Debate the Bigger Issue

Instead of playing a game of political chicken with Obama, the Republican leadership should grab the high ground and focus everyone’s attention on the big picture. Everyone knows the debt ceiling must be raised. The question is not whether it will peak at 15 or 16 trillion dollars-the cold reality is that it will be a much higher number. The GOP should not get trapped into negotiating around such a puny issue. They need to move the focus on the bigger, more important concerns. The health of the economy and the debt rating hinge on Washington’s ability to change the trajectory of government spending and the debt it generates. Under Obama, spending as a share of GDP has jumped 25% while revenues have dropped, as they always do, due to the deep recession. Current debt is virtually irrelevant when compared to the unfunded entitlement liabilities that exceed $100 TRILLION.

The only way to solve this problem, which was decades in the making, is with a long-term plan that will transcend the 2 year election cycle. The GOP needs to reject the static scoring that puts a price tag on lower tax rates. The Laffer curve demonstrates that the presumed correlations do not exist. Alan Reynolds recently authored a piece in the Wall Street Journal accompanied by a chart showing income tax revenue as a share of GDP as the top marginal rate was lowered from 91% to 28%. Revenues rose as a raw number and a percentage. (More on that here: LINK)

The silver lining in the current economic cloud is that the Democrats with their super majorities were able to give their economic theories a thorough test. The failure is also thorough and evident. The so-called “stimulus” was neither targeted nor temporary. The Democrats are trying to use it as a new baseline for budgeting. The crown for the party of big spending is properly placed once again. The GOP needs to claim victory and move on. The 2010 mid-term elections are their mandate.

This is our moment. We must seize it. Promises have been made for decades that can never be kept. The age of unfunded liabilities is over. True entitlement reform must include a transition to private accounts so that congress can never again spend what should have been in the mythical trust fund. Our health care is our responsibility. It is not a right-it is a basic necessity, just like food and housing-other areas where government meddling wreaks havoc. Insurance is a risk management tool that adds a layer of bureaucracy and the associated costs. It should be used sparingly, and will be, once it is untangled from the insane tax code.

A vibrant, growing economy can eventually dwarf the debt figures and then we can pay it off entirely. A rational energy policy focused on domestic drilling and proven technologies must replace the “green” fantasy. Real jobs will produce real revenue and help slay the inflation dragon that has already brought us $4 gas. Gains in national security are achieved as well. This message, this vision, can clarify the ongoing debate and serve as a national platform for the 2012 elections.

Pat Duggan

Tax Facts in a Nutshell

We can debate with the left about economics until we’re blue in the face. We can show them Laffer Curves and explain how supply side economics harnesses basic human nature via incentives. Many of us have tried.

Here’s an easier way:

Simply show them today’s column by Alan Reynolds in the Wall Street Journal (LINK).

Or simply show them this graphic:

Why have immoral, confiscatory tax rates when we can keep them low and boost growth and lower unemployment?

Some people are just stuck on stupid.

Published in: on June 16, 2011 at 4:19 pm  Leave a Comment  
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The Left’s New Math

In their attempts to demonize Republican efforts to restore fiscal sanity the left will try anything, from basic smears to grand hyperbole and outright lies. The Tea Party is “extreme”. Budget cuts will starve seniors and even “kill women” according to Rep. Louise Slaughter, D-N.Y. Now the class warriors are trying a new tactic, one that requires inventing a totally new concept: reverse wealth redistribution.

The theme is appearing more frequently. I hear it in conversations with liberal friends and echoed in the media. E.J. Dionne floated it in a recent column, where left-wing fantasies run free. More evidence that this is an orchestrated left-wing talking point came from Donna Brazile on ABC’s Sunday morning show.

What is their claim? Ms. Brazile claims that Republican policy, as evidenced in Paul Ryan’s “Path to Prosperity”, is “taking money from the poor and giving it to the rich…in a redistribution of wealth.” Huh?

E.J. Dionne wrote that we “are about to learn how radical the new conservatives in Washington are, and the extent to which some politicians would transfer even more resources from the have-nots and have-a-littles to the have-a-lots.” I see.

So this is what goes for logic on the left.

All this is based on the left-wing fallacy that the government has any money that isn’t first seized from the private-sector economy. Under this straw man presumption, money is then doled out, with the rich getting more than they need at the expense of the poor. Only using this deeply-flawed starting point can the wealthy, really just this year’s hard-working top earners, actually be “taking” anything from a group that has nothing to begin with-or they wouldn’t be poor now would they?

They’ll say anything that fits their view, regardless of fact. From this foundation they build their “argument”. According to the left, so-called “income distribution” has been severely skewed in recent decades, going back to the Reagan era of course. This is ground zero for tax zealots. But facts are stubborn things. While top tax rates were cut from 91% to 28%, before moving back up to the 35/39% area, revenues continued to increase and the top income brackets saw their share of total tax revenue increase as well. Rather than concede the obvious-that they have lost the debate-they opt to change the subject. It’s not about revenue anymore; it is about “fairness”. Obama said just that in his famous chat with Charlie Gibson when it was pointed out that lower capital gains rates had produced higher revenues.

Bill Gates became a billionaire, and thousands of employees became millionaires, while developing the software that propelled us into the age of personal computers. Billions upon billions in taxes were paid, both by the corporation and the employees through corporate, income and FICA taxes. Microsoft stock has generated billions more in capital gains. Thousands of companies were launched in related industries, creating yet more jobs. Thousand of separate industries became more efficient and our cost of living was lowered while our standard of living increased. We have thousands of years of information at our fingertips and up-to-the-minute news. Yet all this must be wrong because Bill Gates makes X-times more money than the average Joe.

This is the tantrum of the left. When confronted with evidence that destroys their theories they cover their eyes and ears. They won’t look and they won’t listen. Why not embrace the basic truths of the “Laffer Curve” and enjoy the optimized revenue stream? Because that would begin to unravel their carefully constructed world view. If they’re wrong about economics-and they are-what is next? Could it be that their welfare programs actually hurt the poor? Is global warming a hoax? Could the U.S. drill for enough oil here to be truly energy independent?

In the left’s imagination, America is a pie that magically appears and they think the government should slice it up more “fairly”. In reality, those who bake the pie, after paying for all the ingredients, should have a bigger say in how many slices the government seizes. Under current projections, in a few years they will take it all. The bakers will be on strike before that happens.

Pat Duggan

Published in: on April 11, 2011 at 1:29 pm  Comments (1)  
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Tea Partiers are Ready for Their First Mid Term Election

Wednesday evening I attended the October monthly meeting of the Chicago Tea Party. Featured speakers were Isaac Hayes, the GOP nominee running against Jesse Jackson Jr. (or Senate candidate #5 in FBI reports on Blago’s attempted seat sale) and recent candidate for the Illinois GOP governor nomination, political commentator and radio fill-in Dan Proft. It was the usual lively event with a call for action in the final month approaching the midterm elections with lots of tight races among an expected overall GOP victory. Isaac is ready for congress despite the Chicago Tribune’s gutless “no endorsement” in that race. Dan Proft did a great job of explaining why we prefer the sometimes less polished candidates that agree with our principles and will vote for them over the slick insiders who only sell us out later.

There was various media in attendance including a videographer for CBS evening news. I heard the poor fellow confessing to the owner of host venue, Blackie’s in the south “Loop”, that he’d forgotten his headset and begging to borrow any kind of replacement. Maybe that is why the few seconds of tape that appeared on the Thursday evening news were accompanied only by a Katie Couric voice over and no interviews-all this despite his non-stop 2 hours plus of taping.

Naturally I Tivo’d and watched  the news cast. It is being promoted as an ongoing series on the final month of the campaign. They did their best to smear the TEA party movement and diminish their impact but I doubt it had any effect. Katie Couric’s numbers are at all time lows. LINK

They tried to jam a lot into their 2-3 minute segment. Lots of internal polls designed to show that TEA party activists are white, male, protestant and inclined to vote Republican anyway. This should come as no surprise. The GOP is hearing the message and embracing it. Despite some party insiders insisting on trotting out the same old RINO’s voters are nominating fresh blood. One poll question mirrored the one asked of the Chicago organizer Steve Stevlic: Would the economy have been better off if we allowed the banks to fail? In the interview the car companies were included. This is a transparent apology for bailout-Obamanomics. Sure the economy sucks but it could have been worse-right?

Overall I would describe the coverage as worthless / harmless. It was slanted but mostly just so superficial as to be a waste of viewers’ time. I guess that was their goal: don’t give the TEA party any unnecessary free PR.

In closing the “reporter” Dean Reynolds sighted one last poll that claimed only “22% of Americans view the movement favorably.”

This is nonsense. More than 50% support the TEA party to some degree and would vote for a candidate they support. LINK

The left is in full tantrum now. They have no rational response to a true grass roots effort that focuses on simple, key issues:

1.    Fiscal responsibility and balanced budgets, like every household and business manages through good and bad times.

2.    Lower spending that reverts back to constitutionally endorsed basics.

3.    Tax rates that are kept low to allow for free enterprise to flourish with a nod to the Laffer curve.

4.    Accountability in government: citizen legislators as opposed to career political hacks.

Two thirds of America supported Obama after his election despite only 53% voting for him. This shows the inherent optimism of the American people. They’re even good losers. Now two thirds don’t approve of the direction we’re heading. 80% don’t approve of congress. This is what feeds the TEA party with energy. This is not racism. These are the same people that knew government run health care was a bad idea when it was called “Hillarycare”. This is about economics. Only the desperate Democrats think these are racial issues.

Pat Duggan

Stop Calling Them “Tax Cuts”

The GOP has bungled this situation for 10 years and running. This is about tax RATES and how high is too high. It appears that the GOP is not much better informed on economics than the Democrats. They got suckered into lowering tax rates back in the early Bush years with sunset provisions and now we have to vote for passage again with a hostile congress and a stubborn president without an economic clue.

This is one of the top reasons Michael Steele should be forced out. The GOP has a golden opportunity here to frame the debate in it’s proper terms: Optimal rates and the Laffer curve. The Democrats would have you believe that “tax cuts” are no different than welfare checks and are simply handed to wealthy folks that don’t need them. This is not about how the government spends money this is about where the government gets the money in the first place. Taxing top earners at punitive rates sucks the life blood out of the economy. The GOP has a chance to prove once and for all that the Laffer curve is not a “supply-side” theory, it is an economic truth.

They need to prepare now. Take the house in 2010 and the senate with a new President in 2012. Then gradually lower rates while holding the line on spending and watch the deficits turn to surpluses and showcase the results. The revenue gains from the Reagan and Bush tax reductions were obscured by spending increases. This is the time to take control and regain the title of fiscal responsibility.

Robert Tracinski of the Intellectual Activist reminds us of the toxic policies of the FDR era  in his latest missive, “And let me add that the Republicans of today are (with a few notable exceptions) more radical than the Republicans of 1946, back in the era when “me-too” was the official policy of the right. And that’s not to underestimate the achievement of the post-war Republicans, who did a lot to dismantle FDR’s sweeping wartime economic controls—which is what actually ended the Great Depression and ushered in the prosperity of the 1950s.

You can sign up for a free trial here: LINK

This is a battle of ideas. The GOP needs to prove they have a better idea and this is the way to do it.

Pat Duggan

Back to the Debate

Now that the latest batch of elections are over, delivering knockout blows to incumbents, we return to the debate. What will be the main topic? Until Israel tires of our ongoing appeasement of Iran’s nuclear weapons program and takes action, the economy remains the focus. We’ll continue to watch the troubles in Greece, the other “PIIGS”, the Euro and the implications for America-and they are significant.

Some recent columns dovetail perfectly on the budget issues. I will demonstrate. There’s got to be a reason to spend time on this blog, right? 😉

During the 2008 elections, and seemingly ever since, the left has insisted they offer the alternative to the “failed policies of George Bush”. I’ve asked many of the Bush bashers what specifically they mean. (Like many free-market, fiscal conservatives, I have my own issues with GW). The common reply: “Tax cuts for the rich.” This is laughable. I assume they are referring to the deficit. That theory is debunked here:

In this column Brian Riedl refers to tax revenue as a percent of the economy (referring to GDP) and how it always tops out short of the 20% mark. David Ranson covered this very topic one day earlier in the Wall Street Journal:

This is yet another real life graphic representation of the “Laffer Curve”. I’ve posted some links to explain the Laffer theory here:

The “Readers Digest” version here:

A deeper explanation here:

A full video series for those deeply interested here:

Economist Art Laffer was not the first to point out how the laws of economics apply here, and he doesn’t claim to be. All you need to do is ask yourself this question: If the government announced they were going to seize 100% of your paycheck would you go to work tomorrow? How about 90%? 70%?

You get the idea. Higher tax rates do not necessarily deliver higher revenue. This is a far cry from “tax cuts always pay for themselves”. Add this to the list of other things supply siders do not claim but that big government liberals say they do. Like “trickle-down economics” these are deceptions and straw men constructed by the left to avoid real debate.

For those who argue that Soviet Russia basically took 100% and people still went to work I will remind them that in Russia they had no choice. For now we do. This would more accurately be described as a form of slavery, something Walter Williams dares to assert here.

The bottom line is that there is only so much tax revenue the government can suck out of the private sector. All this talk of “corporate greed” and “obscene profits” ignores the fact that without our profitable businesses the government does not have a dime for social programs or entitlements. There is nothing to redistribute. Private industry is the golden goose. It is the lifeblood of our economy and if we try to draw too much we will kill it.

If we can’t raise more revenue-and layering tax upon tax will not yield more revenue-we must cut spending. Our current Congress lacks the courage and common sense necessary. New leadership is essential. Let’s hope the next Congress takes their job, and their oath of office seriously.

Pat Duggan

Published in: on May 19, 2010 at 10:16 pm  Leave a Comment  
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