Tag: Heritage Foundation

Obama-A Socialist America?

G’Day!

I agree with Dr. Charles Krauthammer, who indicated on National TV after this week’s State of the Union address, that President Obama’s intention is to transform America into a European-style Socialist State. Many of my articles over the last two years have suggested that Obama is a “Neo-socialist” – a person who believes in government control over all aspects of the economy, including wealth redistribution, regulations, “Executive Orders,” and central planning. (Neo-socialism is different from traditional ‘Socialism,” which is based on government “Ownership” of businesses and industries.) Neo-socialists want political and economic central control over the country but not the responsibility of ownership or consequences. Unfortunately, both socialism and neo-socialism are equally destructive to economic growth and individual liberties and has historically failed or is failing in nations that have pursued it. Is this the future you want for America?

Based on the President’s “Inaugural Speech” and the “State of the Union Address”, it appears evident that Obama and the Democrats have no real intention of reducing government spending, reforming entitlements, or even seriously addressing our federal deficit and debt crises. However, they are intent on more spending, more taxes, more regulations, more debt, and less freedom for the American people. Resuming the pattern of his first term, Obama also seems to be more interested in fixing “Blame” on everyone but himself (especially Republicans) for everything wrong, when he should be exercising bipartisan leadership to resolve our problems – especially the ones he has created or aggravated. In my opinion Obama’s idea of a “Grand Bargain” is to raise taxes by every means possible, including class warfare, to fund “Bigger Government,” “Entitlements,” “Green Energy,” “Climate Control,” “Wealth Redistribution” and any other project his neo-socialist ideology deems desirable. I believe America’s best days could be ahead but “Obammunism” is not the way to solve problems and is not good for jobs, the economy, the Middle Class, or the future of our great country. We need a President who is willing to represent ALL the people fairly, exercise impartial leadership, and take responsibility for the consequences of his actions and policies.

So how has Obama really performed so far? During his first Presidential Campaign, he promised “Change” to transform our government. Unfortunately, he has been remarkably successful in moving America in the direction of European-style socialism and a culture of dependency. In only four years the size of government has increased from 20% of GDP to 25% of GDP. Our annual Federal Spending has increased from $2.9 trillion to $3.8 trillion (an increase of over 30%) and is expected to continue for Obama’s second term. Our annual Federal Deficit has increased from $0.5 trillion to over $1 trillion (an increase of 50%). Our National Debt has increased from $10 trillion to over $16 trillion (a 60% increase and now more than 100% of GDP). In the first two years Democrats passed massive new legislation for government-controlled healthcare, sweeping regulations over the financial industry, and the use of “Executive Orders” by the EPA, the Department of Energy, and the unconstitutional appointments to the NLRB to regulate personal and business use of private property and erode personal freedoms. The Democrat controlled Senate has not passed a budget in nearly four years. Welfare dependency has increased significantly and forced wealth redistribution through higher taxes on the “Rich” was recently enacted (and Obama wants more). The economic results have been the worst recovery in decades and a decline in GDP in the 4th Quarter of 2012. Clearly, Obama has delivered on his promise to “Change” our country. Are these the “Changes” for which you voted? Do you believe continuing these policies will solve our problems and advance the future for our children?

In my opinion it is not too late to correct this adverse trend toward national decline and save our nation. America can resolve its fiscal and debt crisis and restore our country to a solid foundation of responsible government and future prosperity. However, this can only occur if we return to the principles that have made America the greatest and most exceptional country in the world. These principles are: Constitutionally protected individual liberties, free markets, sound fiscal and monetary policies, economic growth, and Constitutionally limited government. The “Obammunists” are rapidly leading us away from our founding principles and toward a future of economic stagnation, shared poverty, limited personal freedom, and dependence on government for much of our survival. Under Obama, America is quickly declining into a centrally controlled overregulated neo-socialist state with increasingly limited opportunities for aspiring individuals and companies to succeed.

So what should we do? We have a republic with democratically elected representatives. It is up to us to determine and vote for the representatives that place the future of America before politics and who will stand up for the best interests of the people and the nation. The first and most vital action we can take is to become informed about the issues and vote out the “Obammunists” in the 2014 election. This one single accomplishment will at least stop the decay and give us the opportunity to correct the damage being done by Obama and the Democrats. Currently, we should demand our President and Congress concentrate on resolving our fiscal/debt crisis, get our economy back on track, and create productive private sector jobs. As I outlined in many of my 45 previous articles, this can be done and we need to do it. The American People should not be the servants of the government. Government should be the servant of the people.

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