Wednesday, October 15, 2008

Obama: The Fairytale Candidate

CARTER and MILLER: Fairy-tale candidate
James Carter and James Miller III

Once upon a time and far, far away from mainstream America, lived a U.S. senator named Barack Obama. Mr. Obama had a gift, a truly wondrous gift. He could spin troublesome facts into political gold. And perhaps, with enough spinning, he could even spin himself into the White House.

Bill Clinton understood this. He called Mr. Obama's spin "the biggest fairy tale I've ever seen." Like other fairy tales, this one requires a total suspension of disbelief. Jack (of Jack and the Beanstalk fame) had his magic beans. Mr. Obama has his magic facts. Consider the following so-called facts:

-- Magic Fact No. 1: Senator Obama will cut income taxes "for 95 percent of working families, 95 percent."

It would be truly magical to be able to cut income taxes on 95 percent of working families when only 68 percent of tax filers actually pay the federal income tax. According to the Internal Revenue Service, of the 136 million income tax returns filed in 2006, 43 million returns reported positive adjusted gross income but had no income tax liability because of assorted deductions, exemptions and tax credits.

So how do you give a tax cut to someone who doesn't pay income taxes? Mr. Obama proposes a massive program of "refundable tax credits." Those on the receiving end would simply get a check from the federal government. In other words, they would pay a "negative tax."

By wrapping a thoroughly liberal position - larger welfare benefits - in the mantle of tax cuts, Mr. Obama has very nearly managed to neutralize one of the defining issues of this presidential campaign. If that sleight of hand isn't magic, we don't know what is.

-- Magic Fact No. 2: Mr. Obama pays "for every dime" of his proposals.

According to the nonpartisan National Taxpayers Union Foundation, Mr. Obama has offered 73 proposals that would collectively increase federal spending $365.6 billion annually. That's literally a $1 billion-a-day spending increase. And, unfortunately, that figure doesn't include the cost of Mr. Obama's 88 other spending proposals for which no reliable cost estimates exist.

How does Mr. Obama propose to pay for these new and expanded spending programs? He begins by squeezing defense spending. He would then repeal "the Bush tax cuts for the wealthiest Americans." (Never mind that the Bush tax cuts are already scheduled to expire and that the revenue is already included in the government's budget forecasts.) Finally, he would "close corporate loopholes, [and] stop providing tax cuts to corporations that are shipping jobs overseas."

These steps would not come close to paying for the senator's spending proposals. Assuming they offset $100 billion of new spending, paying for the other $265.6 billion (still ignoring the cost of Mr. Obama's other 88 programs) would require an across-the-board income tax increase of 19 percent. And, of course, this figure does not reflect the tax increase that would be necessary to pay for Mr. Obama's "tax cuts."

The IRS reported earlier this year that the top-earning 5 percent of taxpayers shouldered 60 percent of the federal income tax burden in 2006. If Mr. Obama insists upon having a tiny fraction of Americans shoulder the cost of his spending and tax proposals, the tax increase on those taxpayers would have to be huge - far larger than the 19 percent tax increase described above. This would slow investment, employment and economic growth - and, yes, total governmental receipts.

Sen. Hillary Clinton once threatened, "We're going to take things away from you on behalf of the common good." Perhaps she would have been Mr. Obama's ideal running mate after all.

-- Magic Fact No. 3: Economists overwhelming favor Mr. Obama's economic policies.

The Obama campaign likes to say it has the support of professional economists. Yet, that "fact" is based on two, methodologically flawed polls circulating the Internet. True enough, majorities of those surveyed said they favor Mr. Obama's economic policies. What else would you expect from a poll where Democrat responders outnumbered Republicans by nearly 3-to-1? Only 17 percent of the surveyed economists were Republican. In the second poll, Democrats outnumbered Republicans nearly 5-to-1. Only 10 percent of the respondents were Republican.

Meanwhile, more than 500 economists from across the country, including five Nobel Laureates, have signed a statement supporting Sen. John McCain's economic plan. (For the text of the statement and a complete list of the signatories, see
The fairy tale candidate may yet become the fairy tale president. But will the story end with "and the American people lived happily ever after?"

James E. Carter, a deputy assistant secretary of the Treasury from 2002 to 2006, is an economist with the U.S. Senate. James C. Miller III served as President Reagan's budget director from 1985 to 1988 and is now a senior adviser at Husch Blackwell Sanders, LLP.

Monday, October 13, 2008

Obama's Tax Illusion

(Click the title above for the original WSJ article)

Obama's 95% Illusion
It depends on what the meaning of 'tax cut' is.

One of Barack Obama's most potent campaign claims is that he'll cut taxes for no less than 95% of "working families." He's even promising to cut taxes enough that the government's tax share of GDP will be no more than 18.2% -- which is lower than it is today.

It's a clever pitch, because it lets him pose as a middle-class tax cutter while disguising that he's also proposing one of the largest tax increases ever on the other 5%. But how does he conjure this miracle, especially since more than a third of all Americans already pay no income taxes at all? There are several sleights of hand, but the most creative is to redefine the meaning of "tax cut."

For the Obama Democrats, a tax cut is no longer letting you keep more of what you earn. In their lexicon, a tax cut includes tens of billions of dollars in government handouts that are disguised by the phrase "tax credit." Mr. Obama is proposing to create or expand no fewer than seven such credits for individuals:

  • A $500 tax credit ($1,000 a couple) to "make work pay" that phases out at income of $75,000 for individuals and $150,000 per couple.

  • A $4,000 tax credit for college tuition.A 10% mortgage interest tax credit (on top of the existing mortgage interest deduction and other housing subsidies).

  • A "savings" tax credit of 50% up to $1,000.An expansion of the earned-income tax credit that would allow single workers to receive as much as $555 a year, up from $175 now, and give these workers up to $1,110 if they are paying child support.

  • A child care credit of 50% up to $6,000 of expenses a year.

  • A "clean car" tax credit of up to $7,000 on the purchase of certain vehicles.
Here's the political catch. All but the clean car credit would be "refundable," which is Washington-speak for the fact that you can receive these checks even if you have no income-tax liability. In other words, they are an income transfer -- a federal check -- from taxpayers to nontaxpayers. Once upon a time we called this "welfare," or in George McGovern's 1972 campaign a "Demogrant." Mr. Obama's genius is to call it a tax cut.

The Tax Foundation estimates that under the Obama plan 63 million Americans, or 44% of all tax filers, would have no income tax liability and most of those would get a check from the IRS each year. The Heritage Foundation's Center for Data Analysis estimates that by 2011, under the Obama plan, an additional 10 million filers would pay zero taxes while cashing checks from the IRS.

The total annual expenditures on refundable "tax credits" would rise over the next 10 years by $647 billion to $1.054 trillion, according to the Tax Policy Center. This means that the tax-credit welfare state would soon cost four times actual cash welfare. By redefining such income payments as "tax credits," the Obama campaign also redefines them away as a tax share of GDP. Presto, the federal tax burden looks much smaller than it really is.

The political left defends "refundability" on grounds that these payments help to offset the payroll tax. And that was at least plausible when the only major refundable credit was the earned-income tax credit. Taken together, however, these tax credit payments would exceed payroll levies for most low-income workers.

It is also true that John McCain proposes a refundable tax credit -- his $5,000 to help individuals buy health insurance. We've written before that we prefer a tax deduction for individual health care, rather than a credit. But the big difference with Mr. Obama is that Mr. McCain's proposal replaces the tax subsidy for employer-sponsored health insurance that individuals don't now receive if they buy on their own. It merely changes the nature of the tax subsidy; it doesn't create a new one.

There's another catch: Because Mr. Obama's tax credits are phased out as incomes rise, they impose a huge "marginal" tax rate increase on low-income workers. The marginal tax rate refers to the rate on the next dollar of income earned. As the nearby chart illustrates, the marginal rate for millions of low- and middle-income workers would spike as they earn more income.

Some families with an income of $40,000 could lose up to 40 cents in vanishing credits for every additional dollar earned from working overtime or taking a new job. As public policy, this is contradictory. The tax credits are sold in the name of "making work pay," but in practice they can be a disincentive to working harder, especially if you're a lower-income couple getting raises of $1,000 or $2,000 a year. One mystery -- among many -- of the McCain campaign is why it has allowed Mr. Obama's 95% illusion to go unanswered.

Sunday, October 12, 2008

Obama's 143 days of experience

Source: Obama's 143 Days of Senate Experience

Posted By Cheri Jacobus On May 5, 2008

Just how much Senate experience does Barack Obama have in terms of actual work days? Not much.

From the time Barack Obama was sworn in as a United State Senator, to the time he announced he was forming a Presidential exploratory committee, he logged 143 days of experience in the Senate. That's how many days the Senate was actually in session and working.

After 143 days of work experience, Obama believed he was ready to be Commander In Chief, Leader of the Free World, and fill the shoes of Abraham Lincoln, FDR, JFK and Ronald Reagan.

143 days -- I keep leftovers in my refrigerator longer than that.

In contrast, John McCain's 26 years in Congress, 22 years of military service including 1,966 days in captivity as a POW in Hanoi now seem more impressive than ever. At 71, John McCain may just be hitting his stride

Even Chris Matthews of MSNBC calls bullshit.

Wednesday, October 8, 2008

Grab your helmet... the market has crashed

(Some of this is paraphrased and plagiarised, but it echoes how I feel. Nevertheless, it is me talking. - B)

There's a belief we as a society are beyond saving. We all hope this is wrong, but reality is I hear people talk about how they are hurting and the government must do something. If we expect the government to save us, then, yes we are doomed. I am still a relatively young guy, but at no time in my life do I ever recall people so unwilling to help themselves.

When times get tough, banks fail, capitalists make stupid choices, gas prices go up, hurricanes hit cities, the stock market goes down, people can't buy the newest and best toys - whatever it is, they immediately turn to government and tell them to do something... anything. We have grown weak as a nation and as a people. I believe like so many empires before us, we are in the waning days of what was once a great country and pray this is an inaccurate estimate.

There is a tone in the Obama campaign that the rich have placed us in harm's way. The "little man" can't get ahead. It's time to redistribute the wealth, he says. I'm no great student of history, but I think the Bolsheviks tried that in 1917, creating the Union of Soviet Socialist Republic. No, this isn't McCarthyism talking. I'm just saying I'm not rich, and I'm happy to work for my possessions and freedom.

In some of the editorials I read an argument was made. "It's a fundamental reality of human nature that as life becomes easier and better, people tend to become weaker." The media, right along with most of the populace, outrage (and rightly so) over America's financial collapse, pointing fingers at a collective bogeyman called "the rich," while missing the real problem - that a majority of Americans have become weak. If people in the U.S. were strong, anything would be possible. We proved that for more than 150 years of our existence. A weak people, on the other hand, can do nothing. A weak people throws tantrums and makes demands that "the state" restore their trips to Disneyland, dinners at The Cheesecake Factory, and the newest and latest versions of their electronic toys from China."

When you read this I think of Iraq and a quote that said, "There's a belief that America is at war. Wrong. The US Military is at war. America is at the mall."

One thing the American media likes to propagate if FUD - fear, uncertainty, and doubt. No kidding, there's plenty to fear out there. Financial implosion, rising healthcare costs, economic instability, inflation, threatened retirements, unemployment. When it comes to the current situation (banks crashing and financial crisis), Democrats and the media left would lead you, the sheeple, to believe it is all the Bush Administration's fault.

Wrong. It’s this guy’s fault. Alan Greenspan.

It goes back farther, but here’s a small piece of the genesis...

On November 12, 1999, President Bill Clinton signed into law the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act of 1933, which also created the FDIC. One of the effects of the repeal was to allow commercial and investment banks to consolidate. Some economists have criticized the repeal of the Glass-Steagall Act as contributing to the 2007 subprime mortgage financial crisis.

The banking industry had been seeking the repeal of Glass-Steagall since at least the 1980's. In 1987 the Congressional Research Service prepared a report which explored the case for preserving Glass-Steagall and the case against preserving the act.

The repeal enabled commercial lenders such as Citigroup, the largest U.S. bank by assets, to underwrite and trade instruments such as mortgage-backed securities and collateralized debt obligations and establish so-called structured investment vehicles, or SIVs, that bought those securities. Citigroup played a major part in the repeal. Then called Citicorp, the company merged with Travelers Insurance company the year before using loopholes in Glass-Steagall that allowed for temporary exemptions. With lobbying led by Roger Levy, the "finance, insurance and real estate industries together are regularly the largest campaign contributors and biggest spenders on lobbying of all business sectors [in 1999]. They laid out more than $200 million for lobbying in 1998, according to the Center for Responsive Politics..." These industries succeeded in their two decades long effort to repeal the act.

Another “gotcha” is the Community Reinvestment Act.

Take six minutes and watch this video which is a painful indictment of the Democrat's involvement in CRA and its role in our current financial predicament.

And, lastly, read this 1999 NY Times Article which points hard to the Clinton Administration and predicts the calamity of today. Ouch.

In a speech in February 2004,
[1] Greenspan suggested that more homeowners should consider taking out Adjustable Rate Mortgages (ARMs) where the interest rate adjusts itself to the current interest in the market. The Fed’s own funds rate was at an all-time-low of 1%. A few months after his recommendation, Greenspan began raising interest rates, in a series of rate hikes that would bring the funds rate to 5.25% about two years later.[2] A triggering factor in the 2007 subprime mortgage financial crisis is believed to be the many subprime ARMs that reset at much higher interest rates than what the borrower paid during the first few years of the mortgage.

In that same speech, Greenspan had suggested that lenders should offer to home purchasers a greater variety of "mortgage product alternatives" other than traditional fixed-rate mortgages.[3] Greenspan also praised the rise of the subprime mortgage industry and the tools with which it uses to assess credit-worthiness in an April 2005 speech:

"Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country… With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers… Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s."[4]

But what gets me is this - The Fed, even with Greenspan endorsing risky lending, saw this coming.

“Failed economic policies of the Bush Administration,” Obama would have you believe. Hey, Barrack. Guess what.. look to moves made during the Clinton presidency for the source of this country’s woes.

But whether you voted for Clinton or Bush or not. The real culprit is us – the American people. Neither Clinton or Bush or Greenspan advocated that we all go out and buy more house than we could afford. Neither stood on a mountain and said taking Detroit’s 0% financing offer for the truck or SUV was a good or bad idea. WE are victims of our own free will. The unpredictability of rising fuel costs, facilitated by tight supply and a weak dollar (thanks again, Alan), put the squeeze on us and we got caught.

Free enterprise. Capitalism. If the government is guilty of anything it is guilty of not protecting us from ourselves and our insatiable desire for stuff. Time to pay for our mistakes.

Monday, October 6, 2008

An educated decision

Thomas Sowell was born in North Carolina and grew up in Harlem. As with many others in his neighborhood, he left home early and did not finish high school. The next few years were difficult ones, but eventually he joined the Marine Corps and became a photographer in the Korean War. After leaving the service, Sowell entered Harvard University, worked a part-time job as a photographer and studied the science that would become his passion and profession: economics.

After graduating magna cum laude from Harvard University (1958), he went on to receive his master's in economics from Columbia University (1959) and a doctorate in economics from the University of Chicago (1968).

In the early '60s, Sowell held jobs as an economist with the Department of Labor and AT&T, but his real interest was in teaching and scholarship. In 1965, at Cornell University, he began the first of many professorships. His other teaching assignments include Rutgers University, Amherst University, Brandeis University, and the University of California at Los Angeles, where he taught in the early '70s and also from 1984 to 1989.

Sowell has published a large volume of writing. His dozen books, as well as numerous articles and essays, cover a wide range of topics, from classic economic theory to judicial activism, from civil rights to choosing the right college. Moreover, much of his writing is considered ground-breaking -- work that will outlive the great majority of scholarship done today.

Though Sowell had been a regular contributor to newspapers in the late '70s and early '80s, he did not begin his career as a newspaper columnist until 1984. George F. Will's writing, says Sowell, proved to him that someone could say something of substance in so short a space (750 words). And besides, writing for the general public enables him to address the heart of issues without the smoke and mirrors that so often accompany academic writing.

In 1990, he won the prestigious Francis Boyer Award, presented by The American Enterprise Institute.

Currently Sowell is a senior fellow at the Hoover Institute in Stanford, CA.

Just so we have no idea of a hoax
This is the real deal...

- bw

Obama and McCain
Thomas Sowell
Thursday, June 05, 2008

Now that the two parties have finally selected their presidential candidates, it is time for a sober -- if not grim -- assessment of where we are. Not since 1972 have we been presented with two such painfully inadequate candidates. When election day came that year, I could not bring myself to vote for either George McGovern or Richard Nixon. I stayed home.

This year, none of us has that luxury. While all sorts of gushing is going on in the media, and posturing is going on in politics, the biggest national sponsor of terrorism in the world-- Iran-- is moving step by step toward building a nuclear bomb.

The point when they get that bomb will be the point of no return. Iran's nuclear bomb will be the terrorists' nuclear bomb-- and they can make 9/11 look like child's play.

All the options that are on the table right now will be swept off the table forever. Our choices will be to give in to whatever the terrorists demand-- however outrageous those demands might be-- or to risk seeing American cities start disappearing in radioactive mushroom clouds.

All the things we are preoccupied with today, from the price of gasoline to health care to global warming, will suddenly no longer matter.

Just as the Nazis did not find it enough to simply kill people in their concentration camps, but had to humiliate and dehumanize them first, so we can expect terrorists with nuclear weapons to both humiliate us and force us to humiliate ourselves, before they finally start killing us.

They have already telegraphed their punches with their sadistic beheadings of innocent civilians, and with the popularity of videotapes of those beheadings in the Middle East.

They have already telegraphed their intention to dictate to us with such things as Osama bin Laden's threats to target those places in America that did not vote the way he prescribed in the 2004 elections. He could not back up those threats then but he may be able to in a very few years.

The terrorists have given us as clear a picture of what they are all about as Adolf Hitler and the Nazis did during the 1930s-- and our 'leaders' and intelligentsia have ignored the warning signs as resolutely as the 'leaders' and intelligentsia of the 1930s downplayed the dangers of Hitler.

We are much like people drifting down the Niagara River, oblivious to the waterfalls up ahead. Once we go over those falls, we cannot come back up again.

What does this have to do with today's presidential candidates? It has everything to do with them.

One of these candidates will determine what we are going to do to stop Iran from going nuclear-- or whether we are going to do anything other than talk, as Western leaders talked in the 1930s.

There is one big difference between now and the 1930s. Although the West's lack of military preparedness and its political irresolution led to three solid years of devastating losses to Nazi Germany and imperial Japan, nevertheless when all the West's industrial and military forces were finally mobilized, the democracies were able to turn the tide and win decisively.

But you cannot lose a nuclear war for three years and then come back. You cannot even sustain the will to resist for three years when you are first broken down morally by threats and then devastated by nuclear bombs.

Our one window of opportunity to prevent this will occur within the term of whoever becomes President of the United States next January.

At a time like this, we do not have the luxury of waiting for our ideal candidate or of indulging our emotions by voting for some third party candidate to show our displeasure-- at the cost of putting someone in the White House who is not up to the job.

Senator John McCain has been criticized in this column many times, but when all is said and done, Senator McCain has not spent decades aiding and abetting people who hate America.

On the contrary, he has paid a huge price for resisting our enemies, even when they held him prisoner and tortured him. The choice between him and Barack Obama should be a no-brainer.