"Fair Share" Tax Calculator

We always hear that the "rich" aren't paying their "fair share". This begs the question: what amount constitutes this fair share? This graphic should clear things up:

An Instructive Juxtaposition

The Obama administration's views toward free speech with regards to religion seem to be predicated on how violent the proponents of a given religion are willing to get. This is vividly illustrated with a couple of headlines from the end of the week: State Department spending $70G on Pakistan ads denouncing anti-Islam film

The American Embassy in Islamabad, in a bid to tamp down public rage over the anti-Islam film produced in the U.S., is spending $70,000 to air an ad on Pakistani television that features President Obama and Secretary of State Hillary Rodham Clinton denouncing the video. In the ad, Obama is seen talking about America's tradition of religious tolerance and Clinton is seen saying that the U.S. government had nothing to do with the video that contains vulgar depiction of the Prophet Muhammad. "We absolutely reject its content and message," Clinton says in the advertisement.

This, on top of earlier outing the filmmaker and an American Embassy's initial response and defense of an apologetic tweet shows an administration incredibly sensitive to the feelings of Muslims. Compare that with a piece of "art" that offends another well-known religion: WH Silent Over Demands to Denounce ‘Piss Christ’ Artwork

Religious groups are blasting President Obama for not condemning am anti-Christian art display set to appear in New York City and one Republican lawmaker said he is “fed up with the administration’s double standard and religious hypocrisy.

Maybe if Christians attacked the gallery where the piece was being shown en masse and killed some people along the way the White House would pay attention. No, that isn't a call to violence. But it is an idea that is being promoted by an administration that bends over backwards to apologize for free speech while ignoring the concerns of the "bitter clingers" to a religion that has done more to earn the moniker "religion of peace" than Islam. For the record, I don't think the administration should publicly denounce either the anti-Islamic film or the "Piss Christ" piece. But it has invested a lot of time and money in bowing and scraping to Islam in order to promote the idea that the United States respects all religions. If that's true, then be consistent. Right now, the message is that the U.S. will respect any religion that is willing to burn and kill.

Define "Everybody"

President Obama was quoted as saying, "If you want to be president, you have to work for everyone." I was wondering, does "everyone" include:

The "bitter clingers" of the midwest?

The non-union plant workers of Delphi?

The voters who don't vote for the right guy?

The shops who don't support the right right candidate?

The donors who don't write the correct name on the pay line?

The states that know how to manage their finances?

The followers of any religion or just the ones that get violent?

The Rich Aren't Rich Enough

After reading an article at Canfield Press (linked below) describing America's slide from a wealth creation nation to a wealth transfer state, I remembered a short piece I wrote a couple of years ago about waiting tables as a method of illustrating the flaw in collectivist thinking. That got me thinking about the whole "fair share" argument when it comes to taxing the rich. Setting aside the fact that our tax base largely comes from a relatively small part of the populaton, I wondered just how much more "just a little more" really was. How much would represent a "fair share"? Short of adding up all the numbers on Forbes' 400 list there was no definitive amoung given for the total wealth of all of America's billionaires. However, using some simple calculations of the data that was readily available, I got some interesting (though not unexpected) numbers.

The total wealth of the world's billionaires as of March 2012 was $4,600,000,000,000 (source). Dividing that by the total number of billionaires in the world (1226), that averages out to roughly $3,752,039,152 per 1%er. There are currently 425 billionaires in the United States, so a decent estimate of the total wealth of American billionaires is about $1,594,616,639,478. That certainly isn't a perfect way of estimating it, and the number could be a bit higher or a bit lower.

Now, back to that wealth transfer thing. In 2010, total spending on entitlements was about $2,200,000,000,000. This means that if we simply confiscated all the wealth of all the billionaires in the United States, it wouldn't pay for one year's worth of Social Security, Medicare, Medicaid, unemployment insurance, and all the other programs that fall under the Entitlements umbrella. The idea that if we just raise taxes, if we just ask the rich to "pay a little more", our money problems will be solved is fantasy. We're past the point where taxation can solve our debt woes. We're passed the point where we can ignore the reality that we have to spend less money. Slowing the rate of spending growth is no longer an option. Class warfare won't fix anything. The only thing that will work is to cut budgets. All of them.

The federal budget request for 2012 included outlays of over $3,800,000,000,000 and was based on predicted revenues of just over $2,200,000,000,000. In other words, we planned on spending nearly twice as much as we planned to take in. That's not sustainable, and it's not fixable with class warfare.

TINSTAAFL

A Facebook friend posted a status today cheering on all the "free" benefits that are taking effect for women looking to have their birth control paid for by people other than themselves. After some back and forth about what "free" means when talking about something paid for with tax money, a commenter (who shall remain nameless unless you are mutual friends, in which case you know who to shake your head at) made the following statement:

It has nothing to do with who pays taxes. It is forcing insurance companies to pay for those services out of the premiums that YOU Already pay them!!!! Why is this so hard for people to understand? We are now getting more services for the money that we pay into the insurance company. They make less profits because they have to cover more services for us! This is a very good thing for all of us!!!!!!!!

Note the liberal use of exclamation points, each one adding an order of magnitude to the comment's inherent truthfulness. Exclamation points aside, here was my response (unedited except for the correction of spelling errors):

It has everything to do with who pays taxes. The feds are setting up a national exchange to administer healthcare. Who pays for that? Taxpayers. Set aside for a moment the fact that this will allow the goverment to pick and choose favorites among healthcare companies. While the feds are allowing states to set up their own exchanges (which of course, must meet federal guidelines on how they are set up, which companies can participate, and how money is distributed), most are sensibly opting out. This will increasingly put the decisions in the hands of a federal bureaucracy.

Ever heard of a federal agency that didn't get bigger and succumb to budget bloat? Me neither. This will only increase costs, especially when you consider that by government mandate, people who don't pay federal taxes (and thus don't pay for the upkeep of this behemoth) will still be covered. Who will make up these costs? The insurance companies? No. Economics 101. When costs go up to a supplier, those costs are passed on to the consumer.

One way the goverment will be tempted to combat this is to enforce price controls on what doctors can charge for services. This is how medicare and medicaid work. It has led to an ever-decreasing number of doctors who will accept patients on those plans. A similar effect will occur if the price controls are instead forced upon insurers: fewer companies will enter into the market and many existing ones will drop out. At the same time, more and more people will be forced into this government plan as companies who today pay for healthcare as a fringe benefit decrease coverage or drop it all together, further exploding costs to the taxpayer.

Ask yourself this: are you aware of any government programs which costs has decreased, which budgets have shrunk? No. Because the definition of a budget cut has been changed at the federal level. When you or I think of a budget cut, It looks like this: "our budget was $1000. We cut it 10%. Now our budget is $900". At the federal level, it looks like this: "Our budget was $1000. We wanted to raise it 50%. Instead we only raised it 30%. Therefore, our budget was cut by 20%."

This will not end well.

It never ceases to amaze me that there are still people who believe the following:

1. Businesses don't pass their costs on to consumers.
2. Arbitrarily setting prices for goods will have no effect on the producers of those goods
3. It is somehow a good thing when a business has its profits shrunk or seized.
4. A government that can run up trillions of dollars in debt will have no problem containing costs.
5. The government can ever provide "free" anything to taxpayers.

Of course, my answer above didn't even touch on the other side effect of price controls: rampant fraud and abuse. Some of those doctors who don't stop taking medicare and medicaid patients instead find ways to overbill the system and reap profits off the taxpayer. If oversight and penalties were better enforced, even more doctors would drop entitlement patients.

For taxpayers, THERE IS NO SUCH THING AS A FREE LUNCH.

Addendum: A later comment brought up the 80/20 rule in the law, that requires insurers to use 80% of revenues on "clinical services" in order to cap costs. Well, that's just another method of price control. And it leads to all the bad things mentioned above. Don't believe me? Then believe the feds, who have seen fit to grant waivers to entities that allow them to ignore the 80/20 rule.

Also, passing laws and then selectively allowing certain entities to ignore them: regardless of your political affiliation, shouldn't you be outraged by that?

The Tax System Explained With Beer

This is an oldie but a goodie. I honestly don't know who to credit for the original, but I received this in an email from a friend years ago and it just resurfaced in this post at Say Anything:

The Tax System Explained With Beer

Every day ten men go out for a beer, and the bill is $100. They wish to pay the bill the same way we pay our taxes, so it breaks down like this...

The first four men (the poorest) pay nothing.
The fifth man pays $1.00
The sixth pays $3.00
The seventh pays $7.00
The eighth pays $12.00
The ninth pays $18.00
The tenth man (the richest) pays $59.00

And that's what they decide to do.

These ten men drank in that same bar every day and were quite happy with the arrangement, until one day the owner approached and said, "Since you are such good customers, I'm going to reduce your daily round of beer by $20.00."So now a round of beer cost $80.00.

The group decided to keep paying their tab in the same manner. The first four men were unaffected. They still drank for free. But what about the other six; the paying customers? How could they divide up the $20.00 reduction so everyone would get his fair share?

$20.00 divided by six is $3.33, but if they subtracted that from everyone's share, the fifth and sixth man would each wind up getting paid to drink their beer.

The bar owner suggested they follow the principle of the tax system and reduce each man's bill by a higher percentage the poorer he was, and they worked out the amounts each would now pay.

Now the fifth man, like the first four, drank for free... (100% savings)
The sixth man now paid $2.00 instead of $3.00... (33% savings)
The seventh man now paid $5.00 instead of $7.00... (28% savings)
The eighth man now paid $9.00 instead of $12.00...(25% savings)
The ninth man now paid $14.00 instead of $18.00...(22% savings)
The tenth now paid $49.00 instead of $59.00...(16% savings)

Each of the paying customers was better off than before, and now five of the men drank for free. But outside the bar, the men began comparing the amounts they saved.

"I only got a dollar out of the $20.00" said the sixth man. He pointed at the tenth man and said, "But he got $10.00!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar too. It's unfair that he saved ten times as much as me!"

"That's true," shouted the seventh man. "Why should he get $10.00 back when I only got $2.00. The wealthy get all the tax breaks!"

Wait a minute," yelled the first four men in unison. "We didn't get anything at all! This new system exploits the poor!"

So the nine men beat the tenth man up.

The next night the tenth man didn't show up, and the other nine sat down and had their beers without him. But when the bill arrived, they discovered they didn't have enough money between them for even half the total.

And that boys and girls, journalists and government ministers, is how the tax system works. The people who already pay the most in taxes will get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just might not show up anymore.

In fact they just might start drinking overseas, where the atmosphere is somewhat friendlier.

For those who understand, no explanation is needed.

For those who don't, no explanation is possible.

"Settled" Climate Science Just Got Unsettled

Well, actually it was never settled, but you get the idea. After years of trying to persuade us that we had to stop emitting carbon, like, yesterday or we would all be doomed to heat death -- okay, that's hyperbole. What they really wanted was the U.S. to sharply curb CO₂ emissions (and damn the economic effects) and introduce global food rationing. So, I guess it wasn't that hyperbolic after all.

Anyway, after all the handwringing, it turns out that the warming trend we've heard so much about ended in 1997.

Meanwhile, leading climate scientists yesterday told The Mail on Sunday that, after emitting unusually high levels of energy throughout the 20th Century, the sun is now heading towards a ‘grand minimum’ in its output, threatening cold summers, bitter winters and a shortening of the season available for growing food.

Solar output goes through 11-year cycles, with high numbers of sunspots seen at their peak.

We are now at what should be the peak of what scientists call ‘Cycle 24’ – which is why last week’s solar storm resulted in sightings of the aurora borealis further south than usual. But sunspot numbers are running at less than half those seen during cycle peaks in the 20th Century.
Analysis by experts at NASA and the University of Arizona – derived from magnetic-field measurements 120,000 miles beneath the sun’s surface – suggest that Cycle 25, whose peak is due in 2022, will be a great deal weaker still.

There's a plaintive cry from some bitter clingers -- where on earth did I get that phrase from? -- that any reduced solar output will more than be compensated for by man-made global warming.

The problem with that argument is that we've been hearing for years that the earth is warming. It turns out that wasn't true. We've been hearing for years that the "science is settled". It turns out that it was only settled to the extent that "scientists" with a political agenda attempted to blacklist any scientists who disagreed with the International Panel on Climate Control and manipulate data that didn't fit those politics.

And of course, it must be asked: if human actions were artificially warming the planet then it must be true that the only reason global temperatures have remained steady since 1997 (rather than dropping) would be due to those actions. So, drastically reducing carbon emissions would precipitate global cooling. Following that train of thought leads to some unexpected and unwanted destinations for certain political factions, I daresay.

Oh also, it isn't global warming; that phrase is so passè. It's global climate change. So, all the handwringing over whether the planet is warming or not isn't important. What is important is that humans are destroying the planet! (Seriously, I see that a lot.)

My reply to that is to ask a couple of questions:

1. At what point in history has the climate of the earth been unchanging? (If you answer anything other than "never", you're wrong.)

2. If humans went back to a period of history before the industrial revolution -- heck, if every human and machine disappeared off the face of the earth tomorrow -- do you believe that earth's climate would settle into some ideal state and remain static for eternity? (Because if not, then I'll need more than the word of some obviously compromised "scientists" to work for either the permanent regression of mankind or its complete destruction. Also, you might want to think about question 1 before you answer.)

Now, with the revelation that the trumpted warming trend stopped fifteen years ago, I have another question:

If it turns out that we are headed for another "little ice age", would you support increased CO₂ emissions in an effort to stabilize the climate?

You Realize, Of Course, That Today's Environmental Movement Would Kill The Computer Revolution

Glenn Reynolds had a link this morning to a deal on a 32GB flash card and reader. Along with the link he did some reminiscing about days gone by. He later updated the post with a reader comment:

"Heck, I remember when punch cards were hi tech. It would take a stack of cards 47 miles high to store 32GB. That’s a lot of trees.”

That is a lot of trees. Which made me realize something:

If computers didn't exist in 2012, would they ever? If an inventor (a latent Charles Babbage, say) came along now and proposed a machine that could do calculations at a heretofore unheard of speed and all that was needed was lots and lots of wood to make punch cards, would environmentalists sit still for it? Would a president as firmly in the pocket of those same environmentalists support it?

Keep Your Stupid Wine, Pennsylvania

Reason asks the question, "how does a wine monopoly lose money" when examining the Pennsylvania state liquor control board's plan to sell wine at kiosks in various stores (mainly grocery stores and retailers like Wal-Mart).

"...the kiosks dispense a limited selection of wines at limited locations and times (not on Sunday, of course!) to customers who present ID, look into a camera monitored by a state employee, breathe into a blood-alcohol meter, and swipe a credit card. The Pennsylvania Liquor Control Board (PLCB) originally expected to have 100 kiosks in grocery stores throughout the state, each selling 30 to 50 bottles a day. But only 32 machines were ever up and running at one time, and only 15 manged to hit the bottom end of that sales target. In June the Wegmans supermarket chain withdrewfrom the kiosk program, bringing the total number of machines down to 22."

 So, let a state employee spy on you through a vending machine, swipe an ID card, and take a field sobriety test just to buy a bottle of wine, or go next door to the liquor store that every grocery store seems to have attached these days. Tough choice, let me see... the wine is cheaper in the kiosks, though, right?

"The committee also worried that the lone bidder, Simple Brands (I shit you not) of Conshohocken, was vague about the fees it might be charging, did not respond to repeated requests for information, and 'continued to change its business plan 'on the fly' as the Committee has broached operational issues and concerns.'"

Okay, but at least since this is contracted out to a private company, the taxpayers (some of whom don't drink -- think if this involved cigarette machines instead of booze) aren't on the hook for anything, right?

"The PLCB says the company owes the state the money it has lost so far; the company disagrees. "

 Wow.

Perception Vs Reality: the Debt Deal

All this handwringing over the budget deal makes it sound like there are serious cuts to governement spending involved. Tsk, tsk. You should know better than that! While all the discussion in the media makes it sound like the cuts are going to put poor people in the street, starve kids, and kill grandma, the reality is that the proposed cuts are spread over the next ten years, and, more importantly, represent reductions in planned spending, not real cuts to overall spending.

That's right. When politicians say, for example, that they're going to cut a budget, say, defense, by 4% in 2015, one might assume that that means that in 2015, the defense budget will be 96% of what it is in 2011. Pish posh. What if the plan is to raise defense spending by 8% in 2015. Now they're going only going to raise it 4% instead! Government math, kids, learn it. Know it. Love it. They do this all the time. If Democrats want an 18% increase in education spending, and they ultimately strike a deal with Republicans for an 8% increase, that is touted in the media as a 10% cut in education spending.

I'm serious. They really do that.

Is your head spinning yet? Maybe a simple visual aid will help.

Updated: Crossposted at Say Anything

Trends In Federal Spending

There is no area of the federal budget that couldn't use a little trimming. This includes the sacred cows of the Left (entitlements like welfare benefits and Social Security) and the Right (Defense). The easiest thing would be an across-the-board cut to the budget. Pick a number, something sensible. Five percent, say. That seems to be off the table though, and instead there's a lot of infighting and charges of wanting old people to die and children to go hungry, and so on. Meanwhile, nothing gets cut. Where does all this money go? Well, looked at one way, the biggest chunk goes to Defense ($925.2B). Of course, that includes all defense spending. Entitlements get broken up into subgroups like "Welfare" ($431.5B), "Pensions" ($805.6M), and "Healthcare" ($866.1B). Put together, entitlement spending far outstrips defense spending. That said, there's still room to cut defense spending. Perhaps we could stop building ships that never sail, for example.

But when you look at the historical data around government spending, some interesting trends emerge. First, take a look at Defense spending through the years. Note that I picked 1950 as the cutoff. I picked it because it's a round number and because the immense amount of spending on WWII skewed the chart's y-axis, making it a bit more difficult to read. Suffice to say that at the peak of WWII, defense spending accounted for over 40% of GDP.

(source)

The trend over the last 60 years is clearly a downward one. Even with the "massive" buildup in the 1980's, we're talking about 7% at the peak of the Reagan era. Fiscal Year 2010 projects around 5.8%.

Now look at the trends in Healthcare:

(source)

And Pensions:

(source)

These trends are not sustainable. They just aren't.

(Crossposted at Say Anything)

A Quick Though Exercise: Applying Government Logic on a Micro Level

Listening to Tim Geithner try to explain how raising taxes is necessary in order to preserve the current size of government was enough to give me a headache. It's like watching someone try to explain to you that the Earth is flat. This fictional person isn't lying; he really believes the Earth is flat. No amount of explanation on your part about mercator maps and telescopes and space shuttles taking pictures and nobody having ever fallen off the edge of the Earth into deep space will convince him otherwise. He just answers in a sanguine fashion, "Yes, I understand all that. But back to my point. The Earth, being flat..."

Geithner (and most of the current administration) appear to take the following as givens:

1. The deficit is unsustainable.
2. Government must not be made to shrink.
3. QED, taxes must be raised.

That may seem an oversimplification, but watch the video at the link above. Geithner says,

"If you don't touch revenues and you leave in place the tax cuts for the top 2% that were put in place by President Bush, if you leave those in place, and you're trying to bring our deficits down over time, then you have to do exceptionally deep cuts in benefits for middle class Americans and you have to shrink the overall size of government programs, things like education, to levels we could not accept as a country."

The problem is, there is no level of cuts that don't get attacked with words like "draconian" any time they are proposed.

The list above could be more broadly deployed thusly:

1. There is no problem that government can't fix.
2. There is no problem that can be fixed by shrinking government.
3. QED, taxes must be raised.

Look at Geithner's argument: we can't shrink government enough (in his opinion) to deal with the deficit. So rather than spend less money, we need to keep more of the money that workers earn. How that is supposed to stimulate the economy I will never understand. But let's do a quick thought exercise:

Frank is unemployed. He hasn't held a steady job in over four years. He gets one just long enough to requalify for unemployment benefits then leaves. He has a cell phone with a nice data plan, a computer, a nice car, cable TV, and all sorts of other amenities.

One day he realizes that his unemployment benefits aren't going to cover his rent, cable, cell phone, car payment, and his active lifestyle (he likes to go to bars). Frank has two choices: he can stop going out to bars, get rid of his cable, maybe sell his car for something cheaper, get a cheaper cell phone plan. Or, he can go to the unemployment office and say, "I can't get my spending in line without exceptionally deep cuts in my lifestyle to levels I could not accept as a layabout. You need to give me more money to cover my bills."

Tim Geithner and the current administration are Frank.

(Crossposted at Say Anything)

Some Other Warning Labels the FDA Might Want to Consider

Hey, look! The government is launching its next offensive in the war on tobacco! Now, at least 50% of a cigarette package's surface area will have to include disgusting images portraying the possible consequences of smoking:

No kidding.

It seems only fair that other dangerous products get treated the same way. To help the FDA along, I've mocked up some helpful warning labels to add to some existing products that are known to cause illness, death, and other negative words that get lawyers all a-twitter. (Click to enlarge)

Seriously. There's even some pseudo-scientific
mumbo jumbo to back it up.

Lifeguard Pay a Symptom of California's Woes

If I had it to do all over again I might go to lifeguard school and move to Orange County. Apparently you can make a pretty good living sitting on the beach and watching the bikinis stroll by.

According to a city report on lifeguard pay for the calendar year 2010, of the 14 full-time lifeguards, 13 collected more than $120,000 in total compensation; one lifeguard collected $98,160.65. More than half the lifeguards collected more than $150,000 for 2010 with the two highest-paid collecting $211,451 and $203,481 in total compensation respectively. Even excluding benefits like health care and pension, more than half the lifeguards receive a total salary, including overtime pay, exceeding $100,000. And they also receive an annual allowance of $400 for "Sun Protection." Many work four days a week, 10 hours a day.

I know, I know. lifeguards perform a vital service and save lives. But does anyone seriously think that this level of compensation is realistic?
But, putting that aside--it's California; this is just one item on a very large list of problems they are deealing with--what's interesting is the argument put forth by the union:

In a phone conversation, Brent Jacobsen, president of the Lifeguard Management Association, defended the lifeguard pay in Newport Beach: "We have negotiated very fair and very reasonable salaries in conjunction with comparable positions and other cities up and down the coast." "Lifeguard salaries here are well within the norm of other city employees."

Think about that for a minute. Now imagine this hypothetical conversation:

"Flip Udder, president of the Milk Producers of America, defended the current cost of a gallon of milk, which has reached $7.50 throughout the state. 'We have negotiated very fair and very reasonable prices in conjunction with comparable products in other cities up and down the coast.'"

That's called price fixing. It's illegal and it's happened before. You can argue that the collective bargaining between a union and a municipality and collusion among food producers to set coordinate commodity prices is different, but is it really? The end result is the same: the price of a good or service goes up everywhere because it went up somewhere. There's something very wrong about a system that allows a salary increase in one area to automatically roll over to all the other areas within a particular union's influence. This is a key difference between public- and private-sector unions; a collective bargaining victory for a union in one state doesn't necessarily affect the status in another in the private sector. State government unions are necessarily contained within a single state and can represent hundreds of locales. A pay increase at one of these can ripple throughout those locales and put the state government taxpayer on the hook for vast sums. This is at the root of California's ongoing budget problems. $400 for sunblock is just a symptom.


(H/T Rob Clayton for the OC Register link.)

(Crossposted at Say Anything)

An Immigration Presser Translated

President Obama held a press conference on the U.S. Mexican border today to talk about immigration reform. It can be difficult to decipher politco-speak, so allow me to translate:

"We have gone above and beyond what was requested by the very Republicans who said they supported broader reform as long as we got serious about enforcement," Obama said. "But even though we've answered these concerns, I gotta say I suspect there are still going to be some who are trying to move the goal posts on us one more time."

Translation: We answered those concerns by fighting tooth and nail to stop individual states from enforcing the laws the federal government won't. I don't know how to make it clearer to these knuckleheads that we don't care about their concerns, and yet they continue to insist that we take them seriously. What's up with that?

"Maybe they'll need a moat," he said mockingly to laughter from the crowd. "Maybe they'll want alligators in the moat."

Translation: Ignore that huge tunnel over there.

"I want incomes for middle class families to rise again. I want prosperity in this country to be widely shared. I want everybody to be able to reach that American dream, and that’s why immigration reform is an economic imperative."

Translation: I know what you're thinking; 'shared' is just a euphemism for 'redistribution' and that the American dream is for actual Americans. Shut up.

"We need Washington to know that there is a movement for reform gathering strength from coast to coast. That's how we'll get this done."

Translation: The big labor movement failed. The 'let's get behind healthcare reform' movement failed.  The 'Obama was courageous for killing bin Laden' movement failed. I'm due for one of these stupid movements to pan out.

"You make it here if you try."

Translation: It's not like there's enough border guards to cover the whole desert.

He said he would lead a "constructive and civil debate" on the issue but publicly questioned the motives of Republicans and their ability to keep their word.

Translation: Hey, no fair! You're supposed to be on my side, Associated Press!


(Cross posted at Say Anything)

Desire to End Roth IRAs Exposes Economic Misconceptions

Gerald E. Scorse penned an opinion column in Sunday's LA Times that calls for the dissolution of the Roth IRA retirement vehicle. In doing so he demonstrates several wrong ideas about both how economics work and the ownership of wealth in general.

He first points out the differences between the Roth and other retirement accounts, including traditional IRAs, 401(k) plans and 403(b) plans (which are like 401(k)s for non-profits; for a more detailed explanation, go here). Basically, most retirement vehicles allow for savings to be invested tax free. Finds paid out at retirement time are subject to taxes. Roths require taxes to be paid up front (another way to look at it is, there's no initial tax break upon investing). However, future withdrawals are made with out penalty; no taxes are paid on withdrawals. So far, so good.

Next however, Scorse makes an ill-fated comparison to the healthcare law, referring to Roths as a "fiscal Frankenstein", a term an (unnamed) opponent of the healthcare reform bill used to describe the legislation. It's a false comparison. Government-controlled healthcare is an open-ended mandate for federal spending which will require ever-increasing revenue streams (i.e. taxes) to maintain. The funds paid out from a Roth IRA don't come from taxes. Most Roth IRAs, being investment vehicles that utilize stocks, bonds, mutual funds, and other "risk-based" investments, aren't federally insured. (Some Roths, those offered by banks, are FDIC insured for up to $250,000.) Scorse writes:

In return for little more than ordinary upfront taxes, Congress waived untold billions in future Treasury receipts. Then, too, Roths could be a drag on the U.S. economy. Since no withdrawals are required, assets can lie idle indefinitely.

Yes, they can lie idle indefinitely. So what? They can lie idle indefinitely in a savings account until the sun burns out. Should there be a cap on how long money can sit in such an account, accruing interest? Apparently so, as money sitting in an account and not generating revenue for the government is "a bit like toxic instruments on the nation's books".

That statement exposes another misconception: all money belongs to the government. The idea that Roth IRAs are somehow cheating the federal government out of receipts that it is somehow entitled to shows a fundamental lack of respect for how wealth is created. This misconception was on display last year when Barney Frank was heard explaining why estate taxes were such a great thing. Inherent in both Frank's explanation and Scorse argument above is that any money an individual keeps is a gift from the government, to be rescinded or expanded at its whim. It's the federal government's world and you're just living in it.

Scorse ends by quoting Howard Gleckman of the Tax Policy Center:

"In the long run, turning billions of dollars from tax-deferred to tax-free savings will be a huge loser for Treasury. My colleagues at Tax Policy Center figure that, through mid-century, allowing unlimited Roth conversions will reduce federal revenues by $100 billion."

Scorse uses the qualifier "nonpartisan", which always seems to mean "partisan but not for profit". The Tax Policy Center is a joint venture of the the Urban Institute and the Brookings Institute. Nonpartisan? Maybe. Left-leaning? Certainly. This is not an attempt to discredit Gleckman. But it does serve to put his perspective on taxes into a clearer context.
That context ignores the effect that a greater percentage of capital in the hands of private citizens has on treasury receipts. More money in the private sector means more money to spend on goods and services which generates tax revenues. More money in the private sector means more money in the hands of those who create wealth and jobs, which also generate tax revenues. That's the other misconception at play here: money in the hands of government and money in the hands of the private sector are essentially the same when it comes to wealth and job creation.

Roth IRAs encourage planning for retirement. They provide a way for everyone, regardless of income, to prepare for a future where there is money to support them without living on the dole. The logic that says this should be taken away inevitably increases the risk that people looking to retire must rely on the federal government to take care of them through entitlement programs. It creates a perpetual cycle in which more people need the government to take care of them, leading to a need for more government, which needs more tax receipts, and so on. Which illustrates another misconception: the government knows better how to spend your money than you do. That's the real "fiscal Frankenstein".

(Crossposted at Say Anything)

New At Say Anything: Congress Lacks The Will To See Ryan's Budget Proposal Enacted

You can debate the merits of Paul Ryan's budget proposal. You can applaud or deride the merits of this specific cut or that.It seems unlikely to me that a budget this ambitious and far reaching would ever make it through the Congressional meatgrinder of partisan politics, dealmaking and good old-fashioned greed. That these cuts--or cuts like them in scope if not in the specific areas outlined in the proposal--are necessary seems beyond argument. I think, however, that our Congress lacks the will (and in some cases the desire) to enact this much cutting in one swoop. This proposal would represent the largest reduction in the size of government in our lifetime. That idea alone is scary to all the wrong people. I'm afraid that the goal Ryan's proposal seeks to acheive is beyond our current Congress.

(Click to read the rest of this article at Say Anything)

New At Say Anything: U.K. Energy CEO Sees Atlas Shrugging at Reduced Availability

I have a confession to make. I think Atlas Shrugged ultimately fails as a piece of literature. It's far too long and makes its central point -- that government meddling in the private sphere mucks things up to no end -- over and over, ad nauseum, like a metronome. By the third gratuitous (and long) illustration the metronome analogy fails and is replaced by one of a hammer pounding on your skull. The characters are largely caricatures, one dimensional heroes or baddies. And "the speech". You know the one I mean.

Looked at as a how-to guide for large, central-planning governments to wreck and economy and lower the standard of living for its citizens, however, the book is gold. Ayn Rand might bombard her readers with endless examples that tell the same story, but that doesn't make the point any less valid. Who knows, maybe that was the point. It's true that by the end of the book it was disheartening to see people with good ideas and a strong work ethic beaten down by inane laws and capricious regulations. The book is a testament to myopic politicians who rig the game for their own short term gain at the expense of the long term welfare of the people.

By that I mean that too many politicians succumb to the immediate; the opportunity to make money, to take up a cause, to champion a law, to elevate their standing with (who they determine to be) the right people. They pursue these goals with a tunnel vision that ensures that any stimuli that might trigger revisitation of those goals will be deflected harmlessly away. That same tunnel is padded with the adulation and support of those same "right people" who walk through tunnels of their own.

(Continue reading this article at Say Anything.)

Social Security: Perception Vs. Reality

Please read this whole piece by Eric Schurenberg at the Fiscal Times, which details several reasons why Social Security is not and may never be the safety net it was meant to be, at least by the time I'm old enough to start withdrawing.

But, if that's too much book-learnin', I've taken the liberty of condensing Mr. Schurenberg's wisdom down into easily-understandable visual aids:

Perception.

Reality.

New At Say Anything: New Congress Revives Internet Record Rentention Initiative

The new Congress has a lot on its plate. Working to reverse or at at least render less harmless the healthcare law, turning around the economy, reversing the unemployment numbers, dealing with a newly-nuclear Iran (not to mention a still-nuclear North Korea), the recent events in Egypt. Any and all of those things should take precedence over reviving Bush-era legislation to force internet service providers (ISPs) to maintain detailed records of the websites users visit.

A Judiciary committee aide provided a statement this afternoon saying "the purpose of this hearing is to examine the need for retention of certain data by Internet service providers to facilitate law enforcement investigations of Internet child pornography and other Internet crimes," but declined to elaborate.

Rep. F. James Sensenbrenner of Wisconsin is scheduled to hold a hearing tomorrow morning to discuss forcing ISPs to store records of their users' activities for later review by police.
Thanks to the GOP takeover of the House, the odds of such legislation advancing have markedly increased. The new chairman of the House Judiciary committee is Lamar Smith of Texas, who previously introduced a data retention bill. Sensenbrenner, the new head of the Subcommittee on Crime, Terrorism, and Homeland Security, had similar plans but never introduced legislation. (It's not purely a partisan issue: Rep. Diana DeGette, a Colorado Democrat, was the first to announce such a proposal.)

I don't see how the goal of catching child pornographers -- a worthwhile goal to be sure -- justifies infringing the rights of millions of law abiding internet users. I note the use of the nebulous phrase "other internet crimes"; a pliable, ill-defined concept that can both be used to represent any hot topic in the world of cybercrime and serve as a handy placeholder for whatever the listener cares to envision.

The problem here is that using any single crime perpetrated by a small percentage of the population to justify sweeping legislation that trods roughshod over individual privacy rights paints everyone as a presumed criminal. This might arguably be necessary if it were the only way to procure evidence against a perpetrator. Except of course, it isn't.

(Click here to read the rest of this post at Say Anything.)