Posts tagged taxes

What Is Supply-Side Economics?

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Source: http://www.paulcraigroberts.org

By Dr. Paul Craig Roberts

What Is Supply-Side Economics?

 

Supply-side economics is an innovation in macroeconomic theory and policy. It rose to prominence in congressional policy discussions in the late 1970s in response to worsening Phillips Curve trade-offs between inflation and unemployment. The postwar Keynesian demand management policy had broken down. The attempts to stimulate employment brought higher rates of inflation, and attempts to curtail inflation resulted in higher rates of unemployment.

In other words, the Phillips curve (named after economist A. W. Phillips) trade-offs between inflation and unemployment were worsening. Each additional job created had to be paid for with a higher rate of inflation, and each reduction in inflation had to be paid for with a higher rate of unemployment.

The Phillips curve met its nemesis in stagflation, a new term that entered economics in the late 1970s. Milton Friedman summed up the demise of the Phillips curve with his article, “More Inflation, More Unemployment.”

The appearance of stagflation–simultaneous inflation and unemployment–was a serious problem for Congress, as I pointed out in the late 1970s in an article in The Public Interest, “The Breakdown of the Keynesian Model.” Simultaneous inflation and unemployment meant that the federal budget would soon be out of control. In those days Congress actually worried about such an outcome.

The Keynesian economic establishment could offer Congress no solution other than an “incomes policy.” An incomes policy was wage and price controls. Inflation would be controlled by suppressing wages and prices, while expansionary monetary and fiscal policies boosted aggregate demand to raise employment. Even Congress understood that aggregate demand could not rise if wages were suppressed.

Congress looked for a different solution, and I, being on the scene as a member of the congressional staff, gave them the solution. In Keynesian economics monetary and fiscal policies only affect aggregate demand. If these policies were expansionary, aggregate demand increases, thus boosting employment and inflation. If these policies were restrictive, inflation and employment would fall with consumer spending. The fault in Keynesian theory and policy was the assumption that fiscal policy had no impact on aggregate supply.

I was able to explain to members of Congress, both Democrats and Republicans who were concerned about stagflation, that some forms of fiscal policy directly increase or decrease aggregate supply. High tax rates mean that leisure is cheap in terms of forgone current earnings–thus there is less labor supply–and current consumption is cheap in terms of foregone future income streams–thus less savings for investments. Keynesian demand management had run into trouble, because the high tax rates on income reduced the response of supply to demand stimulus. Thus, prices rose instead of output.

The solution, I said, was to reduce the marginal income tax rates across the board. This would increase the responsiveness of supply to demand and cure stagflation.

Both political parties listened. In the House it was the Republicans who took the lead–Jack Kemp and Marjorie Holt. In the Senate, Republicans Orrin Hatch and Bill Roth stepped forward. However, in the Senate the lead was taken by Democrats, especially Russell Long, chairman of the Senate Finance Committee, Lloyd Bentsen, chairman of the Joint Economic Committee of Congress, and my Georgia Tech fraternity brother, Sam Nunn.

As a result of Rep. Jack Kemp being the first congressional spokesman for a supply-side policy and President Reagan’s adoption of the policy, supply-side economics is associated with Republicans. However, Republicans almost lost the issue to Democrats. The first official government endorsement of supply-side economics was in the late 1970s by the Joint Economic Committee of Congress under the chairmanship of Democratic Senator Lloyd Bentsen of Texas.

The Joint Economic Committee under Senator Bentsen’s leadership put out Annual Reports two years in a row calling for a supply-side policy. As the presidential election approached that put Ronald Reagan in the White House, the majority Democrats in the Senate had a meeting to decide whether to pass the supply-side tax rate reductions prior to the presidential election, thus pulling the rug out from under Reagan on his main plank. The Senate Democrats were inclined to move forward with the tax rate reductions, but the Senate Majority Leader convinced them that it would look like an endorsement of Reagan over their own party’s candidate (Jimmy Carter). The Senate Majority Leader said that immediately after the election, the Democrats would take control of the issue and pass the marginal tax rate reductions. The great surprise of the election was that the Democrats lost control of the Senate.

There was more opposition to Reagan’s tax bill from Republicans than from Democrats. Republicans believed that budget deficits ranked with the Soviet threat and were more willing to raise taxes than to reduce them. The Republican opposition was so strong that I had a hard time getting the tax bill out of the Reagan administration so that Congress could vote on it. In those days the great bogyman for Republicans was budget deficits, and deficits were what Treasury’s projections showed. Although the Treasury was, for the most part, committed to the President’s policy and believed that some part of the lost revenues from marginal tax rate reduction would be recovered, which is also what Keynesians believed, the Treasury’s revenue forecast was based on the traditional static revenue model that every dollar of tax cut would lose a dollar of revenue.

OMB director David Stockman and his economist Larry Kudlow covered up the revenue loss by assuming a higher rate of inflation. In those days the income tax was not indexed for inflation. Nominal income gains pushed taxpayers into higher tax brackets. The higher was inflation, the higher was nominal GDP and tax revenues. In order to raise the revenue forecast, Stockman only needed to raise the inflation forecast.

Senate Democrats complained to me that they were willing to cooperate with Reagan on the tax bill, but were being cut out. Sam Nunn, who had got “Reaganomics” passed in the Senate before Reagan was elected, only to have it nixed by President Carter, told me that no one in the Reagan administration had ever spoken to him or sought his support.

The White House chief of staff, James Baker, wanted a Republican “victory,” and proceeded to pick a fight with the Democrats who were willing to support President Reagan’s policy. I told Jim Baker that he was making a strategic mistake. By cutting out the Democrats, he was setting the policy up for criticism that would create the perception of failure. I told him that Stockman had hidden the deficit by over-estimating inflation, a ploy that contradicted the logic of our policy. If our policy was correct, inflation would be less than Stockman’s forecast. The tax revenues would not materialize, and the Democrats, cut out of the action, would seize on the deficits and pay the White House back for cutting them out of any credit for the new policy. (My prediction came true. Democrats, inured to deficits by decades of Keynesian demand management, suddenly became as rabid about budget deficits as Republicans.)

If I had known then just how corrupt politics was, I would have thought twice before warning Baker that the hidden deficits would be used to discredit the policy even if the policy cured stagflation. Baker was allied with George Herbert Walker Bush, Reagan’s VP, and the fight was on from day one for the succession to Reagan. Kemp was in the forefront, because he was identified with Reagan’s economic policy, and Bush had called it “voodoo economics.” If Baker could make Reagan’s policy appear to be successful only because Bush had moderated it, all the better for VP Bush’s claim to the succession.

Tip O’Neill, the Democratic Speaker of the House, offered an alternative supply-side tax rate reduction to the administration’s bill. Speaker O’Neill’s bill had a smaller reduction in marginal tax rates on personal income, but had a superior pro-growth tax reduction on the business side. The House Democrats’ bill offered expensing of business investment.

The Reagan administration was too fearful to propose expensing (immediate write-offs) of business investment, and here was the leading Democrat in the nation offering it to them. I told Jim Baker to jump on it, to work out a compromise with O’Neill on the size of the personal tax rate reductions and to give the Democrats equal credit for the policy. That, I told Baker, would ensure the policy’s acceptance and success.

For political reasons Baker was more committed to giving Reagan a “victory” over Democrats than he was to the success of the policy. Baker wanted a headline. I wanted a policy. From Baker’s standpoint, if Democrats for political reasons turned against the policy, they would help to create welcome roadblocks to Jack Kemp’s challenge to George H.W. Bush for the succession.

Reagan’s version of supply-side economics carried the day over Tip O’Neill’s version. Deputy Assistant Treasury Secretary Steve Entin prepared a graph comparing the Reagan and O’Neill tax rate reductions. The Democrats’ tax cut was initially larger, but Reagan’s was better over time. That let Reagan go on national TV, point to the graph and say, “the Democrats have the best bill–if you only expect to live one more year.”

The history and explanation of supply-side economics are in my book, The Supply-Side Revolution (Harvard University Press, 1984). Books published by Harvard are peer-reviewed, which means that publication depends on a go-ahead from outside experts. A book that was “voodoo economics” or simply said that “tax cuts pay for themselves” or that “trickle-down economics works by giving the rich money to spend and some of it will trickle-down to help the poor” will not clear peer review.

Thirty five to forty years after supply-side economics made its appearance in policy debates the vast majority of Americans, including apparently some economists and public intellectuals, have no idea what it is. For example, on February 1, 2014, Information Clearing House posted Bill Moyers interview of David Simon, “America as a Horror Show.” This important interview gets fouled in its opening lines when Simon declares: “Supply-side economics has been shown to be bankrupt as an intellectual concept. Not only untrue, but the opposite has occurred.”

Supply-side economics was not relevant to the interview. Yet off the bat Simon destroys the credibility of his interview. Supply-side economics cured stagflation exactly as supply-side economists said it would do. That was its only claim. I know. As Assistant Secretary of the Treasury for Economic Policy, I was in charge.

In 2013 The Supply-Side Revolution, which Harvard has kept in print for three decades, was published in China in the Chinese language. Why would a leading Chinese publisher translate and publish a 30 year old book about a subject that “has been shown to be bankrupt as an intellectual concept?” Why would Chinese economists request a publisher to translate and publish a book about a discredited and useless subject?

Why does Simon, a reporter who was on the Baltimore Sun’s city desk covering crime during the Reagan administration, think that he knows anything about supply-side economics?

How can America save itself when its public intellectuals have no idea what they are talking about?

As I am associated with supply-side economics and the Reagan administration, the coterie of Reagan haters will write in to the many sites that post my column with sarcastic comments denouncing me for “again defending Reagan.” I am not defending anyone. I am merely stating the facts. Anyone can find the facts. All they have to do is to look. But many had rather shoot off their mouths and demonstrate their ignorance. They can’t stand the thought of having one less reason for hating Reagan.

As I am an interested party, let’s turn to a non-interested one, Paul A. Samuelson, “the father of modern economics.” Samuelson was the doyen of Keynesian economics, America’s greatest 20th century economist, and the first American economist to win the Nobel prize. If anyone was harmed by supply-side economics, it was Keynesian economists’ human capital. Yet in the 12th edition of his famous textbook published in 1985, Samuelson shows how supply-side policy can cause aggregate supply to increase or decrease, a first for economics textbooks. Samuelson validates supply-side economics in principle and says that its policy impact varies from “modest” to “substantial,” depending on circumstances. He also says that in Britain, “the supply side policies appear to have had an unexpectedly large impact, improving both inflation and productivity more than many observers expected.”

Is the “foremost academic economist of the 20th century” (New York Times) another trickle-down, voodoo kook like me and Ronald Reagan?

I met Samuelson in his MIT office when I gave the annual State of the Economy address to the combined economic faculties and graduate students of Harvard and MIT sometime in the 1980s. Samuelson had an open mind and could absorb new thinking. At the conclusion of my address, I received a standing ovation. No one in the large liberal audience of professors and graduate students said I was a voodoo economist or an agent for the rich. I have debated in public forums Keynesian economists who are Nobel prize winners, such as James Tobin and Larry Klein. They were always respectful. At a meeting of the Eastern Economics Association, Tobin acknowledged that I was correct.

Supply-side economics dealt with the problem of its time–stagflation. Supply-side economics has no cure for an economy decimated by jobs offshoring and financial deregulation. The problems of today are different. I have made this clear in my book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West.

The George W. Bush tax cuts have nothing to do with supply-side economics. The Bush tax cuts were nothing but a greedy grab, but they are not a signifiant cause of today’s inequality. The main causes of the unacceptable inequality of income and wealth in the US today are financial deregulation and the dismantling of the ladders of upward mobility by the offshoring of manufacturing and tradable professional service jobs. The wages and salaries denied to Americans are transformed into corporate profits, mega-million dollar executive bonuses, and capital gains for shareholders. Financial deregulation unleashed massive debt leverage of bank depositors’ accounts, backed up with Federal Reserve bailouts of the banksters’ uncovered gambling bets. Neither tax increases nor reductions can compensate for these extraordinary mistakes.

Intelligent people over the centuries have stressed that failure to understand the past endangers the present and the future. Across the American political spectrum policymakers, economists, media, commentators, and the public are ignorant of the past and in denial about the present. Those trying to inform are few and far between, and they are constantly under attack from the very people they are endeavoring to inform. What is the point of the effort to inform? Is it merely “sound and fury, signifying nothing”?

NOTE:
Some claim that stagflation was caused by the OPEC oil embargo in 1973, not by the interaction of demand management with high marginal tax rates. The claim is incorrect. By 1971 high US inflation had already wrecked the Bretton Woods fixed exchange rate system.

US inflation forced President Nixon to close the gold window in 1971. Under the Bretton Woods fixed exchange rate system, the currencies of countries were fixed to the dollar, and the dollar was fixed at $35 per ounce of gold. Foreign central banks could redeem dollars for gold. Gold redemption was regarded as a constraint on US money supply growth.

By 1971 the rate of US inflation was 6 percent. The US gold stock had fallen substantially from its 1960 level. Alarmed by countries redeeming their dollar holdings for gold, the Nixon administration closed the gold window and ended the conversion of dollars into gold.

Economists ascribe the monetary inflation that predated the 1973 oil embargo by many years to the Federal Reserve’s accommodation of President Johnson’s “guns and butter” fiscal policy in the 1960s (VIetnam War + Great Society programs).

A common mistake is to claim that oil producers can cause inflation by raising oil prices. Higher oil prices can cause higher costs of production and less output but cannot cause a rise in the general level of prices. In the absence of monetary inflation, higher costs in some areas divert purchasing power from other areas. Costs rise and output falls, but there is no rise in the general price level.

Economists understand that inflation is a monetary phenomenon. For there to be a rise
in the overall level of prices, either the supply of money or the rate at which money turns over (velocity) must rise. Generally, a rise in the velocity of money is a response to rising prices as the willingness to hold depreciating currency declines.

In countries with significant imports, declines in the exchange value of the currency can boost domestic inflation with rising import prices, but generally declines in currency exchange values are caused by domestic monetary inflation. However, a country with a dominant currency can manipulate the exchange values of currencies of smaller economies or impose sanctions which reduce the value of the targeted country’s currency. In a system of flexible exchange rates, international capital flows in and out of countries can destabilize the economies.

 

Reprinted with permission from www.paulcraigroberts.org


 

About Dr. Paul Craig Roberts

Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following. His latest book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is now available.

 

Prison Inc.

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Source: http://www.zerohedge.com

By Tyler Durden

Prison Inc.

 

There are 2.3 million people living behind bars in the United States and the prison system cost the federal government $55 billion every year. Between 1990 and 2010, the number of privately operated prisons in the US increased 1600%… it seems crime does pay, but for whom is the question?

 

 

John Stossel – Stop Subsidizing The Rich (Video)

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Source: http://www.againstcronycapitalism.org

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John Stossel – Stop Subsidizing The Rich (Video)

 

Taxpayers will be the ones to rebuild this house. (Which should never have been built in the first place.)

Taxpayers will be the ones to rebuild this house. (Which should never have been built in the first place.)

 

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How does money move between the States and Feds?

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How does money move between the States and Feds?

 

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Published by NextNewsNetwork

Constitutional scholar Dr. Edwin Vieira sits down with Gary Franchi and answers the question… How does money move between the States and Feds?

Download your free Next News “Heroes & Villains” Poster here: http://nextnewsnetwork.com/the-2013-h…

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You want your tax break (or credit) extended? Better give to the right congresspeople

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Source: http://www.againstcronycapitalism.org

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You want your tax break (or credit) extended? Better give to the right congresspeople

 

US Capitol For Sale (Washington, DC)

 

This is a nice little game (and revenue stream) for Congress. Tax breaks and tax credits come up for renewal every year and the beneficiaries of these favors cue up to throw campaign dollars and other gifts at the feet of Washington politicians – every year.

It’s crony capitalist genius. Why write something permanently into the code and only get paid once when Congress can turn political favors into a subscription service?

Remember the old adage. Never kill a sheep. Shear it over and over.

(From The Washington Free Beacon)
 
“If the past is prologue, some—but not all—of these provisions will be extended, but we will not know until much later in 2014 which ones will be extended, whether they will be extended with modifications, how long they will be extended, whether the extension will be retroactive and who will be stuck “paying” for any such extension,” they wrote. “Still, despite the history of on-again, off-again extensions, it is risky to assume that any particular provision will be extended simply because it has been extended in the past.”

Click here for the article.

Image credit: http://www.againstcronycapitalism.org


Nick Sorrentino
About Nick Sorrentino

Nick Sorrentino is the co-founder and editor of AgainstCronyCapitalism.org. A political and communications consultant with clients across the political spectrum, he lives just outside of Washington DC where he can keep an eye on Leviathan.
 
 

How Will The Economy Improve In 2014 If Almost Everyone Has Less Money To Spend?

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Source: http://theeconomiccollapseblog.com

By Michael Snyder

How Will The Economy Improve In 2014 If Almost Everyone Has Less Money To Spend?

 

Piggybank-Photo-by-Damian-OSullivan-300x199Is the U.S. consumer tapped out?  If so, how in the world will the U.S. economy possibly improve in 2014?  Most Americans know that the U.S. economy is heavily dependent on consumer spending.  If average Americans are not out there spending money, the economy tends not to do very well.  Unfortunately, retail sales during the holiday season appear to be quite disappointing and the middle class continues to deeply struggle.  And for a whole bunch of reasons things are likely going to be even tougher in 2014.  Families are going to have less money in their pockets to spend thanks to much higher health insurance premiums under Obamacare, a wide variety of tax increases, higher interest rates on debt, and cuts in government welfare programs.  The short-lived bubble of false prosperity that we have been enjoying for the last couple of years is rapidly coming to an end, and 2014 certainly promises to be a very “interesting year”.

Obamacare Rate Shock

Most middle class families are just scraping by from month to month these days.

Unfortunately for them, millions of those families are now being hit with massive health insurance rate increases.

In a previous article, I discussed how one study found that health insurance premiums for men are going to go up by an average of 99 percent under Obamacare and health insurance premiums for women are going to go up by an average of 62 percent under Obamacare.

Most middle class families simply cannot afford that.

Earlier today, I got an email from a reader that was paying $478 a month for health insurance for his family but has now received a letter informing him that his rate is going up to $1,150 a month.

Millions of families are receiving letters just like that.  And to say that these rate increases are a “surprise” to most people would be a massive understatement.  Even people that work in the financial industry are shocked at how high these premiums are turning out to be…

“The real big surprise was how much out-of-pocket would be required for our family,” said David Winebrenner, 46, a financial adviser in Lebanon, Ky., whose deductible topped $12,000 for a family of six for a silver plan he was considering. The monthly premium: $1,400.

Since Americans are going to have to pay much more for health insurance, that is going to remove a huge amount of discretionary spending from the economy, and that will not be good news for retailers.

Get Ready For Higher Taxes

When you raise taxes, you reduce the amount of money that people have in their pockets to spend.

Sadly, that is exactly what is happening.

Congress is allowing a whopping 55 tax breaks to expire at the end of this year, and when you add that to the 13 major tax increases that hit American families in 2013, it isn’t a pretty picture.

This tax season, millions of families are going to find out that they have much higher tax bills than they had anticipated.

And all of this comes at a time when incomes in America have been steadily declining.  In fact, real median household income has declined by a total of 8 percent since 2008.

If you are a worker, you might want to check out the chart that I have posted below to see where you stack up.  In America today, most workers are low income workers.  These numbers come from a recent Huffington Post article

-If you make more than $10,000, you earn more than 24.2% of Americans, or 37 million people.
 
-If you make more than $15,000 (roughly the annual salary of a minimum-wage employee working 40 hours per week), you earn more than 32.2% of Americans.
 
-If you make more than $30,000, you earn more than 53.2% of Americans.
 
-If you make more than $50,000, you earn more than 73.4% of Americans.
 
-If you make more than $100,000, you earn more than 92.6% of Americans.
 
-You are officially in the top 1% of American wage earners if you earn more than $250,000.
 
-The 894 people that earn more than $20 million make more than 99.99989% of Americans, and are compensated a cumulative $37,009,979,568 per year.

It is important to keep in mind that those numbers are for the employment income of individuals not households.  Most households have more than one member working, so overall household incomes are significantly higher than these numbers.

Higher Interest Rates Mean Larger Debt Payments

On Tuesday, the yield on 10 year U.S. Treasuries rose to 3.03 percent.  I warned that this would happen once the taper started, and this is just the beginning.  Interest rates are likely to steadily rise throughout 2014.

The reason why the yield on 10 year U.S. Treasuries is such a critical number is because mortgage rates and thousands of other interest rates throughout our economy are heavily influenced by that number.

So big changes are on the way.  As a recent CNBC article declared, the era of low mortgage rates is officially over…

The days of the 3.5% 30-year fixed are over. Rates are already up well over a full percentage point from a year ago, and as the Federal Reserve begins its much anticipated exit from the bond-buying business, I believe rates will inevitably go higher.

Needless to say, this is going to deeply affect the real estate market.  As Mac Slavo recently noted, numbers are already starting to drop precipitously…

The National Association of Realtors reported that the month of September saw its single largest drop in signed home sales in 40 months. And that wasn’t just a one-off event. This month mortgage applications collapsed a shocking 66%, hitting a 13-year low.

And U.S. consumers can expect interest rates on all kinds of loans to start rising.  That is going to mean higher debt payments, and therefore less money for consumers to spend into the economy.

Government Benefit Cuts

Well, if the middle class is going to have less money to spend, perhaps other Americans can pick up the slack.

Or maybe not.

You certainly can’t expect the poor to stimulate the economy.  As I mentioned yesterday, it is being projected that up to 5 million unemployed Americans could lose their unemployment benefits by the end of 2014, and 47 million Americans recently had their food stamp benefits reduced.

So the poor will also have less money to spend in 2014.

The Wealthy Save The Day?

Perhaps the stock market will continue to soar in 2014 and the wealthy will spend so much that it will make up for all the rest of us.

You can believe that if you want, but the truth is that there are a whole host of signs that the days of this irrational stock market bubble are numbered.  The following is an excerpt from one of my recent articles entitled “The Stock Market Has Officially Entered Crazytown Territory“…

The median price-to-earnings ratio on the S&P 500 has reached an all-time record high, and margin debt at the New York Stock Exchange has reached a level that we have never seen before.  In other words, stocks are massively overpriced and people have been borrowing huge amounts of money to buy stocks.  These are behaviors that we also saw just before the last two stock market bubbles burst.

If the stock market bubble does burst, the wealthy will also have less money to spend into the economy in 2014.

For the moment, the stock market has been rallying.  This is typical for the month of December.  You see, the truth is that investors generally don’t want to sell stocks in December because they want to put off paying taxes on the profits.

If stocks are sold before the end of the year, the profits go on the 2013 tax return.

If stocks are sold a few days from now, the profits go on the 2014 tax return.

It is only human nature to want to delay pain for as long as possible.

Expect to see some selling in January.  Many investors are very eager to start taking profits, but they wanted to wait until the holidays were over to do so.

So what do you think is coming up in 2014?

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This article first appeared here at the Economic Collapse Blog.  Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here


Image credit: http://theeconomiccollapseblog.com

 

Lobbyists Cheer Boehner and Ryan for Expanding Government in Deal

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Source: http://www.againstcronycapitalism.org

By

Lobbyists Cheer Boehner and Ryan for Expanding Government in Deal

 

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There is a clear line which has been drawn in the dirt of Washington DC. On one side there are the lobbyists, the #oldmedia, and the establishment political machines. On the other side are the people calling for a truly smaller government.

The thought that government would shrink, even a government which is as bloated and debt ridden as our own, is beyond the pale for those whose business it is to extract wealth from taxpayers. That’s why the lobbyists in Downtown DC have cheered the budget deal.

Think about it. A large part of K Street has built a career on buying the GOP, and now the Tea Party is just going to take over the place? Who do these small government people think they are anyway? This is “our town.” This is our party, and frankly the party has been rocking for decades. So long as government grows everyone can get a piece for themselves–everyone in Washington DC anyway. Why would anyone want to stop this? Principals are great and all, but we are here to get paid! Principals are for poor people.

And that is what they think.

(From Breitbart.com)
 
Grassroots conservative groups have fired back. Club for Growth has responded by pointing out, “Corporations are some of the biggest seekers of welfare in this country.” Heritage Action for America, meanwhile, has commented, “The fact that K Street is applauding confirms that the deal was bad, and Speaker Boehner’s comments confirm conservatives’ worst suspicions about Washington — that the game is rigged.”

Click here for the article.

Image credit: http://www.againstcronycapitalism.org


Nick Sorrentino
About Nick Sorrentino

Nick Sorrentino is the co-founder and editor of AgainstCronyCapitalism.org. A political and communications consultant with clients across the political spectrum, he lives just outside of Washington DC where he can keep an eye on Leviathan.

 

Peter Schiff ~ They Bravely Chickened Out

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Source: http://www.europac.net

By Peter Schiff

Friday, December 13, 2013

Peter Schiff ~ They Bravely Chickened Out

 

Peter Schiff is the CEO and Chief Global Strategist of Euro Pacific Capital

Earlier this week Congress tried to show that it is capable of tackling our chronic and dangerous debt problems. Despite the great fanfare I believe they have accomplished almost nothing. Supporters say that the budget truce created by Republican Representative Paul Ryan and Democratic Senator Patty Murray will provide the economy with badly needed certainty. But I think the only surety this feeble and fictitious deal offers is that Washington will never make any real moves to change the trajectory of our finances, and that future solutions will be forced on us by calamity rather than agreement.

There can be little doubt that the deal resulted from a decision by Republicans, who may be still traumatized by the public relations drubbing they took with the government shutdown, to make the 2014 and 2016 elections a simple referendum on Obamacare. Given the ongoing failures of the President’s signature health care plan, and the likelihood that new problems and outrages will come to light in the near future, the Republicans have decided to clear the field of any obstacles that could distract voters from their anger with Obama and his defenders in Congress. The GOP smells a political winner and all other issues can wait. It is no accident the Republican press conference on the budget deal was dominated by prepared remarks focusing on the ills of Obamacare.

Although he had crafted his reputation as a hard nosed deficit hawk, Paul Ryan claimed that the agreement advances core Republican principles of deficit reduction and tax containment. While technically true, the claim is substantively hollow. In my opinion the more honest Republicans are arguing that the Party is simply making a tactical retreat in order to make a major charge in the years ahead. They argue that Republicans will need majorities in both houses in 2014, and the White House in 2016, in order to pass meaningful reforms in taxing and spending. This has convinced them to prioritize short term politics over long term goals. I believe that this strategy is wishful thinking at best. It magnifies both the GOP’s electoral prospects (especially after alienating the energetic wing of their party) and their willingness to make politically difficult decisions if they were to gain majority power (recent Bush Administration history should provide ample evidence of the party’s true colors). Their strategy suggests that Republicans (just like the Democrats) have just two priorities: hold onto their own jobs, and to make their own party a majority so as to increase their currency among lobbyists and donors. This is politics at its most meaningless.  I believe public approval ratings for Congress have fallen to single digit levels not because of the heightened partisanship, but because of blatant cowardice and dishonesty. Their dereliction of responsibility will not translate to respect or popularity. Real fiscal conservatives should continue to focus on the dangers that we continue to face and look to constructive solutions. Honesty, consistency and courage are the only real options.

In the meantime we are given yet another opportunity to bask in Washington’s naked cynicism. Congress proposes cuts in the future while eliminating cuts in the present that it promised to make in the past! The Congressional Budget Office (which many believe is too optimistic) projects that over the next 10 years the Federal government will create $6.38 trillion in new publicly held debt (intra-governmental debt is excluded from the projections). This week’s deal is projected to trim just $22 billion over that time frame, or just 3 tenths of 1 percent of this growth. This rounding error is not even as good as that. The $22 billion in savings comes from replacing $63 billion in automatic “sequestration” cuts that were slated to occur over the next two years, with $85 billion in cuts spread over 10 years. As we have seen on countless occasions, long term policies rarely occur as planned, since future legislators consistently prioritize their own political needs over the promises made by predecessors.

The lack of new taxes, which is the deal’s other apparent virtue, is merely a semantic achievement. The bill includes billions of dollars in new Federal airline passenger “user fees” (the exact difference between a “fee” and a “tax” may be just as hard to define as the difference between Obamacare “taxes” and a “penalties” that required a Supreme Court case to decide). But just like a tax, these fees will take more money directly from consumer’s wallets. The bigger issue is the trillions that the government will likely take indirectly through debt and inflation.

The good news for Washington watchers is that this deal could finally bring to an end the redundant “can-kicking” exercises that have frustrated the Beltway over the last few years. Going forward all the major players have agreed to pretend that the can just doesn’t exist. In making this leap they are similar to Wall Street investors who ignore the economy’s obvious dependence on the Federal Reserve’s Quantitative Easing program as well as the dangers that will result from any draw down of the Fed’s $4 trillion balance sheet.

The recent slew of employment and GDP reports have convinced the vast majority of market watchers that the Fed will begin tapering its $85 billion per month bond purchases either later this month or possibly by March of 2014. Many also expect that the program will be fully wound down by the end of next year. However, that has not caused any widespread concerns that the current record prices of U.S. markets are in danger. Additionally, given the Fed’s current centrality in the market for both Treasury and Mortgage bonds, I believe the market has failed to adequately allow for severe spikes in interest rates if the Fed were to reduce its purchasing activities. With little fanfare yields on the 10 year and 30 year Treasury bonds are already approaching multi-year highs. Few are sparing thoughts for yield spikes that could result if the Fed were to slow, or stop, its buying binge.

So America blissfully sails on, ignoring the obvious fiscal, monetary, and financial shoals that lay ahead in plain sight. I believe that will continue this dangerous course until powers outside the United States finally force the issue by refusing to expand their holding of U.S. debt. That will finally bring on the debt and currency crisis that we have created by our current cowardice.

Peter Schiff is the CEO and Chief Global Strategist of Euro Pacific Capital, best-selling author and host of syndicated Peter Schiff Show.


 

Boeing’s crony capitalism in America’s heartland

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Source: http://www.againstcronycapitalism.org

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Boeing’s crony capitalism in America’s heartland

 

Boeing Business Jet Family K63803

 

Everywhere Boeing goes subsidies follow. Without fail. In defense, in commercial aircraft, it doesn’t matter. It almost appears that subsidies are built fundamentally into Boeing’s business plan.

 

Actually, subsidies are built fundamentally into Boeing’s business plan.

The airline manufacturer even has its own taxpayer subsidized bank in the Export Import Bank of the United States. Sweet!

Not sweet for the taxpayers, but hey who cares about them?

(From The American Spectator)
 
Nixon is urging Missouri lawmakers to adopt a special tax package that would pay Boeing up to $75,000 per job per year — based on annual subsidies of $150 million spread over a minimum requirement of 2,000 jobs. No doubt that will strike some observers as money well spent — given much higher subsidy costs in other areas, such as solar energy, where federal subsidies have exceeded $350,000 per job.
 
Nevertheless, there are good reasons for being strongly opposed to the Boeing package.

Click here for the article.

Image credit: http://www.againstcronycapitalism.org


Nick Sorrentino
About Nick Sorrentino

Nick Sorrentino is the co-founder and editor of AgainstCronyCapitalism.org. A political and communications consultant with clients across the political spectrum, he lives just outside of Washington DC where he can keep an eye on Leviathan.

 

Abolish The IRS and End Income Tax Legislation Introduced in Congress

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Constitution-CCCC2

Source: http://freepatriot.org

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Abolish The IRS and End Income Tax Legislation Introduced in Congress

 

Three American Congressman are taking a stand for the citizens of this nation and leading an effort to steer us back in line with the Constitutional government as it was given to us by our founders. It is a large step but one that is sorely needed if we are to ever free ourselves from the shackles of our global government protagonists.

Congressman Jim Bridenstine, R-OK, along with Reps. Ron DeSantis, R-FL., and Thomas Massie, R-KY., has introduced House Joint Resolution 104, “an amendment to the Constitution of the United States to repeal the 16th article of Amendment.”

Among the arguments made in favor of this legislation is a resolution to the conflict which exists between the 16th amendment and the 4th Amendment protections to be secure in our persons, houses, papers and effects from unreasonable searches and seizures. Bridenstine’s contention is that the methodology of IRS seizures and IRS data-mining in the form of intrusive mandatory tax form submissions violate the fourth amendment protections.

Repealing the 16th Amendment would eliminate the personal and corporate income taxes, the estate and gift taxes and the taxes on investment earnings at the federal level.

The process is not difficult but does require some time and the involvement of the states and citizens. There is a simple three-fourths of the states approval threshold which must be met in order to repeal an amendment.

After ratification, there would be a two-year period which is more than enough time in which to determine a replacement revenue system.

FULL STORY

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