Thursday, May 26, 2011

It Keeps Getting Better

Media reports in recent weeks say that Senate Democrats are considering a 3% surtax on income over $1 million to raise federal revenues. This would come on top of the higher income tax rates that President Obama has already proposed through the cancellation of the Bush era tax-rate reductions.

If the Democrats' millionaire surtax were to happen—and were added to other tax increases already enacted last year and other leading tax hike ideas on the table this year—this could leave the U.S. with a combined federal and state top tax rate on earnings of 62%. That's more than double the highest federal marginal rate of 28% when President Reagan left office in 1989. Welcome back to the 1970s.

Here's the math behind that depressing calculation. Today's top federal income tax rate is 35%. Almost all Democrats in Washington want to repeal the Bush tax cuts on those who make more than $250,000 and phase out certain deductions, so the effective income tax rate would rise to about 41.5%. The 3% millionaire surtax raises that rate to 44.5%.

.But payroll taxes, which are income taxes on wages and salaries, must also be included in the equation. So we have to add about 2.5 percentage points for the payroll tax for Medicare (employee and employer share after business deductions), which was applied to all income without a ceiling in 1993 as part of the Clinton tax hike. I am including in this analysis the employer share of all payroll taxes because it is a direct tax on a worker's salary and most economists agree that though employers are responsible for collecting this tax, it is ultimately borne by the employee. That brings the tax rate to 47%.

Then last year, as part of the down payment for ObamaCare, Congress snuck in an extra 0.9% Medicare surtax on "high-income earners," meaning any individual earning more than $200,000 or couples earning more than $250,000. This brings the total tax rate to 47.9%.

But that's not all. Several weeks ago, Mr. Obama raised the possibility of eliminating the income ceiling on the Social Security tax, now capped at $106,800 of earnings a year. (Never mind that the program was designed to operate as an insurance system, with each individual's payment tied to the benefits paid out at retirement.) Subjecting all wage and salary income to Social Security taxes would add roughly 10.1 percentage points to the top tax rate. This takes the grand total tax rate on each additional dollar earned in America to about 58%.

Then we have to factor in state income taxes, which on average add after the deductions from the federal income tax roughly another four percentage points to the tax burden. So now on average we are at a tax rate of close to 62%.

Democrats have repeatedly stated they only intend to restore the tax rates that existed during the Clinton years. But after all these taxes on the "rich," we're headed back to the taxes that prevailed under Jimmy Carter, when the highest tax rate was 70%.

Taxes on investment income are also headed way up. Suspending the Bush tax cuts, which is favored by nearly every congressional Democrat, plus a 3.8% investment tax in the ObamaCare bill (which starts in 2014) brings the capital gains tax rate to 23.8% from 15%. The dividend tax would potentially climb to 45% from the current rate of 15%.

Now let's consider how our tax system today compares with the system that was in place in the late 1980s—when the deficit was only about one-quarter as large as a share of GDP as it is now. After the landmark Tax Reform Act of 1986, which closed special-interest loopholes in exchange for top marginal rates of 28%, the highest combined federal-state marginal tax rate was about 33%. Now we may be headed to 62%. You don't have to be Jack Kemp or Arthur Laffer to understand that a 29 percentage point rise in top marginal rates would make America a highly uncompetitive place.

What is particularly worrisome about this trend is the deterioration of the U.S. tax position relative to the rest of our economic rivals. In 1990, the highest individual income tax rate of our major economic trading partners was 51%, while the U.S. was much lower at 33%. It's no wonder that during the 1980s and '90s the U.S. created more than twice as many new jobs as Japan and Western Europe combined.

It's true that the economy was able to absorb the Bush 41 and Clinton tax hikes and still grow at a very rapid pace. But what the soak-the-rich lobby ignores is how different the world is today versus the early 1990s. According to the Organization for Economic Cooperation and Development, over the past two decades the average highest tax rate among the 20 major industrial nations has fallen to about 45%. Yet the highest U.S. tax rate would rise to more than 48% under the Obama/Democratic tax hikes. To make matters worse, if we include the average personal income tax rates of developing countries like India and China, the average tax rate around the world is closer to 30%, according to a new study by KPMG.

What all this means is that in the late 1980s, the U.S. was nearly the lowest taxed nation in the world, and a quarter century later we're nearly the highest.

Despite all of this, the refrain from Treasury Secretary Tim Geithner and most of the Democrats in Congress is our fiscal mess is a result of "tax cuts for the rich." When? Where? Who? The Tax Foundation recently noted that in 2009 the U.S. collected a higher share of income and payroll taxes (45%) from the richest 10% of tax filers than any other nation, including such socialist welfare states as Sweden (27%), France (28%) and Germany (31%). And this was before the rate hikes that Democrats are now endorsing.

Perhaps there can still be a happy ending to this sad tale of U.S. decline. If there were ever a right time to trade in the junk heap of our federal tax code for a pro-growth Steve Forbes-style flat tax, now's the time.

Renewed Hope for the Gang of Five or Six?

The conventional wisdom is that we will now see paralysis in Washington until the next election. There will be a last minute budget deal that will shave $150B from the deficit over the next couple of years and avoid default. But no grand bargain is anticipated this Congress to address our structural fiscal imbalance.

The Gang of Six dropped to five after Tom Coburn received a great deal of pressure for suggesting that concessions on the revenue side might be necessary. Formerly untouchable, his involvement in the Ensign Affair has made him vulnerable and he’d rather foster friends than enemies in his own party.

The hand of the intransigent Republicans has now been seriously damaged. The only way to keep the Ryan Plan from ruining GOP prospects in 2012 is to otherwise address our accumulating red ink. A grand bargain is now a lot more attractive to those who were shouting “No compromise!” only a few months ago. The priorities for the House Republican freshmen has now shifted, a consequence of their collective cold sweat. I expect Coburn to soon rejoin the Gang with the blessing of his party leadership.

The president and the Senate Democrats have been open to a deal resembling Simpson/Bowles. Contrary to conventional wisdom, it is still in the Democrats political interest to deal. They will want bipartisan fingerprints on anything that materially reduces the deficit – something that voters continue to demand (albeit in the abstract).

But it has to happen this year. Next year, both parties will focus on making bipartisan cooperation unnecessary…

Wednesday, May 25, 2011

What Does NY-26 Mean?

The Doc said that last night's drubbing might mean nothing. That is possible, and I hope that is the lesson that the GOP takes from NY-26. There are 17 months before the election - plenty of time to adjust policies and trim sails. Or, you can double down, which appears to be the approach that the Republicans will be taking.

This is a catastrophe for the GOP. The House Republicans are already on record supporting the Ryan Plan. Most of the Senate Republicans soon will be. All of the GOP presidential candidates must pay homage to the plan, more or less - just ask Newt. So what's the problem? 80% of Americans hate the plan. 70% of Tea Partiers, for crying out loud, oppose the plan. Those are huge numbers.

So, my Republican friends, please stick with Mr Ryan and his plan. I'll watch from the deck as you walk the plank.

Thank you Democrats!

Yesterday, as the country went, billions by the hour, further into debt, with the federal government spending 40% more than it took in, Democrats again stood against any realistic spending reform.

"We just need to raise taxes on the rich, that will fix everything" said Democratic spokesman Baxter.  When a reporter pointed out that doing so would not even begin to fix the problem he replied, "we never miss an opportunity to put party before country-GO BIG BLUE".

When asked about their plans for controlling the ever expanding budget, Baxter said "Why worry?  This is just a great opportunity to make political points by describing ANY minor cuts as draconian.  We have a formula and we are sticking to it, we promise to take care of voters with money we don't have and they take care of us at election time".  "Granted at some point the Ponzi scheme will end, but until then...let's rock"!

Tuesday, May 24, 2011

Thank You, Paul Ryan!

May 24, 2011
Democrat Wins Upstate New York Congressional Race
By THOMAS KAPLAN, New York Times

10:02 p.m. | Updated Kathy Hochul, a Democrat, is the winner in a closely watched Congressional race in upstate New York that is being seen as a test of a Republican plan to overhaul Medicare.

Monday, May 23, 2011

Paul, you stupid idiot

The complete title should be, when austerity fails and the bills come due.  So, Paul, instead of complaining about the problem, what is the solution?

Tuesday, May 17, 2011


Despite Baxter's ludicrous statements, the idiot just might win.

How ludicrous?  Trying to tie the long term hyper spending obligations of the Obama administration to a one time "bailout" of the financial industry.

Failing to admit that the anti business anti success pro government growth policies of this administration has in large part caused the current high unemployment rate.

And possibly the best, using job creation in discussing the economy (and even more stupidly, attributing job creation to Obama) instead of the unemployment rate (and ignoring that current job creation is in government).

However, the idiot might win:  despite his and his parties historic loss in the last election, despite a unemployment rate over 8%, despite an annual deficit of $1.5T and counting and borrowing 40% of the federal budget with no end in sight.

Why?  Weak field?  It is going to be either Pawlenty, Romney or Daniels.  Who ever gets the nomination will be savaged by the left supporting press (see the bogus "racism" question asked Newt last weekend).

But no, that is not why the idiot in chief is going to win.

They are seeing the error of their ways, that is why.  The Paul Krugman wacko wing of the Socialist/Liberal?Democratic party has lost their voice.  They realize that their stupid policies did not work, the stimulus was a failure, unemployment will not fall under current policies and they are willing to talk fiscal restraint.

The only chance the idiot has is to change course (of course without admitting it), just like he did on the war on terror, and they seem to be waking up to the possibility. 

To the Republicans credit (and very much unlike the Democrats), they are willing to put country first and invite the president to look at entitlement reform and spending reductions with the only condition of no tax increases.  Wow, honestly, what great guys, Cantor and Ryan are lining up to be American hero's but will unfortunately pull the "O" across the finish line.

Monday, May 16, 2011

Sure, Congress can vote to raise the debt ceiling — just as you and your spouse can reach a bipartisan agreement on raising your own debt ceiling. Go on, try it: Hold a vote in your rec room, come up with a number and then let MasterCard know what you've decided on.

In the real world, debt ceilings are determined by the lenders, not the borrowers. In March, Pimco (which manages the world's largest mutual fund) calculated that 70% of U.S. Treasury debt is being bought by the Federal Reserve.
So under the 2011 budget, every hour of every day, the United States government spends $188 million it doesn't have, $130 million of which is "borrowed" from itself. There's nobody else out there.

Mitt argued that Massachusetts needed to reform its health care system because the uninsured were placing huge strains on the state's emergency rooms and the rest of the population had to pick up the tab for the free-riders, and that was driving up Massachusetts health costs. So, as a famous can-do technocrat, he looked at the problem and came up with a can-do technocratic solution.

Three years later, everyone was insured, but emergency room use was higher than ever, and 70% of those newly insured were all but entirely subsidized by the state, and Massachusetts residents were paying 30% more for their health care than the U.S. average, and Boston had the longest wait time in the nation to see a new doctor.

The inflationary factor in Massachusetts health care was not caused by deadbeats using emergency rooms as their family doctor but by the metastasizing cost distortions of government intervention in health care.
Mitt should have known that. As he should know that government intervention in college loans has absurdly inflated the cost of ludicrously overvalued credentials and, in a broader sense, helped debauch America's human capital. As he should know that government intervention in the mortgage market is why every day more and more American homeowners are drowning in negative equity.

Tuesday, May 10, 2011

What is wrong with our country


Teachers are extremely effective messengers to parents, community groups, faith-based groups and elected officials—and their unions know how to deploy them well. Happy unions can give a politician massive clout, and unhappy unions—well, just ask Eva Moskowitz, a Democrat who headed the New York City Council Education Committee when I became schools chancellor in 2002.
Smart, savvy, ambitious, often a pain in my neck and atypically fearless for a politician, Ms. Moskowitz was widely expected to be elected Manhattan borough president in 2005. Until, that is, she held hearings on the city teachers-union contract, an extraordinary document, running for hundreds of pages, governing who can teach what and when, who can be assigned to hall-monitor or lunchroom duty and who can't, who has to be given time off to do union work during the school day, and so on.
The contract defied parody. So when Ms. Moskowitz exposed its ridiculousness, the United Federation of Teachers (UFT), then headed by Randi Weingarten, made sure that Ms. Moskowitz's run for borough president came up short. After that, other elected officials would say to me, "I agree with you, but I ain't gonna get Eva'd."
Politicians—especially Democratic politicians—generally do what the unions want. The unions, in turn, are very clear about what that is: They want happy members, so that those who run the unions get re-elected, and they want more members, so their power, money and influence grow. The effect of all this? As Albert Shanker, the late, iconic head of the UFT, once pointedly said, "When schoolchildren start paying union dues, that's when I'll start representing the interests of schoolchildren."
Union power is why it's virtually impossible to fire a teacher for non-performance. In New York City, which has some 55,000 tenured teachers, we were able to fire only half a dozen or so for incompetence in a given year, even though we devoted significant resources to this effort.
The extent of the problem is difficult to overstate. Take "rubber rooms," where teachers were kept—while doing no work—pending resolution of disciplinary charges against them, mostly for malfeasance, like physical abuse or embezzlement, but also for incompetence. The teachers got paid regardless. Before we stopped this charade—by returning many of the teachers to the classroom, unfortunately—it cost the city about $35 million a year. (Still costing more than $100 million annually are the more than 1,000 teachers who get full pay to perform substitute or administrative duties because no principal wants to hire them full-time.)

Thursday, May 5, 2011

Education for the Intentionally Ignorant

It has been said on this blog and in the corridors of the RNC that "We do not have a revenue problem, we have a spending problem." These silly words are uttered as we have brought in 14.9%/GDP the last two years. So - for those who genuinely believe there is no problem with receipts, please let me show you revenues the last fiscal year of each of the following presidents:

Roosevelt/1945 - 20.4%
Truman/1953 - 18.7%
Eisenhower/1961 - 17.8%
Kennedy/1963 - 17.8%
Johnson/1969 - 19.7% (Surplus)
Nixon/1974 - 18.3%
Ford/1977 - 18.0%
Carter/1981 - 19.6%
Reagan/1989 - 18.4%
Bush/1993 - 17.5%
Clinton/2001 - 19.5% (Surplus)
Bush/2009 - 14.9%

To answer the question with which my GOP friends struggle, the last time we had a surplus with 15%/GDP revenues was 1949, 62 years ago, as WWII was over and the Korean conflict had yet to begin. Medicare and Medicaid did not exist. Social Security enjoyed 16.5 workers per recipient rather than today's 3.2.

Spending has NEVER been below 17%/GDP since 1956, 55 years ago, when it was 16.5%.

Now - I challenge any honest person to tell me how 15%/GDP is not a revenue problem by definition. Don't just stubbornly parrot what you hear on Fox News, please tell us how 15%/GDP is all we need to operate our government and pay down the debt.

Word from the (very small) Sane Wing of GOP

Wednesday, May 4, 2011

The right is wrong.

President Obama is the worst President of our lifetime.  He is attempting to turn America into a Socialist state.  He is ruining the economy, so that he may offer future "cures" which, like the "stimulus", will not work, put us more into debt and require move government intervention so that we may institute more "social justice' to bring equality (a lower equality, but equality) for everyone.  His wife wants young people to "serve" rather that make money, he wants to "spread the wealth around".  He is terrible.

However, he did the right thing by OBL, pretty much right down the line.  The right wishes to fault him for...Lot's of things...communication, burial,  Bull!.  Like the silly "birther" issue, this just distracts from is economic sinister incompetence. 

He needs to go, and should be egg faced because time has demonstrated all the Bush policies that he protested to be correct (and still used under his administration), but not for the particulars of killing a terrorist.

A Second Look: We Remain a Plodding Giant

I am, of course, a big fan of Obama and I am glad that he is keeping us safe. I am very gratified that he brought bin Laden to justice and think our military does a wonderful job. That said, why did it take so long?

I'm not referring to years, rather to months. US intelligence believed in August - eight months ago - that they may have located the arch terrorist. In mid-February - over two months ago - they were all but certain. It seems that if OBL simply moved every couple of months (if not every eight), he would be safe from the plodding giant.

Hags correctly points out that terrorism will be beat the way we killed Osama, not by a land army massed on frontiers. If that is the case, we have got to be nimble. We have to be able to strike on near moments notice. I'm not kidding. I am shocked as I read the OBL kill timeline. The bastard had all kinds of opportunity to escape - again. If we are 90% certain we have a high-value AQ target, probably their leader, on February 10th, we should be knocking on the door on February 11th. We NEED that kind of capability. In this era of terrorism and potential loose nukes, time is a luxury we cannot afford.

Tuesday, May 3, 2011

4:42 of Pure Joy

We are just NOT taking in enough money...GMIB

Year Total On-budget1 Receipts Outlays Surplus or  deficit (–) Receipts Outlays Surplus or deficit (–) 1789–1849 $1,160 $1,090 $70 $1,160 $1,090 $70
1850–1900 14,462 15,453 –991 14,462 15,453 –991 \
1905 544 567 –23 544 567 –23
1910 676 694 –18 676 694 –18
1915 683 746 –63 683 746 –63
1920 6,649 6,358 291 6,649 6,358 291
1925 3,641 2,924 717 3,641 2,924 717
1930 4,058 3,320 738 4,058 3,320 738
1935 3,609 6,412 –2,803 3,609 6,412 –2,803
1940 6,548 9,468 –2,920 5,998 9,482 –3,484
1945 45,159 92,712 –47,553 43,849 92,569 –48,720
1950 39,443 42,562 –3,119 37,336 42,038 –4,702
1955 65,451 68,444 –2,933 60,370 64,461 –4,091
1960 92,492 92,191 301 81,851 81,341 510 1965 116,817 118,228 –1,411 100,094 101,699 –1,605 1970 192,807 195,649 –2,842 159,348 168,042 –8,694 1975 279,090 332,332 –53,242 216,633 271,892 –55,260
1980 517,112 590,947 –73,835 403,903 476,618 –72,715 1985 734,088 946,423 –212,334 547,918 769,615 –221,698
1990 1,032,094 1,253,130 –221,036 750,439 1,028,065 –277,626
1995 1,351,932 1,515,884 –163,952 1,000,853 1,227,220 –226,367
2000 2,025,457 1,789,216 236,241 1,544,873 1,458,451 86,422
2001 1,991,426 1,863,190 128,236 1,483,907 1,516,352 –32,445
2002 1,853,395 2,011,153 –157,758 1,338,074 1,655,491 –317,417
2003 1,782,532 2,160,117 –377,585 1,258,690 1,797,108 –538,418
2004 1,880,279 2,293,006 –412,727 1,345,534 1,913,495 –567,961
2005 2,153,859 2,472,205 –318,346 1,576,383 2,069,994 –493,611
2006 2,407,254 2,655,435 –248,181 1,798,872 2,233,366 –434,494
2007 2 2,540,096 2,784,267 –244,171 1,905,966 2,332,984 –427,018
2008 2 2,662,474 2,901,861 –239,387 1,988,389 2,439,334 –450,945

Read more: Receipts and Outlays of the Federal Government, 1789–2008 —

Monday, May 2, 2011


Has is stuck anyone else as odd that there is a $1,000,000 "mansion" in Pakistan?  They must have never suffered through the housing bubble in old Packy.  How do they know?  In who's currency?

Mansion?  In Pakistan?  Surrounded by normal housing?      15 foot high walls.

It's just weird, bad reporting, manipulation for no apparent reason...something.

I will say this...looking at the crappy mattresses and furniture on the bloody videos, they over paid and need a decorator.

Hey Crazy Rich, I guess water boarding has its benefits, you out with your protest sign today?

Flushing his body was a good idea, no mess, no fuss....done.

A Valuable Lesson on Fighting Terrorism: Why withdrawing From Afghanistan is our Best Path Forward

We killed bin Laden using the intelligence community and special forces. It took years to develop the necessary intelligence (hope some of you don't mind that the initial tip on the courier's nickname came as a direct result of "enhanced techniques" because, well, you know, those techniques don't really work) but when we had enough info we then deployed the most dangerous men in the world (Navy Seals) onto foreign soil without permission of a sovereign nuclear power and killed the bastard, ransacked his house for more intelligence raw material, scooped up the body and were on our way out in 40 minutes.

The lesson learned from yesterday is the same as the lesson learned when we helped drive the Russians out of Afghanistan. We used the CIA, other special ops personnel, and supplied money and weapons. We did not use armies. Armies are blunt instruments. Armies are targets. Armies are occupiers. Armies stay too long and generate resentment. The Russians had an army.

We should declare victory and withdraw from Afghanistan. And then we should stay fully engaged using strategies and the agencies that are designed for asymmetrical warfare.

Nation building in Afghanistan is a lovely thought that is pure folly. Our costs will come down and our effectiveness will go up when we work within the reality of what Afghan culture is. Yes, there will be effects from our withdrawal that we will hate. But I also hate $100 billion a year down the drain and, more importantly, troops being killed and maimed.

I don't support a withdrawal from the war on terrorism. But I do support adopting a significant change of strategy.

All the best,


This is why we need the TEA party. There is no realistic argument against this...Baxter will.

Former Secretary O'Neill popped up the other day on Bloomberg Television to compare debt-ceiling holdouts to jihadists. "The people who are threatening not to pass the debt ceiling," he said, "are our version of al-Qaida terrorists. Really."

Really?  Absolutely.

"They're really putting our whole society at risk by threatening to round up 50% of the members of the Congress, who are loony, who would put our credit at risk."

But hang on, generally speaking, when you hit your "debt ceiling," your credit is at risk. If you've got a $10,000 credit card, and you run it up to the limit, but you need a couple more grand right now, pronto, because you outspend your earnings by 50% every month and you have no plans to change that anytime soon, well, the bank might increase the limit to $15,000, or $20,000. Or they might not. There is a question mark over your credit because there is a question mark over your creditworthiness: It is at risk.

Paul O'Neill seems to regard that attitude as unhelpful. So does Timothy Geithner, his successor at what is still laughingly known as the United States Treasury. Geithner says that even to be discussing the debt ceiling is "a ridiculous debate to have."

Ridiculous?  Absolutely.

"I mean, the idea that the United States would take the risk that people would start to believe we won't pay our bills," continued Geithner, "is a ridiculous proposition, irresponsible, completely unacceptable."

The best way to persuade people to believe we'll pay our bills is to borrow up to our limit, and then increase the limit and borrow a whole bunch more. This would be the 75th increase in the debt ceiling in the last half-century. Let's just get it done, and resume the party.

But if Geithner thinks that even discussing the question is "ridiculous," then, why have a debt limit at all? What's the point?

Well, because it gives us more credibility with our creditors, right? Even if we set the debt ceiling way up in cloud-cuckoo land to a bazillion trillion gazillion dollars and 83 cents, even a debt limit entirely unmoored from reality still gives the impression we haven't quite flown the coop.

Yes, but why does the U.S. government need to maintain credibility with its creditors when increasingly it's buying its debt from itself? Every month there's more and more U.S. Treasury debt and fewer and fewer people who want it. The Chinese are reducing their exposure. The investment behemoth Pimco, which manages the world's largest mutual fund, recently dumped U.S. Treasuries entirely.

To avoid the failure of U.S. bond auctions, or an increase in interest rates to make them more attractive to rational lenders, the U.S. government's debt is bought by the U.S. government's Federal Reserve.

"Quantitative easing" is extremely quantitative if not terribly easing, so raising the debt ceiling would enable us to issue more debt for us to buy from ourselves. You can see why Secretary Geithner thinks that's a no-brainer.

"If the national debt doesn't matter, why have taxes at all?" Particularly when you no longer have to "print" money, you can just quantitatively ease yourself into it.

Once we raise the old debt ceiling, we'll be pretty much at the point where the U.S. government is spending four trillion but only taking in two trillion: For every dollar we raise in taxes, we spend two.

No surprise there: The "poorest" half of the population pay no federal income tax. They're not exactly poor as the term would be understood in almost any other country, but in federal revenue terms they're dependents, so in order to fund government services for the wealthiest "poor" people on the planet we borrow money from a nation of subsistence peasants where pigs are such prized possessions they sleep in the house.

Sunday, May 1, 2011

Yes, the Adults are In Charge

Osama bin Laden Dead - USA Has the Body

831 Days into President Obama's First Term.