Leadership Matters

The New York Sun posted an article today by Larry Kudlow about the contrast between California and Florida.

The article reports:

Call it the Tale of Two States — the best of times and the worst of times. Apologies to Charles Dickens, but there’s no better way to glimpse the fight for the soul of our great country than to compare the ultra-blue state of California with the ultra-red state of Florida. They are completely different cultures and policies.

You could also think of it as Donald Trump versus Kamala Harris — or maybe we should think of it as Kamala Harris and Nancy Pelosi versus Donald Trump. I don’t mean to shortchange, or disrespect, President Biden by choosing his veep, but I see his political future as late afternoon or well into the evening.

Or you could think of it as a presidential race between Florida’s governor, Ron Desantis, and California’s governor, Gavin Newsom. The current California governor and former San Francisco mayor first has to survive a gubernatorial recall.

Kudos to New York Post columnist Kyle Smith who laid out the battle between California and Florida in a compelling way.

“Those differences,” Kyle writes, “are growing into a chasm of philosophical and practical contrasts between two basic models for the American future. Call them the California way and the Florida way.”

Kyle highlights the extraordinary differences and contrasts between the two states: California public schools teach critical race theory, Florida does not; California hates fossil fuels and worships at the shrine of global warming, with sky-high gas prices. Florida does not; California had some of the harshest Covid lockdown measures, while Florida was among one of the first states to reopen, way back in May of 2020.

It should be noted that Florida has one of the highest percentages of elderly in the nation. The elderly were the people most vulnerable to the coronavirus. As of July 11th, there were 2,406,727 coronavirus cases in Florida, 38,157 deaths, and 2,240,417 people who recovered. In contrast, California had 3,724,833 cases and 63,376 deaths. In Florida 20.1 percent of the population is over 65 years of age. In California 14 percent of the population is over 65 years of age (According to Consumer Affairs). Obviously, Florida did a better job of handling the coronavirus.

The article also notes:

California’s economy has an unemployment rate of 7.9%, Florida is below 5%. California has a 13.3% top income tax rate, while Florida does not have an income tax. California has only 12% of America’s population and a quarter of America’s homeless.

That includes sanctioned encampments that are tax-payer funded. Los Angeles spends $2,700 a tent — a month. California pays homeless people to put up the tents and provide other services. So it’s kind of a cottage industry there. California has the second highest income tax rate in the country, bowing only to New York

The article concludes:

Florida is an example of how legal immigration can be successfully assimilated into community and business life. California is an example of the failure of woke ideology implemented by massively big government and state central planning. Florida is an example of traditional values supported by frugal government and free enterprise.

Miami is the cultural business and financial center of Latin America and South America. It’s not far-fetched to imagine that Miami and South Florida will replace New York as the financial center of the country. Not only does Florida love traditional values, but Florida loves business — and the people businesses employ.

In everything it does, California now opposes traditional values. With massive over-regulation and tax burdens on businesses, it is likely to lose its tech supremacy. Joe Biden wants to take California nationwide. But Florida works. California does not.

Leadership matters.

 

 

 

The Impact of President Biden’s Tax Policies

In April 2014, The Tax Foundation reported the following:

The tax code is huge and complex. But how huge and complex is it?

Andrew Grossman, the legislation counsel for the Joint Committee on Taxation that helps write tax laws, attacked us in Slate yesterday for saying that the tax code runs 70,000 pages, countering that it’s “only” 2,600 pages.

So how long is the U.S. tax code really? There are a couple ways to look at it.

Statutes

There’s the literal statutes that Congress has passed (Title 26 of the U.S. Code). The Government Printing Office sells it spread over two volumes, and according to them, book one is 1,404 pages and book two is 1,248 pages, for a total of 2,652 pages. At perhaps 450 words per page, that puts the tax code at well over 1 million words. (By way of comparison, the King James Bible has 788,280 words; War and Peace runs 560,000 words; and the Harry Potter series is just over 1 million words.)

Statutes and Regulations

However, a tax practitioner who relies just on the tax statutes will go to jail, because so much of federal tax law is in IRS regulations, revenue rulings, and other clarifications. Congress will set down a policy and leave it to the IRS to write all the rules to implement it. These regulations aren’t short: the National Taxpayer Advocate did a Microsoft Word word count of the tax statutes and IRS regulations in 2012, and came up with roughly 4 million words. Again at roughly 450 words per page, that comes out to around 9,000 pages. The National Taxpayer Advocate also noted that the tax code changed 4,680 times from 2001 to 2012, an average of once per day.

The tax code is that large and that complex due to the efforts of lobbyists in Washington, D.C. Money talks. Corporations and foreign governments know how to get around laws limiting their gifts (bribes) to Congressmen, and Congressmen know how to earn money through investments in areas of the economy (and other countries) influenced by their decisions. It’s not right, but it is what is.

Yesterday Newsmax posted an article about some recent comments made by former Trump Chief Economist Larry Kudlow about President Biden’s tax proposals.

The article reports:

Former Trump Chief Economist Larry Kudlow says President Joe Biden’s tax plan is an “assault on investment.”

“There’s some pretty tough headwinds ahead if these taxes, which are an assault on investment … and the people they are going to hurt the most are the middle class, the blue collar middle class, [who will bear] 70% of the burden of the corporate tax, which includes the capital gains tax, 70% of that burden falls on the blue-collar middle class. Make no mistake about that Biden rhetoric notwithstanding,” Kudlow on Sunday told John Catsimatidis on his radio show, “The Cats Roundtable ” on WABC 770 AM.

When corporate profits are down that means less investment, less capital, which results in less family income, he explained.

“You’re going to take about 20 to 25 percent of corporate profits down. Now, that means less investment, that means less money to payout wages, that means less money to purchase new machinery and equipment to enhance productivity, and that means family incomes are gonna go down. That’s the cap gains tax, which runs through corporate profits taxes,” said Kudlow.

Because of Biden’s tax plan, over time, the Gross Domestic Product (GDP) will drop 1 percentage point, “this is not good,” he added.

The article concludes:

Under former President Donald Trump’s economic principals “we’re in a boom,” he said.

“This economy is in good shape because right now before new legislation. Tax rates are low, and the regulatory burdens are low, and we still have energy independence,” he said.

Kudlow asked, “Why would you start taxing the daylights out of an economy that is roaring ahead? I don’t get it.”

“Don’t use your ideology from the left to smother this boom for heaven sakes–use common sense,” he said. He continued; this is ideology. This is a progressive left wing ideology tax. The rich redistribute incomes to build up a new great society, a social welfare state, he said.

Hang on to your wallet. Tax and spend is here for at least three more years unless conservatives take over Congress in 2022.

It Really Is A Shame That The Media Has Chosen To Ignore President Trump’s Economic Success

On Saturday, The Western Journal reported the following:

The Trump economy is giving the greatest benefits to those who have been at the bottom, according to new data from the Council of Economic Advisers.

Data released by the CEA shows that over 11 quarters from the end of 2016 through the first half of 2019, the net wealth of the top 1 percent of American households rose 13 percent. However, that rise is dwarfed by the 47 percent increase seen by the bottom 50 percent of America’s households over that same period.

…The report said that on average, workers’ pay has been rising faster than that of managers, and wage gains for Americans without a bachelor’s degree are rising faster than those for Americans with a bachelor’s degree or higher.

And, in keeping with Trump’s campaign promise to lift up black Americans, “average wage growth for African Americans now outpaces wage growth for white Americans,” according to the White House report.

America’s labor force is growing because Americans who were not formerly even looking for jobs are now employed, the report said.

The article concludes:

The Labor Department’s December jobs numbers, meanwhile, showed that women now are the majority in the American workforce.

“Why is today a milestone? It’s a milestone because it’s really heralding the future and not just telling us where we are today,” Betsey Stevenson, a professor of public policy and economics at the University of Michigan, told The Washington Post.

Larry Kudlow, director of the National Economic Council, said the jobs report has political ramifications.

“This stuff will translate in the election, I’m surprised the Democrats are so pessimistic painting a picture of a deep recession,” Kudlow told The Post. “The key point here is 3.5 percent unemployment continues, and that is a very low number historically and shows you still have a healthy economy and healthy job market.”

There is another aspect of President Trump’s policies that is impacting the wages of working Americans. President Trump’s policy of ending illegal immigration also eliminates some downward pressure on the lower end of the wage scale. Illegal immigrants are willing to work for less than American workers and don’t demand the same benefits. If they are working ‘under the table’, their employee is not paying Social Security taxes on them. Ending the flow of illegal immigrants into America is a positive thing for everyone.

Revising The Numbers

Economists seems to have a problem lately correctly predicting economic growth. They always seem a bit surprised when the numbers come in higher than what they predicted. Well, it has happened again.

The Gateway Pundit is reporting the following today:

The fourth quarter GDP number was released on Thursday and beat expectations at 2.6%Economists expected a 2.2% GDP rate.

CNBC says the GDP report was only preliminary, it would mean average growth for the year was 3.1 percent.

...Ronald Reagan brought forth an annual real GDP growth of 3.5% . Barack Obama, with his abysmal policies, was lucky to average a GDP growth rate of slightly greater than 1%.

Obama ranked as the fourth worst presidency on record in GDP growth at 1.457% . Only Herbert Hoover (-5.65% ), Andrew Johnson (-0.70% ) and Theodore Roosevelt (1.41% ) had lower average annual GDP growth than Barack Obama.

The Commerce Department announced in the first quarter of 2016 that the US economy expanded at the slowest pace in two years with a GDP growth rate of an anemic 0.5% . The second quarter GDP growth rate was not much better at 1.2% . (The 3rd quarter GDP rate was not yet announced by the time we drafted our post before the 2016 election.)

…Barack Obama was the first President ever to never surpass an annual rate of 3% GDP growth!  This resulted in Obama being rated the worst economic President ever!

Obama’s Congressional Budget Office (CBO) forecast in 2016 that America would never see 3.0% economic growth again. They had given up and Hillary was their candidate.

President Trump did win the election in 2016 and his Director of the White House National Economic Council Larry Kudlow said in early December that the U.S. economy is growing at a rate greater than 3% –

This is good news for people in the job market and people entering the job market. Jobs are becoming more plentiful and salaries are rising.

Putting Politics Before The Welfare Of Americans

Yesterday Investor’s Business Daily posted an editorial about the coming Congressional session. The title of the editorial is, “Market Turmoil Shows Why Trump’s Pro-Growth Policies Must Continue.”

The editorial explains:

Kudlow (President Trump’s top economic advisor, Larry Kudlow) tried to calm the waters. “Corrections come and go,” he told reporters at the White House. “I’m reading some of the weirdest stuff how a recession is in the future. Nonsense. Recession is so far in the distance I can’t see it. Keep the faith. It’s a very strong economy.”

Let’s be clear. Economic forecasts have been overly pessimistic for most of the Trump administration, with actual results consistently coming in “unexpectedly” higher than forecast. And Kudlow is right. There’s no sign of a recession on the horizon.

The editorial points out the indications of a strong economy and the steps needed to keep it strong:

Unemployment is at 50-year lows. Wages are growing at the fastest rate since the financial crisis. There are a million more job listings than officially unemployed people. Productivity grew 2.2% in the third quarter, after jumping 3% in the second quarter — the fastest growth rate in four years. Small business optimism and the IBD/TIPP Economic Optimism Index remains at record highs.

After eight long years of sluggish growth under President Obama, the economy has been booming.

Still, the Fed has been raising interest rates, and as we’ve pointed out repeatedly in this space, the risk is always that they will go too far, too fast, and crash the economy. The trade war with China is taking its toll. And the economic expansion is old. The last recession ended 113 months ago, making this the second longest in the post-World War II era.

Which is all the more reason for the federal government to continue wringing every bit of growth-inhibiting policies out of the system. For his part, Trump needs to get a trade deal in place with China when he meets with President Xi Jinping at a G-20 summit later this month. And he needs to continue to deregulate where he can.

Unfortunately the Democrats in Congress have little interest in continuing the policies that have resulted in the current economic growth. They will make every effort to roll back the tax cuts and increase the size and spending of the federal government. Hopefully their efforts will not be successful.

The Trump Economy

There are no guarantees in the economy. There are certain things that the government can do that historically have aided growth and certain things that the government can do that have inhibited growth. We have history as our guide as to what works, but sometimes people have a political bias that tends to ignore history.

Real Clear Politics posted an article today about the Trump economy. The article was written by Stephen Moore. The economy is not booming, the workforce participation rate is still too low for it to be considered booming, but it is definitely improving. The title of the article is, “Why the Left Has Been So Wrong About the Trump Boom.”

The article reports:

Time magazine‘s cover story for the week of Nov. 6 is a classic. It blares: “The Wrecking Crew: How Trump’s Cabinet Is Dismantling Government As We Know It.” The New York Times ran a lead editorial complaining that team Trump is shrinking the regulatory state at an “unprecedented” pace.

Meanwhile, last week the stock market raced to new all-time highs; we had another blockbuster jobs report with another fall in the unemployment rate; and housing sales soared to their highest level in a decade.

The article at Time magazine fails to recognize that those two facts are related.

The article at Real Clear Politics further notes:

But so far the Trump haters have missed the call on the economy‘s trajectory. Doubly ironic is that the same Obama-era economists who are trashing Trump’s increasingly realistic forecast of 3 percent growth are the ones who predicted 4 percent growth from the Obama budgets. Obama never came anywhere near 4 percent growth, and at the end of his second term, the economy grew at a pitiful 1.6 percent.

Under Obama, free enterprise and pro-business policies were thrown out the window. What was delivered was the weakest recovery from a recession since World War II, with a meager 2.2 percent average growth rate. Middle America felt it, which is why Trump won these forgotten Americans.

One reason that economist Larry Kudlow and I and others assured Donald Trump that 3 to 4 percent growth was achievable was that Trump could capitalize on the underperformance of the Obama years. Under Obama, business investment fell almost two-thirds below the long-term trend line — thanks to higher taxes on investment. Now, partly in anticipation of the tax cut, business spending keeps climbing.

The article at Real Clear Politics concludes:

Maybe the liberal economists and their shills in the media should show some humility. They should acknowledge they were dead wrong about how much Obamanomics was going to grow the economy and about how Trumponomics would crash the economy and the stock market. Or better yet, maybe the rest of us should all just stop listening to them.

The other conclusion that can be reached is that the free market works every time it is allowed to work. Government interference has a very negative impact on economic growth. We need to send President Obama’s economic advisors and a good number of Congressmen back to school to study basic economics.