Tag Archives: Economic

We Have A Spending Problem

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On Monday, The Daily Signal posted an article about government spending. The article included five charts that illustrate the problem.

These are the charts:

When interest payments make up a quarter or our spending, we have a problem. We have been living beyond our means for so long that we will never get out of debt without drastic action. There have been various plans to cut the federal budget in the past–one of which simply required taking one penny away from every dollar. It is time to reconsider these plans and to reconsider shrinking federal employment by at least 10 percent. If companies are forced to cut back because of inflation, the federal government should also be required to reduce its size. We are becoming the economically illiterate consumer who pays the minimum payment on his credit card every month and wonders why the balance never goes down.

The Accomplishments Of The Biden Administration

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On January 2nd, The Daily Caller posted the following headline:

Biden Added $745 Billion Worth Of Regulations In 2023

Just what we needed.

The article reports:

The Biden administration promulgated over $745 billion worth of regulations in 2023, according to information supplied by Advancing American Freedom (AAF) to the Daily Caller News Foundation.

The Biden administration has used rulemaking procedures in agencies to enact several of its left-wing policy initiatives, such as stringent emissions standards to encourage the adoption of electric vehicles and student loan forgiveness plans. From Jan. 1 to Dec. 29 of 2023, the administration greatly exceeded both the Trump and Obama administrations in terms of the regulations it issued, adding to the 743 rules since 2021, according to data from AAF, a government regulations watchdog.

Remember that when President Trump took office, he began removing regulations in order to allow the American economy to grow. What impact have these new regulations put on by the Biden administration had on economic growth?

The article notes:

“Since January 1, the federal government has published $745.2 billion in total net costs (with $129.2 billion in new costs from finalized rules) and 251.3 million hours of net annual paperwork burden increases (with 60.5 million hours in coming from final rules),” AAF told the DCNF. “[T]he Biden Administration heads into 2024 with to-date final rule cost and paperwork totals exceeding those of the Obama Administration by $173.7 billion and 91.4 million hours, respectively.”

The article reports:

Moreover, in the last working week of the administration from Dec. 26 to Dec. 29, which was shortened due to Christmas Day, the administration added $45.6 billion in total costs and added 43.4 million annual paperwork burden hours, according to AAF.

The article includes the following statement:

Today, we released new standards for fridges & freezers that reflect a joint agreement with manufacturers & advocacy groups.

This will save Americans $5B/year & underscores our ongoing work with industry partners to promote innovation & cut energy costs.https://t.co/0Q9UKTRB31 pic.twitter.com/mXWh6SxR2U

— Secretary Jennifer Granholm (@SecGranholm) December 29, 2023

Can we please have a new President in 2025 before this administration can do any more damage.

Let’s Teach Our Children To Be Successful

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On November 21, The NC Family Policy Council posted an article about the keys to help our young people become successful adults.

The article notes:

While some of these trends have been beneficial (I’m personally a fan of working remotely), not all of these have been good for our society. Many of the values that the parents of these two generations have tried to pass on have instead been tossed to the wayside. Principles like the importance of getting a good education, waiting until marriage to have children, or getting a good job have been ignored more and more.

While the long-lasting impacts of these lifestyle changes are yet to be seen, researchers Wendy Wang and Brad Wilcox have confirmed that these “traditional” values are actually beneficial for individuals, giving them the information to build what they’ve termed the “Success Sequence.”

The Success Sequence

The report from Wang and Wilcox states that Millennials are most likely to live an economically successful life and avoid poverty if they follow these three steps:

    1. Graduate from high school or get a GED by their mid-twenties;
    2. Work full time;
    3. Marry before having children.

This sounds an awful lot like what my generation was told growing up. Here’s the evidence for their model:

    • 97% of Millennials who follow this sequence are not poor when they reach adulthood. The link remains strong when this cohort of young Americans reaches their mid-30s.
    • 94% of young adults from lower-income families who followed the success sequence are not poor.
    • 95% of young adults from non-intact families who followed the success sequence are not poor.
    • The poverty gap between college and high school graduates is small among those who followed the success sequence.

Correcting For Disadvantages

What is interesting is that this works across all of the variables that are often cited as reasons for people to be economically disadvantaged, including race, gender, parents’ low economic status, not receiving a college degree, and being from a non-intact family. The poverty rate for adults between the ages of 32 and 38 after completing each step is well under 10%, even for those experiencing the disadvantages mentioned above.

These are the values the parents of the baby boomers taught their children and grandchildren. It’s time to go back to those values.

The article includes a video summary:

Good Economic News

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The Epoch Times reported the following yesterday:

Manufacturing in the United States, as measured by a key business activity gauge, surged to a 15-month high in July, exceeding economists’ expectations.

The Institute for Supply Management (ISM) business survey, published Aug. 3, shows that its topline manufacturing activity indicator, called the Purchasing Managers’ Index (PMI), surged to a reading of 54.2 in July.

Readings above 50 indicate expansion, while those below mean contraction.

“The PMI signaled a continued rebuilding of economic activity in July and reached its highest level of expansion since March 2019,” Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a statement (pdf).

Economists polled by Reuters predicted the manufacturing index would rise to 53.6 in July, so the higher-than-expected number is encouraging, particularly in light of April’s 11-year low of 41.5.

Why is it that when a Republican is the President, good economic news always exceeds expectations?

The article also notes:

Another manufacturing sector gauge tapped by ISM in the survey is the New Orders measure, which soared to 61.5, up 5.1 percentage points from June.

“Orders starting to pick up. [An] increase of about 35 percent to 40 percent,” a chemical product manufacturing executive said.

“Incoming orders are slow. This is usually our busiest time of the year, but production is reduced due to lack of demand. Additional layoffs expected,” an executive at a furniture maker said.

Another gauge, the production index, showed 4.8 percentage point growth from June to July, coming in at 62.1, the highest reading of all the ISM gauges.

“Manufacturing outlook has improved greatly in June, as business has resumed at nearly 100 percent. We have implemented a number of safeguards that are costing extra money, but we are running,” an executive at a computer and electronics products maker said.

There was also some negative news included in the article, but considering the fact that the country has been locked down or in semi-lockdown since March, that is not surprising. The two-week shutdown has extended far past where it was scheduled to be. I would also like to note that the purpose of the lockdown was to avoid overwhelming our hospitals. Now we are in semi-lockdown to avoid the spread of the disease. There is significant information that this is not the best course of action (see article here), so why are we still in semi-lockdown? Why are churches limited in the amount of people they can allow in their buildings when the John Lewis funeral was packed? Why was there an exception to the quarantine rule for the people who attended the John Lewis funeral? Has the damage from the lockdown now exceeded the possible damage from the disease?

If You Watch The Mainstream Media, You Are Uninformed

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Newsbusters posted an article today about some recent economic news reported by the major networks.

The article reports:

Another astounding market rally, another big chunk of good market news ABC’s, CBS’s and NBC’s evening news shows censor because it isn’t anti-Trump.

The Dow Jones Industrial Average closed above 27,000 Wednesday, “extending a market rally and returning the index to a level it first hit a year ago and last touched in early June,” according to The Hill. The new figure (27,006) put “the Dow within striking distance of erasing its losses for the year.” ABC World News Tonight with David Muir, CBS Evening News with Norah O’Donnell and NBC Nightly News with Lester Holt all censored the news last night.

By contrast, consider when the Dow dropped 1,000 points beneath 25,000 before rallying a bit later Feb. 28 to cap off Wall Street’s “worst week since the [2008] financial crisis.” On that day, the Big Three gave the negative market news a whopping 313 seconds of coverage collectively — or more than five minutes.

That’s 313 seconds for negative news versus 0 seconds for positive news. Seems like a pretty massive bias. 

Fox News’s Bret Baier did report the stock market news Wednesday during his 6:00 pm broadcast of Special Report. Maybe the Big Three should take notes from Baier.

The article also notes:

Both CBS Evening News and NBC Nightly News in particular did find the time to boost presumptive Democratic presidential nominee Joe Biden’s flat-out lie that President Donald Trump was a racist president.

But the Dow’s performance isn’t all the good market news yesterday had to offer last night. “Sales of previously owned homes rose 20.7% in June over the prior month to a seasonally adjusted annual rate of 4.72 million,” according to The Wall Street Journal July 22. This, according to The Journal, was “the biggest monthly increase on record going back to 1968.” [Emphasis added.]

It’s difficult to have a fair election when the news sources that many Americans depend on refuse to report the news in an unbiased manner. Hopefully, most Americans have learned to look beyond the propaganda and search for the facts.

Interesting Research

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Yesterday The Gateway Pundit posted an article about a recent study of the coronavirus.

The article reports:

A new report by Justin Silverman and Alex Washberne on COVID-19 and featured in The Economist finds that the coronvirus is widespread in the US.

The authors argue that 28 million Americans have or have had the coronavirus.

Yesterday I posted an article that somewhat confirms that conclusion.

The article at The Gateway Pundit includes the following tweet by Andrew Bostom:

The article also includes the following chart:

I realize that the chart is small, but the basic conclusion is that we have overreacted to a virus that is no more dangerous than the flu. That being said, social distancing is still a good idea because it is a relatively new virus that we are still learning about. The game-changer here is that the French researchers have found something that cures the virus at least 95 percent of the time. One has to wonder why the American press is fighting so hard to discredit the findings of the French doctor who has done the research and the trials of the drug combination.

The article concludes:

We don’t know how horrible the economic damage will be but we know it will be huge.
And we are still nowhere near the total flu deaths we see each year.

And now it looks like the WHO, Tedros Adhanom Ghebreyesus, and the global “experts” completely failed in their predictions and talking points!

It’s time to rethink our reaction to the coronavirus and consider opening sections of the country again.

How The Media Game Is Played

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Townhall posted an article today which illustrates how some media outlets skew their reporting in order to advance a political agenda.

The article notes a change in a CNN headline about the Democrats’ blocking of a bill to add more funding for paycheck protection for small businesses.

The article includes the following tweet:

The article notes:

Democrats in the Senate blocked Majority Leader Mitch McConnell’s effort to legislate more funding to the Small Business Administration’s Paycheck Protection Program, which gives small businesses the opportunity to take out forgivable loans during COVID-19. 

Sen. Ben Cardin (D-MD) ultimately torpedoed Leader McConnell’s effort by objecting to a vote by unanimous consent, calling the effort to deliver more relief to America’s small businesses a “political stunt.” A bipartisan program, PPP alleviates the economic hardship facing small businesses while the economy is virtually shut down. 

The article concludes:

This misrepresentation is not only inaccurate, but also dangerous for Americans seeking information. The American people deserve to know which lawmakers put aside ideology in order to alleviate economic distress, and which party chose partisanship over relief for small businesses during a global health pandemic. Despite CNN’s virtue signaling in defense of Democrats, the delay of additional funding for the Paycheck Protection Program is at the hands of Senate Democrats, and Americans will suffer because of their delay.

I have very mixed emotions about the amount of money we are spending. The only silver lining here is that at least the money is aimed at businesses who need it–not destined to be lost in corporate kickbacks to Congress or subsides to companies that are not able to stand on their own such as Solyndra.

 

This Is How Media Spin Works

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This is a screenshot from The Gateway Pundit illustrating how The New York Times changed its headline to fit the political narrative:

This is how you spin a crisis. I would like to remind everyone that Congress is not losing their income during this crisis. In fact, a number of Congressmen have profited in the crisis. Other than to be re-elected or because they actually care about the fate of average Americans, they have no incentive to pass a relief package. November is a long way away in terms of remembering, but we need to remember the actions of Congress during this crisis when we vote in November. Anyone who held up the package that would provide relief for American workers needs to lose their election bid. Blocking the bill has nothing to do with worker protections–it has to do with funding Planned Parenthood, a major donor to Democrat campaigns. The Democrats are rewarding their campaign donor rather than helping the American people.

Stacking The Deck To Steal An Election

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Next year is an important election for America. The ‘fundamental transformation of America’ has been temporarily interrupted by the Trump administration, but there are those who are extremely anxious to see the transformation continue. They are fully prepared to manage the decline of America. Unfortunately President Trump is fully prepared to manage the reemergence of America as a major economic player. That will be the battle fought. Americans (knowingly or unknowingly) will be asked to choose between growth or decline. President Obama is sending his henchman Eric Holder to see if the scales can be tipped in favor of decline. In August I posted an article about this effort. Now that effort is officially coming to North Carolina.

On Thursday, Channel 5 in Raleigh reported:

Former U.S. Attorney General Eric Holder strategized on redistricting reform Thursday with left-leaning groups that are knee-deep in the issue in North Carolina.

Holder, who served under former President Barack Obama, met with activists in Raleigh and Greensboro. He’s chairman of the National Democratic Redistricting Committee, making him the Democratic Party’s point man on redistricting reform, gerrymandering lawsuits and state legislative fights heading into the 2020 elections.

Those elections will decide control of state legislatures, and thus a decade’s worth of election maps for legislative and congressional districts across the country. His group, with backing from the former president, has funded lawsuits and election campaigns with the overarching goal of electing Democrats and undoing maps his side sees as unfair Republican gerrymanders.

When that’s done, Holder said Thursday, he hopes to see nonpartisan redistricting reform take hold in more states. He said he favors an independent commission that takes the power away from elected officials to draw their own districts.

“We’ve got to get back to a place where elections are simply fair,” Holder said.

The article further explains:

Republicans have criticized Holder’s effort as a partisan one, geared toward electing Democrats whether the maps are fair or not. A spokesman for Senate President Pro Tem Phil Berger, with whom Holder sparred a bit on Twitter last month, asked Thursday “how many times Eric Holder has hosted a roundtable in blue states.”

“It’s probably equal to the number of blue states he’s sued, which is zero,” Pat Ryan said in an email. “Holder’s support for ‘fair maps’ is a phony front to help Democrats win more elections.”

Holder hasn’t shied away from the partisan nature of his effort. He told those gathered in Raleigh that “it sounds kind of strange, but this is a partisan attempt at good government.”

Sorry, Eric Holder, there is no such thing as a partisan attempt at good government. Remember, this is the man who ignored a video of the New Black Panthers intimidating voters in Philadelphia and dropped the charges. The video has disappeared from YouTube, but here is a still shot:

When I think of Eric Holder, I don’t think of good government.

Give Peace A Chance

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The news media is melting down at hearing that President Trump has withdrawn troops out of northern Syria ahead of a Turkish military advance to expel Kurdish forces from the area. There are a few things that they might consider before jumping off of a cliff. First of all, Turkey is a member of NATO (I realize that their allegiance has shifted away from NATO under Turkish President Recep Tayyip Erdogan, but they are still a member.). Second of all, the struggle between the Turks and the Kurds has been going on for a long time. Frankly, it is something they need to work out themselves. Our presence is not really helpful in this situation.

Breitbart posted an article about the troop withdrawal today.

The article reports:

President Donald Trump on Monday defended his administration’s decision to withdraw U.S. troops out of northern Syria and warned Turkey that he will “totally destroy and obliterate” if it engages in activities deemed “off limits” in the war-torn country.

“As I have stated strongly before, and just to reiterate, if Turkey does anything that I, in my great and unmatched wisdom, consider to be off limits, I will totally destroy and obliterate the Economy of Turkey (I’ve done before!),” Trump tweeted.

The article concludes:

Nonetheless, President Trump dismissed critics of his decision, stating it is time for the U.S. to halt fighting “ridiculous Endless Wars, many of them tribal, and bring our soldiers home.”

I agree. Hopefully, we can use economic pressure against Turkey to prevent a humanitarian crisis. We have been at war in the Middle East for more than eighteen years. We can’t fight a real war there because some in Congress will use the war for political purposes, so we need to come home.

I pray that we can begin to use economic pressure rather than troops to fight wars in the future.

Playing Chess With World Trade

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America has been on the wrong end of bad trade deals for a long time. We watched our manufacturing jobs leave America after NAFTA. We watched the steel industry disappear after being undercut by Chinese steel held up by subsidies by the Chinese government. President Trump is a businessman. As a businessman, he is trying to level the trade playing field. In some areas he is getting cooperation at home and abroad; in some areas he is not. China has been a difficult country to deal with regarding trade. The uneven playing field they have enjoyed for years has been very profitable for them. Because their economy is based on an uneven playing field, they are reluctant to make changes. Their economy is currently struggling, and if President Trump stands his ground, the Chinese economy could face serious challenges. That’s where we are. There is, however, some positive news about where we might be headed.

Ed Morrissey at Hot Air posted an article today about a possible breakthrough in the talks with China.

The article reports:

Did China finally blink in Donald Trump’s trade war? Trump himself seems to think so. At the G-7 summit, Trump told reporters that a statement earlier in the day from a top official in Beijing showed that China had finally expressed a real interest in redefining the trade relationship between the world’s top two economies. It’s “the first time” that Trump sees China acting in good faith, he said

The article continues:

After rapid-fire escalations in tariffs by both sides, China’s vice premiere called for “calm.” Liu He also declared Beijing’s willingness to conclude a trade agreement and called for talks to begin immediately:

“We are willing to resolve the issue through consultations and cooperation in a calm attitude and resolutely oppose the escalation of the trade war,” Liu, who is President Xi Jinping’s top economic adviser, said, according to a government transcript.

“We believe that the escalation of the trade war is not beneficial for China, the United States, nor to the interests of the people of the world,” he added.

U.S. companies are especially welcome in China, and will be treated well, Liu said.

“We welcome enterprises from all over the world, including the United States, to invest and operate in China,” he added.

“We will continue to create a good investment environment, protect intellectual property rights, promote the development of smart intelligent industries with our market open, resolutely oppose technological blockades and protectionism, and strive to protect the completeness of the supply chain.”

The last time we thought we had a deal, the person who made the deal was executed when he returned home. Hopefully this time will turn out better for everyone.

The Arrival Of Robin Hood

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Remember teaching your children that money doesn’t grow on trees and that they have to earn it? Evidently some of our members of Congress never learned that lesson.

Yesterday Breitbart posted an article about some recent statements made by Representative Rashida Tlaib, a Democrat from Minnesota.

The article reports:

Far-left “Squad” member Rep. Rashida Tlaib (D-MI) spoke at the NAACP convention over the weekend and railed against the GOP tax cuts in a pitch for her anti-poverty BOOST Act, promising to take money from the rich and give it “back to the people that earned it.”

Tlaib introduced her anti-poverty legislation – the Building Our Opportunities to Survive and Thrive (BOOST) Act – last month and spoke about it at the NAACP convention over the weekend. The proposal offers a guaranteed income – up to $6,000 per year – to families and individuals under certain financial thresholds via a “refundable tax credit that can be paid monthly.”

The Michigan lawmaker’s BOOST Act serves as her response to what she calls the “GOP Tax Scam,” despite the fact that two-thirds of Americans will pay less in taxes in 2018, thanks to the tax cuts.

“Recently, I introduced the Boost Act. This legislation completely repeals the GOP Tax Scam that is only helping wealthy individuals – the rich, the corporations,” she told the crowd.

“And do you know what I did with that money? Do you know what I said? We’re going to go ahead and put it in the pockets of folks like everyday Americans,” she said, noting that families making less than $100,000 could get up to $6,000 per year.

Taking the moral route, Tlaib said it is important to give money back to the people who actually “earned” it, suggesting that wealthy individuals do not earn or deserve to keep the fruits of their labor.

 I guess the Democrats have decided that class warfare works better than racism. Their playbook is getting very old.

The article notes the impact of the GOP tax cuts:

The economy has seen a boost from the GOP tax cuts, with companies issuing employee bonuses and announcing plans to invest billions in the U.S., thereby providing thousands of new jobs.

Last year, Exxon Mobil announced that it would invest $50 billion in the U.S. economy, adding 12,000 new jobs, thanks to the GOP tax cuts.

Even Starbucks, a notoriously left-leaning company, used millions of its corporate tax cut to raise the wage for existing workers.

Under Tlaib’s economic plan, the people who would benefit are the people who are not working; and the people who would lose are the people who work for a living. How long would it be before those who are working to give those who don’t work a free ride would see the folly of their ways and quit producing? That’s where socialism always winds up.

This Could Make The Next Two Years Very Interesting

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Don Surber posted an article today that included some rather surprising information.

The article reports:

Brad Parscale, Donald John Trump’s 2020 campaign manager, told Jesse Watters last night that 34% of the people who attended the president’s rally in Grand Rapids were registered Democrats.

Parscale knows that because people needed to give the campaign their cellphone numbers to get tickets. The campaign then used the information to check their voting record.

…Parscale called the Green New Deal a big juicy steak for the campaign.

Axios limited its report on the interview to Parscale saying, “[Trump] has been very easy to work with this week. He’s been very smiley.

“I was in the White House this week; he served me hors d’oeuvres. That was a first. … [A] little pigs in a blanket, some meatballs. …He gave me a Diet Coke; he was very happy. It was my first [time] in nine years serving, of hors d’oeuvres from the president. Which is safe to say, very good mood.”

Axios was the only outlet (besides Fox News) that I could find with a report on the interview.

Gee, I wonder how the experts missed that last election?

It’s difficult to ignore the economic success of the Trump administration. I suspect those in the deep state will attempt to undermine that success during the next year or so, but there are some fundamental changes in regulations that will make that difficult. The unemployment rate and the workforce participation rate speak for themselves. Salaries at the lower end of the wage scale are going up. People are keeping more of what they earn. The mainstream media is not telling us all of the good news, but people are experiencing better economic times and discounting the media. This President has dealt with an unprecedented assault on our southern border and is beginning to deal with the problem in spite of Congress–not with the help of Congress. The President has also dealt with an unprecedented attack on him personally and on his family. It is time to stop harassing the President and let him lead. The attendance at his rallies are an indication that the public is not listening to the mainstream media–they are doing their own research and drawing their own conclusions.

Americans Often Vote With Their Feet

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Yesterday The New York Post posted an article about New York City’s shrinking middle class.

The article reports:

After decades of sharp income erosion in the face of relentless taxes, escalating living costs and wage reductions through technological changes, the full extent of this shocking exodus is laid bare in the latest US Census data.

That shows the city is losing 100 residents each day — with departures exceeding new arrivals.

“The rich in New York City are getting richer; the poor are actually getting richer, but not rich enough to be middle class,” said Peter C. Earle, an economist at the American Institute for Economic Research, who has studied other data, noting the expansion in welfare and entitlement programs.

Earle said it isn’t unreasonable to assume middle-class incomes are falling even faster in New York City than in other major US cities, because of the city’s high — and rising — housing and other living costs.

New York City’s middle class comprises 48 percent of city residents, with median annual incomes between $30,000 and $60,000.

Thirty-one percent make lower incomes, and the ranks of the rich account for 21 percent of New York City residents.

By contrast, in the early 1970s, about 61 percent of New Yorkers were ensconced in the middle class; today, fewer than half are.

Recently Amazon opened a facility in Long Island City that received an estimated $3 billion in subsidies, increasing the tax burden on city residents. Although increasing the number of jobs is a good idea, having the taxpayers pay for those jobs is not.

The article concludes:

National chain-store locations have plunged in the city by 0.3 percent, to 7,849, this year, according to the Center for an Urban Future. And a record 18 chains, including Aerosoles and Nine West, vacated all their city sites in 2018.

One sector doing a booming “business” is food pantries. Despite a city unemployment rate of 4 percent, New York food pantries report elevated levels of demand, especially during the holiday season.

More than 1 million New Yorkers now worry they won’t have enough food for their families, according to recent studies.

Unless something changes in the economic policies of New York City, the city will no longer be the center of commerce and art that it has been. The voters in New York City need to take a good look at where there city is going and make the appropriate political changes.

How Cutting Taxes Creates Revenue

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On November 16th, Hot Air posted an article about the impact of the Trump tax cuts on government revenue. As I am sure you remember, the Democrats called the tax cuts on individuals ‘crumbs’ and swore that the tax cuts would bankrupt the country. Well, that’s not exactly what happened.

The article reports:

Unemployment is at an historic low. Employment is at an all-time high. Wagers are growing after years of stagnation.

And now from all that increased economic activity, the federal government has just reported historic record tax revenues in October, the first month of the new fiscal year, of $252,692,000,000.

That’s more than $11.4 billion above revenue for October of last year, which was the previous record tax revenue for an October.

And it did this by collecting more than $3 billion less in personal income taxes, thanks to the tax cuts.

The new revenues were the result of increased business taxes because of increased business. Here’s how much different it was:

Corporation income tax receipts to the U.S. Treasury this year in October were a whopping $8,000,000,000. This compares to the previous October’s $3.8 billion.

Despite the record tax revenues in October, the federal government ran a deficit of $100.5 billion that month because, spending. That’s a problem that newly-elected members of Congress such as Indiana’s senator-elect Mike Braun, a businessman, said would be a major target in 2019.

The thing to remember here is that as unemployment decreases, government spending should also decrease. Unfortunately Congress did not get the message. Our problem is not the revenue–the problem is the spending. If either party were serious about curbing government spending, it would have been done by now. Obviously they are not. There are a few members of the Republican party who have been trying to put the brakes on runaway spending for years, but they are either not trying very hard or they are ineffective. At any rate, we need to elect Congressmen (regardless of party) who will pledge to bring the spending under control. It does no good to increase the revenue if the spending increases right along with it.

An Explanation I Can Understand

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IJReview has posted this in the past, but I thought it was worth sharing again.

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this…

The first four men (the poorest) would pay nothing The fifth would pay $1 The sixth would pay $3 The seventh would pay $7 The eighth would pay $12 The ninth would pay $18 The tenth man (the richest) would pay $59

So, that’s what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. “Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20″. Drinks for the ten men would now cost just $80.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what about the other six men ? How could they divide the $20 windfall so that everyone would get his fair share?

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man’s bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.

And so the fifth man, like the first four, now paid nothing (100% saving). The sixth now paid $2 instead of $3 (33% saving). The seventh now paid $5 instead of $7 (28% saving). The eighth now paid $9 instead of $12 (25% saving). The ninth now paid $14 instead of $18 (22% saving). The tenth now paid $49 instead of $59 (16% saving).

Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.

“I only got a dollar out of the $20 saving,” declared the sixth man. He pointed to the tenth man,”but he got $10!”

“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar too. It’s unfair that he got ten times more benefit than me!” “That’s true!” shouted the seventh man. “Why should he get $10 back, when I got only $2? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. This new tax system exploits the poor!”

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.  –   Professor of Economics.

The same general principle is explained in the Laffer Curve.

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