The house of cards will crash. Call it peak government. The game is up.

If we will not impose discipline on ourselves, the market will do it for us.
- Monty

It amazes me that this far in the recession the only solution they have is to increase taxes. It doesn’t seem like any State of the Union or any of the European nations outside of Iceland and Finland have smaller operating budgets today than in 2007. Just tax, tax, tax and spend your way out.

Governments are choosing to do all they can to perpetuate the status quo – focusing on keeping things together just through the next quarter, through the next election cycle. And it’s clear that their best efforts are meeting with less and less as the situation worsens.
- Macleod

Example #1 – the last paragraph says it all:

Malloy’s strategy is flawed because he enacted the largest tax increase in Connecticut history and the state is still facing a deficit.

Example #2 – In January 2011:

Illinois lawmakers raised income tax rates by 46 percent on businesses and a record 67 percent on individuals. And with this flood of new tax dollars, urgent pressure to pass lasting structural spending reforms deflated. The state is still broke. Not only still broke, but they borrowed more money last year further ballooning state debt.

One of the problems for politicians is GDP. GDP in of itself isn’t bad. But insert a bureaucrat statistician and GDP becomes a numbers game.

Take for instance efficiency. Efficient producers such as the manufacturers and suppliers of electronic goods and services, who reduce their prices over time, see their output diminished as a proportion of the statistical whole, while those that maintain their prices by monopolistic or subsidized means keep and even increase their weightings.

Alasdair Macleod continues and spells it out:

if you try and measure an economy by GDP, all you are measuring at the end of the day is the amount of money in the economy. It is not a measure of economic progress and/or true economic growth.

You have money in the private sector where value is produced and competitive advantages are gained – Keynesians are taking money away from the productive economy and injecting it into something less productive or not productive at all.

The money from the productive area of the economy is the area that needs to progress for the world to move forward from this global malaise.

Not only have politicians completely deceived the public over economic growth, but they deceive themselves. For this reason they are unequipped to deal with the developing crises, which are the result of earlier interventions. They now claim that economic growth, the ultimate source of tax revenue and government solvency is jeopardized by spending cuts. Statistically, this is obviously true, because if you take away government costs and support for unwanted economic activities, GDP will fall. But the important point that is commonly missed is that a government which stops draining an economy of its private sector resources actually releases them to be deployed more effectively for the common benefit by those randomly-acting entrepreneurs.
– Alasdair Macleod

The next economic cycle? The Facebook ipo flop – this was as good as any confirmation that we are entering it. And this one is going to be nasty.

IMF Managing Director Christine Lagarde told Harvard graduates they faced one of the most challenging economic times since the 1930s…pointing out the inability of 75 million young people to find a decent job.

Barron’s has an article up about the Baltic Dry Index no longer being a relevant metric because of too many ships and not enough trade.

I read China defaulted on coal contracts this month.

Spain, France, and Germany just passed new border controls laws. When the EU collapses, people are going to attempt to flee with their money as this email from a family member in Europe illustrates:

Shortly after I arrived, the merchants did not want dollars or to be paid by credit cards issued from American banks (no Visa, no MasterCard etc) and they covered up the slots to swipe American credit cards on their machines and asked for cash or a bank card with a “chipknip” from a euro bank…The banks are undercapitalized, they are being asked to increase their capital requirements. … When we drove across the German border from Switzerland, there were armed border patrols.

Hattip – Brother Bob, TAB, ZeroHedge, Monty

Have you ever seen one of those movies where a car is speeding towards a cliff and just before it heads over the edge the driver jumps out and the car flies into the abyss and maybe crashes and ignites into a ball of flame?

If you haven’t don’t worry, you’re about to live one… and unfortunately for you, you’re not the driver who escapes, you’re a passenger strapped in for the excitement. President Obama is the driver and the way he’s running his campaign, it looks like he’s getting ready to jump…

As you probably guessed, the car in this story is the United States economy. Everyone knows that the economy is… anemic to say the least. The unemployment rate, which is now down to 8.1% is so only because 2.2 million people have given up looking for work since Obama’s inauguration. If those people were still looking for work, if they had any expectation of actually finding a job, the unemployment rate would be 11%.

As bad as two million people being so discouraged that they quit looking for work altogether is, there are a pair of dangers right around the corner that may mushroom that number, and take millions of jobs with them.

The first has to do with taxes. Unless it’s fixed, in January 2013 the tax code is going to create what the Washington Post has christened Taxmageddon. Between the expiration of the Bush tax cuts, the beginning of the taxes within ObamaCare, and a variety of other tax changes, federal taxes are going to increase by a total of $500 billion next year. That means that the government is going to be sucking $500 billion out of the private sector, i.e. your pocket, to fund its turtle tunnels, green energy boondoggles and Las Vegas conventions. To put that amount in perspective, that $500 billion you will no longer have to spend is more than the revenues of Apple, Target, Coke, Disney, McDonalds and Procter & Gamble combined! Now imagine removing that much activity out of the economy… That shouldn’t have much of an impact on jobs.

Would you rather keep that $1,600 (per person) tax hike and spend it as you like on goods and services that benefit you and your family, or would you rather send it to Washington so that the borg can spend it on things like National Public Radio, wealth redistribution schemes and Amtrak? Unfortunately for us we already know what Barack Obama thinks about that.

The second bomb the country is facing is particularly troubling because the danger is so obvious. Why is it obvious? Because we’re still licking our wounds from a mini version of the same problem: the housing crisis driven recession. Although the fundamental cause of the economic meltdown was government intervention in the housing market, the proximate cause was the sub-prime mortgages. Many of those mortgages were of the variable rate type where borrowers received a low introductory rate that would adjust (usually upward) over a period of time or in some cases, abruptly. When rates were low everything was peachy and consumers were purchasing houses at record numbers while investors were borrowing to buy investment properties. The markets were humming along.

Then everything hit a wall. Interest rates jumped, borrowers were no longer able to pay their mortgages, property values plummeted, banks collapsed, and the economy staggered into the “Great Recession”. We were told we were on the brink of a financial meltdown on par with the financial collapse of 1929 and civilization might not survive. Five years later we are limping along, but at least the world didn’t end.

Unfortunately for you and me, Barack Obama has not been smart enough to learn from that recent history. Over the last three years he has piled a total of $5 trillion in new debt on the shoulders of the American people. As bad as that is, that’s not the worst part of it! The greater danger is that virtually every dollar of that new debt is in the form of short term notes. The administration chose this route because, like the homebuyers, they get a great low rate. A two year note today carries a .03% interest rate while a ten year would carry a 2% rate. The problem is, when interest rates spike, all that debt will have to be refinanced, likely at the much higher rates. As an example of the impact of higher rates, consider this: If the government were today paying the 5% it was paying a mere 5 years ago the interest payments alone would be an additional $400 billion a year, almost as much as they will spend on the whole of Medicare this year. That would be like removing from the economy the revenue of Ford, Dow Chemical, Kellogg’s, Google, GAP, the NFL and Microsoft as well. A rate jump from .03% to 5%? No way, that’s not possible. Really? In the two years between January 1978 and January 1980 interest rates jumped a total of 14%, from 6% to 20%. Imagine what $10 trillion financed at 20% might look like!

Barack Obama has set the United States on a Thelma and Louise course, but likely won’t be in the driver’s seat when we actually leave terra firma. Unfortunately for Mitt Romney, the pain that Obama has guaranteed us will likely occur on his watch and there may not be much he can do to avoid it. Indeed, unbelievably, it has the potential to make the current disaster of a presidency look relatively prosperous in comparison.

If he recognizes this in advance, Romney will have the opportunity to steel the American people for the maelstrom ahead while giving them a reason to expect things will get better. That is after all what real leaders do: They prepare their countrymen to persevere through difficult times without needing a scapegoat to make their case; they inspire their citizens to pick themselves up, dust themselves off and go forward to build the prosperous future they seek; and finally, and perhaps most importantly, they seek to reduce the state’s power to frustrate and obstruct the citizenry’s ability to build that prosperous future. Now that’s an action movie I’d like to see.

To all of the leftists out there, it is time for you to take a dose of reality when it comes to tax policy in this country. I’m not just picking on you this time – I’m throwing out a comparable reality check to my libertarian/conservative brethren. For you, it’s time to put to rest one of your favorite solutions to fiscal problems at every level of government – I am of course, referring to raising taxes.

I’ve written before about how targeted luxury goods such as yachts and jewelry have failed. I’ve also illustrated that you can raise taxes all that you like; it will not make a difference unless we curb government spending. Today I’m going to show you that no matter how much you raise taxes on the wealthy, they will never pay the percentage that you personally are morally and intellectually qualified to deem as fair. How do I know this? Because they can do it today and choose not to.

Before we go into the choices of wealthy leftists, it’s important to first note the difference between tax rates and tax revenue. The tax rate is the percentage that the government takes of income or goods, such as in a sales tax or import tariff. Think of the 25% tax rate or a 6% sales tax as illustrations. Tax revenue is the dollars that are actually collected. You can raise rates as high as you want to. As those higher rates make their affected activity more expensive, we see less of it, aka. tax avoidance. This is not the same as tax evasion, which is avoiding taxes that you are legally bound to pay under law. Tax avoidance is using legal means to avoid a tax rate. On an investment level think of investing in tax free government bonds. At the local level think of living close to the border of a state with a low sales tax rate (such as Delaware’s 0% sales tax) and traveling to that state to do the bulk of your shopping. Both of these activities are legal ways to avoid taxes. Or you could simply not purchase a good, as the luxury tax example referenced above shows. At the level of taxing the wealthy or taxing businesses, they will use every resource at their disposal to avoid paying any more taxes than they have to. If our government makes paying the tax less expensive than avoiding the tax, people will choose to pay the tax.

Look at the table below. It shows the income of someone who has an annual income of $1 million per year. In the name of fairness we impose a 50% tax on that millionaire’s income. Having worked hard for his money said millionaire will look for ways to avoid having to hand over half of his income, and hires accountants and lawyers to help him avoid this tax. By paying them $100 thousand per year they get him down to a 20% rate, he gets a total tax + accounting cost of $300,000. Guess which one he chooses? Now look below the black stripe – when the rate is lowered to 25% it costs the person less to pay the tax than to avoid it. As an added bonus, the government actually collects more money at the lower rate, hence we see actual "revenue enhancement."

Now back to the choices made by the wealthy. We have our share of leftist billionaires who say the correct things about tax fairness to the powers that be. Buffett, Gates, Ted Turner, etc. If they feel so strongly about people at their income levels, why don’t they simply pay it? Why do they set up charitable foundations to selfishly help causes that they personally support when by their own words that money can be better spent by a mid-level bureaucrat? Why is every wealthy billionaire not cheerfully walking down to the treasury department and handing over an annual endowment to support the government’s good deeds? Because they choose not to. I think that we can all agree that Warren Buffet is an intelligent guy. When he negotiated his compensation package he was well aware of the tax implications of taking home his pay via capital gains versus salary. He could just as easily have negotiated salary with performance bonuses tied to stock price that would have been taxed at a higher rate. Why didn’t Buffett do this? The answer is simple – he chose not to.

I apologize if this seems pretty elementary, but what is it that makes you believe that raising the rates on these individuals will cause them to pay the amount that you want to collect? Yes we can close tax loopholes, but Warren Buffett and Bill Gates can afford to hire the tax accountants and lawyers to ensure that that rate never gets applied to their income. You know who can’t afford those lawyers and accountants? It’s the small to mid-sized business owners who spend their time and money on such evil pursuits such as providing goods and services that customers willingly purchase and creating jobs. You can scream for fairness all you want, but raising tax rates is not going to accomplish that.

Of course, I have evidence to back this up. Look no farther than that bluest of the blue states, Massachusetts. The good people of that state spent decades choosing to inflict leftist stalwarts John Kerry and Ted Kennedy onto the American people. Kerry and Kennedy were always reliable leaders of all things leftist, so you would expect them to be at the front of the line when it comes to paying their fair share of taxes, right? Wrong. A few years ago John Forbes Kerry, a man who earned his wealth the old fashioned way by marrying it, cause a bit of a stir over his yacht. Apparently the state of Massachusetts levies and extra $50,000 tax for anchoring your boat along its shoreline, so he chose to anchor his yacht over in Rhode Island to avoid paying his state’s tax. I guess that now we can question his patriotism.

Then there was Ted – the late Lion of the Senate who is so near and dear to so many on the left. He would be the first in line to ensure that he’s paying his fair share, right? Wrong. When his mother Rose was close to death, Ted realized that the state was going to try to take its fair share of her vast estate, so rather than allow this money go toward helping the poor or keeping teachers and firefighters employed the Lion of the Senate did what any compassionate leftist would do – he had his mother declare residency in the state of Florida, which does not have the same tax laws. So instead of this money going to the poor or our brave civil servants, the money stayed a cause that Mr. Kennedy deemed far more worthy – Mr. Kennedy.

I won’t follow the classic leftist tactic of pretending that two isolated incidents equate research. The two gentlemen I just cited make for a good starting point, let’s spread this example across a macro level, as in the entire state of Massachusetts. It’s citizens found a perfect way to get the rich to pay their fair share – they’ve passed an optional higher rate on their state taxes. That’s right, if you are one of the wealthier taxpayers you are allowed to choose to pay that higher state tax. Guess how many do – if you said "somewhere around nobody" you would be correct.

You know who else did not pay this optional higher tax rate? That’s right, the Occupy Wall Street favorite Native American candidate in Elizabeth Warren – wealthy one percenter, advocate of the downtrodden, and pure hypocrite.

It also doesn’t take much research to find other examples of where "Revenue enhancements" actually… didn’t.

This is my point. I’ve taken the bluest of the blue states, and two of the truest blues that any good leftist could ask for as representatives in Congress. By your criteria of ideology, these represent the best of the best from your end of the spectrum, and if they can’t be counted on to pay their fair share, what hope is there that the government will be able to collect from those evil, selfish, knuckle dragging red staters?

I’m not suggesting that we abolish taxes or government – I’ve written about this before, and save for your occasional flake nobody else is either. If we want more revenue coming in, we need to simplify our tax code and stop promoting policies that are designed to restrict taxable activities. And conservatives have their own issues with getting in touch with reality on taxes, but from your end you need to take a hard look at your policies. One point you can rightly ding me for is asking what that ideal rate should be. To be honest, I don’t have a magic number, and where we should be on the Laffer Curve is a separate debate. But we’ve established that we have reached the point where your stock answer of "more" as to what the ideal tax rate should be won’t work, either. We need a less complicated tax code, and your endless mantra of raising taxes as the answer… isn’t.

Conservatives, I have a bone to pick with my brethren. It’s over a favorite piece of red meat that politicians like to throw at us, one that we enthusiastically support, and one that will never happen. I am of course, referring to the flat tax. First off, let me be up front about my own views – I favor a flat tax. More specifically, I favor simplifying our tax code. As I’ve pointed out to our leftist friends in this post’s companion piece, tax rates are irrelevant – amounts collected are all that matters. Simplifying our tax code and making it cheaper to pay taxes will naturally result in more companies and individuals choosing to simply pay the tax rather than pay to avoid said taxes. A flat tax would be ideal – and it is never going to happen.

Before getting into the subject, let’s step back and look at a great example of how a drastic change to the law of the land gets passed. I am of course, referring to Obamacare. While conservatives were very well united in their opposition, the left were pretty much united as well in their efforts to allow all Americans to enjoy higher premiums, doctor shortages, and rationing of health care. Their main bone to pick with the law is that it does not go far enough to kill off the private health insurance as quickly as they would have liked, but at the end of the day, to quote the most eloquent voice of the left, it was their "Big F***ing Deal".

Now look at the proposals for a flat tax. Many conservatives will agree that a simple across the board tax rate of something like 20% for all Americans (a number I am arbitrarily throwing out) would be fair. Yes, the family making $50,000 per year is paying the same rate as the guy making $10 million, but at the end of the day the family is paying $20,000 in taxes while the millionaire is paying $2 million. How’s that for fair? Just as conservatives were pretty well united against Obamacare, the left will be against anything that tries to simplify the tax code that might lead to people actually giving up the same percentage of their income. Take away abortion funding, green energy subsidy sinkholes, or cut off funding to various members of the NGO-Nonprofit industrial complex (the only place of employment for many leftists without any useful skills) and there is no way anyone on the left can get behind a fair tax.

Wait a minute, that’s the same problem with conservatives. No, not the same causes – the same principle. Don’t believe me? we’ve already seen it. Early on in his administration President Obama proposed reducing the charitable deduction tax credit, suggesting that the government instead use that money toward helping to fund charities of its choosing (faith based initiatives, anyone?). Study after study has shown that conservatives give more of their time and money to charity than leftists do. And this makes sense. While I believe that leftists care about helping others as much as conservatives do the approaches sum up the two sides’ philosophies – "I am responsible" versus "Someone else should be responsible". Naturally conservatives were none too happy about this potential change to how charities were to be treated.

For most individuals this would not affect their giving too much. Many people give to causes of charities because they want to support them, not for personal financial reasons. Most of the charitable giving patterns for Sister Babe and me won’t be altered if this change were to go into effect. But we’re not the ones that charities are worried about. They are more worried about the larger donations that they get from wealthy individuals and corporations that make up a larger percentage of their operating budgets. As almost anyone can tell you when something gets more expensive you will see less of it. Philanthropists and companies will naturally look at what their best financial strategies are, and if the now more expensive charitable giving is not the best option it won’t happen. No, large charitable donations won’t disappear, but they will decrease. Being that we conservatives are more closely tied to charities in general we’re going to stand up for them, whether by maintaining the tax loopholes if not asking for direct government subsidy.

How about if we hit a little bit closer to home, literally? Conservatives don’t like the idea of doing away with the mortgage interest tax deduction, either. And lest you think that I’m only running an exercise in finger pointing, you can count me into this category. When Sister Babe and I bought our house last year I went through our finances in depth and laid out a few scenarios for what we could afford and how much we wanted to spend and lay down as a down payment. The interest tax deduction was one of the factors that went into the grand equation, and if this deduction were to go away it would hurt us, too. Granted, if someone can make the case for how an overall simplification would either be helpful or moderately painful at best, I’ll be the first in line to support it. But I’m not ready to sacrifice our budget if others are getting to keep their loopholes.

These are only two examples, and ones that are easy to illustrate. For every deduction in our tax code there is a special interest that will fight tooth and nail to preserve it. Sadly, politicians don’t have the will to stand up since it’s a lot easier to show how someone will be directly hurt by a closed loophole than it is to show how we as a society would benefit by simplifying the code. Still don’t believe me? How many presidential candidates walk through Iowa and talk about ending corn subsidies?

And that’s the reality we face. As conservatives we’re supposed to be the adults in the room, the ones who not only are willing to acknowledge that we have a problem, but understand that we have to actually take action to get off of our current path to destruction. If we can’t rely on the conservative base to rally around this cause, what hope is there of rallying enough independents to defeat the lefties on this?

Are you listening, Herman Cain? You’re exactly the kind of guy who can articulate a realistic tax reform approach to economically illiterate journalists and reach the American people. 9-9-9 sounds good in theory, but in reality it has no chance of happening. And this is coming from someone who was one of Herman’s Cainaanites back when he was in the race. While I didn’t think that 9-9-9 should have been his answer to most of the questions posed to him, I am grateful for the fact that he got the GOP primary debate questions pointed toward a subject as critical as our tax code as opposed to "boxers or briefs?" pabulum. The flat tax can be useful as an extreme position for bargaining from, just as the left used the single payer health care system during that debate. Obama was able to pretend he was a moderate by passing a law that would only gently strangle private health insurance to death rather than the immediate decapitation his base wanted.

All hope isn’t lost, though. Our tax code is going to have to be simplified in the next decade or two because it has to. We’ll either do it because we have the maturity to make painful decisions or because painful consequences will force us to. Who knows? Maybe watching what happens to Europe might even wake our leftist friends up! I’m not counting on it, but if we’re going to wake them up we have to ensure that our objectives are grounded in reality.

I was, the other day, trying to explain the word "fair" to a friend. Suddenly it occurred to me that I was trying to explain the definition from a statistics perspective, and that was the cause of the miscommunication. In statistics, the word "fair" means that probabilities of occurrence does not change each time an action or process (trial) is conducted. If a process is "fair," then exact probabilities of occurrence can be calculated regardless of initial conditions. We statisticians (besides being weird) understand the word "fair" because it has a very precise, unchanging meaning.

That is the reason why, in a Craps game, "loaded" dice always have the same appearance as regular dice, and that they are slipped into the game only when "serious" money is being wagered and the sucker cannot alter his wagering accordingly. Loaded dice are not fair from a wagering perspective because they alter probabilities of occurrence, thereby increasing the probability that the sucker will lose his wager. Besides, even without loaded dice, craps probabilities favor the person running the game. All he has to do is make the payoff, not welsh, if an individual sucker gets lucky.

That difficulty, the definition of "fair,"occurs quite often. As Jim Yardley said, "’Fair’ is one of those warm, fuzzy words that allows the listener to define it to his own personal taste – and the definition changes from one specific case to another."

For example, Obama, during the Democrat Party primary debate, said that he would raise capital gains rates — not because it would increase revenue, but because it was "fair." During the debate, Obama said, "…I would look at raising the capital gains tax for purposes of fairness." He continued, "…I also want to make sure is that our tax system is fair…."

The "problem" is that Obama did not define, precisely or otherwise, his definition of "fair." As Yardley says, we are left with, in this case, Obama’s definition – "and the definition changes from one specific case to another." One thing you will never hear Obama explain is precisely what he means when he uses the word "fair."

In his 2012 State of the Union speech, Obama said, "… or we can restore an economy where everyone gets a fair shot, and everyone does their fair share…." But nowhere does he define what he means by "fair shot" or "fair share." I guess that he wants us to trust that his definition will be "fair."

We are all familiar with the "Buffett Rule."   It states, according to the White House, "No household making more than $1 million each year should pay a smaller share of their income in taxes than a middle class family pays. This is the Buffett Rule – a simple principle of tax fairness that asks everyone to pay their fair share." The site continues, "Warren Buffett, for example, pays a lower effective tax rate than his secretary, and that’s not fair." Please notice that, in the White House definition, there is an inconsistency. The rule states, "…pay a smaller share…." Then the White House definition offers, "… effective tax rate…." So, which definition applies? How can we be "fair" if the rule is arbitrary?

It is quite disingenuous to use the word "fair" when referring to the "Buffett Rule" tax situation. Buffett contributes much more as an absolute amount than his secretary. "Fairness" means an equal share is paid by all – thus fairness would mean that Buffett and his secretary pay exactly the same absolute amount of tax. And that is what the Buffett Rule says – reread it. Will it be "fair" for Buffett and his secretary to pay the same amount, the same share? Whose tax amount will increase and whose will decrease in order to preserve "fairness?"

According to his 2011 income tax return, Obama doesn’t technically fall under the Buffett Rule – his income was "only" $789,684. If you believe that the amount was his entire income, I hold the deed to certain bridge in NYC in which you may be interested! Anyway, Obama’s secretary, Anita J. Breckenridge, earned $95,000 in 2011. Yet she paid a higher effective tax rate than did Obama. And Obama made substantially more than she did. Her tax rate was not much higher than Obama’s but it was still higher. Is that "fair?"

Dr. Walter E. Williams, in "Devious Taxation," wrote, "…the top 1 percent of American income earners paid almost 37 percent of federal income taxes. The top 10 percent paid about 70 percent of federal income taxes, and the top 50 percent paid nearly 98 percent. Roughly 47 percent of Americans pay no federal income tax. Here’s my fairness question to you: What standard of fairness dictates that the top 10 percent of income earners pay 70 percent of the income tax burden while 47 percent of Americans pay nothing?" It sure doesn’t sound like everyone, as Obama said in the State of the Union speech, "does their fair share."

As Gary Wickert, in "Defining ‘Fair’ in Obama’s ‘Paying a Fair Share’ Rhetoric" wrote: "Precisely what our president means by "fair" remains unclear – clouded in social envy, class warfare, and populist rhetoric. But one thing is certain. The so-called wealthy are paying a disproportionately higher amount of taxes even when compared to their share of the income – far more than their "fair share."

Further, the statistical definition of a "fair game" is one that has an expected value (EV) of zero. For example, consider the wager in which a person tosses a "fair" coin and wins $1 if heads appears and loses $1 if tails appears. The EV = 0.5*$1 + 0.5*(-$1) = 0. In this game, the word "fair" refers to the fact that each time the coin is tossed the probability of the face appearance remains at 50%. We could, even if the coin was weighted so that heads appeared (say) 70% of time, adjust our wagering so as to make this a "fair game." The key concept is that the probability of occurrence remain unchanged each time the coin is tossed.

This is how Obama sees the US and world economy – a zero-sum. In order to be "fair," Obama wants to redistribute assets that the rich obviously stole from the poor, the defenseless. He even formalized his view. On the world economy, R.A., in "Free exchange," wrote that Obama said in his State of the Union speech: "Don’t let other countries win the race for the future." About this statement, R.A. says, "A zero-sum world is a world without hope, and if Mr Obama is convinced that’s what we’re in then I don’t see much need for him to stick around."

Obama chides corporations that are "sitting on" vast quantities of cash. They are waiting for a precise definition of "fair." They will not get that definition until November, 2012, when Obama is voted out of office.

The bottom line is, as Jim Yardley says, that the listener (and, in this instance, the declarer) gets to use the word "fair" and define it to his personal taste. And, with Obama, the definition is constantly changing.

But that’s just my opinion.

"It isn’t so much that liberals are ignorant. It’s just that they know so many things that aren’t so." – Ronald Reagan

Cross-posted at RWNO, my personal web site.

Bill Whittle over at Pajamas Media had a great piece in his Afterburner segment this week. Calling statistician William M. Briggs’ “The love of theory is the root of all evil” “The Best Sentence Ever”, Whittle discusses how the love of the theory of Communism caused the deaths of well over 100,000 million people during the 20th century. The crux of his piece is that liberals, living in their world of theory and planning have no clue how the world actually works.

Just such liberal fatuousness was on display in Saturday’s New York Times. The paper ran a 3,800 word piece bemoaning the fact that Apple Computer, the most valuable company in the world was short changing California (and the United States) on taxes. Somehow, the company, which employs over 20,000 people in the state is not doing its fair share. According to the Times, Apple, which is headquartered in Cupertino, California, could earn up to $46 billion this year worldwide and California is getting bilked. The Times states that Apple utilizes offices as close as Nevada and as far away as Luxemburg to shield itself from California and US taxes.

While the Times explicitly states that Apple is not responsible for California’s budget problems, in a piece Mark Antony would be proud of, it helpfully points out: Apple serves as a window on how technology giants have taken advantage of tax codes written for an industrial age and ill suited to today’s digital economy. And if the subtlety makes the point too opaque, the Gray Lady makes it clear: The growing digital economy presents a conundrum for lawmakers overseeing corporate taxation: although technology is now one of the nation’s largest and most valued industries, many tech companies are among the least taxed…

The message is clear. The fact that California is an economic basket case is Apple’s fault, (along with other high tech companies). It couldn’t have anything to do with the fact that California’s budget grew by 40% from 2000 to 2010 while the population grew by a mere 13%. It couldn’t have anything to do with the fact that the government has been chasing companies and jobs out of the state for decades with their regulatory straightjacket. It couldn’t have anything to do with the fact that state employees, most supported by unions, earn an average salary of $68,000 (vs. a state average salary of $54,000) and total compensation in excess of $105,000. No, the problem is that Apple is legally taking advantage of the tax code to reduce the amount of money it pours down the bottomless pit known as Sacramento. That should be obvious to anyone.

The Times suggests that if Apple were not using these “tactics” its federal taxes would have been $2.4 billion higher in 2011. Assuming that Apple does half of its US work in California, that figure suggests that Apple would have paid approximately $300 million dollars more in California taxes than it actually did. Obviously that would have fixed the state’s $25 billion shortfall.

To put this in perspective it might be helpful to examine what Apple actually does in California. It employs over 20,000 people in the Golden State, with an average salary of $70,000. Their $1.5 billion in wages contribute $132 million directly to the state’s coffers via income taxes. According to Apple, for every one employee in the United States, it creates or supports 11 jobs outside the company via suppliers, partners, service providers etc. Taking Apple’s metric and applying it to those 20,000 employees would give you an additional 220,000 California jobs. Given that the average salary in California is $54,000, those 220,000 employees doing the jobs created or supported by Apple generate an additional $12 billion in salary which would generate another $1.05 billion in state income taxes. Then of course all of those employees likely spent most of that $13 billion wage income in California, which in turn generated much income and more taxes.

Not to be forgotten are the shareholders such as California’s many shareholders, pensioners and mutual fund holders who own shares of Apple stock. The country’s largest pension fund, CalPERS, owns 2.8 Apple shares and provides benefits to more than 1.6 million California employees and retirees. Because the company has done such a good job of husbanding its resources, its stock has quadrupled in three years, generating almost half a trillion dollars in wealth. No doubt many of those investors and pensioners have enjoyed the capital gains Apple has provided, which are of course taxed as ordinary income at 9.3%. Not only did those capital gains generate tens of millions of dollars to state coffers, they no doubt generated revenue at the local coffee shops, grocery stores and movie theaters as well.

The Times provides a perfect example of Whittle’s point. California is a fiscal basket case and the solution is fairly straightforward: Change the tax code to force companies like Apple to pony up hundreds of millions or billions more in taxes. As liberals often do, they sit in their little cubbyholes and play with their calculators. “We can raise taxes or plug that loophole and the money will just pour in”. They rarely look at how the world really works. Certainly California and Congressional legislators could revise the tax code to make it more difficult for companies like Apple to reduce their tax burden. But would it generate a tax windfall? A balanced California budget? Not likely. What’s more likely is that Apple would start looking to reduce its California footprint and begin to open offices and actually employ people outside the state and the country, imperiling the real impact the company has on the state.

Despite decades of crystal clear proof that they simply don’t work, liberals maintain their devotion to the theories of high taxes, centralization and state control like members of the People’s Temple following every Jim Jones dictum as if it were gospel, regardless of its rather negative consequences. The only problem is, they not only want to drink the Kool-aid themselves, they want to force us to drink it as well. As a good libertarian I’m happy to let anyone put anything in their bodies they choose, but I’d just rather not drink the cyanide myself.

While our president crusades with an unrealistic plan to tax the rich to pay for his profligate spending and bring the country back to what now seems like a Capitalist pipe dream, the elusive pre-Obama economy. Obama Elites, who are almost always rich, but don’t seem to pay taxes or worry about them, agree with the old Marxist parable, “tax the rich to spread the wealth around,” at least, as long as no one dips into their private accounts. If Obama stays in power, their money is safe, that’s the way his system works. While the public frets over wether Obama is a Statist or a Marxist, he keeps trying to make the old failed Marxist principles work. Apparently, the Marxists of history didn’t understand how to run a Statist economy or so Obama must reason, to keep from being collectively diagnosed as a psychotic, by doing the same experiment repeatedly and expecting a different result.

Taxing the rich and the productive people of society, in order to give the money to non-productive members of society, is like beating your head against a wall to rid yourself of a headache. It may seem like a good idea to the naive and stupid, but eventually, your situation becomes worse or desperate. The wall maintains its integrity, but your head and your ability to reason is in an indirect proportion to the time spent beating your brains to a pulp.

Marx argued that the Socialists of the 19th Century continued to fail because they neglected to address the economic issues, and he was regarded as a brilliant thinker, his formula for the evolution of Socialism into Communism incorporated the concept of Wealth Redistribution. Obama incorporated Wealth Redistribution as a major portion of his election platform in 2008 and it has been an underlying principle of his economic policies. In the beginning, Marx was content to describe his theories in newspapers, but in 1848 he published, “The Communist Manifesto”; in 1867, he wrote the more notable book, “Das Kapital”. The brilliance of Marx has been the silent epitaph for over a hundred million, but Obama is not one to let the failures and the disasters of every experiment in Marxism and Statism deter his idealism.

The major problem with Marxism, a problem described by Orwell in his book, “1984″ and later illustrated so poignantly by Obama during what may charitably become known as America’s Malignant Presidency, is the problem of reallocation of wealth or the Redistribution of Wealth, since the creation of wealth in Marxism or Statism is extremely laborious and difficult.

Marx believed that the problem with the socialism of his day was that it failed to deal in a realistic manner with economic issues. He proposed that his new (Communist) economic system, which called for redistribution of wealth, was more equitable. But in time and with application, it became clear that this system fails as well; in part, because it requires people to be altruistic and to live like ants or for the community rather than to advance the concept of self. Unfortunately, working for the benefit of others over self is not in harmony with human nature. Marx advanced a secular solution to a spiritual problem. But by its very nature, a spiritual problem can be solved only on a spiritual level.

Wait, wait, Progressive Marxist sympathizers may be tempted to work themselves into a coronary, but let’s consider some basic facts. Increasing taxes will always dry up a percentage of an economy, because a finite amount of money evacuates the economy and the economy becomes less dynamic. If at a certain moment in time, 45% of the money of an economy is taxed, the economy is weakened by 45%. Nancy Pelosi has argued that the money isn’t lost because it is fed back through the economy in the form of welfare and food stamp programs. But this requires a caveat. Before the money was taxed out of the economy, wealth was being created, goods and services were provided, and the economy was healthy and dynamic. But when money is taken from the economy and given to non-productive people to spend, no wealth is being created. The economy becomes anemic with false values and a loss of 45% of the economy’s capacity for the creation of wealth.

In an imaginary economy of Dystopia, the United Socialist States has $20 dollars, but a wealthy man has the $20 dollars and has decided to sit on the entire amount, except for his personal living expenses, say $2 a year. The rest of the people of Dystopia will be falling over one another to get a few cents of that two dollars to be able to feed their families and repair the roof over their heads and be glad to get a portion of that small pittance of the national economy of Dystopia. The money is spent in desperation by each citizen of Dystopia, who feels lucky to earn some of the limited money supply. They feed their families and provide whatever comforts they can afford with their share of the limited money supply as it is spent solely on the basics required for subsistence.

These few pennies of wealth are spent over and over throughout the economy. This economy is said to possess a limited money supply. However, if the wealthy person see the opportunity to “Create wealth” by investing a portion of his capital in a business or the manufacture of a product, the capacity of the money supply of Dystopia will begin to increase exponentially.

The investment that our imaginary capitalist has seen is in the form of ceramic tiles for the roofs of the homes of Dystopia’s citizens. It will take $14 of wealth to manufacture the roofing tiles, but since there is demand for this inexpensive product that can be produced and sold to turn a profit, the enterprise seems promising. Our theoretical capitalist thinks there is an opportunity to increase his fortune and create wealth within the community. The wealth created is not limited to the bank account of the capitalist; the actual wealth is recorded in the higher standard of living provided by the jobs and the spinoff industries that spring up to service the roofing industries.

It is the $14 dollars that invigorated the economy; once people had income beyond substance levels, they had the option of being a Hedonist and spending money on indulgences, sitting on money like the capitalist did before he saw opportunity, or trying to create wealth by investing in a business or creating another product. A group of human beings will provide examples of all three, but more importantly, the economy is invigorated as the $14 turns over almost every business day. People are seeing their standard of living improve weekly and the economy is not only healthy, it is strong. People have faith in the future and they are not afraid to take economic risks.

Obama has created the antithesis of a healthy economy. The money supply is dwindling. People who can invest have little confidence in the future and the money supply is turning over in a manner much closer to early Dystopia when the rich man sat on his assets rather than risk his money in a “Down” economy.

But Obama has the answer, he will tax the rich and spread the wealth around; unfortunately, the wealthy producers see the economic climate and close up their wealth and innovative creativity like a turtle hiding in his shell.

Illinois offers us a perfect example of what happens when you institute liberal policies, as Obama has done to the entire country:

After trying to tax Illinois to governmental solvency and economic dynamism, Pat Quinn, a Democrat who has been governor since 2009, now says “our rendezvous with reality has arrived.” Actually, Illinois is still reality-averse, so Americans may soon learn the importance of the freedom to fail in a system of competitive federalism.

Illinois was more heavily taxed than the five contiguous states (Indiana, Kentucky, Missouri, Iowa, Wisconsin) even before January 2011, when Quinn got a lame-duck legislature (its successor has fewer Democrats) to raise corporate taxes 30 percent (from 7.3 percent to 9.5 percent), giving Illinois one of the highest state corporate taxes and the fourth-highest combination of national and local corporate taxation in the industrialized world. Since 2009, Quinn has spent more than $500 million in corporate welfare to bribe companies not to flee the tax environment he has created.

Quinn raised personal income taxes 67 percent (from 3 percent to 5 percent), adding about $1,040 to the tax burden of a family of four earning $60,000. Illinois’ unemployment rate increased faster than any other state’s in 2011…

…To prepare for Illinois’ probable plunge into insolvency, read “Freedom to Fail: The Keystone of American Federalism” by Paul E. Peterson and Daniel Nadler in the University of Chicago Law Review. They note that only 25 of the world’s 193 nations have federal systems, and in most of the 25 the freedom of the lower tiers of government is more circumscribed by the central government than American state governments are by the federal government. American states’ greater freedom — autonomy under America’s system of dual sovereignty — from the central government’s supervision requires that they be disciplined instead by the market for government bonds, and by the real possibility of default.

…At least 12 percent of Americans change their residences each year, often moving to more hospitable economic environments. In a system of competitive federalism, Peterson and Nadler write, “If states and localities attempt in a serious way to tax the rich and give to the poor, the rich will depart while the poor will be attracted.” And government revenues and expenditures vary inversely.

And if the most incompetent President in our history is re-elected we will see this kind of thing spread throughout the country. Any government that believes they can tax themselves out of a hole WILL face reality soon.

WSJ:

In the 1980s, the world learned (or so we thought) that the way out of the malaise of the 1970s were reforms that encourage private investment and risk-taking, labor mobility and flexibility, an end to price controls, tax rates that encouraged capital formation, and what the World Bank now broadly calls “the ease of doing business.” Amid this crisis, Europe has tried everything except these policies.

If Reagan or Margaret Thatcher are too déclassé for Europeans to invoke, how about Germany? Throughout the 1990s and the first years of the last decade, Germany was Europe’s hobbled giant, with consistently subpar growth rates and unemployment that in 2005 hit 11.3%, nearly at the top of the OECD chart.

Then-Chancellor Gerhard Schröder, a Social Democrat, surprised the world, to say nothing of his own voters, by pushing through the labor-market reforms that paved the way for the current relative prosperity. The changes cut welfare benefits and gave employers more flexibility in reaching agreement with their employees on working time and pay.

The Schröder government, and later the coalition under Angela Merkel, also cut federal corporate income taxes to 15% from 45% in 1998. Include state taxes, and the effective corporate rate today is close to 30%, down from 50% or more in the 1990s. These reforms made Germany more competitive, attracted investment and jobs, and paved the way for the country’s economic resurgence and an unemployment rate currently at 5.7%.

Mrs. Merkel’s government did the world an additional favor in 2009, amid the financial crisis, by rejecting calls from the International Monetary Fund, then British Prime Minister Gordon Brown, President Obama, Treasury Secretary Tim Geithner and the same dominant Keynesian consensus to join the global spending party.

“They’ve already pumped endless amounts of money into the economy,” said German Finance Minister Wolfgang Schäuble in 2010 about U.S. policy. “The results are dismal.”

The results are indeed dismal, and set to get much worse if their policies of over taxation while printing money to continue spending is continued.

But don’t tell that to the left in this country. If someone makes more money than they do then it’s just unfair.

In a supposed discussion of financial ethics with left-wing Harvard professor Michael Sandel on Wednesday’s NBC Today, co-host Ann Curry decried people being able to pay more money to get through airport security faster: “…there’s an inherent unfairness to it….it’s about those with money having an easier life than those who don’t. And there’s something fundamentally unfair about that.” 

Sandel was on to hawk his new book, “What Money Can’t Buy,” which Curry touted as, “a hard look at what’s up for grabs in our society and asks, even if we can buy something, should we?” Sandel put different “moral dilemmas” to the morning show hosts, including the airport security line scenario. Curry went on to indict American society: “…not everyone has access to being able to get money, to work for money…. until America becomes fair in terms of how able people are – can be to make money, until the playing field is fair, it is unfair.”

This is how they think. It’s a belief in Marxist ideals that is ruining this great country. If someone works harder, has better ideas, takes more chances, than the other guy and succeeds in making more money then dammit…we need to forcibly confiscate that money to give to those who are less fortunate. To make it fair.

This kind of insanity will continue if Obama is re-elected. It’s just plain nuts to me to even think this man has even a slight chance at re-election with his pandering slogans, his bankrupt policies, as he leads us to a bankrupt nation.

Click here to view the embedded video.

The gift that keeps on giving.

Here is the DNC’s chair Debbie Wasserman Schultz making a fool of herself, once again, on Bret Baier’s show last night whining that the GOP had blocked the President’s budget plan even though SHE, along with all of her fellow Democrats voted against her President’s budget plan.

Meanwhile The Heritage Foundation just released some Federal Spending in Graphs. A pictorial tour through Obama’s destruction of our economy. A taste:

Much more where that came from at the link.

Runaway spending is causing our doom, so why not spend a bit more. This time to pander to the youth in our country:

Obama told the students that since they were born, tuition and fees at colleges have doubled.

“And that forces students like you to take on a lot more loans, there are fewer grants, you rack up a lot more debt,” Obama stated.

“Can I get an Amen for that?” he asked the crowd who cheered, “AMEN!”

“Now, the average student who borrows to pay for college, now graduates with with about $25,000 in debt, that’s the average, he added,

“Some have more,” he said. “Can I get an Amen for that?”

“AMEN!” the crowd who cheered.

“Because some folks have a lot more debt like that,” Obama chuckled, as another person in the crowd shouted, “AMEN!”

Ugh, the pandering from this man is disgusting. Can I get an Amen for that?

Doug Powers:

What the students didn’t hear:

“In 2007 I missed two votes to extend the student loan bill that I now want you to believe is the most important things I’ve ever promoted. Can I get an amen?”

“More than half of all young college grads are now jobless or underemployed. Can I get an amen?”

“According to my own Vice President, government meddling in the free market actually increases college tuition. Can I get an amen?”

“Since I took office, over $5 trillion has been added to the national debt — or over $16,000 for every man, woman and child in the United States. Can I get an amen?”

“Student loan interest rates are set to double because the then Democrat-controlled Congress voted to do so. Can I get an amen?”

Anyways, he wants to freeze student loan interest rates to buy some votes. Of course this would cost close to 6 billion dollars. How will they pay for that?

By raising taxes of course:

Senate Democrats introduced legislation Tuesday that would prevent student loan interest rates from doubling this summer. Its $5.9 billion cost would be paid for by making it harder for owners of so-called S corporations to avoid paying Social Security and Medicare payroll taxes on some of their earnings.

The proposal would affect such companies with earnings of at least $250,000 annually and whose revenues come from the work of three or fewer owners. It would also apply to some lawyers, doctors and other professional service businesses that are owned by partnerships.

House Democrats said late Tuesday that they would introduce a similar bill, also financed by boosting payroll tax collections from many private companies’ owners.

S-Corps are used by many small companies, from mom and pop stores to individual workers like doctors and to start up businesses to file their taxes.

So he wants to raise the taxes on these small business owners to help students who have racked up a ton of debt to get an education.

And what does Obama tell those kids?

And living with that kind of debt means some pretty tough choices when you’re first starting out. It means putting off buying your first house. Or it means maybe you can’t start up that business right away that you’ve got this great idea for.

When I was over at The Sink I was talking to three business majors, and they all had these business ideas. But it’s tougher if you’ve got all this loan that you’re already thinking about the minute you get out of school. Maybe you’ve got to start a family a little bit later. It takes you a longer time to save for retirement. And when a big chunk of every paycheck goes towards loan debt, that’s not just tough on you. It’s not just tough on your families. It’s painful for the whole economy because that’s money that could be going into the economy and could be going into new businesses and could be helping businesses grow.

So on the one hand he panders to the youth telling them the taxpayers will help get them out of debt so they can start those small businesses, and on the other hand he wants to raise taxes on those same small businesses. I’m sure many of those students who have racked up a ton of debt are doctors and lawyers. Those same people who WOULD have used the S-Corps tax breaks to become more successful. Not anymore.

Just another example how Obama and the Democrats are destroying this country.

Can I get an Amen for that?

Don’t you just love the smell of hypocrisy in the morning?

Having criticized her Republican opponent for voting against a millionaires’ tax measure, U.S. Senate candidate Elizabeth Warren said here Friday that she opted not to pay a voluntary higher tax rate in Massachusetts.

“I paid my taxes, and I did not make a charitable contribution to the state,” Warren, who worked with the Obama administration to create the new consumer financial protection bureau, said when asked if she paid a 5.85 percent state income tax instead of the standard 5.3 percent — a choice given to Massachusetts taxpayers.

I see. So let me get this straight. If a rich person feels more money should be going into the treasury of the state it should NOT be a voluntary contribution, instead it MUST be a forced tax. Meanwhile she wants to be elected into a position where she will force more money into the treasury by raising taxes, which then gives her more power to spend spend and spend some more like a good little liberal

“The problem with running a campaign based on self-righteousness and moral superiority is that you had better live up to the same standard you would impose on everyone else,” Barnett said. “Millionaire Warren lectures others about their obligation and responsibility to pay higher taxes, but she refuses to pay the optional higher rate available in Massachusetts.”

Barnett continued, “This is the sort of hypocrisy and double-speak voters are sick and tired of hearing from politicians, especially those who can’t keep their hands out of others’ pocketbooks.”

Hypocrisy, thy name is Elisabeth Warren.