone else to whip the army back into shape. The remonstrance against McClellan remained in Stanton’s pocked. Lincoln had made up his mind, and experience had taught Stanton that argument in such circumstances was fruitless.”3
The President relied on Stanton and spent a great deal of time at the War Department. According to Secretary of the Navy Gideon Welles, “Stanton does not care usually to come [to the White House], for the President is much of his time at the War Department, and what is said or done is communicated by the President, who is fond of telling as well as of hearing what is new. Three or four times daily the President goes to the War Department and into the telegraph office to look over communications.”4 Although Stanton was sometimes frustrated by the President’s compassion and humor, Mr. Lincoln maintained an easy relationship with the Secretary of War, as this anecdote from Congressman George W. Julian suggests:
It is related that a committee of Western men, headed by [Congressman Owen] Lovejoy, procured from the President an important order looking to the exchange of Eastern and Western soldiers with a view to more effective work. Repairing to the office of the Secretary, Mr. Lovejoy explained the scheme, as he had done before to the President, but was met by a flat refusal.
‘But we have the President’s order sir,’ said Lovejoy.
‘Did Lincoln give you an order of that kind?’ said Stanton.
‘He did, sir.’
‘Then he is a d—d fool,’ said the irate Secretary.
“Do you mean to say the President is a d—d fool?’ asked Lovejoy, in amazement.
‘Yes, sir, if he gave you such an order as that.’
The bewildered Congressman from Illinois betook himself at once to the President, and related the result of his conference.
‘Did Stanton say I was a d–d fool? Asked Lincoln at the close of the recital.
‘He did, sir; and repeated it.’
After a moment’s pause, and looking up, the President said:
‘If Stanton said I was a d–d fool, then I must be one, for he is nearly always right, and generally says what he means. I will step over and see him.’5
General James Fry, a War Department official who had frequent opportunity to observe the relations between the two men, noted such anecdotes were “interpreted as meaning that Lincoln could not control Stanton. The inference is erroneous. Lincoln, so far as I could discover, was in every respect the actual head of the administration, and whenever he chose to do so, he controlled Stanton as well as all the other Cabinet ministers.” Fry related a conflict between President Lincoln and Secretary Stanton which concluded with the following dialogue in Stanton’s office. Stanton said: “Now Mr. President, those are the facts, and you must see that your order cannot be executed.” The President cordially replied: “Mr. Secretary, I reckon you’ll have to execute the order.” Stanton objected: “Mr. President, I cannot do it. The order is an improper one, and I cannot execute it.” The President stared down the shorter Stanton and firmly issued an order: “Mr. Secretary, it will have to be done.”6
Generally, Stanton was much more irritable and explosive than the President. William Crook contrasted the personalities of the two men:
To such expressions of a natural impatience Mr. Lincoln opposed a placid front. More than that, he was placid. He knew Secretary Stanton’s intense, irritable nature. He knew how the excitement of the time tried men’s tempers and shattered their nerves. He himself, apparently, was the only one who was not to be allowed the indulgence of giving way. So Mr. Stanton’s indignation passed unnoticed. The two men were often at variance when it came to matters of discipline in the army. On one occasion, I have heard, Secretary Stanton was particularly angry with one of the generals. He was eloquent about him. ‘I would like to tell him what I think of him!’ he stormed.
‘Why don’t you?’ Mr. Lincoln agreed. ‘Write it all down – do.’
Mr. Stanton wrote his letter. When it was finished he took it to the President. The President listened to it all.
‘All right. Capital!’ he nodded. ‘And now, Stanton, what are you going to do with it?’
‘Do with it? Why, send it, of course!’
‘I wouldn’t,’ said the President. ‘Throw it in the waste-paper basket.’
‘But it took me two days to write —‘
‘Yes, yes, and it did you ever so much good. You feel better now. That is all that is necessary. Just throw it in the basket.’
After a little more expostulation, into the basket it went.7
According to historian Allen Nevins, Stanton’s “arbitrary temper was accentuated by his tendency to jump to conclusions. He would impetuously take a stand just to prove his authority, as he did early in the war in trying to destroy the invaluable Sanitary Commission. It was accentuated also by his intolerant, vindictive nursing of prejudices and grudges. He almost never admitted himself wrong, tried to see a situation from an antagonist’s eye, or showed generosity to a foe either victorious or defeated.”8
Stanton had a deserved reputation for irascibility but he also had a softer side, as revealed by an incident reported by Homer Bates, who worked in the War Department’s telegraph office: “One evening, in the summer of 1864, I rode out to the Soldiers Home with important despatches for the President and Secretary of War, who were temporarily domiciled with their families on the grounds of the Home. I found Stanton reclining on the grass, playing with Lewis, one of his children ..He invited me to a seat on the greensward while he read the telegrams; and then, business being finished, we began talking of early times in Steubenville, Ohio, his native town and mine. One of us mentioned the game of ‘mumble-the-peg,’ and he asked me if I could play it. Of course I said yes, and he proposed that we should have a game then and there. Stanton entered into the spirit of the boyish sport with great zest , and for the moment all the perplexing questions of the terrible war were forgotten. I do not remember who won.'”9
Because of his fragile health, Stanton tried to resign shortly after the Confederate surrender at Appomattox in April 1865, but his resignation was rejected by President Lincoln. “‘Stanton,’ reported his biographer Fletcher Pratt, ‘you cannot go. Reconstruction is more difficult and dangerous than construction or destruction. You have been our main reliance; you must help us through the final act. The bag is filled. It must be tied and tied securely. Some knots slip; yours do not. You understand the situation better than anybody else, and it is my wish and the country’s that you remain.'”10
Like Ward Hill Lamon, he had a continuing concern for the President’s safety and the inadequacy of his security arrangements. He tried to keep President Lincoln from going to the theater on April 14, 1865 by ordering one of his subordinates, Major Thomas Eckert, not to accompany the Lincolns. After Mr. Lincoln died, Stanton announced: “Now he belongs to the ages.” Stanton organized the response to Lincoln’s assassination, the pursuit of assassin John Wilkes Booth, and the prosecution of the assassination conspiracists.
Shortly after President Lincoln’s assassination, John Hay told Stanton: “Not everyone knows, as I do, how close you stood to our lost leader, how he loved you and trusted you, and how vain were all the efforts to shake that trust and confidence, not lightly given and never withdrawn.”11
Stanton was the lead attorney on McCormick Reaper patent case on which Lincoln also served as counsel. Later, Stanton fought over Reconstruction with President Andrew Johnson, who tried to remove him. Stanton was named to the Supreme Court by President Grant shortly before Stanton’s death. Born poor, determined and imperious, devious but devoted, self-centered and self-confident, quick to judge and condemn, irritable and irascible, Stanton was driven by ambition as well as bile.
Milton Friedman on Phil Donahue Show in 1980 provides a direct and to-the-point defense of capitalism and free trade. He explains how governmental regulations, no matter how well-intended, are inevitably infiltrated by business interests which use governmental power to stifle competition
The disagreement is over the solutions — on what spending to cut; what taxes to raise (basically none ever, according to Boozman); whether or not to enact a balanced budget amendment (Boozman says yes; Pryor no); and on what policies would promote the kind of economic growth that would make this a little easier.
In Feb of 1983 Milton Friedman wrote the article “Washington:Less Red Ink (An argument that the balanced-budget amendent would be a rare merging of public and private interests),” and here is a portion of that article:
Here, for their consideration, are my answers to the principal objections to the proposed amendment that I have come across, other than those that arise from a desire to have a still-bigger government:
**5. The amendment will be ineffective because (a) it requires estimates of receipts and outlays which can be fudged; (b) its language is fuzzy; (c) the Congress can find loopholes to evade it; (d) it contains no specific provisions for enforcement.**
(a) It will be possible to evade the amendment by overestimating receipts–but only once, for the first year the amendment is effective. Thereafter, section 2 of the amendment limits each year’s statement receipts to the prior year’s statement receipts plus the prior rate of increase of national income. No further estimates of budget receipts are called for. This is one of the overlooked subtleties in the amendment.
Any further fudging would have to be of the national-income estimates. That is possible but both unlikely and not easy. What matters is not the level of national income but the percentage change in national income. Alterations of the definition of national income that affect levels are likely to have far less effect on percentage changes. Moreover, making the change in income artificially high in one year will tend to make it artificially low the next. All in all, I do not believe that this is a serious problem.
(b) The language is not fuzzy. The only undefined technical term is “national income.” The amendment also refers to “receipts” and “outlays,” terms of long-standing usage in government accounting; in section 4, total receipts and total outlays are defined explicitly.
Nor is the amendment a hastily drawn gimmick designed to provide a fig leaf to hide Congress’s sins. On the contrary, it is a sophisticated product, developed over a period of years, that reflects the combined wisdom of the many persons who participated in its development.
(c) Loopholes are a more serious problem. One obvious loophole–off-budget outlays–has been closed by phrasing the amendment in terms of total outlays and defining them to include “all outlays of the United States except those for repayment of debt principal.” But other, less obvious, loopholes have not been closed. Two are particularly worrisome: government credit guarantees, and mandating private expenditures for public purposes (e. g., antipollution devices on automobiles). These loopholes now exist and are now being resorted to. I wish there were some way to close them. No doubt the amendment would provide an incentive to make greater use of them. Yet I find it hard to believe that they are such attractive alternatives to direct government spending that they would render the amendment useless.
(d) No constitutional provision will be enforced unless it has widespread public support. That has certainly been demonstrated. However, if a provision does have widespread support–as public-opinion polls have clearly shown that this one does–legislators are not likely to flout it, which brings us back to the loopholes.
Equally important, legislators will find it in their own interest to confer an aura of inviolability on the amendment. This point has been impressed on me by the experience of legislators in states that have adopted amendments limiting state spending. Prior to the amendments, they had no effective defense against lobbyists urging spending programs–all of them, of course, for good purposes. Now they do. They can say: Your program is an excellent one; I would like to support it, but the total amount we can spend is fixed. To get funds for your program, we shall have to cut elsewhere. Where should we cut?” The effect is to force lobbyists to compete against one another rather than form a coalition against the general taxpayer.
That is the purpose of constitutional rules: to establish arrangements under which private interest coincides with the public interest. This amendment passes that test with flying colors.
___________________________________________
The Queen and The Duke of Edinburgh travel from Buckingham Palace to Westminster Abbey
Princess Eugenie and Princess Beatrice
Princess Eugenie of York (L) and Princess Beatrice of York arrive to attend the Royal Wedding of Prince William to Catherine Middleton at Westminster Abbey on April 29, 2011 in London, England. (Photo by Pascal Le Segretain/Getty Images)
Also contrary to Republican mythology, the infamous Bush tax cuts did anything but increase revenue, as tax cuts never do. As Fiscal Times columnist Bruce Bartlett shows, federal revenues dropped from 20.6 percent of GDP in 2000 to 18.5 percent in 2007.
I am starting a new series today that breaks down Lyon’s claims and take a look at the cold hard facts.
Bush Tax Cuts: President George W. Bush’s 2003 tax cuts generated a massive increase in federal tax revenue and were followed by 52 consecutive months of economic growth. From 2004 to 2007, federal tax revenue increased by $780 billion, the largest four-year increase in American history. Total federal revenue from 2003 to 2007:
2003 — $1.78 trillion
2004 — $1.88 trillion
2005 — $2.15 trillion
2006 — $2.40 trillion
2007 — $2.56 trillion
Ep. 10 – How to Stay Free [3/7]. Milton Friedman’s Free to Choose (1980)
________________________________________________
Abraham Lincoln and Allan Pinkerton
There is perhaps no name more synonymous with security than that of Allan Pinkerton. Pinkerton was an important ally of Abraham Lincoln, and actually played an important role in thwarting an assassination plot in 1861. Allan Pinkerton is pictured to the left in the image above. This photograph was taken on the Battlefield of Antietam shortly after the completion of the battle.
I really enjoyed the movie “The Conspirator” and I have been posting articles of interest on the people involved in this historical event. Of course, Abraham Lincolin is the primary figure and below is an interesting article on him.
Monday, Jun. 27, 2005
Life Behind the Legend
From his obscure birth to his shocking death, Abraham Lincoln provided all the ingredients for a myth that grows with each passing generation. A hardworking, self-taught farm boy grows up to become President, leads the nation through a wrenching cataclysm and is killed at the moment of victory.
Behind those bare facts are many Lincolns: lawyer, master politician, storyteller, warrior, jokester and man of near constant sorrow.
General WilliamT. Sherman, no soft touch, provides one epitaph: “Of all the men I ever met, he seemed to possess more of the elements of greatness, combined with goodness, than any other.”
CHILDHOOD
Abraham Lincoln born Feb. 12, 1809
AGE 2 Family moves a few miles for better farmland. Abe’s brother Thomas dies in infancy the next year. Abe also has an older sister, Sarah
AGE 7 Family moves to a new farm in southern Indiana
AGE 9 Lincoln’s mother Nancy dies from “milk sickness” after drinking milk from a cow that has eaten poisonous snakeroot. Lincoln would later write of sorrow coming to him with “bitterest agony” when he was young
AGE 10 Abe’s father Thomas Lincoln remarries, bringing Sarah Bush Johnston and her three children into the family. She and Abe had a warm relationship. Years later, she called him “the best boy I ever saw”
EARLY ADULTHOOD
AGE 22 Lincoln works on a river flatboat, then moves to New Salem, Ill., and works as a clerk and a surveyor. Interest in politics begins
AGE 23 Lincoln enlists in a militia during the Black Hawk War but sees no fighting. He would later joke about his time in combat: “I fought, bled, and came away … I had a good many bloody struggles with the musquetoes.”
AGE 25 On his second try for public office, Lincoln is elected to the Illinois legislature. He would go on to serve four terms
AGE 27 After years of studying in his spare time, Lincoln gets a state law license. The next year he moves to Springfield, Ill., and begins a law partnership while living above a store
AGE 33 After a rocky courtship, Lincoln marries Mary Todd, 23, from a well-to-do Kentucky family. Their first child, Robert, is born nine months later. Mary would live to bury three of her four children
NATIONAL SCENE
AGE 37 Elected to U.S. House of Representatives. Lincoln serves only one term but remains active in party politics
AGE 40 Declines offer to become Governor of Oregon
AGE 45 Elected again to Illinois legislature but resigns to run for U.S. Senate. He loses
AGE 47 Attends first Republican Party Convention
AGE 49 Accepting the nomination to run for U.S. Senate against Stephen A. Douglas, Lincoln declares: “A house divided against itself cannot stand. I believe this government cannot endure, permanently half slave and half free.” Lincoln loses the race but gains national attention
THE PRESIDENCY
AGES 51-56 Elected the 16th President of the U.S. with 40% of the vote in a four-way race. Within months, seven Southern states secede to form the Confederacy. Four more would follow. The Civil War begins
As the war drags on, political and military necessity drives Lincoln to issue the Emancipation Proclamation in 1863
Lincoln is re-elected in 1864. Five days after Robert E. Lee’s surrender, Lincoln goes to a play at Ford’s Theatre
APRIL 14, 1865
The First American Presidential Assassination
“Our cause being almost lost, something decisive and great must be done,” famous actor and Southern sympathizer John Wilkes Booth said. “I am sure that posterity will justify me.” During Act III, Scene II of a farce called Our American Cousin, he struck
THE SCENE President and Mrs. Lincoln were seated in a box with Major Henry Rathbone and his fiance Clara Harris. General Ulysses S. Grant and his wife had been expected but begged off at the last minute
1 – Booth, well known in the theater, enters the presidential box and bars the door behind him
2 – About 10:15 p.m., he points a derringer at the back of Lincoln’s head and fires once
3 – Rathbone tries to grab Booth, but Booth slashes him severely with a hunting knife
4 – Booth leaps to the stage, but his spur catches on a draped flag. He breaks his leg in the fall. Fleeing, Booth shouts “Sic semper tyrannis” (Thus always to tyrants), the state motto of Virginia. Some say he added, “The South is avenged”
DEATH OF A PRESIDENT Lincoln never regained consciousness and died in a house across from the theater at 7:22 the next morning
FAMILY LIFE
Marries Mary Todd …. Died 1882
Son Robert …. Died 1926
Son Eddie …. Died 1850
Son Willie …. Died 1862
Son Tad …. Died 1871
Sources: Abraham Lincoln Presidential Library and Museum; National Park Service; Speeches and Writings of Abraham Lincoln (Library of America); Memoirs of General W.T. Sherman (Library of America); Lincoln by David Herbert Donald (Simon & Schuster)
___________________________________________
The Last Picture Taken of Abraham Lincoln
This is a dramatic portrait of Abraham Lincoln. It was taken on April 10, 1865 . . . four days before his Assassination. It is interesting to note the look on Lincoln’s face. While four years of Civil War have had a dramatic effect on the facial features of the president, there is a sense of calm and peace on his face in this image . . . as if he knows that he has run a good race, and completed his task.
The Daily Hatch 