Star Parker with a clear headed view of our fiscal cliff. The Obamanistas have already begun round two of their effort to put the final nails in the coffin of capitalism. They are already floating their tax the rich some more trial balloons as their opening volley over the debt limit. The ground breaking agreement Obama just signed will add $4.6 trillion to the National Debt over the next ten years. If interest rates were just to revert back to a normal rate of 5% (where they were in 2007), the interest on our debt would add another $9 trillion to the national debt in ten years. We are a dead country walking and no one is willing to admit it.
If we want Medicare, Medicaid, Social Security, Food stamps, Foreign aid, Disaster relief, and policing the entire world, then we’ve got to fucking pay for it. Total it up and then have everyone in the country pony up the dough to pay for it now. We can’t shove the bill into the drawer for future generations. The adults in this country have to act like adults and accept the financial consequences of their desires. The liberals don’t want to pay for their welfare state and the neo-cons don’t want to pay for their warfare state. The reality will blow when the whole corrupt, delusional farce implodes with no warning.
U.S. fiscal policy is detached from reality
Sunday, January 6,2013
Here are two ways to think about the “fiscal cliff” deal that just took place in Washington.
You are sitting at dinner and television is on, broadcasting the news. There is one story after another about things you don’t want to hear. Recession. Unemployment. You walk over to the TV, turn it off or switch to a sitcom or sporting event and sit back down to finish your meal in peace.
Or a more personal version.
You take your mail out of the mailbox and see the bills that are due. Without opening the envelopes, you throw them into a desk drawer with vague intention to open them at some point. Or you have voice mails from creditors that you erase and then head out to a show.
There is an inconvenient truth called reality. There are aspects of reality — things involving behavior and obligations that, unlike a rock falling on your head, can be denied so that, at the moment it’s like it’s not there.
Our political “friends” in Washington welcomed in 2013 for us by turning off the TV, by throwing the unopened bills into the drawer, allowing Americans to enter the New Year under the illusion that something fiscally meaningful has been solved or accomplished.
No one can claim that the problem is lack of information.
Open any newspaper or magazine and there is sure to be at least one report about the spending of our federal government, which now takes almost $1 of every $4 produced by the American economy, or about our trillion dollar budget deficits, to which no end appears in sight, or about our national debt which soon will exceed the value of all the goods and services our whole economy produces in a year, or about the shortfalls of Social Security and Medicare, which together is about five times that.
Doesn’t seem to matter. Turn off the TV. Throw the bills in the drawer. Everything will work out. Always does.
Supposedly what we want is a growing, prosperous nation.
But symptomatic of being detached from reality is behaving in ways inconsistent with what you think you are trying to do.
Economic growth happens when success and risk taking is rewarded and sloth and failure is not.
But part of the spending spree that has been going on over recent years has involved bailing out and subsidizing failure — auto companies, banks, green energy.
Yet successful small businesses are punished in this fiscal cliff bill. According to the Wall Street Journal, a 2011 Treasury Department study indicated raising taxes on incomes over $500,000 would affect about 750,000 small business and that according to one survey during the fiscal cliff talks, 29 percent of small business heads indicated the result would be less hiring and 32 percent indicated they would invest less.
Meanwhile, not working is being subsidized by further extending unemployment benefits, already having been extended to a mind-boggling 99 weeks.
Which all goes to explain why I was and am opposed to this agreement, which some are celebrating.
That inconvenient truth called reality is something Americans badly need to connect with. If we want all this spending, pay for it. That means everyone. Let’s get the real numbers on the table and lets get out our checkbooks.
If you don’t want to pay, cut the spending.
In the words of the great 19th century French political economist Frederic Bastiat, “When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe.”
Star Parker is an author and president of CURE, Center for Urban Renewal and Education. She can be reached at www.urbancure.org.
Mr. Happy says:
From the Chris Weber Gold & Silver report;
Subject your tax increases
It is clear to me that the events of the last few days will only mean more stagnation. This is
because payroll taxes are going to be raised on nearly 80 million taxpayers. This is going to
come as a nasty surprise to those who earn the least. For instance, those earning just
$13,000 will pay $260 more, $25,000 will pay $500 more, $50,000 pay $1,000 more,
$100,000 pays $2,000 more, and then it falls, percentage-wise from there. Those making
$200,000 pay $2,274 more, the same for $300,000 and up. Thus, the lowest-earning
Americans and the typical family will be paying the highest taxes since 2008, and this news is
pretty much covered up. When this hits, it will be a huge drain on those who can least afford
it.
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7th January 2013 at 9:17 am
Administrator says:
Ticker ® Commentary on The Capital Markets Posted 2013-01-07 08:36
by Karl Denninger
This Morning On CNBS – More BS!
Oh do come on.
I just flipped it on and heard the following (paraphrased):
“Nobody wants to leave this bill (in the form of a lower standard of living) to our children and grandchildren.”
Utter and complete crap.
My own parents told me more than a decade ago, when I bought this very point up as their grand-daughter was crawling around on their carpet at their feet, that they were entitled to all of those benefits they were “promised” even though my father, as a CPA, knew damn well that the money had already been spent.
Those who say that “nobody wants to screw our kids, grandkids and those not yet born” is simply lying. The fact of the matter is that the majority of so-called “boomers” and the so-called “greatest generation” not only do want to do exactly that they know good and damn well that they voted for policies through their entire life that already spent every single nickel taken in for those entitlement programs! They know they money is gone, it’s gone because they demanded it be gone, and now they want to spend it again having already done so!
We will never solve what’s wrong with this country’s finances until we hold people’s feet to the fire. When my own family, which contains a CPA and thus is fully aware of exactly how arithmetic works, tells me that they’re entitled to these programs despite being able to pay on their own for their retirement needs (due to being reasonably fiscally astute during their working lives) I do not want to hear crap like I did this morning on CNBS.
We must honestly face the fact that our Seniors do want to bend our youth over the table and will screw them blind. They have done so thus far with their votes and lobbying organizations (AARP anyone?) and will continue to do so if permitted to continue precisely because those youth are too young to effectively resist.
Further, these very same people are in our schools as teachers and administrators and they intentionally omit any sort of practical instruction in mathematics classes when it comes to exponents and how they work in the real world.
This is not an accident, it’s intentional; were they to explain how this will impact those kids in the classroom there would be an all-on revolt by our youth right here and now.
Those who are adults and who do not agree that our children and grandchildren should cover the puerile and outrageous fiscal behavior by our Seniors and those who are not yet there in age should both teach our young exactly what’s going on and urge them to say out loud: I WILL NOT PAY.
Cut the crap CNBC and tell the truth.
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7th January 2013 at 9:21 am
card802 says:
Michigan borrowed $3.2 Billion from the federal government to pay for extended unemployment.
Just got the letter from the state of Mich with what they spin as great news for all small business.
Our legislators have refinanced that debt to 1.8% interest from the federal rate of 2.9% so it will “save” Michigan small business $130 Million in additional interest over the life of the transaction.
Last year my obligation assessment was $42.00 per employee, this year it will be $64.00 per employee and go up another 50% next year. It will keep rising because more and more small business’s are left to pay the bill.
Happy days are here again……
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7th January 2013 at 9:57 am
Outtahere says:
First of all, I never voted for any of this crap that has piled up at all of our doors. Nor did any of my friends or relatives. Who DID vote for it is the career politicians that we DID allow to stay in office. That part I will take the blame for, but not how the money has been or is being spent.
Having said that, if we REALLY wanted to bring the govt. to a standstill without firing a shot, we would ALL stop paying income taxes which the scumbags in Washington continue to waste and redistribute as THEY see fit and WHERE they see fit. Only through a concerted effort like that can we get their attention and effect any meaningful change. Yes, they will come after us and threaten to take away our assets, but they can’t foreclose on the whole country. Other than that, we’ll just sit in the stew pot as it warms up more and more until our ass is cooked and we’re broke; or it all falls apart and everyone says screw it!
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7th January 2013 at 10:10 am
card802 says:
From Market Watch today:
“Paul Krugman, the liberal economist who pens a widely read column for The New York Times, on Monday joined the calls for the U.S. to mint a $1 trillion platinum coin as a way out of the debt ceiling.
The idea is that the Treasury Secretary can take advantage of a loophole allowing him to mint a platinum coin of any denomination. Print a $1 trillion coin, and presto, there’s a $1 trillion in spare capacity under the debt ceiling. Plus, since the coin isn’t going to make it into circulation, it should not be inflationary. And further, it still leaves Congress in control of the purse.
“It’s easy to make sententious remarks to the effect that we shouldn’t look for gimmicks, we should sit down like serious people and deal with our problems realistically. That may sound reasonable — if you’ve been living in a cave for the past four years. Given the realities of our political situation, and in particular the mixture of ruthlessness and craziness that now characterizes House Republicans, it’s just ridiculous — far more ridiculous than the notion of the coin,” Krugman writes.”
“Sit down like serious people and deal with our problems realistically” WTF?
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7th January 2013 at 10:20 am
DaveL says:
“Print a $1 trillion coin, and presto, there’s a $1 trillion in spare capacity under the debt ceiling. Plus, since the coin isn’t going to make it into circulation, it should not be inflationary.”
Isn’t the Treasury then going to print $1 trillion paper dollars to spend that are backed by that $1 trillion dollar coin? The coin may not be inflationary because it isn’t put into circulation, but the dollars will be, won’t they?
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7th January 2013 at 10:52 am
underfire says:
I could make a pretty good case that the stealing from our children over the last few decades has been what has caused our current fiscal crises. If we hadn’t been artificially stimulating our economy we would actually now have an economy we could pay for.
We would have since made the hard decisions that are now impossible. We would have a less clutching monstrosity of a military. Not quite so many billionaires needing continuous further enrichment. Flash mobs would not be tearing up the cities, and the entire entitlement community would be much smaller and demanding. We wouldn’t have been so hell bent on burning up our resources, leaving a little more for the kids. I could go on.
Maybe Universal Justice is coming into play. We’re going to reap what we’ve sown. The absolutely immoral act of stealing from our children is unleashing all these plagues, but the shame of it is that the younger ones are going to be caught up in it too.
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7th January 2013 at 11:44 am
Eddie says:
A trillion dollar coin that does not circulate is NOT money, and we can’t, as a nation, spend it.
We use money to buy stuff. Right now we have a 16 billion+ deficit from giving away money, which is ALL being spent on stuff. Real stuff.
That’s such a big number it’s surreal and hard to comprehend. I’ve been trying to figure out a way to even express it, and here’s the best I can come up with. Correct my math if I’m wrong, but:
The entire petroleum reserve of the planet is estimated to be between 2 and 3 trillion barrels.
Oil is roughly $100 a barrel at the moment.
So…in terms of stuff (the mostly important stuff we use) the deficit is equal to 8 to 10 per cent of all the oil reserves in the whole world.
So…I don’t see how a trillion dollar coin..or a magic bullet…is going to buy us any more oil, or any more medical care, or food. What total and absolute bullshit.
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7th January 2013 at 12:16 pm
Eddie says:
Oops, admin, cull one of those. Sorry.
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7th January 2013 at 12:32 pm
David says:
Game over. The people that are being asked to pay for it are the ones voting against it. Problem is, more takers than givers. Barak Chavez Mugabe Obama wants the system to collapse so he can have an excuse to declare a state of emergency and start putting out executive orders to force what he has always wanted. He will disenfranchise the voters, congress and ultimately the Supreme Court.
That Obama, he is a stand up guy! And, anybody that voted for him is either stupid or part of the game.
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7th January 2013 at 1:21 pm
card802 says:
Found in the comment section on Marketwatch about Krugman:
“What is the Opposite of Nobel? Le bon…
If Le Bon means ‘The Good’ in French, what does Nobel mean?”
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7th January 2013 at 2:41 pm
Administrator says:
Cliff Asness: “Nobody, Left Or Right, Really Thinks The Math Works, No Matter What They Say In Public”
Submitted by Tyler Durden on 01/07/2013 14:47 -0500
Originally posted at The American,
We Are the 98 Percent
The only way to finance a big European-style state is to have it paid for by massive taxation of everyone, mostly the middle class. Right now, we are avoiding honest debate on this fact.
The central issue of our time is the debate over the size and scope of government. Two unpleasant but undeniable mathematical truths limit the feasible policy choices. The recent sound and fury of the fiscal cliff follies in the end signified nothing because the resolution was in fact just a denial of both truths.
The first truth is that the current tax rates cannot support the promises made to middle-class Americans. The most unaffordable items in fiscal projections are Social Security for everyone and government-sponsored health care for the middle class. You cannot preserve these even with Draconian slashing of military, infrastructure, welfare, education, and other expenditures.
The second truth is that you cannot pay for the Life of Julia, or any vision of a cradle-to-grave welfare state, without massive and increasingly regressive middle-class taxes. The poor don’t have the money to pay for a European-style welfare state, and the rich, rich as they are, don’t have anywhere near enough.
Not only that, it’s easy to tax middle-class assets and transactions — things like payrolls, sales, and real estate — but soaking the rich means taxing investments. Investments are complicated and can be restructured to minimize taxes. Also, investments are the lifeblood of economic growth. Raising significantly more taxes from the rich also requires higher marginal tax rates — and their rates are already quite high. High marginal rates distort the economy and yield less revenue than anticipated because they increase the rewards for legal and illegal tax avoidance.
That’s not to say it’s impossible to get more money from the rich, but it’s tricky and past attempts have typically been less effective than forecast and often counterproductive. Moreover, even under the most optimistic assumptions, taxes on the rich — or taxes on businesses, financial transactions, or anything else aimed at the rich (and often hitting others) — will still not cover a large fraction of the costs of a European-style welfare state. Ask the Europeans — they’ve tried it all and failed.
To be in our political center today, you have to deny both these truths and pretend that if we sharpen our pencils and make a bunch of wildly optimistic assumptions, we can close a few tax loopholes, cut some waste from spending, and maybe nudge upper-income tax rates up a little, and continue merrily on the same big-and-growing-bigger government path without unfortunate consequences. This is a “balanced approach,” as it ignores both mathematical truths equally, but the denial of clear reality means this approach is doomed to fail.
Surprisingly, many progressive pundits are moving away from their traditional complaint that America’s tax code is too regressive, favoring the rich. They are starting to tell us, albeit only after an election mainly contested on these issues, the truth: to fund the European-style social welfare state which they advocate, we must tax everyone more.
For example, Ezra Klein, blogging for the Washington Post on December 7th, writes, “The need for tax receipts to grow underscores the necessity of finding an efficient way to collect them. Experts say that should include tax reform and new tax sources that take the pressure off the income tax, such as a value added tax or a carbon tax.”
Klein is mild compared to Eduardo Porter, who writes in the New York Times on November 27th, “Many Americans may find this hard to believe, but the United States already has one of the most progressive tax systems in the developed world” and “Taxes on American households do more to redistribute resources and reduce inequality than the tax codes of most other rich nations.” Mr. Porter, it is shocking to see you argue in the New York Times that the United States is a progressive paragon! Those in the Occupy Wall Street movement must be surprised to learn that you, one of their standard-bearers, think the United States already does considerably more redistribution than Western Europe!
These pundits know the math. To achieve anything like the European-style entitlement state they advocate, we need to tax everyone a lot more, not just the 1 percent. Despite all the drum circles protesting the inequitable distribution of resources, the wealthy just don’t have enough. The middle class and even the poor must step up to carry more of the burden if this is our desired endgame.
In his November 27th op-ed, Porter also writes “The experience of many other developed countries suggests that paying for a government that could help the poor and the middle class cope in our brave new globalized world will require more money from the middle class itself,” and “Big-government social democracies, by contrast, rely on flatter taxes to finance their public spending.”
In a similar vein, Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities and a former economist for Vice President Biden, writes, “It’s perfectly reasonable for the White House to begin collecting more revenue from folks who have done by far the best in pretax terms.” But wait a moment for it — he then adds, “But ultimately we can’t raise the revenue we need only on the top 2 percent.”
Note the use of “2 percent,” a number the president himself has begun using more often. It is a small but telling evolution from decrying the “1 percent.” One wonders if the Occupy Wall Street protestors have corrected their signs to read “We are the 98 percent”? Are those in the 98th percentile already saying “They came for the 1 percent and I said nothing…”? According to the more honest progressive pundits above, it will not be long until the 50th percentile is saying it too.
If we take the logic of a Porter or Klein or Bernstein seriously — and we should — their prescription for taxes is nearly the opposite of the president’s public stance. Let’s say what Porter and others are saying but in plain English (or, failing that, let’s just underline a lot).
If we are to redistribute like Europe, we must tax like Europe. The middle class must pay more taxes and they must pay a larger share of the tax burden. The president, in contrast, is vowing to raise taxes on only the rich. One wonders if President Obama would have won the election if he had warned voters that “to pay for Obamacare, stimulus spending, increased regulatory oversight, and the rest of the big government wish list I believe important, we need to raise the level and share of taxes paid by the middle class”? One also wonders why more progressive pundits were not as clear about their goals and the necessities pre-election as they are starting to be now.
The choice the country faces is simple. We can have big government and the Life of Julia (at least for a while, but that is another essay), with everyone paying through the nose and the middle-class share of taxes rising not falling, or we can return to the American tradition of limited government, with everyone paying a smaller burden to the state, with relatively limited services for, and relatively light taxes on, the middle class. What we cannot have is the Life of Julia at no additional burden to 99 out of 100 of us. Nobody, Left or Right, really thinks that math works, no matter what they may say in public.
So what happens if we continue down the current path, with perhaps some small amount of revenue raised from some additional taxes on the rich? Remember, the only way to finance a big European-style state is to have it paid for by massive taxation of everyone, mostly the middle class. Right now we are avoiding honest debate on this fact, perhaps because those desirous of this change know the middle class would rebel if it saw the future bill it will have to pay. Instead, large government benefits are being continued and increased, and still new ones introduced, with little accurate discussion of who will ultimately pay.
What happens historically when benefits are bestowed without a bill also coming due is that we get hooked on them. Then, even when they become disasters not worth their cost, people are terrified to change them, as giving something up is indeed quite frightening.
Of course, as a byproduct of this growth in the state, many of us believe we also suffer a terrific erosion of liberty, free-enterprise, and individual responsibility and initiative.
Finally, after we become fully addicted to the latest increase in big government, the bill will ultimately be presented to everyone including, and in all likelihood over-emphasizing, the middle class and the poor. The people who were promised they would be untouched will see the largest proportional hikes. That’s exactly what has happened in Europe. We have seen this movie before, but this time we don’t need subtitles.
In other words, if we told everyone the ultimate destination right now, the country would likely reject it. But if built up in this piecemeal manner with benefits up front and the bill presented later, it can become reality.
The way to boil the frog of freedom is slowly.
We may, with open eyes, choose the reassuring security of big government with a far larger safety and subsidy net and far higher taxes for all — by no means just the “rich” but in fact more so on the middle class — and likely the sclerotic growth and dependency of Europe. Or we may choose the opposite. But we deserve an honest debate about this critical issue. A debate missing from the last election.
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7th January 2013 at 2:59 pm
AWD says:
I really liked this diagram. Can you tell where we are right now?
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7th January 2013 at 3:46 pm
Administrator says:
We’re at the end of Crisis 3.
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7th January 2013 at 4:19 pm
underfire says:
Administrator says:
Cliff Asness: “Nobody, Left Or Right, Really Thinks The Math Works, No Matter What They Say In Public”…..”The middle class and even the poor must step up to carry more of the burden”..
Good article. And the author and everyone else knows that the poor and middle class can’t hold up the system as we know it either. Too many black holes there already, the government take, increasing fuel costs with all it’s related effects, out the roof health care costs, etc. We’re already in the consuming our self mode.
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7th January 2013 at 5:00 pm
ThePessimisticChemist says:
@underfire – ” Too many black holes there already,”
I see what you did there.
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7th January 2013 at 5:16 pm
DaveL says:
I would like someone to post a chart/graph that shows what income is on average for the top 1%, 2%, 3%, 4% etc, all the way to the last percent, and what they pay on average in federal income taxes, and who is really getting fucked by our tax code.
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7th January 2013 at 5:17 pm
DaveL says:
And, Oh, what is MIDDLE CLASS INCOME?
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7th January 2013 at 5:18 pm
underfire says:
PC
I didn’t mean black holes to mean black holes.
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7th January 2013 at 5:26 pm
Stucky says:
“And, Oh, what is MIDDLE CLASS INCOME?” ———– DaveL
Monies you earn, 100% thereof, which belongs to the government.
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7th January 2013 at 5:28 pm