An Interesting Perspective On Immigration Reform

Yesterday John Hinderaker at Power Line posted an article about the economic impact the current proposals regarding immigration reform will have on the incomes of Americans.

This week in his weekly address, President Obama stated the following:

The Senate’s plan would also provide a big boost to our recovery. And on Wednesday, we released a report detailing exactly how big a boost that would be.

The report is based on the findings of independent, nonpartisan economists and experts who concluded that, if the Senate’s plan becomes law, our economy will be 5% larger in two decades compared to the status quo. That’s $1.4 trillion added to our economy just by fixing our immigration system.

Here in America, we’ve always been a nation of immigrants. That’s what’s kept our workforce dynamic, our businesses on the cutting edge, and our economy the strongest in the world. But under the current system, too many smart, hardworking immigrants are prevented from contributing to that success.

John Hinderaker points out:

And who might those supposedly “independent, nonpartisan economists and experts” be? When you check out the actual report, here is who they are:

President’s National Economic Council, Domestic Policy Council, Office of Management and Budget, and the Council of Economic Advisers.

In other words, extensions of the office of the president. His appointees–high level flacks.

That’s the first problem with that statement. The second problem is explained by a Power Line reader with amazing math skills who sent a note to Power Line which definitely disputed that claim.

The reader reports:

The claim is that aggregate GDP will be 5% higher in 20 years than otherwise, equal to $1.4 trillion in constant dollars. By simple algebra that means they are assuming a status quo future GDP of $28 trillion and therefore an immigration-enhanced GDP of $29.4 trillion. But wait! What about GDP per capita, the only meaningful measure of economic growth for the populace? Well…population will increase from today’s 315 million to about 378 million under the current immigration and population levels, and to about 410 million with the new immigration regime, conservatively estimated. [Ed.: That is a VERY conservative estimate.] Simple arithmetic demonstrates that future GDP per capita without the new immigration levels is $74,000, whereas with increased immigration it is $71,700.

…Their plan is simply to import scores of millions of unskilled 3rd world immigrants, covered by a fig leaf of a few hundred thousand high skilled STEM workers, 90% of whom we can easily do without, in order to create “economic growth” — in the aggregate — by a massive population expansion from the outside–but not growth that will benefit existing native born Americans at all. And that is not counting the inevitable economic drawbacks of this grotesque giantism — overcrowding, land use issues, infrastructure deterioration, and environmental degradation, to name a few.

The ability of some of our elected leaders to lie in order to further whatever agenda they have is amazing to me. I would love to see our immigration policies reformed–they are awful. However, the current changes proposed by the Senate are not the answer. The incremental proposals coming from the House of Representatives might better solve our current problems.

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About The Rather Modest Recovery We Are Experiencing

Recently I have heard some Democrats blame spending cuts for the fact that we are in the weakest economic recovery since recoveries began. Investor’s Business Daily has a different perspective. They posted an article today with the following chart:

The article explains:

Instead, the researchers found, “the excess fiscal drag on the horizon comes almost entirely from raising taxes.”

Taxes as a share of GDP are on track to rise well above historic averages and well above rates at comparable periods in previous recoveries.

And what explains this “super-cyclical” rise in taxes?

Well, let’s see. Obama forced through a $600 billion tax hike on upper-income families at the start of this year in the name of “fairness.”

Before that, he and his fellow Democrats imposed $1 trillion of new taxes for ObamaCare, taxes that are just now hitting the economy.

As a result, federal tax revenues as a share of GDP will hit 19.3% of GDP by 2015, a level reached just six times since World War II and well above the 17.9% average over the previous 40 years.

We’d only add that Obama’s other economic policies — an out-of-control regulatory state, the looming disaster known as ObamaCare, various attempts at industrial policy among them — have also weakened what should have been a robust recovery.

Increased taxes have taken spending money out of the pockets of all Americans. Even those people fortunate enough to get raises or bonuses this year found themselves with smaller paychecks because of the increases in taxes. The combination of less spending money for the average American and the confusion many companies are dealing with regarding ObamaCare has stalled our economy. Because many of the regulations in ObamaCare only apply to companies with fifty or more employees, we are going to see many companies stop hiring at forty-nine employees until they are certain of the impact of all these regulations. We are essentially in an economic holding pattern as we wait for the current paradigm of higher taxes and more regulation to settle in. Unfortunately, if that paradigm does permanently settle in, low growth and economic stagnation will be the new normal.

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Where Is The Economy?

The economy hasn’t been in the news lately–there seem to have been a few other things going on–but the economy is something we do need to be keeping an eye on.

CNBC posted an article today describing where the country is economically.

The article reports:

GDP growth is in the midst of its longest sub-3 percent annual growth rate since 1929, the beginning of the Great Depression, according to Bespoke Investment Group. The economy hasn’t topped 3 percent since 2005—before Federal Reserve Chairman Ben Bernanke took over—and is unlikely to do so this year.

The article points out that in two months the revised economic numbers will show that the United States economy has grown to more than the currently stated $15 trillion. This has nothing to do with economic growth–it has to do with a change in the way that the size of the economy is calculated.

The article points out:

Under the new math, the government will add research and development spending, as well as the capital value of all books, movies, records, television programs and plays produced since 1929.

In jacking up the economy’s size, the revisions also will skew the ratio of debt to GDP, considered important in determining government spending.

Of course, the recent attempt at debunking a critical study of the ratio by Carmen Reinhart and Kenneth Rogoff also has dimmed the prospects for government debt-cutting. The two economists asserted that a 90 percent debt-to-GDP ratio restrained growth, but the data set they used has been challenged as faulty.

The new GDP calculations, combined with the souring on the Reinhart-Rogoff conclusions, likely will add to the thirst to keep Washington’s debt machine purring.

Meanwhile, the unemployment rate remains high.

The article reports:

Though employment has risen by 1.3 million over the past year, unemployment that counts the discouraged and underemployed, as well as the jobless (often called the “real” unemployment rate) has remained stubbornly high, at 13.8 percent of the workforce, according to the most recent count.

In fact, a state-by-state look at the numbers, released a few days ago and current through the first quarter, shows that just six states have real rates below 10 percent.

There are a lot of reasons for the high unemployment numbers. One of them is the fact that businessmen are reluctant to hire new employees until they understand the impact of Obamacare will have on their business. Uncertainty is creating an environment where hiring is at least temporarily delayed. The other thing to keep in mind is that as the government grows, it takes money away from the private sector. When the private sector isn’t growing, the economy isn’t growing.

There hasn’t been a lot of reporting lately on the economy, but we still need to be aware of what is going on around us economically.

How To Make Things Look Better When They Aren’t

Yesterday the Financial Times posted an article explaining that Brent Moulton, who manages the Bureau of Economic Analysis, has told the Financial Times that in July, government statistics will be updated to include such things as royalties and spending on research and development. Including those things will increase the size of the United States economy by 3 percent–making it appear that the economy has grown.

The article states:

“We are carrying these major changes all the way back in time – which for us means to 1929 – so we are essentially rewriting economic history,” said Mr Moulton.

This move represents a new international standard for Gross Domestic Product accounting. Considering the state of the world’s finances in general, I can’t help but wonder if this is simply a step into denial of the fiscal collapse that surrounds us at the present moment.

There is one aspect of the changes being made that I think is positive. The article reports that deficits in pension plans will also have to be included–what is promised will be measured as well as what is paid. These unfunded liabilities are something that federal, state, and local governments have kept below the radar for years–it will be good to see them brought out into the open.

The changes coming in July move us closer to worldwide accounting practices. I have very mixed emotions about that. The changes in July will also lull the low-information voters in America into believing the economy is growing at at least 3 percent. Believing that should be a stretch for anyone.

Please follow the link above to read the entire article. It is an interesting read.

 

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The Senate Has Finally Produced A Budget

The Senate has finally produced a budget. John Hinderaker at Power Line posted an article today explaining what was in that budget.

The article states:

The process has proved revealing: the Democrats’ budget never balances, increases spending by 62% over ten years, and adds $7 trillion to the national debt despite raising taxes by $1.5 trillion. So Senate Democrats must agree with President Obama that the nation does not face a debt crisis.

The article quotes a statement President Obama made yesterday on ABC:

[W]e don’t have an immediate crisis in terms of debt. In fact, for the next ten years, it’s gonna be in a sustainable place….

There’s not–-in any way–-an immediate crisis with respect to our finances. …

Heritage.org posted an article yesterday explaining some of the details.

The article at Heritage.org states:

…Murray’s budget includes a massive tax increase. She raises taxes by almost $1 trillion ($975 billion to be exact) over the next 10 years by “closing loopholes.” Closing loopholes is Washington-speak for eliminating deductions, exemptions, and credits.

Which loopholes to close Murray leaves up to the Senate Finance Committee. But she is pursuing this tax increase unnecessarily. The Congressional Budget Office says that revenues will be 19 percent of GDP at the end of the current 10-year budget window. That is uncomfortably above the 18.5 percent of GDP that tax revenues have averaged in times of economic growth since the end of World War II. Murray’s budget would push revenues close to 20 percent of GDP by 2023, well above average—yet still not enough to catch up with her budget’s excessive spending.

Until Congress limits spending to 18 percent of the GDP (which is what we generally collect in tax revenue) we can expect deficits to grow. It is time to cut the spending in order to prevent the growth of deficits. Otherwise, we are simply creating a debt our children and grandchildren will never be able to repay.Enhanced by Zemanta

The Economy Is Shrinking–Not Growing

The Washington Free Beacon reported today that in the fourth quarter of 2012, the U. S. Gross Domestic Product fell .1 percent. This is the first decline in three years.

The article reports:

“The number isn’t as bad as it looks,” said Paul Edelstein, director of financial economics at IHS Global Insight in Lexington, Massachusetts, whose team projected a 0.3 percent gain, the lowest in the Bloomberg survey. “This really was a story about a payback in national defense spending. Consumer spending growth picked up, fixed investment was fairly strong.” […]

Government outlays dropped at a 6.6 percent annual pace from October through December, subtracting 1.3 percentage points from GDP. The decrease was led by a 22.2 percent fall in defense that was the biggest since 1972, following the Vietnam War.

Meanwhile, everyone in Washington is blaming everyone else.

The Hill reported today:

Carney said economic observers were “rightly appalled” by the threat of sequestration or default to drive a debt deal, and charged that Republicans were harming the economy to the benefit of the wealthiest Americans.

“It can’t be we’ll let sequester kick in because we insist tax loopholes remain in place for corporate jet-owners,” Carney said.

Brendan Buck, a spokesman for Speaker John Boehner (R-Ohio), pointed the finger of blame for the still-looming sequester back at the White House

“These arbitrary, automatic cuts were a creation and demand of the White House in 2011,” said Buck. “Twice the House has passed legislation to replace them with common sense cuts and reforms. If there was any uncertainty late last year about the sequester, it was because the Democratic-controlled Senate, per usual, never lifted a finger to pass a plan to replace it.”

Let’s back up a minute. The Senate has been operating on continuing resolutions since 2009 because they have failed to pass a budget. These resolutions allow them to keep the spending at the 2009 levels. We are going into debt at the rate of more than $1 trillion dollars a year because of those continuing resolutions. Has anyone considered the impact of runaway spending on the financial health of the nation? Has anyone considered the fact that businesses are holding their breath waiting to see what the impact of Obamacare will be? Has anyone considered that Americans knew at the end of last year that their paychecks would be smaller after January 1st?

We are now more than four years into bad fiscal policy. At some point that fact will be recognized (even in Washington). The answer, unfortunately, will not come until the 2014 elections. At that point Americans will have to decide whether to continue on our present path or try something different. I strongly suggest we try something different–controlling spending and passing a budget would be a great start.

 

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What Did The Fiscal Cliff Deal Really Accomplish ?

Investors.com posted an article today about what the deal reached on the fiscal cliff this week will actually accomplish. Not much.

The article states that the tax hikes will hurt the economy. Specifically:

Moody’s Analytics chief economist Mark Zandi says the higher taxes on the wealthy and the increase in payroll taxes will shave close to 1 point off GDP growth this year and result in 600,000 fewer new jobs.

Pantheon Macroeconomic Advisors chief economist Ian Shepherdson figures the deal will cut GDP by 1.5 points. And Gallup’s chief economist Dennis Jacobe says the deal has created a “higher probability of recession — just the opposite of what fixing the fiscal cliff was intended to do.”

The article also points out that the increased taxes will not actually help shrink the deficit. Included in the article is the following chart:

Any answer to the debt crisis must include cuts in government spending in order to work. Americans are waiting for the President to propose a plan to shrink government. If President Obama fails to do that, he will lose the support of the public. If he does propose a plan for smaller government, he will lose the support of his party (and a large part of the Republican establishment).

Tax hikes don’t necessarily raise the money that those who pass them think they will. For instance:

President George H.W. Bush‘s tax hikes in 1990 generated $135 billion less than expected. And revenues as a share of GDP came in lower than predicted after Clinton’s tax hikes went into effect.

The article concludes that because President Obama has added more brackets to the tax code, it will be harder to reform. I’m not sure that is an accident.

At any rate, we survived a Congress-created crisis and are about to face another one (the debt ceiling). It would be nice to believe that there are enough grown-ups in Congress to create a long-term solution to our overspending, rather than to simply put a band-aid on a broken arm.Enhanced by Zemanta

A Concise, Honest Statement About The Fiscal Cliff

Yesterday Real Clear Politics posted a video and transcript of a statement made by Senator Tom Coburn on Face the Nation.

This is the statement:

SEN. TOM COBURN (R-OKLAHOMA): The characterization is no matter where we raise taxes, what’s going to happen wit the money? We’re going to grow the government with it. We’re not going to reduce the deficit, because we refused to solve the bigger problems like saving Medicare, insuring Social Security Disability (SSI). We’re not going to use that money to do anything except continue to grow the government.

So, the characterization is that we’re wanting to protect — what we’re wanting to do is to make sure we have a dynamic economy. And I have no problems, I’ve been out there for a long time with saying those who are making more ought to contribute more, but where does that money go? And what do you do with the money? Do you do something with the money that will actually get us further down the road and fix our ultimate long-term problem, which is we’re bankrupt? And we went off the cliff two years ago when we covered 90% of our debt-to-GDP? And by the way, if you actually look at it the way every other country [does], our debt-to-GDP right now is 120%. Not 90%, not 100%, it’s 120%.

So, if you look at that, what’s ultimately going to happen — one last fact, the average Greek citizen‘s debt, for their country, is $36,000; we’re at $51,000 per person in this country. We’re becoming Greece, and we have a government where we’re willing to pay the taxes for 65% of the cost of it. We need to change that. We need both, we need to do both.

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It’s The Spending–Not The Taxes

On Friday Representative Darrell Issa posted an editorial in the Washington Times about the current fiscal cliff debate in Washington.

He begins the article with some recent history on American tax policy:

Twenty-six years ago, President Reagan implemented significant tax reforms that lowered the individual income tax rate, limited deductions and brought equality to tax rates across all levels. Before that reform, there had been 15 different marginal tax rates reaching levels as high as 50 percent for top brackets. By the time Reagan left office, the number of brackets had been reduced to two: 15 percent and 28 percent.

In 1993, President Clinton raised the top two income rates to 36 percent and 39.6 percent while also raising the corporate tax rate, increasing the taxable portion of Social Security benefits and increasing income taxable for Medicare. This is what has become known as the “Clinton tax rates.”

In 2001, President George W. Bush changed the rate from 39.6 percent to 35 percent, lowered the capital gains and dividend income rates, and expanded credits and deductions such as the Child Tax Credit and the Earned Income Tax Credit.

The current discussions in Congress are centered on the idea of raising taxes–not on cutting spending. What would be the impact of raising taxes on the rich?

Representative Issa points out:

If you raised taxes on the top income bracket, you would generate around $1 trillion over 10 years. The past four years under President Obama have resulted in trillion-dollar deficits each year. At this rate, in 10 years we’re looking at $10 trillion in new debt. At best, the “tax-the-rich” proposal is just a 10 percent solution.

Government spending has traditionally been about 18 to 20 percent of America’s Gross Domestic Product (GDP). Under President Obama, it has been about 24%. Since tax revenue is about 18% of GDP for year, the source of the deficit is obvious. Even when taxes are raised, tax revenue remains about 18% of GDP.

Representative Issa concludes:

The other side tries to boil this down into a seven-second sound bite about taxing the rich and people paying their fair share. In 2009, the top 10 percent of earners in the United States already paid more than 70 percent of federal income taxes.

This isn’t about fairness and unfairness. It’s about taxing and spending, and the federal government has spent enough.

The federal government collects more tax money from all Americans than the Medieval lords collected from the serfs. It really is time for that to stop.

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Voting With Your Feet

CBN News is reporting today that when the British government changed the tax rate on millionaires to 50 percent, wealth left the country. Wow! What a surprise.

The article reports:

The London Telegraph reports that 16,000 British citizens declared an annual income of more than a million pounds in the 2009-2010 tax year.

That number fell to just 6,000 after the government introduced the new top tax rate of 50 percent.

Analysts believe many Brits simply moved out of the country to avoid the high taxes. Others found ways to cut their taxable income.

The article further reports:

Chancellor of the Exchequer George Osborne, a member of the new Conservative Party majority, announced the top tax rate will be reduced to 45 percent next year for those with annual incomes of 150,000 pounds.

Since that announcement, the number of people making a million pounds a year has gone back up.

Tax revenue in the United States generally averages between 18 and 20 percent of the Gross Domestic Product. When you increase the taxes on the rich, tax revenue in the United States generally averages between 18 and 20 percent of the Gross Domestic Product. There is a lesson here. Attempting to ‘punish’ the rich for their success does not work. Aside from the fact that envy is not a particularly desirable trait in anyone, it does not make good economic policy. Our budget problems in America are not the result of low revenue–they are the result of high spending. Traditionally government spending has averaged between 18 and 20 percent of the Gross Domestic Product. Under President Obama it has averaged closer to 25 percent. That has created a problem. The solution to the problem is less spending–not more taxes.

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It Is Possible To Balance The Budget Without Raising Taxes

On Saturday the Washington Examiner posted an editorial about balancing the American budget. The editorial reminds us that everyone–rich or poor–will pay more in taxes after January 1.

The editorial states:

Liberal columnists love to point out that the top marginal rate on personal income was 91 percent in the 1950s and in the early 1960s. But the tax code back then was also chock-full of loopholes and benefits that let top earners escape such stifling tax burdens. As high as top marginal rates were, taxes as a percentage of GDP never rose above 19 percent, and in fact fell as low as 14.5 percent.

In fact, since World War II, federal taxes as a percentage of GDP have never risen above 20.6 percent and have averaged just under 18 percent. This has been consistent, regardless of changes to tax rates.

This fact is also confirmed in the Laffer Curve. There is a point at which tax increases actually result in less revenue. We need to keep this fact in mind as we discuss what to do about the ‘fiscal cliff.’

There are two think tanks that represent the two ways of thinking about solutions to the ‘fiscal cliff’:

Obama’s favorite think tank, the Center for American Progress, submitted a plan that calls for the federal government to eat up more than 20 percent of the American economy through taxation every year, in perpetuity. Being the liberals that they are, CAP calls for even higher levels of spending — above 22 percent of GDP by 2022 alone.

Contrast CAP’s plan with that of the Heritage Foundation. It returns taxation to just above the historical U.S. average at 18.5 percent of GDP. By cutting spending to pre-Great Society levels, the Heritage plan not only balances the budget but actually begins to lower our cumulative national debt.

Taking money from people who earn it and giving it to people who don’t earn it is not a solution to anything. Until Washington stops using American taxpayers as vehicles to get re-elected, nothing will be accomplished.

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The Impact Of Quantitative Easing (QE3)

Investors.com posted an article today on QE3 and the impact it will have on the American economy. The article points out that the economic problems America is currently experiencing are not due to a lack of money–their fiscal.

The article reports:

Fed chief Ben Bernanke defends the QE program, claiming Fed studies showed it boosted GDP by 3% and led to 2 million new jobs.

Even if true, the basic arithmetic is irrefutable: The Fed‘s tab for the QE program is now over $3 trillion. And most of that new money went to buy government debt — not to “stimulate” the private sector.

The article points out that banks and companies are currently holding on to their money rather than spending or investing it. One reason for that is the uncertainty about future tax policy and future federal spending.

The article concludes:

We don’t mean to sound conspiratorial, but a major Fed action coming just before an election is highly suspect — particularly when the sitting president’s foe has said he would not rename Bernanke to his Fed post in January 2014, when his term in office expires.

The government’s addition of $1 trillion a year to our nation’s debt hangs over this economy like a dark cloud, keeping entrepreneurs and big businesses alike on the sideline. The “fiscal cliff” we’re about to go over will sock Americans — especially entrepreneurs — with a tax hike of almost $1 trillion. That’s why the economy’s dead — not insufficient Fed money printing.

Bad leadership has consequences.

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A Chart That Tells It All

The chart below was posted in the Wall Street Journal yesterday:

image

The chart is based on numbers from the International Monetary Fund. The chart is contained in an article by Arthur Laffer about the impact of government stimulus spending.

In the article Mr. Laffer points out:

The four nations—Estonia, Ireland, the Slovak Republic and Finland—with the biggest stimulus programs had the steepest declines in growth. The United States was no different, with greater spending (up 7.3%) followed by far lower growth rates (down 8.4%).

These numbers are particularly relevant as countries around the world are debating whether or not another round of stimulus spending is the answer to the current recession.

Mr. Laffer states:

Still, the debate rages between those who espouse stimulus spending as a remedy for our weak economy and those who argue it is the cause of our current malaise. The numbers at stake aren’t small. Federal government spending as a share of GDP rose to a high of 27.3% in 2009 from 21.4% in late 2007. This increase is virtually all stimulus spending, including add-ons to the agricultural and housing bills in 2007, the $600 per capita tax rebate in 2008, the TARP and Fannie Mae and Freddie Mac bailouts, “cash for clunkers,” additional mortgage relief subsidies and, of course, President Obama’s $860 billion stimulus plan that promised to deliver unemployment rates below 6% by now. Stimulus spending over the past five years totaled more than $4 trillion.

If you believe, as I do, that the macro economy is the sum total of all of its micro parts, then stimulus spending really doesn’t make much sense. In essence, it’s when government takes additional resources beyond what it would otherwise take from one group of people (usually the people who produced the resources) and then gives those resources to another group of people (often to non-workers and non-producers).

If the government wants the producers in our society to continue producing, it needs to understand how human nature and incentives work. If I can make more money by not working than I can for working, it doesn’t take a rocket scientist to figure out that I am less likely to work.

I think Mr. Laffer is on to something. Please read the entire article at the Wall Street Journal for more information on the impact of government stimulus programs.

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That Cost What ?

CBN News posted an article today about the cost of federal regulations.

The article reports:

Author Phil Kerpen looks at how such regulation is crippling the economy in his book titled Democracy Denied: How Obama is Ingnoring You and Bypassing Congress to Radically Transform America. 

How much do regulations cost?

“They found that each federal regulator destroys an average of 98 private sector jobs per year,” he said.

And each federal regulator wipes out about $6.2 million in economic output each year.

The bottom line:

“These busy bodies who are being paid with our tax dollars are spending all day long interfering in the private economy, and that has a very real, very negative cost associated with it,” Kerpen said.

The same study found cutting the budgets of the federal regulatory agencies just 10 percent would add about $150 billion to the gross domestic product every year.

And increase the creation of private jobs by 2.5 million or so a year.

We live in a representative republic. We are responsible for the government we have. If the government is not working, we have the responsibility to replace it. “Nuff said.

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We Are Definitely Not Headed In The Right Direction

Yesterday CNSNews reported that according to the the Budget and Economic Outlook published January 31, 2012,  by the the Congressional Budget Office (CBO), the amount of taxes collected by the government will increase 30 percent between 2012 and 2014. That increase is not due to a growing economy, which automatically increases the amount of revenue flowing into the treasury, but due to an increased tax burden placed on every American.

The article reports:

The anticipated percentage increase in federal tax revenue is not only large when calculated in dollar terms but also when calculated as a share of GDP. The jump from 15.4 percent of GDP in fiscal 2011 to 20.0 percent of GDP in fiscal 2014 equals an increase of 29.8 percent. The jump from 16.3 percent in fiscal 2012 to 20.0 percent in fiscal 2014 equals an increase over two years of 22.7 percent.

Federal tax revenues have averaged “about 18 percent of GDP for the past 40 years,” according to CBO. So, in the next two years federal tax revenues will rise from a level that is below the modern historical average to a level that is above it.

A revenue increase that was due to an expanding economy would help us deal with our deficit problem (although the spending–not the revenue–is at the root of the problem). As long as the government spending is out of control, the economy will not grow. Right now our economy is the equivalent of a hamster on an exercise wheel–until the hamster gets off the wheel, he is not going anywhere.

The American economy cannot survive this kind of a tax increase. It is time for everyone to take a good look at their Senators and Representatives and examine their voting record over the past ten years. If they have consistently voted to increase government spending, they need to be voted out of office in November–this cannot wait any longer. Americans will get the government they deserve (the government they vote into office). If you would like to see America survive, you need to be part of the solution–not part of the problem.

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Some Notes On The Current Budget Debate

The super committee is desperately trying to find a way to cut the budget deficit. I am not alone in believing that no solution will be reached.

On Friday Heritage.org posted an article about what exactly is being discussed. Some basic facts pointed out in the article:

Words can’t even begin to describe the scope of borrowed federal spending, but it is no doubt a staggering figure that has risen dramatically in the last decade and is more than $4 trillion higher than when President Barack Obama took office less than three years ago.

Federal spending, at about 24 percent today, is significantly over the average of 20 percent of GDP, but in a decade it will top 26 percent.  Within a generation it will reach nearly 35 percent of GDP.

The facts are simple: Entitlements are going to generate European style debt levels unless they are reformed. Paying for it without bringing down their spending would require constant, crushing tax hikes on all taxpayers — not just the top 1 percent.

And there are some in the House and Senate who understand the problem and are advocating significant action. Seventy-two Members of the House and 33 Senators are standing against continued overspending, over-borrowing, and overtaxing. In a letter yesterday to the super committee, the House Members wrote, “It is evident that America has a fiscal crisis because Washington spends too much, not because it taxes too little,” and warned, “Increasing taxes on Americans would destroy jobs, erase all hope of an economic recovery, and simply serve to feed out-of-control spending in Washington.”

If those in Washington do not have the courage to cut the spending, we need to elect people who do.

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The Myth Of Actually Cutting Spending

As long as we have the current leadership in Congress, the federal government will continue to grow. That is true despite what you are hearing about coming drastic cuts by the super committee or drastic cuts if the super committee fails.

This is where we are:

George Will posted an article at the Washington Post yesterday explaining that the current discussions are all smoke and mirrors.

The article reports:

But suppose the sequester occurs. Ignore loose talk about “draconian” spending cuts. Veronique de Rugy of George Mason University’s Mercatus Center has a graph you should see.

It shows two lines. The top one charts spending, 2013-2021, without the sequester; the other shows spending with the sequester. Both lines are ascending. Both show annual spending rising from less than $4 trillion to more than $5 trillion. The space between them is so narrow that it is difficult to see that there are two lines. Without the sequester, spending will increase $1.7 trillion; with the sequester, spending will increase $1.6 trillion. Here are categories of spending:

Ten-year spending increases:

                                                     Without                         With

Defense                                   20 percent                    18 percent

Nondefense discretionary     14 percent                   12 percent

Medicare                                   62 percent                    62 percent

Other mandatory                      51 percent                     51 percent

Net interest                            152 percent                   136 percent

This whole super committee thing seems to be much ado about nothing.


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The Obama Deficit Plan In Pictures

Yesterday’s Washington Examiner posted an article explaining why President Obama’s deficit reduction plan will not work. The article included two graphs:

The main point of the article is that tax revenues at the end of the Clinton administration hit 20.6 percent of the Gross Domestic Product (GDP). The highest number for that percentage is 20.9 percent in 1944. Unfortunately, government spending will reach levels well above 20 percent in the near future. The problem is not the revenue–it’s the spending. Most Americans have figured out that it is not productive to spend more money than you take in. It’s time the government also learned that principle.

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