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President Obama Wants To Cut Spending (But Not Really)

admin — Wed, 27 Jan 2010 16:42:17 +0000

The news leaked several days ago that in tonight’s State of the Union address, President Obama will speak about the need to curb the government’s out of control spending. He will announce spending freezes on “non discretionary,” non military spending, as well as pay and bonus freezes on some political appointees.

To put this announcement in context, I want you to imagine a 400 lb man who was eating 3100 calories per day a year ago. A year ago, the man started eating 3555 calories per day (an increase of 455 calories–14.67%) and gained 64 lbs during the past year and now weighs 464 lbs–an increase of 16%. Now, the even fatter man realizes that his weight has become an even more serious problem and he hatches a plan to deal with it. He decides that he will freeze the increases in his caloric intake from most snacks for the next three years. However, he decides that instead of cutting his meal sizes, he will actually continue to increase their sizes. He will also increase the sizes of some of his snacks, while freezing the growth in the sizes of other snacks. He concludes that these meals and snacks are essential to his survival and that therefore he must increase their sizes if he wants to get healthy.

Does this example sound far fetched? It isnt. The numbers used above are scaled down numbers from our federal budget.

Our 2009 budget, passed in 2008 under President Bush called for $3.1 trillion in spending. Of this, $1.89 trillion was “mandatory”–it funded government social welfare programs. These are the meals described above. The remaining $1.21 trillion was considered discretionary funding–these are the snacks described above.

But, included in the discretionary funding of that budget was $515.4 billion for the Defense Department, $145.2 billion for the War on Terror, $37.6 billion for the Department of Homeland Security, and $44.8 billion for the Department of Veterans Affairs. That total is $743 billion. These are the snacks that the man above will not only continue to eat, but will actually increase the size of.

Now, lets look at the 2010 budget which was proposed by President Obama last February. This budget had $3.55 trillion in spending. Of this, $2.184 trillion was “mandatory.” This is an increase of 15.6% in only one year. As you can see, the costs of Social Security, Medicare, and other programs are rising rapidly.

The remaining $1.368 trillion was considered discretionary. The cost of these snacks increased by $13.1% in that single year.

In other words, while discretionary costs are rapidly rising they are not the biggest problem. Our mandatory costs are not only bigger than our discretionary costs–but mandatory costs are increasing at a much faster rate than are discretionary costs.

But,this budget included $663.7 billion for the Defense Department, $52.5 billions for the Department of Veterans Affairs, and $42.7 billion for the Department of Homeland Security. The total here was $758.9 billion. This is an increase of about 2.14%.

If President Obama were proposing to cap the annual growth in the total budget at 2.14%, the majority of Americnas would be pleased. However, as mentioned above this spending freeze will not include mandatory spending–the biggest and fastest growing part of the budget. But, just like the fat man described above, our national debt increased by 16% in President Obama’s first year–and just like that fat man, we are going to increase what we eat.

The government is cooking itself bigger meals as well as increasing the size of its snacks. This is not the way to get in shape. Using our analogy of the overweight man, we see that at best, this will only slow the rate at which the man gets fatter.

And, we would be fools to think that the President’s freeze on discretionary spending actually means a freeze on discretionary spending. The news of the spending freeze was leaked the other day, but this morning news leaked that the President was going to request a 6.2% increase in the education budget.

Of course this money will come with strings attached. Federal money always comes with strings attached and efforts to increase federal control. Federal funding for education is nothing more than a move by the federal government to expropriate the money from Americans through taxes and then sell that money back to State education departments and local districts in exchange for influence. The Carter Administration nationalized education in 1979 and the effect has been disastrous: steady declines in education all across the nation and sharp increases in costs of education. These federal actions have made the American people pay more money for less education. But, we cant be surprised by the Obama Administration’s efforts to further erode local and family control over yet another aspect of our lives.

On top of this, President Obama will announce an $8 billion high speed rail initiative in Florida tomorrow. This sounds nice, but the fact of the matter is that the high speed rail systems proposed by the government is a horrible idea that will be extremely costly, bad for the environment, and will not be high speed! This isnt actually a new plan, but rather a rehashing of a plan that President Obama put forward last year.

The good people at the Georgia Public Policy Foundation put together a report on this plan last year. You can find that report here. Here are a few excerpts:

“The FRA is not proposing to build 200-mph bullet trains throughout the U.S. Instead, in most places it is proposing to upgrade existing freight lines to allow passenger trains to run as fast as 110 mph – which means average speeds of only 55-75 mph. This would actually be slower than driving for anyone whose origin and destination are not both right next to a train station.” (Page 6)

“Even with these optimistic assumptions, high-speed rail reduces corridor transportation energy consumption by only 8.3 percent. This means the operational energy and greenhouse gas savings fall to zero if we assume instead that automobiles and airplanes are, by 2025, just 8.3 percent more energy efficient than they are today. If automakers meet Obama’s fuel-efficiency standards, autos will be more than 30 percent more efficient in 2025 than they are today, so high-speed rail will actually be wasting energy.” (Page 21)

“the FRA system will carry each person an average of 58 miles per year.” (Page 25)

But, these are just the two spending increases that have been leaked today. If we factor in the “mandatory” increases in social welfare programs, the increases in defense and intelligence budgets, and the new jobs/stimulus programs that Congress is almost sure to pass, we are still looking at heafty budget increases.

The man in my analogy would be stupid to not go on a diet. Our government should do the same. It needs to stop eating snacks where it can and begin to reduce the size of its meals to a sustainable level.

If President Obama is serious about preventing the looming debt crisis from wiping out decades of economic growth, he needs to change his tone. Instead of just freezing spending in certain areas while allowing the already bloated budget to expand, Mr. Obama should cut the budget where possible. He should also look for ways to stop the increases in the costs of mandatory spending before it is too late.

But of course, it may already be too late.

Americanly Yours,

Phred Barnet

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President Obama’s First Year: Failure As Far As The Eye Can See

admin — Tue, 26 Jan 2010 16:18:22 +0000

The phrase “you never get a second chance to make a first impression” works for Presidents too. President Obama’s first year in office has been marked by failure after failure. His only remarkable legislative success, last year’s “stimulus” bill is itself a failure. But just how has the first year of Mr. Obama’s Presidency been a failure? Lets take a brief look:

Economy:

The economy continues to deteriorate under President Obama’s leadership. When President Obama pitched the “stimulus” bill to the skeptical American public, we were told that if this “crucial” bill was not passed soon (ie, before Congress had ample time to read the bill) then the economy would face devastating consequences. This was of course a well calculated and bold faced LIE. The fact of the matter is that the majority of the spending in the “urgent stimulus” bill were not going to be spent for over a year. We were warned by the Administration that failure to pass the bill would cause unemployment to skyrocket and could cause it to reach as high as 9%, but passing the bill would keep unemployment from raising above 8% (see this chart put out by the Obama Administration to urge support for the “stimulus”). So, we passed the bill and despite (or because of) this, the official unemployment rate surged past 9% and currently sits at 10%. Of course, the 10% figure is a lie as well. Previous administrations changed the way that the unemployment rate was measured in order to disguise how bad things really were. This U-6 unemployment figure is still reported by the government, however, the government now uses U-3 as the official unemployment number. While U-3 unemployment is 10%, U-6 unemployment is 17.3%. This figure was 13.5% one year ago. Simply put, things are bad. But, government data collection is shady and should not be trusted as definitive. Shadow Government Statistics, a private data collection/analysis website places unemployment at over 22%!

Ben Bernanke failed to see the impending collapse even shortly before the economy tanked. While a candidate for President, Mr. Obama repeatedly criticized the economic policies of the Bush Administration. By choosing to reappoint Ben Bernanke as Chairman of the Federal Reserve, President Obama was giving his tacit approval to the policies of the Bush Administration.

The administration has also increased the national debt to dangerous levels. The US is now in serious risk of having its credit rating downgraded. Any hopes of an economic recovery would be shattered if this were to happen.

Foreign Policy:

Candidate Obama repeatedly attacked the Bush Administration on three fronts: the economy, the wars, and foreign relations. President Obama has failed to correct the errors of the Bush Administration on any of these areas. As mentioned above, President Obama has continued the “stimulus” and bailout policies initiated by President Bush. His reappointment of President Bush’s Federal Reserve Chairman Ben Bernanke confirms the fact that President Obama’s economic policies are not notably different than those of President Bush.

The second area where candidate Obama frequently attacked the Bush Administration was his handling of the wars in Iraq and Afghanistan. Mr. Obama criticized President Bush’s Iraqi surge, falsely claiming that it was not a success. If I were a candidate who ran on a platform of change and who repeatedly criticized the previous administration’s military policies, I surely would not have allowed the previous President’s Defense Secretary to continue serving. Furthermore, if I had attacked the former President’s Iraqi surge strategy, I would not have employed a similar strategy in Afghanistan. However, President Obama has done both of these things. He kept Defense Secretary Robert Gates in his position, and he has sent an additional 68,000 troops to Afghanistan since taking office (many of those troops were sent in the weeks following the President’s claiming of the Nobel Peace Prize).

Candidate Obama promised to have all of the combat troops out of Iraq within 18 months after taking office. That leaves him less than six months to remove over 100 thousand troops from Iraq. Id put the chances of this happening right at zero. More likely, President Obama will declare that the troops in Iraq are no longer combat troops (despite the fact that they will almost surely be engaging in combat).

President Obama missed a historic opportunity to improve relations with Cuba. Since taking over, Raul Castro has introduced many positive reforms, introducing notions of private property, increasing wages for productive workers, and allowing Cubans to take advantage of certain technologies. Raul Castro’s Cuba still has a very long way to go, but any movement in the right direction should be seen as positive. Candidate Obama pledged to improve relations with Cuba. Instead, President Obama has continued to support the same policies towards Cuba which have failed for the past 48 years. Of course, this si just one example of this administration’s failed foreign policy.

Candidate Obama pledged to repair our strained relations with foreign nations. President Obama has failed at this as well. He has been publicly scolded by Russia’s Putin, Israel’s Netanyahu, France’s Sarkozy, and other allies. In fact, I would argue that our foreign relations have not noticably improved with a single foreign nation since President Obama’s inauguration.

Agenda:

President Obama has almost completely failed in his efforts to push his agenda during his first year.

Remember, this President was the candidate who vigorously campaigned on a platform of “change.” There have been few noticeable changes in the previous year.

With sizable majorities in Congress and a public eager for change, President Obama should have had a relatively easy time pushing through at least some major parts of his agenda. The only major bill that President Obama was able to push through Congress during his first year in office was the “stimulus bill.” This was a bill which was passed by using intimidation, threats, fuzzy math, erroneous estimates, and down right lies. The “stimulus” bill was a costly mistake that did little if anything to stimulate the economy but will cost taxpayers around $1 trillion when the time comes to repay the costs of financing this bill.

Congressional Democrats pushed various health care reform bills for well over 6 months. During this time, President Obama showed almost zero leadership on this issue, basically promising to sign any bill that came out of Congress.

Had President Obama taken a leadership role and urged Congress to pass a series of smaller health care reforms instead of trying to push a sweeping bill down the throats of an adamantly opposed American public, he could have signed several of these reforms months ago and moved onto other pressing issues. Instead, Democrats wasted the better part of a year, alienated a large portion of American voters, and came up empty handed. Democrats might now adopt the strategy of pushing through smaller, incremental reforms, although it could even be too late for that approach.

Opponents of government controlled health care can thank President Obama’s complete lack of management abilities for preventing the nationalization of health care that seemed to be a foregone conclusion several months ago.

The President’s inability to lead has also prevented the passing of cap and trade and several other government intrusions into the lives of individuals. He has placed his coalition in danger time after time, and now seriously risks losing the House of Representatives in November. Things also look increasingly likely that the Senate may be in play in November as well. More ont his in a future article, but it is beginning to look very likely that Democrats will lose President Obama’s former Senate seat, Vice President Biden’s former Senate seat, Harry Reid’s Seat, and possibly Hillary Clinton’s seat. This would have been unthinkable only one year ago, but then again so would a Republican winning Ted Kennedy’s former Senate seat. President Obama has alienated Democratic voters to a degree that even the most optimistic Republican would have thought to be impossible a year ago.

President Obama should follow the lead of Domino’s Pizza: soak in and address the valid criticisms, revamp his “product,” and use his rhetorical skills to sell his new image to the public. Failure to do so can only lead to a changing of the guard in the 2012 Presidential election.

Americanly Yours,

Phred Barnet

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Our Perverse Government’s Perverse Actions Lead To Perverse Incentives

admin — Tue, 27 Oct 2009 19:16:37 +0000

How exactly did we get to the point where government owned banks started charging credit card holders fees for paying off their balances every month?

The government passed laws like the Community Reinvestment Act which essentially mandated banks to loan to people who would not have been able to obtain loans otherwise. Then, the government and the Federal Reserve created money out of thin air and lent it to banks at absurdly low rates. Flush with new and cheap money, these banks massively increased their lending to “sub-prime” borrowers (begin bubble). With the money supply growing at unprecedented rates in the 1990′s and this decade, there was always enough money for banks to make loans. Borrowers were able to take out second mortgages at very low rates. Home builders rapidly built houses to meet soaring (bubble-induced) demand.

As with all bubbles, this one burst, leaving home builders unable to sell newly built houses and borrowers unable to meet their obligations. Banks had sold off the rights to their lender’s payments so they would have more money to make new loans. This left the banks in the same boat as homeowners who could not make their payments. But, while homeowners and home builders had to file for bankruptcy and sell off their assets to pay their debts, the banks used their lobbyists, fear, and their ownership of the Federal Reserve to convince our government to bal them out.

The government and the Federal Reserve then printed up a bunch of money–they simply created it out of thin air–and gave it to the banks in exchange for ownership.

This happened on October 3rd, 2008. I can understand the government’s perverse rationale that led it to bail out these banks. What I can not understand is why, over a year later, the government continues to own large stakes in these banks.

The government has now taken to regulating the salaries of banking officials, as well as the actions and practices of these banks.

So, it comes as no surprise to the observant that the government would use its power and control to create perverse incentives.

Bank of America and Citigroup–two firms now under the ownership of the federal government have begun implementing new fees. These fees are not on late payments, gong over one’s credit limit, or cash advances. Instead, these government owned banks have announced fees for customers who regularly pay off their balances. Customers who leave monthly balances on their cards will not be charged the fees.

A fee is similar to a tax (especially if t is levied by a government owned entity). Both taxes and fees use pricing to create incentives to change behavior.

Because Bank of America and Citigroup are owned by the government, a fee on those who pay off their balances regularly can be viewed as a tax on them. Because those who leave monthly balances on their cards are exempt from these fees, this can be viewed as a subsidy for those who leave balances.

Our government is creating perverse and dangerous incentives: they are incentivizing debt and discouraging good and proper financial habits.

But, you cant hardly be surprised by this. After all: our perverse government’s perverse actions do tend to lead to perverse incentives.

Americanly Yours,

Phred Barnet

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The Time Has Come: End The War In Afghanistan

admin — Tue, 01 Sep 2009 17:30:29 +0000

The War in Afghanistan will soon have been going on for 8 years with absolutely no end in sight.

Are we losing? Maybe, maybe not. But, it is clear that we are not winning.

A “surge” like President Bush’s successful strategy for turning around the Iraq War is unlikely to work in Afghanistan.

This War has cost hundreds of billions of dollars in Treasure and, more importantly, hundreds of honorable American lives.

I supported this War for a long time–pretty much everyone did at some point. In November 2001, shortly after the War started, only 9% of Americans thought the War was a mistake.

But, changing situations create the need for changes in outlook, and often changes in policy.

Whether or not the War was a mistake, a majority of Americans now want our troops to leave Afghanistan.

We have not succeeded in dismantling al-Qaeda. We have not captured Osama bin-Laden or many of the other high value targets.

The Soviet Empire’s premature end was due in part to its war in Afghanistan. We should not allow history to repeat itself and bring an end to the mighty American Empire as well.

This Nation is hemmorhaging money, the economy is dismal. It is time to stop spending so much of our National fortune on this War. Our cost for this War will be paid back over the next 3o years to China and others who have loaned us the money to fight.

Afghanistan’s government is crumbling and it now appears that Hamid Karzai, Afghanistan’s American backed Prime Minister may have engaged in ballot-stuffing and other measures of voter fraud to keep himself in power. These actions are preciously the same that American officials have criticized Iran for taking. By standing behind a government like this, we are implicitly voicing our approval of these actions.

This war has spilled over into Pakistan and has greatly destabilized a nation with nuclear weapons–threatening the security of the entire world in the process.

The anti-war left has recently been strangely silent over the wars in Afghanistan and Iraq. My assumption is that they have not wanted to create political problems for a President that they largely supported while he is trying to push through health care and environmental legislation also largely supported by this group. With the health care and cap and trade bills headed for near-certain failure or at a least a major watering down, I suspect that the anti-war left will begin to be more vocal in its opposition to the War in Afghanistan again soon.

New polls show that the majority of Americans now oppose the War in Afghanistan. President Obama’s approval ratings have now dropped to the mid-40-low 50′s range. You can be certain that President Obama does not intend to sacrifice his popularity over a war that was started on President Bush’s watch.

In the coming months, President Obama soon announce his decisions on what to do about the War in Afghanistan. Many policy analysts believe that the President will announce a large increase in the number of troops for Afghanistan. This is exactly the wrong strategy. President Obama should begin a massive withdrawal of American troops from Afghanistan. Im not saying that we shouldnt continue to hunt bin-Laden–I would favor leaving behind an extremely small and elite force to hunt terrorists and bring them to justice. However, we should stop engaging in “nation building,” stop propping up Karzai’s corrput government, and stop fighting this War. If other Nations wish to continue fighting this War without our aid, let them do so, but the United States government should cease spending the lives and the wealth of Americans on this War.

We can still leave Afghanistan honorably; it is time to do the right thing and bring our brave and heroic men and women home from Afghanistan.

Americanly Yours,

Phred Barnet

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Dont take my word for it:

President Obama: Same As President Bush On Civil Liberties

admin — Mon, 06 Jul 2009 14:25:01 +0000

“President Obama may mouth very different rhetoric,” said Anthony D. Romero, executive director of the American Civil Liberties Union. “He may have a more complicated process with members of Congress. But in the end, there is no substantive break from the policies of the Bush administration.”

Americanly Yours,

Phred Barnet

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GM (Government Motors)

admin — Tue, 02 Jun 2009 15:20:16 +0000

General Motors declared bankruptcy yesterday morning. This move had been much anticipated and probably didnt surprise anyone.

Presidents Bush and Obama gave General Motors billions of dollars to help it avoid bankruptcy, yet the inevitable still happened. No matter what your stance on bailouts and government interventions are, you probably agree that this money was wasted. If you support bailouts and nationalizations, then you would probably argue that the money was wasted because the government could have and should have) bailed out and taken over GM six months ago. If you are opposed to bailouts and nationalizations, then you would be opposed to any and all government assistance for GM. More money will be wasted on GM in the future.

According to the Washington Post: “During the GM bankruptcy, the United States aims to raise its investment in the company to $50 billion, take a majority stake in it and name most of its directors, giving the government unprecedented control over one of the nation’s largest manufacturers.”

I dont think that you can seriously deny that the United States is no longer a Capitalist Nation. We have now officially morphed into a socialist country. Yesterday was another sad day for Capitalists who again were forced to watch while the government continued to destroy this once great Nation.

President Obama and other supporters of these interventions have promised that they will be temporary. I dont believe this and neither should you. Thomas Sowell says that “nothing is so permanent as a temporary government program.” Historically this has proven again and again to be true. There are still programs in effect from the Great Depression which were said to be temporary at the time. A 3% excise tax on phone use was enacted as a temporary measure in 1898 to help pay for the Spanish-American War. This “temporary” tax lasted 108 years until it was finally ended in 2006.

Government programs, actions, and interventions tend not to end. It is important to oppose them as they happen, while these actions are still fresh in the minds of the public. If the government does not sell its stake in General Motors within the next few years the vast majority of people will cease to care, opposition will subside, and the government will continue to control General Motors forever (or at least for quite a long time).

Even if our government sells its stake in General Motors within the next few years, there will still be a tendency for future administrations to use Presidents Bush and Obama’s actions as precedents for future interventions and nationalizations.

President Obama told NBC’s Brian Williams that the government would be taking a controlling stake in General Motors. He also said that he essentially had no choice but to do so.

But, President Obama did have a choice. A liquidation bankruptcy of GM might have caused temporary stress for the economy, but this stress would have been temporary and would have smoothed out in the long run. Under a liquidation bankruptcy, General Motors would have been broken into pieces and sold off piece by piece to the highest bidder. Every brand name, factory, patent, and all real estate owned by GM would have been sold off. The money recovered from these sales would have gone to pay as much of the money owed to GM bondholders–who to the company in good faith–as possible.

The brand names would have been sold–probably to existing car companies, although they possibly would have been sold to venture capitalists who were looking to start a new car company. The factories would have been sold to new owners (or the same venture capitalists) who would either continue to make cars in them or would refit them for some other kind of production. GM’s patents would have fetched lucrative amounts of money at auction. Purchasing these patents at a discounted auction price could have helped move other automakers years forward in their research and development, saving them billions of dollars. For example, GM was years ahead of the competition in developing fuel cell cars.

The auction process might have been stressful while it was being sorted out, but it would have been an efficient way to deal with General Motors. Instead, our government has pledged to loan GM an additional $50,000,000,000 [$50 billion]. However, GM owes creditors $172,800,000,000 [$172.8 billion], meaning that the government’s invenstment will be unlikely to stop at $50,000,000,000 [$50 billion], just as AIG’s initial $85,000,000,000 [$85 billion] bailout ended up doubling.

You can argue that government control of General Motors will save American jobs, although this argument is tenuous at best. General Motors is losing money for several reasons including: their cars are not up to par with those of Honda, Toyota, Nissan, and Ford, their union contracts force them to pay their current and former workers much more money than similar workers at Honda, Toyota, and Nissan, and they have been slower to innovate than have their Asian rivals.

Toyota, Honda, and Nissan have been continually building more and more of their cars in America, while General Motors, Chrysler, and Ford have been building less. Last November, I wrote an article detailing my opposition to all bailouts, but said that if the government had to bailout auto companies, I would rather it bailout the successful ones (ie Toyota and Honda). At least this way money would be flowing to innovative companies who have a chance of paying back the loans, rather than to sluggish companies who refuse to adapt and will be unlikely to repay any loans.

The United States government now has a controlling stake in General Motors and a very large stake in Chrysler. General Motors, the world’s second largest automaker, is now owned by the United States government (with a minority stake being held by the UAW). Chrysler is now owned by the UAW (with a sizable minority stake being held by the US government). Additionally, a significant percentage of Nissan is owned by the French government (the French government owns 15.7% of Renault which owns 44.4% of Nissan). This is not fair to Ford, Honda, and Toyota. These three companies have to compete with three large automakers who are owned by large and powerful governments who have made it a matter of public policy to ensure that the automakers they own do not disappear. As a Ford stockholder, I’m pretty mad that a company that I have invested in (because I believe in its products and its management) now has to compete with a powerful government which can print money to pump into Ford’s competitors as it sees fit. Additionally, the US government also had the right to increase regulations on the auto industry which can hurt Ford and benefit its government owned competitors.

As unfair as this is to Ford’s shareholders, this is extremely unfair to the taxpayers who will have to foot the bill for these bailouts. The tens of billions of dollars in additional funding for GM are not the whole picture. American consumers will have to pay thousands more for their cars in the future due to the inefficiencies being created by the government bailiuts. The United States government is keeping car companies in business which have no business being in business. It is also mandating that certain GM models now be produced in America, rather than in foreign countries. While this may sound like a good thing in an economy that is hemorrhaging jobs, it is not. GM has chosen to produce cars overseas becaue it is cheaper to do so. Simply put, forcing GM to produce cars here will raise the cost of those cars and will make American consumers poorer.

Americanly Yours,

Phred Barnet

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Conservatives

admin — Wed, 22 Apr 2009 14:48:38 +0000

To all conservatives (and especially those in the Republican Party),

You probably enjoyed yesterday’s post quite a lot. You have probably enjoyed many of my posts so far. But that is because they have focused almost exclusively on economic issues.

The term conservative is far more difficult to define than liberal. Almost 25% of registered Democrats consider themselves to be conservatives. Then there are those in the Constitution Party who declare that they are the real conservatives. Of course, there is also the crowd that calls former President George W. Bush a liberal.

Who is a conservative? Is John McCain a conservative? Is George W. Bush? Is Ron Paul? Is Mitt Romney? Is Sarah Palin?

Does conservativism seek to maintain the status quo? Or, does it seek to return to the “good old days?”

Just as with liberals, there are a range of people who are considered conservatives. I am writing to the broadest range of them. This is much more difficult to do with conservatives than with liberals.

You claim to be the party of small, limited government. Yet, each Republican administration that has come to power following a Democratic administration has increased the size and scope of government by more than the Democratic administration preceding it. I have little doubt that if a Republican candidate were to defeat President Obama in 2012 or win in 2016, he or she would increase, rather than decrease the power of the federal government.

In the months after 9/11, President Bush’s approval ratings reached 90%. Did the Republican Party use its new political capital to eliminate wasteful programs? Did it use this power to create any committees to review proposals for the reform or elimination of Social Security, Medicare, or any other significant government program? No, in fact, you pushed for—and got—a large expansion of Medicare. The No Child Left Behind debacle which was an extremely expensive bill which was pushed by conservatives and Republicans and gave the Federal government much more power over education.

You claim to be the defenders of the Constitution. You rail against liberals for violating the 2nd and 10th Amendments. True, they do ignore those amendments. But you do your fair share of ignoring them too. President Bush’s warrantless wiretapping program was an unconstitutional violation of the 4th Amendment. And lets at least be consistent on the 4th Amendment. When President Bush and his team pushed for the monitoring of phones, you called it necessary for the protection of America. Yet, when Democrats and President Obama want similar powers over the internet, you cry foul. As if your defense of warrantless wiretapping didnt set this up.

And while we are on the Constitution, you have also ignored the 10th Amendment and used it for your own political purposes. Whether you support or oppose abortion, the federal government has no Constitutional basis for setting abortion policy. The same is true for gay marriage. The 10th Amendment gives this power to the States, where it belongs. This power was delegated to the States so that divisive social issues would not be played out on the national arena.

How can those who claim to support limited government continue to push for so much expanded power of the government? The simple answer here is that many of those who claim to be opposed to government control are actually only opposed when their side is not in control.

You claim to be the party which supports freedom. You claim to be the party of personal responsibility. Yet, you have prosecuted an endless war on drugs. Your policies have sent millions of your fellow citizens to prison for offenses which harmed no one but themselves. I know that the Democratic Party has not exactly come out in favor of legalization or decriminalization of drugs, but the Republican Party has been relentless in promoting the prosecution of drug offenders. [Plus, President Obama has made some great moves in this area. More on that in a future article.]

You rail against President Obama for supporting bailouts and stimulus, but remember that the first stimulus bill was passed last year and signed by President Bush. The TARP bill and several other bailouts, including that of AIG were all pushed through by President Bush. I know that many of you have been against these moves since the beginning, but plenty of you were not and did not take a stand until President Obama took office.

You have supported economic populism, creating and continuing policies which have contributed to the current financial crisis. Using the government’s power of regulations over financial companies to force banks to lend to those who couldnt afford to buy homes is exactly what caused this mess. Yes, this practice was made government policy under President Clinton, but Republicans controlled Congress then–and did for another 8 years.

You criticize the Democrats for supporting inefficient social welfare programs which you say infringe on the free market. Yet, you support corportate welfare. You have given American companies tax breaks to ship jobs overseas. Yes, outsourcing is a good, natural step that our economy needs to take, but the government should never subsidize private companies, especially for the purpose of eliminating American jobs.

Previously, I wrote that I found “it ironic that the same people who criticized President Bush for every little thing that he did–whether it was right, wrong, or unimportant have now resorted to questioning the Patriotism of people like me for simply disagreeing with President Obama.” You conservatives probably loved that comment. But when did this start? Anyone who criticized the previous administration was criticized as unpatriotic, un-American, or was accused of being soft of terrorists. The medicine doesnt taste so great when you have to take it.

Americanly Yours,

Phred Barnet

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Why Income Tax Rates Should Be Lower

admin — Mon, 13 Apr 2009 16:15:41 +0000

[I wrote this article earlier and WordPress messed up and deleted most of it. I had to rewrite the final 2/3 of this article. I think I wrote it better the first time, but enjoy.]

I am not going to get into the philosophical reasons why I am opposed to income taxes in this piece article. I am however going to explain why lower tax rates are better than higher tax rates.

Here is a chart that was sent to me by Mike at The Young Conservative Blog. It shows the highest federal individual income tax rate. It also shows the tax receipts received by the federal government as a percentage of GDP.

[Check out Mike's blog, theres a lot of interesting stuff there. Also, here is a Wall Street Journal article about Hauser's Law.

I think this is pretty remarkable. While the highest individual income tax rates in this country dropped from 91% down to 28%, and then rose back up to the current 35%, tax receipts as a percentage of GDP has remained at a fairly stable level of 19.5%. Cutting the rates from 91% to 70% in a few years didnt really affect the receipt rate, nor did increasing them from 28% to 40% in a few years.

Now, you might say that the reason that the tax receipts as a percentage of GDP remain pretty much the same is that when taxes on the rich are cut, the tax burden falls more heavily on the poor. However, you may recall the chart that I posted regarding tax burden. I was able to find an acrhived copy of the chart that the government removed from its website here. I dont know how long it will stay up.

This chart clearly shows that the rich have paid an increasing portion of the total income taxes collected since 1979.

In 1979, the top income tax rate was 70%. The government collected about 19.5% of GDP through income taxes, and the top 20% of wage earners paid 64.9% of all income taxes. The top 40% of wage earners combined paid 85.1% of all income taxes.

In 2005, the last year for which data is available, the top tax rate was 35%. The government still collected about 19.5% of GDP through income taxes, however, the top 20% of wage earners now paid 86.3% of all income taxes (a higher percentage than was paid by the top 40% of wage earners in 1979), and the top 40% of wage earners paid 99.4% of all income taxes collected.

I know this seems counterintuitive, but cutting taxes on the rich--and all Americans--actually increased the tax burden on the rich. 2005's top tax rate (35%) was exactly half of what the top tax rate was in 1979 (70%). Yet, the rich paid a much higher percentage of income taxes in 2005 under a lower tax rate than they did in 1979 under a higher rate.

As I mentioned in a previous post, I found this spreadsheet when I was trying to prove to someone that President Bush's tax cuts favored the rich and hurt the poor. I was wrong. In 2000, the top 20% of earners paid 81.2%of all income taxes. By 2005, this proportion had grown to 86.3% of all income taxes. The tax burden of the top 40% increased from 94.7% in 2000 to 99.4% in 2005. In fact, every quintile in the "bottom 80%" of wage earners paid a smaller proportion of the total income taxes in 2005 than they did in 2000. Broad based tax cuts benefit all wage earners.

Cutting taxes allows Americans to keep more of their hard earned money. This in turn leads to increased spending, savings, and investment. These three factors lead directly to increased GDP growth. Increased GDP growth means higher tax revenue for the government (which will always collect around 19.5% of GDP through income taxes).

I have already demonstrated that the government will collect roughly the same percentage of GDP--19.5%--through income taxes no matter what the top tax rate is. This is true whether that rate is 92% or 28%. I have also demonstrated that cutting taxes on the rich and all Americans has actually increased the tax burden on the rich. Finally, I have explained that cutting taxes leads to higher GDP (which equals higher tax receipts).

I see no further arguments against cutting taxes on all Americans including the wealthy.

Rather than raising the tax rates on the wealthy back to what they were in 2000, the President and Congress should consider drastically cutting income taxes for all Americans. This will lead to increased economic growth which will in turn lead to higher tax revenues for the government. Most importantly, doing this would allow all Americans to keep more of their hard earned money.

Americanly Yours,

Phred Barnet

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Irony

admin — Thu, 09 Apr 2009 18:54:36 +0000

I find it ironic that the same people who criticized President Bush for every little thing that he did–whether it was right, wrong, or unimportant have now resorted to questioning the Patriotism of people like me for simply disagreeing with President Obama.

Americanly Yours,

Phred Barnet

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