Category: Limited Government

Government Imposed Uncertainties Hurt Economic Growth!

G’Day!

In nearly every analysis or survey of why business and financial institutions are not currently hiring or investing in America, the primary reason given is “uncertainties”. While dealing with economic uncertainties is a normal part of business decisions, the Obama Administration and Democrats in Congress have created additional administrative and legislative uncertainties that are unnecessary and detrimental to growth. Removal, or at minimum temporary suspension, of these government obstacles to investment, growth, and job creation would allow business and financial institutions to get America moving again.

Summarized below are the current government-sponsored complications that are discouraging job creation, capital investment, and the economic growth that we would expect from business during a normal expansion. I apologize in advance for its length but the issues are important and merit nominal analysis. Please review the information below and ask yourself, “If I were a business manager or a banker, would I risk my own money to expand, startup a new business, or make loans in this restrictive and uncertain regulatory environment?”

Fiscal Deficit & Debt Crisis: These two related issues are by far our greatest overall national risk! Fortunately we have a very comprehensive, rational, and bipartisan solution available, which was initially sponsored by President Obama. It is the Bowles-Simpson Debt Reduction Commission Report, “The Moment of Truth”. Unfortunately, President Obama and Congress have ignored this proposal since its completion. I have extensively discussed and still support this positive and bipartisan solution, (see “Bowles & Simpson Have it Right!” “Obama Ignores Bowles-Simpson Debt Reduction Commission – Again?” and “Is Obama Really Serious about Debt Reduction?”). The commission’s report, which was approved by a majority of 61% of the bipartisan members, has languished in obscurity since it was completed and presented to President Obama early this year. The recommendations from the commission cover all the necessary aspects of an implementable comprehensive solution to the our fiscal and debt crises including significant tax reform, reductions in discretionary and defense spending, and entitlement reforms including Social Security. For reasons that are a mystery to me, neither Congress nor the President appears to be considering this report in their current discussions. The President and the Democrats are not only totally ignoring a rational solution but have been fighting for months to avoid even minimal reductions from the inflated federal budget spending of the last 2-3 years. How can anyone expect financial institutions or business firms to act positively with these uncertainties hanging over them?

Taxes: As repeatedly discussed in previous articles, both corporate and individual income tax reform is essential for economic growth and investment in our country (see “Fiscal & Debt Crises – Tax Reform Essential!”). We need to raise additional federal revenues by lowering tax rates (especially corporate tax rates), eliminating loopholes, subsidies, and unnecessary “tax expenditures”, broadening the tax base to include more taxpayers, and simplifying the tax code. Currently at 35%, corporate tax rates in America are among the highest in the developed world (corporate taxes in China are 25%, Russia 20%, Germany 15%, and Ireland 12.5%) and foreign profits are penalized if returned to the US. This is ridiculous and encourages job creation and investment overseas, not in the US!

Regarding broadening the tax base, over 51% of US families currently pay no income taxes but receive the benefits paid by taxes from the rest of us, especially the much maligned “wealthy” (who already pay 76% of total income tax revenues). The current Obama proposal is to add more taxes on the “Rich” by rescinding the “Bush Tax Cuts” sooner than they are scheduled to expire. Simple math demonstrates that the “Rich” don’t have enough income to pay for the current and projected Obama deficits. This is nothing but political demagoguery and class warfare in preparation for the next election and is neither rational nor a serious solution to our long-term government overspending problems. If we are to solve our deficit and debt crises, broadening the tax base can and must be accomplished.

In “Fiscal & Debt Crises – Tax Reform Essential!” noted above, I have outlined three overall reform alternatives: 1) Retain but simplify our current “Progressive tax system, 2) Adopt a “Flat Tax” (one tax rate for all), and/or 3) Adopt a “Fair Tax” (a consumption or “VAT” tax). I personally prefer implementation of the “Fair Tax” either alone or in conjunction with one of the other two alternatives.  However, any one or a rational combination of these alternatives will accomplish the necessary tax reform goals and stimulate economic growth. All have detailed proposals available to our government, which are currently being ignored. The current extension of the “Bush Tax Cuts” expires at the end of 2012. Would you hire new employees or invest in your business, if you didn’t know what your taxes would be in eighteen months?

Obamacare: Virtually all independent analysis indicates that implementation of the 2000+ pages of Obamacare will ADD not reduce healthcare costs and will probably result in a single payer government-controlled healthcare system with restricted options and limited services. Small businesses, the job growth engine of our economy, are particularly at risk. At last count, approximately 1450 organizations, including many unions, have been given Obama Administration waivers against required implementation of Obamacare because of the higher costs it demands. Equally importantly, no one really knows all the implications, costs, or unintended consequences of the legislation because the Obama Administration is still writing the rules. In two separate articles, I suggested market-based solutions to our healthcare issues, “How to Solve Healthcare Part I” and “How to Solve Healthcare Part II”. I lived and worked in England for the better part of ten years and can assure you government-run healthcare is costly (through taxation), inefficient, slow, and limited in providing medical services. Think long and hard before you support such a system in the US. Again, if you were a business manager and were faced with the higher costs, more administration, and uncertainties associated about healthcare rules that are still being written by the administration, would you add to your payroll costs by hiring new employees?

Dodd-Frank Financial Regulation: Like Obamacare, this legislation is lengthy, complicated and potentially expensive for the financial services industry and ultimately consumers. No one really knows all the implications or additional regulations of the legislation because they are still being written by the administration and will create many unintended consequences for consumers and the industry. The Act is perhaps the most significant change in financial regulation since FDR. It represents major changes to all financial regulatory agencies and affects most of the nation’s financial industry. Major new agencies have been created: Financial Stability Oversight Council, the Office of Financial Research, and the Bureau of Consumer Financial Protection. Perhaps the most controversial provision is the creation of the potentially big and expensive “Bureau of Consumer Financial Protection” within the Federal Reserve System (FRS). Very importantly, even though the new Bureau is placed within the FRS, it operates INDEPENDENTLY. The FRS is PROHIBITED from interfering with matters before the Director, directing any employee of the Bureau, modifying the functions and responsibilities of the Bureau or impeding an order of the Bureau. With virtually unlimited power and authority to act independently, without oversight, the agency can do whatever it deems appropriate supposedly to protect consumers! WOW! Have we become a potential police state regarding “consumer protection”! What ever happened to “Caveat Emptor” (let the buyer beware) and personal responsibility? Is the government going to protect us from everything and if so, how? How many new public-sector union employees will this take? What will it cost? Ultimately, businesses and consumers will end up paying for this new unlimited-power bureau with sweeping authority to do “whatever it deems appropriate to protect consumers”. This is a scary development and creates endless uncertainties as the bureau writes its new regulations. More government madness and not good for job creation (except in the government)!

Additionally, the “Durbin Amendment” gives the power to regulate debit card interchange fees (prices) to the FRS. Effectively this eliminates free markets for debit cards and allows price fixing by the FRS, which was acted on by the FRS this week!

This is not a good trend for freedoms or free markets and bodes poorly for the other uncertain regulations to follow. If you were a banker faced with these uncertainties and risks, what would you do?

Energy & Environmental Policy: An intelligent national energy policy is vital to support economic growth and minimize the very real and present dangers of disruptions in our essential imports of foreign supplies. This policy must include and recognize America’s economic necessities, national security concerns, and the time required and costs necessary for conversion from any current source to any new technologies without creating growth constrains. It must include ALL possible sources of domestic energy generation including fossil fuels (oil, natural gas, coal), nuclear, as well as green energy sources (wind, solar, biotech).

Obama has no apparent energy policy other than promoting the green energy sources to ostensibly support his “global warming” environmental agenda. This action is happening at a time when more and more evidence is challenging and refuting not only “global warming” theory but also CO2 as a causative agent, and at a time when energy demands and prices for fossil fuels are increasing with NO serious alternatives in sight for decades! Further, the dependency and risks from imports of fossil fuels to the US are staggering and the economic and national security consequences of a stoppage of these imports would be catastrophic for our nation. Obama’s administration is actively working against virtually every effort to explore and develop domestic sources of fossil fuels. Offshore drilling in the continental shelf and interior of the US is being severely restricted even though thousands (perhaps hundreds of thousands) of good jobs could be created by actively pursuing known domestic reserves. Specifically, exploration and development of fossil fuel sources are being stifled by a lack of permits from the Administration and delays forced on development by environmentalists such as the EPA’s recent stoppage of Shell Oil’s permit to drill and develop a 27 billion barrel reserve in the Arctic Ocean off the coast of Alaska. (see “Obama Administration Attacks American Business Again!”)

The EPA is also trying to circumvent Congress’ refusal to pass “Cap and Trade” legislation by “backdooring” the regulations as new rules issued directly from the agency. Also, the EPA has proposed two new “clean coal” regulations regarding the use of coal in power plants that may result in “hundreds of thousands of coal industry jobs lost” and an estimated increase in the cost of coal produced electrical power by 11-23%. It is further estimated by a trade group that, in addition to the above jobs lost, the new regulations will cost the coal industry approximately $180 billion. For information, coal-fired power plants account for approximately half America’s energy supply.

I am not opposed to environmental protection or pursuit of green energy sources but, like many, am not convinced that global warming is actually occurring, and if so, is caused by humans or CO2. A rational and balanced national energy policy is needed. Restricting our domestic economy growth at a time of increasing global competition and increasing our dependency on foreign imports from a very volatile area of the world for the sake of a still unproven theory does not seem to me to be wise. It only creates more costs and uncertainties for our country and harms job growth, especially in the energy sector.

Pro-Union, Anti-Business Activism: The pro-union anti-business biases of the current administration are well documented and are detrimental to job creation, capital investment, and economic growth in America. Obama’s endless campaign speeches to unions, the stream of union activists to the White House, and repeated class warfare attacks on the “wealthy” are sufficient evidence of these biases.

Perhaps the most flagrant current example is the National Labor Relations Board’s (NLRB) anti-business, anti-free market, and pro-union (not pro-labor) socialist attack on the Boeing Corporation and “Right-to-Work” States (see “Attack on American Business by Obama “packed” NLRB!” and “Obama “packed” NLRB Continues Attack on Boeing & Free Markets!”). Under Obama, the NLRB has become a pro-union activist body and is now deliberately attacking job creation and investment in America by attempting to stop Boeing, America’s #1 exporter, from final implementation of the firm’s new “Dreamliner” factory in Charleston, South Carolina. South Carolina is one of 22 “Right-to-Work” States, which don’t require (or prevent) hiring union workers. To date, Boeing has already invested approximately $1 billion and hired approximately 1000 workers in South Carolina. Boeing directly employs over 160,000 workers, and is indirectly responsible for approximately another 1.2 million jobs. Apparently to the NLRB, the only “good” American jobs are union jobs.

For years during and subsequent to the Bush Presidency, union activists and Democrats in Congress have prevented the passage of Free Trade Agreements with South Korea, Columbia, and Panama, which are favorable to American business, American exports, American consumers, and will create American jobs. The unions have delayed passage because imported goods coming into the country at lower prices will displace some workers. Really! This is the global free market at work, expands economic growth, creates wealth and jobs, and benefits all consumers who are provided with more product choices at cheaper prices. Finally, this week the Senate is holding hearings on these bills and hopefully, after years of delays and economic losses, will be passed and signed by the President. Just another uncertainty caused by government interference in the marketplace that has hurt job growth and consumers.

With these pro-union anti-business biases at the very top of our political leadership and government, is it any wonder that business is hesitant to hire and banks to loan?

Conclusion: Government needs to get out of the way! (see “Big Government IS Our Problem”) The above issues and the uncertainties they have imposed on our economy are indications of where Obama’s and the Democrat’s policies are leading us. Socialism and central planning don’t work – just ask the former Soviet Union or India. Free markets and individual freedoms do work! Obama is increasingly turning our nation into a centrally-controlled socialist welfare state with significant pro-union, anti-business biases and uncertainties that hurt us all. These policies are not the foundation of freedoms upon which our country was created and which made America great. It’s time to return to individual liberties, free markets, sound fiscal and monetary policy, and limited government. It is time to take back our country!

The Old Guy PhD

 

The Declaration of Independence

G’Day!

Next week we will celebrate our nation’s birth! This is a time for both rejoicing and reflection on the reasons for, characteristics of, and principles that have made America the greatest country in the history of the world.

When this blog was established in February, it was and continues to be dedicated to the support, promotion, and preservation of the foundations upon which our Founding Fathers and our ancestors/countrymen risked and gave their lives to create our country. These basic principles are individual freedom, free markets, sound fiscal and monetary policy, economic growth, and limited government. In other words, it is dedicated to the principles for which this country fought the Revolutionary War and which were subsequently established in our Constitution and Bill of Rights.

Presented below is “The Declaration of Independence” as originally written. This document summarizes succinctly and completely the reasons for our Founding Fathers’ increasing dissatisfaction for a government that was remote, not representative, and not responsive to the needs and desires of the people being governed. I commend each of you to take a brief amount of time to reread and reflect on these reasons and the decision our former countrymen made to risk their lives to establish a new nation.

“The Declaration of Independence”

“When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. –That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, –That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed.

But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.–Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world.

He has refused his Assent to Laws, the most wholesome and necessary for the public good.

He has forbidden his Governors to pass Laws of immediate and pressing importance, unless suspended in their operation till his Assent should be obtained; and when so suspended, he has utterly neglected to attend to them.

He has refused to pass other Laws for the accommodation of large districts of people, unless those people would relinquish the right of Representation in the Legislature, a right inestimable to them and formidable to tyrants only.

He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their public Records, for the sole purpose of fatiguing them into compliance with his measures.

He has dissolved Representative Houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.

He has refused for a long time, after such dissolutions, to cause others to be elected; whereby the Legislative powers, incapable of Annihilation, have returned to the People at large for their exercise; the State remaining in the mean time exposed to all the dangers of invasion from without, and convulsions within.

He has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither, and raising the conditions of new Appropriations of Lands.

He has obstructed the Administration of Justice, by refusing his Assent to Laws for establishing Judiciary powers.

He has made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries.

He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people, and eat out their substance.

He has kept among us, in times of peace, Standing Armies without the Consent of our legislatures.

He has affected to render the Military independent of and superior to the Civil power.

He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation:

For quartering large bodies of armed troops among us:

For protecting them, by a mock Trial, from punishment for any Murders which they should commit on the Inhabitants of these States:

For cutting off our Trade with all parts of the world:

For imposing Taxes on us without our Consent:

For depriving us in many cases, of the benefits of Trial by Jury:

For transporting us beyond Seas to be tried for pretended offences

For abolishing the free System of English Laws in a neighbouring Province, establishing therein an Arbitrary government, and enlarging its Boundaries so as to render it at once an example and fit instrument for introducing the same absolute rule into these Colonies:

For taking away our Charters, abolishing our most valuable Laws, and altering fundamentally the Forms of our Governments:

For suspending our own Legislatures, and declaring themselves invested with power to legislate for us in all cases whatsoever.

He has abdicated Government here, by declaring us out of his Protection and waging War against us.

He has plundered our seas, ravaged our Coasts, burnt our towns, and destroyed the lives of our people.

He is at this time transporting large Armies of foreign Mercenaries to compleat the works of death, desolation and tyranny, already begun with circumstances of Cruelty & perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the Head of a civilized nation.

He has constrained our fellow Citizens taken Captive on the high Seas to bear Arms against their Country, to become the executioners of their friends and Brethren, or to fall themselves by their Hands.

He has excited domestic insurrections amongst us, and has endeavoured to bring on the inhabitants of our frontiers, the merciless Indian Savages, whose known rule of warfare, is an undistinguished destruction of all ages, sexes and conditions.

In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.

Nor have We been wanting in attentions to our British brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which, would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our Separation, and hold them, as we hold the rest of mankind, Enemies in War, in Peace Friends.

We, therefore, the Representatives of the united States of America, in General Congress, Assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the Name, and by Authority of the good People of these Colonies, solemnly publish and declare, That these United Colonies are, and of Right ought to be Free and Independent States; that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do. And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.”

Please join me in celebrating the anniversary of the birth of our great nation!

The Old Guy PhD

 

Obama “packed” NLRB Continues Attack on Boeing & Free Markets!

G’Day!

The Obama Administration and the National Labor Relations Board (NLRB) continue their anti-business, anti-free market, and pro-union (not pro-labor) socialist attack on the Boeing Corporation and “Right-to-Work” States (see “Attack on American Business by Obama “packed” NLRB!”). The NLRB was originally intended to be an impartial arbiter of labor elections and management/labor disputes, if necessary. Under Obama, the NLRB has become a pro-union activist, anti-business organization and is now hurting job creation in America.

How did we reach the situation where the NRLB apparently defines only “union” jobs as “good” jobs and is willing to support union membership over job creation? During the March 2010 Congressional recess, Obama temporarily “packed” the NLRB by filling 2 of the vacant positions with Craig Becker and Mark Pearce without Senate confirmation. Subsequently Pearce and a Republican nominee, Brian Hayes, were confirmed by voice vote in the Senate in June 2010 but Becker was not. Becker, a union activist and former Associate General Counsel of the AFL-CIO & SEIU, remains a temporary voting board member until the end of 2011. Obama also appointed “Acting” General Counsel, Lafe Solomon, during the same Congressional recess. This currently gives the NLRB a majority of members supporting activist union causes and biases their decisions in favor of “union” jobs and against American business.

The International Association of Machinists & Aerospace Workers Union (IAMAWU) are attempting to stop Boeing, America’s #1 exporter, from final implementation of the firm’s new “Dreamliner” factory in Charleston, South Carolina. South Carolina is one of 22 “Right-to-Work” States, which don’t require (or prevent) hiring union workers and account for 7 of the top 10 and 10 of the top 15 in the “2010 Best States for Business” report. To date, Boeing has already invested approximately $1 billion and hired approximately 1000 workers in South Carolina. (Please note: the new workers in South Carolina independently decided to be non-union!) Boeing had $29 billion in exports in 2009 (nearly 2% of our country’s total), directly employs over 160,000 workers, and is indirectly responsible for approximately another 1.2 million jobs.

Boeing is not required to employ union workers in South Carolina or obtain union permission to build a new plant anywhere in the US or the World. However, the history of union disruptions and delays in Washington State could support moving their entire business operation out of Washington State. Boeing has not done this. Instead Boeing is hiring 2000-3000 new union workers in Washington State while adding the new plant in South Carolina. What Boeing has done is to diversify their operations by expanding into a State with a more favorable business environment and reducing their risk of union-motivated business interruptions. Expanding into South Carolina is much better than expanding into South Korea, or Mexico, or China as Boeing could have done. As indicated in the referenced article, this latest attack on business and free markets is another very, very dangerous anti-business precedent being attempted by the unions with NLRB reinforcement to increase both union & government central control over free market business decisions in America. Is anybody in the Obama Administration really interested in economic growth and private-sector job creation in this country?

Not surprisingly, President Obama has been totally silent on this blatantly inappropriate and probably unlawful move by the unions to force private firms to get union approval for the location of business operations throughout our country. This action has now reached the second level in the process where the “Acting” General Counsel, Lafe Solomon, and the NLRB will rule as to the validity of the union’s demands. Given Obama’s bypassing of the Senate confirmation process, the IAMAWU’s complaint is expected to be approved by the “temporary” pro-union membership in the NLRB.  The process will then move into the US court system for appeals, probably all the way to the US Supreme Court. This process may take years to resolve and leave Boeing and other US business with even greater operational uncertainty than already exists under the Obama Administration policies. This is another government and union-imposed dagger in the heart of job creation, economic growth, and the free market decision-making process for American businesses. In the interim, what will be the on-going status of the new Boeing plant, US vs. foreign expansion decisions by other companies, and the domestic job growth they could provide?

If this bogus union complaint is allowed to proceed, businesses in the 22 states with “Right-to-Work” laws are in jeopardy of having union membership forced on them and American businesses throughout our country will be clearly encouraged to locate future business operations and jobs overseas. This is likely to be another inappropriate and unnecessary administration-created “slow-motion train wreck” for the stalled economy. How can President Obama, who now claims “jobs” are his most important priority, permit this disaster in our country?

This is just another example that Obama and his policies are increasingly turning our nation into a centrally controlled socialist welfare state. These policies are not the foundation of freedoms upon which our country was created and which made America great. It’s time to take back our country as soon as possible and return to individual liberties, free markets, economic growth, and limited government.

The Old Guy PhD

Yes, We CAN Grow the Economy & Create Jobs

G’Day!

Obama and the Democrats have tried and failed with virtually every centrally controlled socialist alternative to stimulate the economy and create jobs. The only jobs they have really created are in government. The so-called recovery is the weakest in decades and may be about to “double dip”. Big collectivist government solutions have failed miserably (see “Big Government IS Our Problem!”). Obama and the Democrats only answer to this failure has been to blame it all on Bush. They claim that without their $4 trillion dollar taxpayer & debt funded stimulus, nationalization of businesses, increased healthcare regulations and spending, increased financial regulations, and extreme monetary easing by the Federal Reserve, it could be worse. The only thing that worked has been TARP and that was enacted under President Bush! It is time for government to stop regulating, remove the uncertainties facing business, get out of the way, and let the free market and capitalism work. You do not create jobs by taking wealth from those that generate it, siphon off government administration and oversight, and redistribute less of it back into the economy.

Economic growth and job creation is about free markets, minimum regulations, incentives, and opportunities in the private sector. Government doesn’t create jobs; the private sector creates jobs. Government also doesn’t create opportunities but it can discourage or prevent them (think energy policy) and it can and does distort the market through politically motivated subsidies or tax deductions for selected industries. If taxation and regulations are minimized to the level necessary to support the essential role of government as defined in our Constitution, business will take advantage of whatever opportunities are available in the marketplace and the economy will grow. Unfortunately, the Obama administration and the Democrats in Congress do not understand this. They apparently believe that a few “elites” (themselves) in government are smarter than the millions of consumers and business managers throughout the global economy. They have imposed on American business a climate of increasing regulatory restrictions, increasing healthcare costs, high business taxes, and increasing uncertainty as to what they will do next. In this centrally controlled environment, it is no surprise that American businesses are not currently hiring or investing in our country. The regulations and costs just in Obamacare and the Dodd-Frank Financial Regulations Act are particularly harmful and businesses are wisely waiting to see what the government will force on them next.

So what needs to be done to create jobs and get our economy back on track? At least six actions could and should to be taken: 1) Stop/Minimize non-essential regulations, 2) Have a business-friendly government, 3) Reduce tax rates, especially on business, through tax reform, 4) Enact an energy policy that encourages rather than discourages development of domestic sources of traditional energy, 5) Fix the fiscal and debt crises by cutting government spending, revising entitlements, and increasing tax revenues through tax reform, 6) Pass the three pending Free Trade bills and expand them to include other trading partners.

First, a moratorium on new regulations should be declared and all regulations associated with Obamacare and Dodd-Frank (especially the Consumer Protection Agency) halted until after the next election in 2012. The uncertainty overhang from these two bills alone is stifling hiring and investment by business. Ultimately, all regulations, both existing and new, should have a “sunset clause” that requires our government to formally reaffirm their need at pre-set intervals, perhaps every ten years. This would insure that outdated or unnecessary laws do not become permanent.

Second, President Obama needs to realize that his collectivist socialist policies don’t work and become truly business-friendly. It is no secret that the current administration is pro-union, pro-environmentalist, and anti-business as evidenced by numerous actions by himself and the Administration’s Departments and Agencies. The pro-union/anti-Constitution actions by the NLRB against Boeing in South Carolina (see “Attack on American Business by Obama “packed” NLRB!”) and the many actions of environmentalists against any form of energy development (drilling in the Gulf of Mexico, Shell Oil off the coast of Alaska (see “Obama Administration Attacks American Business Again!”) are not conducive to economic growth and job creation. This week the issue of an energy pipeline from Canada to Texas has also come under attack by environmentalists. These and other obviously pro-union and environmentally biased activities against businesses (and some States) should be halted and free markets given an opportunity to function.

Third, tax reform is essential to both economic growth and reduction in the deficit (see “Fiscal & Debt Crises – Tax Reform essential!”). As the referenced article indicates, there are several excellent proposals available and Republican presidential candidate, Tim Pawlenty, just added another this week. All are pro-growth and pro-job creation and all will work by providing incentives for private sector investment IN THIS COUNTRY, not abroad. Naturally, the Democrats, who believe in centralist government solutions and not in free markets, are generally opposed to all of them. Perhaps the easiest, most immediate, and most beneficial tax reform is to reduce (or eliminate) corporate tax rates to a level equal to or less than the major nations with whom we compete and simultaneously eliminate the politically motivated subsidies and deductions that distort the market. Currently US corporate taxes at 35% are highest in the developed world and actually represent double taxation on income, first at corporate level and again at personal level, when distributed as dividends. Additionally, the high US corporate tax rates discourage US based international companies from repatriating foreign profits back into the US because, if returned, they are taxed at the higher US tax rate. Our current tax policy encourages investment abroad and discourages repatriation of profits back into America. This is a job killer, not a job creator. Is our government crazy?

Fourth, enact a domestic energy policy that encourages rather than attacks development of domestic sources for traditional energy. This will create thousands of good jobs in our economy and reduce our dependence on foreign energy supply. For far too long we have allowed the environmentalists to dictate policy and stagnate domestic energy growth. Every rational person knows America will be dependent on fossil fuels for decades. Yes, development of alternative energy forms and technology is important but there is no chance “green energy” is going to be a replacement for traditional energy sources, including nuclear power, any time soon. It is madness to exclude active development of domestic fossil fuel sources and nuclear power from our alternatives just to satisfy a few environmentalists with unproven science and questionable computer projections. If “green energy” was a viable economic solution, we would not need a policy or subsidies to support it. Also, independent of the longer-term cost benefits from domestic production, the extremely high and increasing risk of supply from the foreign sources is a very dangerous national security concern. The Middle East is in turmoil and no one knows how it will turn out. Without domestic alternatives, American could find itself with an energy disaster, which could seriously endanger our economy. We must actively develop domestic energy to create jobs in America, sustain our economy, and reduce our global supply risk.

Fifth, resolve our short and long term deficit and debt crises. We must get government spending and the dual debt and deficit crises under control (see “Bowles & Simpson Have it Right!”, “Obama Ignores Bowles-Simpson Debt Reduction Commission – Again!”, “Is Obama Really Serious about Debt Reduction?”). Our Government is too big, too oppressive, and exercises too much control over the American people and business. The current policies are sucking money from business and taxpayers, adding more public sector union layers of government control, stifling business growth, and reducing America’s ability to grow and prosper. As stated above, in a free market economy with protection for the freedom of individuals and businesses, the private sector creates jobs. Since his election, Obama has expanded the size and scope of government control far beyond the level any freedom-minded citizen would have imagined possible. Simultaneously, Obama has also increased our federal deficit by $4 trillion and increased our national Debt by approximately 40% to $14.3 trillion. Relative to GDP the size of government has increased from approximately 20% of GDP to over 25.5% of GDP, a 5% increase in the size of government relative to our economy in less than three years. Without correction, our deficit next year is expected to be another $1.6 trillion and in ten years our national debt will grow to a staggering $22 trillion! Does anyone think this makes sense? My article last week, “Is Our Government Broken? – Redux!”, provides more information on this critical issue.

Sixth, pass the Free Trade Agreements for South Korea, Columbia, and Panama. These proposals go back to the Bush Administration and should be easy to pass. I believe nearly everyone including the President and many Democrats support them. As usual, politics is holding them up. Free trade works and provides value through additional products and services at lower costs to all American consumers. Only unions are opposed to free trade because, in the short term, it may reduce union jobs in non-competitive industries. Over 200 years ago, Adam Smith established the unchallenged principle that the wealth of a nation was based on the goods and services available to its citizens. Free trade allows this to work for the benefit of all consumers. It’s time for the unions to realize this and support what’s good for the nation over what’s good for the union.

Yes, we CAN solve our problems, if we have the political will to do so. This country was founded and prospered on the principles of individual freedom, free markets, sound fiscal and monetary policy, and limited government. Let’s get back to our foundations and demand that our elected representatives in government get to work.

The Old Guy PhD

 

Is Our Government Broken? – Redux!

G’Day!

Nothing has really changed since my earlier post “Is Our Government Broken” on March 16. If anything, the situation is now worse and potentially more detrimental to our country’s international reputation and the growth of our economy. Obama and the Democrats appear to be determined to ignore the problem and demagogue any efforts by the Republicans to actually confront and attempt to resolve our fiscal and debt crises. While there will probably be an extension of the debt ceiling this summer, it will more than likely be another temporary fix and will just “kick the can” further down the road. As I have repeatedly said, this is madness and intolerable behavior for Congress and the President.

The good news is we now have three rational proposals available, any one of which would start to solve our problems. The bad news is that neither the President nor Congress is seriously considering any of them. The proposals available are: 1) the bipartisan Bowles-Simpson Debt Reduction Commission report, “The Moment of Truth”; 2) the Paul Ryan 2012 Budget Proposal, “The Path to Prosperity: Restoring the American Dream”; and 3) the recent Heritage Foundation Special Report, “Saving the American Dream: The Heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity”. The Bowles-Simpson report and The Heritage Foundation Special Report are fully comprehensive proposals dealing with all sectors of our economy, including desperately needed tax reform, entitlement reform, and cuts in discretionary government spending (including defense). The Bowles-Simpson report was approved by 61% of the members of the commission but for unexplainable reasons, has been ignored by the President and Congress. Paul Ryan’s proposal, which was passed by the House but rejected by Democrats in the Senate, is reasonably comprehensive but does not address Social Security and, in my opinion, does not adequately address Defense spending. In addition to the proposals above, the GAO report “Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue” has already identified unnecessary duplication, overlap, or fragmentation existing across our Federal Government totaling BILLIONS of dollars in ANNUAL SAVINGS. This is also a good place to start.

I have referred to each of these reports in several previous posts on this website and, for the sake of brevity, provide appropriate links below:

The first two (2) paragraphs in my initial post on this subject are still relevant:

“Yes, our government is currently broken and it needs to GET TO WORK! The events taking place in our national government and some states do not represent the principles of elected representative government upon which America was founded. We elected our officials to serve the needs of the people, not the desires of their political party, big business, or unions.”

“President Obama, both Democrat and Republican Congressional Representatives and Senators (with minor exceptions) are not currently working for the long-term benefit of America. Nearly all are posturing and working for what they perceive as the good of their political party and personal reelection. Citizens have common sense and know that we have fiscal and debt crises that are too large and unsustainable. We must get our State and Federal Governments in order.”

Our federal government is out of control and has grown to be too large, too self-oriented, and is not performing their duty to be responsible to the American people. To date the Democrats have proposed absolutely no specific plan to elevate our fiscal and debt crises (other than increase tax rates) and have not passed a budget in over 700 days! President Obama is also not exercising leadership in this crisis and, as indicated recently, is “leading from behind”. Our President is already in full campaign mode in preparation for the 2012 election (which can’t come soon enough!) and is engaged in travelling, golfing, and political speeches. Obama’s proposed 2012 budget is an embarrassment given the magnitude of our country’s ongoing financial problems and projects spending next year of another $3.7 trillion and an addition to the deficit of $1.6 trillion. Over the next 10 years the new Obama budget proposal is expected to produce a further cumulative deficit of $7.2 trillion, bringing our overall national debt to approximately $22 trillion. Again, this is madness and irresponsible and does not serve the interests of the American people!

Most of the Americans now realize “Big Government is Our Problem”! Let’s fix it and put our country back on a solid jobs and economic growth foundation! Adopt one or a combination of the above proposals and let’s get to work.

The Old Guy PhD

Fiscal & Debt Crises – Tax Reform Essential!

G’Day!

Like our government, our federal tax system is broken (see “Is Our Government Broken?”). Our tax code is complex, unfair, damaging to our economy, and its thousands of pages of code are completely beyond understanding by all but a few highly specialized lawyers and accountants! On national television recently it was disclosed that 51% of AMERICAN HOUSEHOLDS PAID NO FEDERAL INCOME TAX last year, the so-called “rich” paid 76% of all income taxes, and 31% of households not only paid no income taxes but receive monetary benefits from the government. Less than half of households are paying for the services and benefits for the all the American people. Our federal tax system is broken and must be reformed as part of the solution to our fiscal and debt crisis. The basic goals of this reform should to stimulate our economy, simplify the tax code and its administration, broaden the taxable base so that all except those in real poverty pay federal tax, and is fair to the American people.

For over a century, federal income taxes were unconstitutional because our Founding Fathers believed that Federal Government should be limited. They believed (correctly as it turned out) that a direct tax on incomes would provide revenues that bureaucrats would find increasing ways to spend, triggering the desire for bigger and bigger government and more and more taxes! Our federal government successfully served the American people from the founding of our nation until 1913 without an income tax, fought several major wars, and we survived and prospered. It required the passage of a Constitutional Amendment (Article XVI) in 1913 to initiate the mess we currently have. In 1913 seven (7) tax brackets with rates from 1-7% were introduced. Five short years later under President Wilson, the top tax rate was 77%! President Coolidge reduced the top rate to 25% by 1925, avoided a post-war recession, and America enjoyed nearly a decade of prosperity. In the Great Depression under F.D. Roosevelt (FDR), while the economy stagnated, taxes were increased to a top rate of 81% by 1940 and reached 94% by the end of WW II.

History since 1913 has repeatedly shown that when income TAX RATES ARE REDUCED, the economy is stimulated, economic growth occurs, and FEDERAL REVENUES INCREASE! President Coolidge in the 1920s, President Kennedy in the early 1960s, President Reagan in the 1980s, and President Bush in the 2000s demonstrated this. The deficit problems following the more recent Kennedy, Reagan, and Bush tax cuts resulted from government spending that increased faster the increasing tax revenues. This provides further support to the original concern of our Founding Fathers that increased tax revenues lead to bigger government bureaucracy and control over economic and individual freedoms.

Our current and worsening fiscal and debt crises requires a comprehensive solution including significant reductions in government spending, major entitlement reform, and desperately needed tax reform to accomplish the goals above. Reform alternatives must consider sales (consumption) taxes, personal and business income taxes, social taxes (those designed to regulate behavior such as “sin” taxes and redistribution of income), “tax expenditures” (legal/loophole tax deductions for businesses and individuals), and government subsidies. The Congressional Democrats have no specific tax reform plan and Obama’s only consideration is raising taxes on the so-called “rich”, which is neither rational nor fair, will harm growth of our country, and cannot solve our deficit problem. Simply taxing business and the “rich” and giving revenues to the government to be redistributed is inefficient, wasteful, detrimental to job and economic growth, and encourages more companies and individuals to move offshore or find lawyers to “game” the system. Last year GE, with $14 Billion in worldwide profits, paid NO federal income tax, because of “tax expenditures” and government subsidies. This is crazy! Big businesses with big legal departments and lobbyists in Washington get tax relief and subsidies while the small businesses, which are the job creation engine of our country’s growth and future prosperity, are stuck with the high tax rates and no funding (unless you have friends in government or are part of stimulus plan).

Overly simplified, there are three basic reform alternatives to consider.

1) Retain but simplify our current “Progressive” tax system (the more you make, the higher the tax rate), eliminate or significantly reduce the deductions and government subsidies (thereby broadening the tax base), significantly reduce all the tax rates for both individuals and business, and eliminate the Alternative Minimum Tax (AMT). Our current system with extensive and complicated deductions also represents a “double taxation” on income, first at business level and again at personal level when profits or gains are distributed. It is important to realize that the US business tax rate is currently the highest in the developed world at 35% (China is 25%, Russia is 20%, Germany is 15%, Ireland is 12.5%) and foreign profits repatriated back to the US are penalized by being taxed at the higher US rate. The current system encourages businesses to move offshore where taxes are lower and to retain profits abroad rather than returning them to America for investment or distribution. This is a job killer not a job creator and leads to wealth creation abroad not in the US. Frankly, I believe business “income (profit)” taxes should be abolished or at minimum reduced to levels consistent with those countries with whom we compete. Reform of the current “Progressive” tax system is the basis for alternatives in the Bowles-Simpson Deficit Reduction Commission Report, “The Moment of Truth”, and ignored to date by President Obama and the Democrats (see Bowles-Simpson Have it Right!). Republican Paul Ryan’s House of Representatives’ approved 2012 Budget Plan, “The Path to Prosperity”, is also based on this approach. (My reservations with the Ryan budget are that it does not address Social Security reform and does not adequately address Defense spending.)

2) Adopt a “Flat Tax” (one low tax rate paid by all) combined with the elimination or significant reduction of deductions and government subsidies above and the establishment of a single low tax rate for individuals and business. It is neither “Progressive” nor “Regressive” based on income and does not penalize one class of citizens over another. Steve Forbes, Arthur Laffer, and Stephen Moore, among others, have proposed a “Flat Tax”. A low “Flat Tax” could accomplish all the goals above and reduce costs and increase compliance with the tax code by significantly simplifying both tax filing and administration. The tax reform in The Heritage Foundation comprehensive proposal “Saving the American Dream” is essentially a “Flat Tax” system based on income sources spent on consumption with an initial single low rate of 18.5% and deductions limited to education, charitable donations, and mortgage interest protection plus protection for low-income earners.

3) Adopt the “Fair Tax” (a tax on sales or consumption, not income), which abolishes income taxes on business and individuals and eliminates the need for the Internal Revenue Service (IRS). The US is the only developed country in the world without a broad national sales tax, usually called VAT. Currently a “Fair Tax” proposal in Congress would replace all federal income taxes on individuals and businesses, the Internal Revenue Service (IRS) would be abolished (a huge saving in administration expenses), and income tax withholding from wages would be eliminated. The new “Fair Tax” would be collected at the point of purchase like the current state and local sales tax. A “prebate” (advance monthly tax rebate) would be given to households on purchases up to the poverty level. Initially the tax would be levied at 23%. A “Fair Tax” treats everyone equally, would substantially reduce administration and compliance costs, greatly simplify the tax process, and allow more freedom of choice for consumers in purchasing and saving decisions. Equally important is the fact that a federal sales tax broadens the taxpayer base to include federal tax revenues from all non-citizens (including illegal immigrants) as well as US citizens making purchases within the country. A “Fair Tax” also encourages savings rather than consumption. “Americans for Fair Taxation” and Republican Presidential Candidate Herman Cain support this proposal.

Any of these proposals or a rational combination of them will accomplish the goals for tax reform stated above and stimulate economic and job growth for our country. Fortunately as noted above, there are several specific proposals available to accomplish this and adoption of any of them would be an improvement over the current system. I personally prefer alternative 3), the “Fair Tax”, followed closely by alternative 2), the “Flat Tax”, but neither may be politically viable. The “Fair Tax” in combination with either alternatives 1) or 2) is also a preferred option.

Tax reform is a vital part of any successful comprehensive plan to resolve our fiscal and debt problems. Let’s encourage our government to stop political bickering, get back to work, adopt one of the above, and get job growth and our economy back on track!

The Old Guy PhD

Obama Administration Attacks American Business Again!

G’Day!

In just the last few days, the Obama Administration has directly or indirectly initiated four (see below) separate anti-business actions against American corporations, which interfere with our national economic growth and prosperity. These actions are similar to strong-arm tactics initially used by authoritarian regimes to increase central government control and to decrease individual and economic freedoms. As I said in Tuesday’s OpEd, “Attack on American Business by Obama “packed” NLRB!”, this is a very, very dangerous precedent. The policies of President Obama do not represent the American free market, limited government culture I know and admire. Specifically, the actions taken in the last week are:

1) The National Labor Relations Board (NLRB) has agreed with a union complaint against Boeing and South Carolina to prevent Boeing from opening the nearly completed expansion plant in South Carolina for the 787 Dreamliner.

2) The Environmental Protection Agency (EPA) under Lisa Jackson has stopped a Department of the Interior’s previously approved Shell Oil request to drill and develop a 27 billion barrel oil reserve in the Arctic Ocean off Alaska.

3) The Health and Human Services Department (HHS) under Kathleen Sebelius has demanded the firing of the CEO of Forest Labs, a privately owned firm, under the coercive threat of refusing to do government business with the firm, if the CEO is not replaced.

4) The NLRB (again) is suing Arizona and South Dakota to invalidate a law requiring “secret ballots” for union recognition in those States. Two (2) other States have also passed similar laws. (How silly of me, I thought secret ballots were a fundamental part of our democratic freedoms.)

All of these actions represent intimidation or possibly even extortion by these government departments, agencies, and boards to bully privately owned businesses and even States of the Union to conform to the wishes of the current Administration. This is an unprecedented use of governmental administrative power in peacetime and is not in keeping with the freedoms we have enjoyed in this country for over two hundred (200) years. If this were happening in another country, we might call it “creeping fascism”. I sincerely hope this is not Obama’s intent.

Equally disturbing is the trend by the Obama Administration to bypass Congress and increasingly use administrative force, not legislation, to control and implement the Administration’s agenda and greater centralization of Presidential power. Evident in the actions above is promoting unions over business, environment over energy development, and intimidation of private businesses into conforming to healthcare and other administrative objectives. This centralization and probable misuse of administrative power is not good for our democracy or our nation.

The EPA’s frivolous and damaging action against Shell Oil is worthy of additional comment because of the importance of energy in our economy. This is another questionable environmental complaint by the EPA that forces Shell to abort its approved exploration and development of domestic oil resources in the Arctic Ocean off Alaska. The court ruling on the EPA claim is that the air quality of the remote village of Kaktovik, with less than 250 people and 70 miles away from the drilling site, will be “close to” the air quality standard (not above) based on the greenhouse gas emissions from an icebreaker servicing the site. Also claimed is the site is “too close” to ANWR (but not inside it) and wildlife will be endangered.

This action by the EPA comes at a time when higher domestic oil production is critical to reducing our dependence on vitally necessary oil from questionable foreign sources. The US currently consumes 18.8 million barrels of petroleum per day (approximately 6.8 billion/year) of which approximately 50% is imported. The proven US oil reserves are only 19.1 billion barrels. The Shell project in the Arctic Ocean was expected to add 27 billion barrels and 74 trillion cubic feet of natural gas of new US reserves, which would more than double the current level of US petroleum reserves! Shell has already invested almost $4 billion and over 5 years in the project, $2.2 billion for the leases alone.

This is another deliberate anti-business action by the Obama Administration, this time the EPA, and further stifles economic development, domestic oil production, American job creation, and encourages American businesses to move offshore. We do not need an authoritarian government that dictates to its people and its businesses what they can do, where they can do it, and how they can do it. If this policy is continued, it will restrict economic growth, innovation, job creation, and our personal liberties; AND it will further pressure our American enterprises to move to more business-friendly nations. I believe it was Thomas Jefferson who said, “That government is best which governs least.” This is good advice and should be remembered at the next election.

It’s time to take back our country and return to Constitutionally protected freedoms, free markets, economic growth, and limited government. Let’s get to work!

The Old Guy PhD

 

Attack on American Business by Obama “packed” NLRB!

G’Day!

The latest union-driven government-supported attack on business and free markets is against Boeing and South Carolina. This is another very, very dangerous anti-business precedent being attempted by the unions with National Labor Relations Board (NLRB) reinforcement, which would increase both union & government central control over free market business decisions.

After 4 crippling union strikes in Washington State in the last 2 decades (with 2 nearly back-to-back) and the most recent in 2008 costing Boeing an estimated loss of over $5 billion in revenue, Boeing decided to build an expansion plant for the 787 Dreamliner in South Carolina. Twenty-two (22) States, including South Carolina, are “Right to Work States” which don’t require (or prevent) hiring union workers. The Boeing plant in South Carolina is nearly complete and approximately 1000 workers have already been hired with 1000s more to follow (many from the soon to be closed NASA/Kennedy Space Center). Interestingly the new Boeing plant, if it is allowed to open in South Carolina, will be 100% powered by a combination of renewable energies.

The International Association of Machinists & Aerospace Workers at Boeing in Washington State filed a complaint with the NLRB to prevent Boeing from completing the new plant in South Carolina with non-union workers (as permitted by law). The NLRB, with a majority of union-supporting members has agreed with the Washington State-based union (big surprise). Obama temporarily packed the NLRB during the March 2010 Congressional recess by filling 2 of the vacant positions with Craig Becker and Mark Pearce without Senate confirmation. Subsequently Pearce and a Republican nominee, Brian Hayes, were confirmed by voice vote in the Senate in June 2010 but Becker was not. Becker, union activist and former Associate General Counsel of the AFL-CIO & SEIU, remains a temporary voting board member until the end of 2011. This currently gives the NLRB a majority of members supporting union causes and biases their decisions in favor of labor and against American business. Please note, the Democrat-controlled Senate prevented former President Bush from filling the 3 vacant appointments to the NLRB in 2007-08.

This will likely turn into another expensive and delaying lawsuit which, if unions and the NLRB win, will force businesses to get union or government approval on where and how to locate and operate their business operations within the US. This would be another potential disaster for capitalism and freedom in our economy and further encourages American businesses to move offshore. At a minimum it is a threat to all expanding businesses and the twenty-two (22) States that have “Right to Work Laws”, which were enacted to encourage competitive business operations and free markets. Timing could not be worse as we are just coming out of a recession and need job growth. Boeing has already committed significant time and money to the plant, which could be lost, and improved global competitiveness is crucial to the future success of American business. Is anybody in the Obama Administration really interested in economic growth and private-sector job creation?

Obama and his policies are increasingly turning our nation into a centrally controlled socialist welfare state. These policies are not the foundation upon which our country was created and which made America great.

It’s time to take back our country as soon as possible and return to individual liberties, free markets, economic growth, and limited government.

The Old Guy PhD

 

Is Obama Really Serious about Debt Reduction?

G’Day!

The answer is apparently “NO”, based on the 1st & 2nd Obama budget proposals for 2012 and the Democrats tooth-and-nail fight before agreeing to a miniscule and questionable $38 billion (a mere 3-4 days) in spending cuts this year from a current projected deficit of $1.7 trillion for 2011! However, they are serious about political posturing, fear mongering, and demagoguery against Paul Ryan and the Republicans for even proposing an earnest plan to resolve the crisis. As indicated last week in “Obama Ignores Bowles-Simpson Debt Reduction Commission – AGAIN!”, their answer is SPEND, SPEND, SPEND and TAX the success of the real investors and hard-working small businesses who are the genuine creators of economic growth, job creation, and wealth in our country. Their only solution is to tax the “Rich” when approximately 45% of the households pay no federal income taxes at all and the “Rich” (Top 2%, incomes over $250,000) already pay over 40% of the total! Tax reform is necessary but Obama’s proposals are neither the serious leadership our country needs nor even a nod of recognition for the fiscal and debt crises we face.

The Fed can’t print enough money to solve this problem without major devaluation of our currency and significant increases in inflation and interest rates. History has repeatedly shown that excessive government spending financed by debt combined with extreme increases in money supply usually results in a collapsed economy and crisis in government. Many other nations have tried this and failed miserably. For example, France tried this before and during the French Revolution and it ultimately led to the collapse of their currency, their economy, the failure of their government, and the rise of Napoleon as dictator. Germany tried this after WWI and it lead to the collapse of their currency, their economy, the failure of their government, and the rise of Hitler as dictator. For more information about financial crises see, “This Time is Different: Eight Centuries of Financial Folly”, by Carmen M. Reinhart & Kenneth S. Rogoff, who analyze financial crises in 66 countries in their 2009 book. Regarding “This Time is Different” they conclude, “It almost never is.”

America is not immune to the workings of economic forces and cannot continue as a great nation if we do not put our bloated and inefficient government spending on a sound fiscal path, cap government spending as a percentage of GDP, and appropriately modify (not eliminate) our currently unsustainable entitlement and social programs for long-term viability. Recent history suggests the sustainable level for federal government spending has been approximately 20% of GDP. Federal government spending was 20.7% of GDP in 2008, 23.8% in 2010, and is expected to be over 25.5% in the current year (the highest level in history, other than WWII). This is a +5% increase in the size of our federal government in the first 2-3 years of the Obama Administration! This is madness and must be corrected!

There is no question that many (but not all) government social programs are desirable; they are just not affordable or consistent with a vibrant, innovative, expanding economy, and rising standard of living for the American people. As I said last week, “We cannot continue as a great nation if we base economic policies on the failed socialistic principles of taking from those who work hard and succeed and redistributing their earnings to those who don’t.” Most other developed nations, including Russia, have learned the incentives and benefits of free market capitalism and our government needs to relearn them as well.

If President Obama was sincere about debt reduction, he would be listening to and acting on the recommendations from the bipartisan Debt Reduction Commission he established. The Bowles-Simpson Co-Chairs’ Proposal outlines how to achieve results through comprehensive and specific actions to improve revenues through tax reform, to reduce government discretionary spending including defense, and to reduce entitlement programs through healthcare and social security reform. All of these reforms: taxation, discretionary spending, entitlements for healthcare and social security are essential to a comprehensive solution for our country’s problems and, if we are to succeed, ALL must be addressed.

Our fiscal and debt problems are correctable if our government seriously addresses the needs of the country and not their political desires for reelection. If Obama, Democrats, and Republicans can’t agree on comprehensive legislation to reduce government spending and bring the size of government back to sustainable levels consistent with a growth economy, our country faces a potential sovereign debt crisis similar to those described in the book by Reinhart & Rogoff referenced above. I agree with Standard & Poor’s downgrading of the “outlook” for US Debt based on the political turmoil in our Government. The outlook for a government solution before the 2012 election is not good and I don’t believe Obama and the Democrats want a real solution. Currently, it appears Obama and the Democrats believe the American people are not intelligent enough to see the need for real government spending reform and are too self-interested to revise the social programs to sustainable levels. I do not agree with this view. I believe the American people are intelligent and don’t want to leave to future generations of Americans a damaged economy with an authoritarian bureaucratic government controlling our lives.

In my first post on this website, “Big Government IS Our Problem!”, I described in more detail the current Administration’s trend toward big government collectivism and the dangerous omens it portends for the future of our lives and our nation. In the 2 months since that posting, the situation has become worse and the socialist agenda of our President and the Democrats has become very clear. They do not appear to be serious about debt reduction or reducing government spending. If we are to have a successful and prosperous country in the future, we must take back our country and reestablish the principles of limited government, free markets, individual liberties, and sound fiscal & monetary policies. Get “Big Brother” out of the way and off our backs, reform taxation & spending, and our economy will recover faster and the future of our nation will be assured.

The Old Guy PhD

 

Obama Ignores Bowles-Simpson Debt Reduction Commission – Again!

G’Day!

Spend and Tax! Tax and Spend! Spend, Spend, Spend! This is the clearly defined policy framework outlined in Wednesday’s political speech by President Barack Hussein Obama. As noted in a previous post, “Big Government IS Our Problem!”. Unless we replace Obama and the Senate Democrats in 2012, big government, reduced personal freedoms, and unsustainable economic policies will continue to be with us for the foreseeable future. Why does the President continue to reject the bipartisan comprehensive proposal by the Debt Reduction Commission, (“Bowles & Simpson have It Right!”)? Can’t Obama and the Democrats do math?

In President Obama’s speech presenting his 2nd new 2012 budget proposal in two months, he again, as usual, failed to exercise leadership by trashing the serious Republican debt-reduction budget plan of Paul Ryan, and by again refusing to incorporate important recommendations from the Debt Reduction Commission’s proposal. The President’s theme was to incorrectly accuse Republicans of taking money from Senior Citizens and Medicare to provide tax cuts for the “wealthy”. Obama knows better and, as President, should be ashamed of his attempt to mislead the American people. The Bowles-Simpson Debt Reduction Commission’s proposal is excellent and the President, the Democrats, and the Republicans should immediately and seriously pursue this comprehensive bipartisan recommendation, which was approved by a majority (61%) of the commission members. Our economic, fiscal, and debt problems cannot be solved by half-hearted and halfway measures. Everything must be on the table, considered, and acted on through an overall, thoughtful, bipartisan solution that benefits the American people not the political ambitions of the politicians.

In this regard, Obama’s speech was disappointing and pure politics, apparently intended to support his announcement to rerun for President in 2012 (hopefully unsuccessfully). The speech essentially ignored the Debt Reduction Commission’s recommendations and lacked real substance or specifics. In response to the Republican’s budget, Obama did propose to reduce the fiscal deficit from his 1st 2012 budget by promising to raise taxes on the successful job-creators in our economy – not a good idea for growth and innovation if you understand economics. The speech primarily engaged in inaccurate political demagoguery aimed at Republican Paul Ryan’s 2012 budget proposal. VP Joe Biden was so impressed that he dozed off during the President’s delivery! The prospect of either the 1st or 2nd Obama 2012 budget proposal is potentially the same: a larger, bankrupt nanny-state in a slow-growth economy with lower than possible living standards, and a devalued currency with entitlements for non-producers supported by the few motivated and successful business managers, investors, and job-creators. Obama’s plan is an arrow aimed at the heart of entrepreneurs, innovators, and commerce.

In 2-3 short years Obama has increased government spending from an annual rate of $2.9 trillion in 2008 to an expected $3.8 trillion in 2011, increased our budget deficits by over $4 trillion and increased our National Debt by approximately 40% to nearly $14.3 trillion (over $1 trillion owed to China). In addition to this massive increase in the size and scope of government (which Obama now wants to “lock in”, not reverse), he has reduced our individual freedoms in healthcare choices (Obamacare), increased government control over our financial and consumer markets (Financial Regulation Bill including the powerful new Consumer Financial Protection Bureau), taken over private companies, halted domestic oil development, and expanded unsustainable fiscal and monetary policies. Obama is eroding virtually all the policies in which I personally believe and which made our country great, (see “Is Obama Our Worst President or Just the Weakest?”). How did we ever allow ourselves to believe his campaign rhetoric and fail to see through his lack of experience, leadership, and knowledge of the workings of an economy and foreign relations?

What is now quite clear is Obama’s personal commitment to increasing an already bloated and inefficient federal government and expanding bureaucratic control over our lives and our economy. He is attempting to change our entrepreneurial spirit of independence and freedom into a socialist state of citizens dependent on government handouts for our very survival. I would not be totally surprised if Obama adopted Herbert Hoover’s campaign slogan, “A chicken in every pot and a car in every garage”, with this addition: “Paid for by the US Government”.

We cannot continue as a great nation if we base economic policies on the failed socialistic principles of taking from those who work hard and succeed and redistributing their earnings to those who don’t. Even Russia learned that Karl Marx was wrong when he said, “From each, according to his ability; to each, according to his need.” History has shown that socialist policies, if pursued to their ultimate end, result in reduced individual incentive, slower economic growth, lower living standards, and domination by state bureaucrats over the lives of people, (see Nobel Prize Winner in Economics, “The Road to Serfdom”, F. A. Hayek). Obama and the Democrats do not appear to have learned this yet. They appear to have the elitist belief that government bureaucrats can make better decisions for the people than people can make for themselves. Capitalism and democracy aren’t perfect but they are far better than a government-controlled command economy and authoritarianism.

The incentives of capitalism combined with free markets, individual freedoms, and limited government are the best ways to achieve economic growth, prosperity, improved living standards, AND to remain competitive in the global economy. Our US Constitution supposedly protects these fundamental principles but they appear to be increasingly in jeopardy through the actions of our current government. Let’s stop this decay, get back to our traditional foundations, and correct the trend as soon as possible.

The Old Guy PhD