Mitt Romney Just Lost My Vote

If anyone should quit the 2012 race it's Gov. Mitt Romney, not Rep. Todd Akin. Even with the clothespin on my nose I won't be able to do it.

Romney should quit not just for the good of the Republican Party, but for the good of the nation. Surely the Republican convention can come up with someone better than this man Romney, whose political convictions are as uncertain as Barack Obama's biography.

Otherwise Romney is certainly going to lead the Republican Party to defeat in November, just like John McCain did in 2008, and a bunch of us who haven't gone broke already will promptly do so while the likes of David Frum tell us it's no debacle. Only in the Republican Party can conservatism be transformed from opposition to the welfare state in 1965 into support for Medicare as a matter of principle in 2012. And you feared Barack Obama would transform America.

The only thing Romney is proving in the case of Rep. Akin is that Republicans once again don't know how to fight, and don't understand how politics works.

Winning parties like the Democrat Party rally around their own when they are in trouble, and at the minimum do not make things worse for themselves by joining in on the criticism of individuals who make mistakes. A good recent example is Rep. Charlie Rangel who has been censured by the US House but is still standing, and quite happily so. Republicans, by contrast, have a habit of rushing at the first sign of trouble to distance themselves from members who come under fire, and end up isolated and alone, resorting to their own devices to survive.

No one but a fool wants such for friends. The voters can smell that smell for what it is: lack of self-confidence. And then they vote accordingly.

My hunch is Missouri will have a new senator named Todd Akin come November, and America will have another four years of Barack Obama.

We deserve it.

Government Payments Like Social Security/Medicare Consume 89 Percent Of Tax Revenues

The government collects only $2.66 trillion in taxes but spends $2.36 trillion just on Social Security, Medicare, Medicaid, food stamps and the like, summed up as Personal Current Transfer Payments.

If we ran a balanced budget, that would leave just $300 billion for everything else, such as defending the country from our enemies, for which we actually spend about $700 billion currently.

Total current expenditures are running at $3.8 trillion, nearly 41 percent more than we presently take in.

On 1/1/2011 Social Security/Medicare Payments Exceeded Revenues By $329 Billion

Social insurance revenues were $906 billion on 1/1/11, but outlays for Social Security were $703 billion and for Medicare $532 billion on that date, meaning the programs were not self-sustaining, running a deficit of $329 billion.

Romney Has Ryan Reassuring On Medicare Because He Really Needs Florida To Win

The projection (here) back in the second week of April was that 124 electoral college votes were up for grabs in 9 states, with Obama at 233 and the Republicans at 181, who needed at the time 70 percent of the remaining electoral college votes to win.

Today the picture (here) shows the toss-ups reduced to 110 (still in 9 states, though a different mix), Obama up slightly to 237, and Romney up from 181 to 191, who now needs to win almost 72 percent of the remaining toss-up electoral college votes to win, according to the analysis.

In 2008 John McCain lost to Barack Obama because McCain lost in George Bush's red states of Colorado, Florida, Indiana, Iowa, Nevada, New Mexico, North Carolina, Ohio and Virginia (112 electoral college votes) by 1.4 million votes.

A Southern/Western strategy concentrating on Florida, North Carolina, Virginia, Colorado and Nevada would still leave Romney 7 electoral college votes short of 270 if he wins the currently projected 191 in addition.

Romney losing Florida would necessitate winning the 191 plus every one of the states in the toss-up category today, including New Hampshire, hence the recent Medicare emphasis in Florida where many seniors live.

An Eastern Time Zone strategy winning Florida, North Carolina, Virginia, New Hampshire and Ohio in addition to the 191 would give Romney exactly 270.

Rep. Paul Ryan Rejects Conservatism For The Government Dependency Culture

Quoted here:

"When I think of Medicare, it's not just a program, it's not just a bunch of numbers, it's what my mom relies on, it's what my grandma had."

"Medicare was there for our family, for my grandma when we needed it then. And Medicare is there for my mom, when she needs it now. And we have to keep that guarantee."

"But in order to make sure that we can guarantee that promise for my mom's generation, for those baby boomers who are retiring every day, we must reform it for my generation."

Another Voice Saying Rep. Paul Ryan Isn't Serious About Cutting Spending

Peter Schiff:

So what was the Ryan Budget's radical departure from the status quo that has caused such uproar? If enacted today, the Ryan budget would so drastically upend the fiscal picture that the U.S. federal budget would come into balance in just... wait for it.... 27 years! This is because the Ryan budget doesn't actually cut anything. At no point in Ryan's decades long budget timeline does he ever suggest that the government spend less than it had the year before. He doesn't touch a penny in current Social Security or Medicare outlays, nor in the bloated defense budget. His apocalypse inducing departure comes from trying to limit the rate of increase in federal spending to "just" 3.1% annually. This is below the 4.3% rate of increase that is currently baked into the budget, and farther below what we would likely see if Obama's priorities were adopted.

Read the whole thing here.

Ryan Is No Conservative: He Voted For The Biggest Entitlement Program Since The 1960s

Rep. Paul Ryan, Republican from Wisconsin, Gov. Romney's VP nominee, is a huge friend of the welfare state and is no conservative.

Not only did he vote to bail out the banks and everyone else in 2008, in 2003 he voted for the largest expansion of government entitlement since the 1960s when he said "Yes" to Drugs For Seniors.

If he has any principles, they don't animate his votes when it's time to roll back liberalism. Instead, he rolls with liberalism when push comes to shove. Which is why Romney picked him. A man after his own heart he is.

Conservatives don't say "Yes" to Mitt Romney. Conservatives say what they said in South Carolina:

WE DESPISE MITT ROMNEY TO THE VERY CORE OF OUR BEING.

The Left's True Objective Is Higher Taxes On Middle Class: Citizen Cohn Admits It

Say whatever you want about Romney's tax numbers not adding up, the objective of the left in America is to raise taxes on the middle class, precisely because government spending as projected going forward cannot be paid for without it.

So Jonathan Cohn, here:

To reiterate something I've said before, I happen to support higher taxes for the middle class, at least over the long term, assuming they are part of a balanced deficit reduction approach that preserves Medicare, Social Security, and other critical programs. In an ideal world, Obama would make a case for precisely that sort of agenda, because without those higher taxes (above and beyond taxing the rich, as Obama has proposed) government won't have enough money to fund future spending obligations. But it's hard to fault Obama for not presenting the full facts about fiscal tradeoffs when the other side has shown repeatedly that it doesn't care about facts at all.

Conservatives need to make the point that government spending even at Rep. Paul Ryan levels is unaffordable without tax hikes on the middle class.

All the talk in the Republican Party about broadening the tax base is really about eliminating tax loss expenditures in order to raise revenues. In other words, taking away the deductibility of mortgage interest expenses, state and local income tax expenses, and the like. If it walks like a tax increase and talks like a tax increase, it's a tax increase, whether it's brought to you by the Gang of Six, the Gang of Twelve, or Mitt Romney.

The Stupid Party is about to vote for this again and the left knows it, which is why they are so happy. People like Jonathan Cohn know a Romney presidency will help achieve their goal, so it really doesn't matter if Obama loses. Unless conservatives take over the Republican National Convention and give the nomination to someone who will actually protect the middle class, taxes on the 66 percent of America which earns less than $100K per year are going up, up, up.

Conservatives need to remember what happened last time we fell for this gimmickry. Ronald Reagan agreed to eliminate deductibility of consumer interest in the 1986 tax reform in exchange for lower rates. We lost that deductibility and got the lower rates, but when Democrat Bill Clinton raised taxes in 1993, we didn't get back the deductibility. The same thing will happen again. We'll sacrifice deductibility of something else in exchange for lower tax rates, which liberals later will succeed in raising the next time they have power, putting the middle class even farther behind than it is now.

We didn't get back the deductibility lost in 1986 under George Bush in 2001, and we won't in future if we answer the siren call of broadening the tax base again.

Unfunded Liabilities Of State, Local Governments Could Be $4 Trillion Or More

That's what I read in the new State Budget Crisis Task Force Report, here:

Under current assumptions used by actuaries to value liabilities, state and local government pensions are underfunded by approximately $1 trillion. Economists and financial analysts generally believe that liabilities should be valued using “low risk” discount rates, which would lead to much higher liability estimates. Under this approach, estimated unfunded pension liabilities are $3 trillion or more. ...

Most state and local governments have promised, in addition to pensions, substantial retirement health care benefits to their workforces. These benefits have barely any funding. In addition to health care, sometimes there are other benefits provided in retirement, such as life insurance; in combination all of these are known as “Other Post-Employment Benefits” (OPEB). Until the Governmental Accounting Standards Board in 2004 issued standards requiring disclosure, governments did not regularly make these liabilities public. ...

State-administered OPEB plans have unfunded liabilities of more than $600 billion. Similar liabilities for locally administered plans are likely even larger, since local workforces are almost three times as large as state workforces. The combined state and local government liabilities are likely to be well above $1 trillion. If the federal government increases the eligibility age for Medicare, OPEB liabilities could increase further, because state and local government retiree health plans generally provide substantial benefits for the transition period between retirement (usually under age 65) and eligibility for Medicare.

Most governments fund these benefits on a pay-as-you-go basis rather than contributing to a funded plan.

The New York Times discusses the report, as reproduced here.

Municipal bond investors will want to weigh seriously this language from the report:

Recently, the number of municipal bond downgrades for governments has outnumbered upgrades. States are finding it difficult to ignore their local governments’ increasing fiscal distress. A few states, including North Carolina, New Jersey, and Pennsylvania, have well-established, effective procedures for monitoring and assisting local governments before they encounter acute fiscal distress . . .. More recently, Michigan has established significantly expanded oversight procedures. But most states wait until local governments approach fiscal insolvency or seek aid from the state before intervening. There appears to be growing recognition in the financial community and the states themselves that state monitoring, supervision, and early state involvement in solving local government fiscal problems is sound policy for both levels of government. But it will require skilled political leadership at the state level to overcome local government resistance to what localities often regard as intrusions on their right to self-government.

Conservatism Has Never Meant So Little, Especially to the Likes of Pete Wehner

Or, to put it another way, today's neo-conservative idea of fundamental change means a return only to the spending trend line assumed by Rep. Paul Ryan's budget, established in the 1970s.

As if such a reaction against the nearly vertical spending trend, first of George W. Bush in the 2000s and then the even worse one of Barack Obama after him, would represent an achievement.

(See the discussion illustrating the differences, here.)

I refer, of course, to Peter Wehner's post at Commentary, here:

The single most important [!] idea, when it comes to fundamentally changing Washington, is the budget plan put forward by Representative Paul Ryan last April. When most massive-scale-of-change [!] conservatives were defending Ryan’s plan against scorching criticisms from the left, Gingrich described the plan as an example of “right-wing social engineering.” It was Gingrich, not the rest of us, who was counseling caution, timidity, and an unwillingness to shape (rather than follow) public opinion. (The Medicare reform plan Gingrich eventually put out wasn’t nearly as bold and far-reaching as the one put out by Governor Romney.)

So much for Mr. Fundamental Change.

This is the problem with a conservatism which has no imagination, although its implicit repudiation of the dramatic spending under George W. Bush is rather refreshing considering where it comes from.

Be that as it may, after a leftist Obama lurches the country dramatically toward oblivion, any pull-back from that instantly becomes fundamental change, when all it is, once achieved, is really just a pale reflection of what real conservatism might actually have looked like.

Newt's formulation has been interpreted with the emphasis all on the "right-wing" idea of the formulation, when it's the "social" which I think was his real target.

Speaker Gingrich was mocking today's right wing for its lack of imagination, as if codifying social welfare spending at a somewhat reduced level represented an achievement. When his taunt was misunderstood and quickly became toxic to him, he realized he had no political recourse but to recant and change the subject. The truth had become the enemy of the political, which is why professors have so little impact. Believe me, it frustrates the hell out of them.

Regrettably, most of us on first blush assumed Speaker Gingrich meant his criticism from the left, and, horror of horrors, that he now supposedly lived there. No one wanted to give him the benefit of the doubt and believe his was a criticism from the right.

I know I didn't.

On further reflection I suggest Speaker Gingrich meant to criticize Ryan's plan because it represented a conservative codification of big government (albeit on a smaller scale than Obama was implementing at the time). He meant thereby to criticize it as an (unacceptable) truce with the post-war consensus for Social Security, Medicare and their iterative expansions under Republican and Democrat administrations.

Consider that the trend line of spending of the status quo ante Obama was itself a radical departure from the post-war period, and even from that established in the 1960s. The new and truly radical trend began after the recession of 1974. Real conservatism, if it could exist at all, would seek to recapture the post-war trend lines of spending before 1974, but Paul Ryan's plan is nothing more than a return to that untenable trend.

A Newt Gingrich presidency might make such episodes of misunderstanding a more frequent occurrence, but from the look of things Americans appear instead to be hoping for the bell to ring so they can get to the next class, which will be, thankfully, lunch, study hall, or possibly human health and hygiene.

I, for one, hope Newt sticks around to keep entertaining the thinkers in the class.

But we're most probably going to end up with a very boring president instead of him, not unlike the one we have now.

Probably the same one. 

Ronald Reagan Was No Conservative: He's Responsible For The Healthcare Mess

Treatment regardless of ability to pay is all his fault, along with a number of other things:

The Emergency Medical Treatment and Active Labor Act (EMTALA) is a U.S. Act of Congress passed in 1986 as part of the Consolidated Omnibus Budget Reconciliation Act (COBRA). It requires hospitals to provide care to anyone needing emergency healthcare treatment regardless of citizenship, legal status or ability to pay. There are no reimbursement provisions. Participating hospitals may only transfer or discharge patients needing emergency treatment under their own informed consent, after stabilization, or when their condition requires transfer to a hospital better equipped to administer the treatment.

EMTALA applies to "participating hospitals." The statute defines "participating hospitals" as those that accept payment from the Department of Health and Human Services, Centers for Medicare and Medicaid Services (CMS) under the Medicare program. However, in practical terms, EMTALA applies to virtually all hospitals in the U.S., with the exception of the Shriners Hospitals for Children, Indian Health Service hospitals, and Veterans Affairs hospitals. The combined payments of Medicare and Medicaid, $602 billion in 2004, or roughly 44% of all medical expenditures in the U.S., make not participating in EMTALA impractical for nearly all hospitals. EMTALA's provisions apply to all patients, and not just to Medicare patients.

The Increase in the Wealth Gap is Due to the Housing Collapse

The latest figures from the Federal Reserve (link: compare lines 4 and 42) show that enormous wealth destruction in housing is the overwhelming cause of the dramatic decline in household net worth between 2006 and 2011.

Of the $7.8 trillion decline in net worth over that period, $6.6 trillion of that is all from the bursting of the housing bubble . . . nearly 85 percent.

Hurt most by this are the millions of middle class Americans whose primary asset is their home. Desperately trying to hold on to what they have, by scrimping, saving and working, they don't have the luxury of time to occupy much of anything to protest what is happening to them.

It is impolitic to say so, but their plight is the frequent one of the undiversified investor: too many eggs in one basket.

But that's not a bug, it's a feature of entering the middle class, whose goal is owning a home and raising a family in it, not sophisticated money management and investing. Such people who can scrape together the income of $40,000 to $50,000 necessary to support home ownership typically aren't going to have significant financial assets to manage. Of the 150 million wage earners in America, after all, fully 99 million make $40,000 a year or less.

Neither Obama nor the Republican candidates for president, nor Occupy Wall Street or the Tea Party for that matter, seem to talk much about any of this, yet the collapse of housing better explains the growing gap between rich and poor in America than do the supposed crimes of the one percent. The rich may be getting richer, but it's inspite of the fact that their own homes have declined in value, too. The middle class is being squeezed downward because its primary asset continues to lose value.

The deep frustration of so many of the American people with their elected leaders is that the leaders really don't represent them in this matter, in the same sense that sympathizing with, understanding, or trying to fix this problem doesn't have the urgency for them anymore than it does for the rich. The reason is that virtually none of them has personal experience of it. From our president to our senators and all the way on down to our representatives, we have leaders whose own high net worth and the insulation from our vulnerabilities that that affords make them remote, unfeeling, and unmotivated.

In point of fact, since it was Democrats and Republicans who conspired in the very policies which have misled Americans to drain $10 trillion in home equity over three decades (for example, dramatic changes to tax and banking policy in 1997 and 1999 under Bill Clinton, Newt Gingrich and Phil Gramm), it shouldn't be surprising that none of them really wants to talk about this gorilla in the living room. They helped make and sell the bed we're now sleeping in. And we bought it.

Of about 132 million total dwellings in 2010 of all types (table 3), just 61 million occupied dwellings are single family homes occupied by their owners, with an additional 11 million occupied by renters, according to the latest Census data here (link). That means something substantially less than 46 percent of total dwellings in the country could plausibly represent the American dream of the traditional middle class. The richest quintile, those households making over $100,000 per year, let it be remembered, lives in houses, too.

The Economic Policy Institute, whose president is a socialist, here (link) provides a useful summary of how wealthier individuals avoided the severity of the housing decline precisely because more of their assets were diversified and were not all riding on real estate (emphases added):

In 2007—prior to the Great Recession—median net worth was $106,000 (consisting primarily of home equity, as discussed later). ... Net worth for the top 1% was $19.2 million in 2007 . . ..

The updated figures for 2009 reflect the enormous destruction of wealth due to the bursting of the housing bubble. As a general rule, households with less wealth have a greater share of their wealth embedded in their homes. Thus, it is not surprising that the fallout from the deflating housing bubble disproportionally affected them. On average, the top 20% lost 16.0% and the bottom 80% lost 25.1% of their total wealth in 2008 and 2009. Average wealth of the bottom 80% was just $62,900 in 2009—a dropoff of $40,900 from 2007 and slightly less, in inflation-adjusted terms, than it was more than a quarter-century ago in 1983. Those at the top also lost ground but not nearly as much, percentage-wise. Average wealth of the top 1% was close to $14 million in 2009, down $5.2 million from 2007. ...

[H]ousing equity is a far more important form of wealth for most households. ... In 2007, the middle 20% of households held $196,700 in non-stock assets, and only $10,200 in stocks. In other words, non-stock assets—which are over-whelmingly housing equity—made up about 95% of this group’s wealth.

In the United States homeownership has long been associated with solid footing on the economic ladder, and yet the housing crash has meant that for a broad swath of people homeownership is no longer a reality.

The stepping stone from the lower and working classes to the upper classes, obviously, is the middle class. Very few skip that step, on the way up or on the way down. Rags to riches and back to rags again is interesting, but not common. Rich liberals from both parties, however, have a vested interest in minimizing the middle class to polarize the country. Rich Republicans and Democrats alike don't want the competition entrepreneurial Americans threaten them with, and leftist Democrats need a servile, manipulable constituency they can feed table scraps to in order to keep themselves in power. Some so-called conservative Republicans also, it must be said, seek their own fiefdoms of influence and power at the expense of impulses to limited government. George W. Bush's play for senior votes with Medicare Part D comes to mind.

What middle Americans should demand is a bigger House of Representatives to co-opt these entrenched interests by de-concentrating the power which the 435 now enjoy. Tea Partiers in particular should be advocating a return to the constitutional principle of one representative for every thirty-thousand of population, if their protestations to originalism mean anything. Instead of the bloated, rich and corrupt 435 politicians we've been stuck with for a hundred years, we should have 10,000 lean citizen legislators.

When we get them, things will begin to change for the better because our representatives will have far less power and far more reason to listen to the people. Special interests will have much less influence over them, campaigns will be far less costly, and Congressional staffs could be reduced dramatically, saving us money and getting some actual work out of our politicians for a change. The move would also take away the enthusiasm for radical proposals such as the elimination of the electoral college by dramatically expanding the pool of electors in presidential elections.

We might even persuade such a House to overturn the 17th Amendment, another blow for originalism, which would help improve the US Senate almost overnight. By returning the corrupting influences of campaign cash to state houses where senators would be appointed, we might actually be able to do something about corruption more often because it would be closer to home and we'd be more aware of it.

The Broadest Tax Base Which Can Possibly Be Imagined Implies a Tax Rate of 6.2%

Herman Cain's 999 Plan is focusing attention on the perennially perplexing problem of taxation for the American electorate in 2012. His plan has brought questions about broadening the tax base for tax reform front and center, including: What tax base is large enough to generate adequate federal revenues? and: What rate of taxation is fair?

Herman's big idea is to scrap the entire tax code and start over with three new bases taxed at the same low rate for a temporary period of time, eventually transitioning the country permanently to just one of these bases, taxed at a much higher single rate.

His scheme is quite conventional in that it looks to the existing traditional bases of taxation with which we have been familiar for decades: corporations and individuals.

What is new, however, is the national sales tax, the base for which was fairly sizable in 2008 at $10.1 trillion in personal consumption expenditures [PCE], and running at almost $10.8 trillion annualized through August 2011.

Currently the overwhelming burden of taxation falls on the individual filer whose personal income is taxed in order to provide Social Insurance and Federal revenues, which in 2011 are currently running at an annualized rate of $2.3 trillion, as shown here by the Bureau of Economic Analysis. Corporations, excises and tariffs provide puny sums by comparison: less than $500 billion in 2008.

This means that in 2011, Herman Cain's ultimate idea of taxing consumption to replace current revenues of approximately $3 trillion would imply a national sales tax rate of 28 percent on $10.8 trillion in goods and services expenditures this year. That's a pretty hefty rate by comparison with present conditions.

Currently the personal income base on which we exact that $2.3 trillion in Social Insurance and Federal taxes is just over $13 trillion. This implies an overall tax rate of 18 percent. If personal income in that aggregate amount had to do all the pulling to generate the full $3 trillion in revenues, personal income would have to be taxed at a rate of 23 percent to do the same thing as the consumption tax. Not as high, but still much higher than the 9 percent Herman Cain has called for currently, if only temporarily, in deference to the God of the Bible who asked for just 10 percent from his chosen people.

By way of comparison, if there were some way to easily tax GDP, currently running at $15 trillion, the effective tax rate would have to be 20 percent.

So is there a tax base which is broader still, from which we can derive the necessary sums and get that rate even lower?

Given that people by definition receive income in consequence of the conduct of business of one kind or another (aside from gambling, prostitution and bank robbery), it seems reasonable to look at the size of the various tax bases available strictly from businesses, without whom none of the other tax bases would exist in the first place. If we really mean it when we say we want to tax income only once, we need to go to its source, and for nearly everyone in our society, that source is business.

Corporations in 2008 had total receipts of $28.5 trillion, 2.8 times the size of Herman Cain's PCE tax base. It would have taken a gross receipts tax of merely 10.5 percent on this sum to have generated $3 trillion in tax revenue in tax year 2008, a year when revenues were actually lower at $2.5 trillion. That implies a gross receipts tax of only 8.8 percent on corporations in 2008.

In such a world, there would be no more income taxes on individuals, no Social Security or Medicare taxes either, and no capital gains taxes nor taxes on investment income or savings of any kind, and government would not go wanting. Nor would business be constrained by other taxes and fees imposed on it if we were to throw out the current code and replace it with this simple levy.

But the base could be made broader still in order to lower the effective rate even more.

Add in partnerships, which had $5.9 trillion in total receipts in 2008. And S corporations, which had $6.1 trillion in total receipts in 2008. Both of these added to corporation total receipts yields a gargantuan tax base for 2008 of $40.5 trillion in gross receipts.

All of that could have been taxed at a mere 6.2 percent to meet the federal revenue of $2.5 trillion collected in 2008.

No more talk of a flat income tax, nor of a progressive income tax, nor of a consumption tax. No more compliance costs of $450 billion because of the current code. No more lost time equivalent to 3 million full time jobs.  Just one, low, simple, rate on business. That's it.

In addition to God, John Tamny might go for it, too:

"The answer as always is for the government to simply get out of the way. If it must tax corporations, its taxation should be blind in the way that justice is. A flat gross receipts tax would make all corporations equal before the IRS. That would ensure the most economic allocation of capital on the way to rational, market-driven growth."

Bill Clinton's Middle Class Tax Increase Meant the Rich Got a Bigger Piece of the Pie

Mark Perry seems to have missed a good story.

He's been talking recently about how the income share of the top 20 percent has been FLAT since 1994, as shown here.

What's more interesting, however, is the oddity that his charts show that the income share of the top 20 percent experienced a pronounced spike up between 1992 and 1994, which includes the first two years of the Bill Clinton administration.

Why did the richer get a bigger share of the income pie after Bill Clinton raised taxes on them in 1993?

Top marginal income tax rates had declined from 38.5 percent in 1987 to 28 percent in 1988, as shown here, and in 1991 another higher rate of 31 percent was added under Bush 41. But under Clinton in 1993 an additional marginal rate of 39.6 percent was added with the help of the Democrat controlled Congress. So higher marginal income tax rates prevailed, but the richer nevertheless got a bigger share of the income.

That doesn't make any sense. How did that happen?

The answer is Clinton's middle class tax increases.

For one thing, the cap on income subject to Social Security taxes was raised. That bumped up the limit on incomes on which the tax was levied. A tax increase for all wage earners. For another thing, the cap on income subject to Medicare taxes was removed. That meant no ordinary income could escape the tax any longer. Another huge tax increase. And thirdly, Social Security income beyond 50 percent up to 85 percent became subject to income taxation. Anyone taking Social Security income felt this, not just the rich. Another huge tax increase.

These were massive tax increases on wage earners, as opposed to those richer Americans who could take their income differently if need be, often in the form of capital gains, or from tax-free municipal bonds, or from tax shelters.

The net effect of the Clinton tax increase was that just about everyone in the four quintiles below the top 20 percent lost ground on income, which meant that the rich appeared to spike up in their share of the income pie. The regimentation in law of the tax increases on everyone altered and froze the aggregate shares of the income pie going forward, hence the flatness of those charts since 1994.

The truth was that Clinton's tax increase on the richer, who ended up shifting income to avoid taxation, masked a massive tax increase on everyone else, who couldn't shift their income if they wanted to, and they've experienced a smaller bite of the income pie ever since.

That's what expanding the tax base in tandem with raising rates will do.

Republicans, take note.

Herman Cain Comes Closest to a True Flat Tax

So says Stephen Moore for The Wall Street Journal, here, pointing out that FICA taxes do go in the shredder under Cain's 999 plan:

But the candidate who comes closest to a true flat tax is Herman Cain, the former Godfather's Pizza CEO. His argument for a "9-9-9" plan puts the current income and payroll taxes in the shredder and replaces them with a 9% personal income tax with no deductions, a 9% net business income tax, and a 9% national sales tax.

That would be rocket fuel for the economy, though the combination of a federal sales tax and an income tax is a big worry. But at least Mr. Cain has super-sized solutions to an economy with super-sized problems.

Solution? In 2008 Cain's 999 plan would have meant 900 billion fewer dollars in receipts for federal social insurance. I don't see how he could make up that difference, let alone an additional $300+ billion he comes up short compared to what was actually collected in 2008.

It looks more like a stealth plan to bankrupt Social Security and Medicare by ignoring it.

• A 9 percent tax on $8.50 trillion in adjusted gross incomes in 2008 comes to $765 billion (actual collected in 2008 was $1.03 trillion).

This is actually a huge tax cut on the wealthy and a big tax increase on everyone else. And does Cain intend to do away with deductions even for IRAs and 401Ks? If so that AGI number would be much higher, and the tax revenue higher, along with your tax bill. At least the billionaire will pay the same rate as the janitor, as Obama now famously says he wants.

• A 9 percent tax on $1.25 trillion in corporate profits comes to $113 billion (actual collected was $309 billion).

This is a huge tax cut on business, which is why Stephen Moore calls Cain's plan rocket fuel.

• A 9 percent tax on $4.40 trillion in total retail and food service consumer spending in 2008 comes to $396 billion. 

Does Cain intend this to be wider in scope than indicated? It is often said that 70 percent of the economy is consumer spending. In a $15 trillion economy, that's $10.5 trillion. A 9 percent tax on that would boost the receipts of a national sales tax to $945 billion.

But all told, Cain's plan would have collected only $1.274 trillion in federal revenue for 2008 when the government actually collected $2.5 trillion and still ran a deficit of close to $400 billion anyway.

We're currently spending $3.8 trillion in this country under Obama, $1 trillion more than in 2008. The 999 plan doesn't look up to the task.

'Social Security's Long-Term Shortfall Grows About $1.2 Trillion Annually'

And by "long-term" the meaning is about 18 years.

So said Dennis Cauchon late in the spring for USA Today, here:

Social Security's long-term shortfall grows about $1.2 trillion annually — a sign of an imbalance between the number of young workers and older beneficiaries, according to the Social Security trustees' annual reports. The $21.4 trillion unfunded liability represents the difference between all taxes that will be paid and all benefits received over the lifetimes of everyone in the system now — workers and beneficiaries alike. This is the measure corporations and insurance companies use to assess financial adequacy of their retirement programs.

What this means is that this year and every year for the next two decades or so social security will be in the red annually to the tune of about $1.2 trillion, and government will have to borrow the funds to pay for that annual deficit spending.

Put another way, the social security scheme is a Ponzi scheme writ large. The pool of early fools putting up the dough for the few early, and very lucky, investors has now dried up so much that the program will run in deficit mode annually going forward, just like the rest of government has for years.

This will add significantly to the national debt, driving up interest payments on that debt and severely crimping the government's other spending options without massive injections of new revenues, aka higher taxes on the people.

In the short term, the $2.6 trillion in the social security trust fund (intragovernmental debt) would disappear in relatively short order under this analysis, say roughly in just over two years from now, except that the monies are invested in a mix of shorter and longer US Treasury securities which will reach maturity over a more or less longer period of time and thus force the program into deficit much sooner because redemptions are barred, compounding the pressure on the availability of funds for current year government spending.

Obama Talks Again of 'Balanced Approach' Meaning New Taxes, Market Tanks

CBS News reported here at 2:36 pm on the president's remarks made today after the lunch hour:

Mr. Obama noted that S and P attributed its downgrade in part to doubts about the U.S. political system's ability to act to reign in the nation's ballooning deficit and debt, and called for a "balanced approach" to deficit reduction - one that includes both tax increases on high earners and "modest adjustments" to Medicare and other health care programs.

At 1:47 pm the S and P 500 was down 56 points. At 2:18 pm it was down 67 points. By the close it stood at nearly 80 points down for the day:

Another Voice Wrongly Claiming 'The Money is in the Middle'

Brian Wesbury at The DC, here:

What most people don’t realize is that the U.S. has gorged so much (boosting spending from roughly 18% of GDP in 2000 to 24% of GDP today), that the only way to pay for it is to tax the middle class. ...

The money is in the middle. And the only way our politicians can get it is to follow Europe’s lead and institute a national sales tax or Value-Added Tax (VAT). This is the elephant in the room that is never talked about. Those who are using the debt ceiling in an attempt to cut spending are actually saving the middle class from tax hikes — not the millionaires and billionaires.


It's a frequently repeated claim that the money is in the middle, but it's just not true, no matter how often  it is said.

If all the (reported) income in America were poured into a giant hour glass, you'd have to start it and wait about twenty minutes to begin to visualize how all the money is actually distributed.

A snapshot taken at that moment would show $5.7 trillion in adjusted gross income still in the top, and $2.8 trillion in AGI in the bottom. The kicker is that 35 million tax returns split what's on top, while the remaining 105 million tax returns, 75 percent of the total, divvy up what's on the bottom.

The money's definitely not "in the middle."

It's hard to get agreement on what's middle class in America, especially since it is a conceit of our society that everyone is middle class. The rich aspire down to it to escape notice, the poor up to it to escape the indignities of dependence.

But no matter what smoke anyone tries to blow up your bottom, the biggest single pile of money remains with the top 25 percent:

Top 10 percent = 14 million tax returns (10 percent of the total) = $3.9 trillion in AGI
The next 25-10 percent = 21 million tax returns (15 percent of the total) = $1.8 trillion in AGI

The next 50-25 percent = 35 million tax returns (25 percent of the total) = $1.7 trillion in AGI
The bottom 50 percent = 70 million tax returns (50 percent of the total) = $1.1 trillion in AGI.

It's ridiculous to think that a VAT tax will somehow generate huge piles of new tax revenue on the backs of the middle class.  The VAT will hurt them just like Social Security and Medicare taxes hurt them because it's regressive, not because they have a lot of untapped money they're going to be parting with.

Considering how much tax evasion there already is in America of the unreported income variety, variously estimated (here at $2 trillion, resulting in a tax gap of $500 billion), a VAT will fail simply because it will drive more and more of the economy underground where cash is king and credit cards, checks, invoices and receipts are anathema. Think of it as the inverse of how the rich escape high rates of taxation, for example by shifting to capital gains away from ordinary income. A quicker way to become Greece I cannot think of.

Setting money free to move around openly is the key to an effective tax policy. But bringing it out into the open where it can be captured and taxed depends on perceptions of fairness.

As long as too many people think some people should pay taxes at a higher rate just because they have more, we're not going to get there. 

Will Government Be Short $134 Billion In August as Bob Brinker Claims Today?

He made the claim on his radio show, "Money Talk." See the recap here.

Others, as for example here, maintain there's plenty of cash flow to pay for everything critical both in law and for creditworthiness:

"The Daily Treasury Statement for June 30—which any American, including the president, can look up on the U.S. Treasury Department’s website at this link—says the government took in $196.994 billion in revenue during the month ... more than enough to pay not only all Social Security benefits and veterans benefits and programs for the month, but also, on top of that, the interest on the federal debt, Medicare, Medicaid, the Indian Health Service, Temporary Assistance to Needy Families, all federal workers’ salaries, federal workers’ insurance benefits, Justice Department programs, and Defense Department venders.

"The combined costs for all of these federal expenditures in June was $195.502 billion.

"That means that out of the federal government’s $196.994 billion in revenue in June, the government would have had a surplus of $1.492 billion after it had paid the interest on the national debt, plus all Social Security benefits, veterans’ benefits, veterans’ programs, Medicare, Medicaid, the Indian Health Service, Temporary Assistance to Needy Families, federal workers’ salaries, federal workers’ insurance benefits, Justice Department programs, and Defense Department vend[o]rs."


Isn't it the potential of cutting off the cash cow for extraneous government spending which really has liberals like Brinker in a fit? After all, he called Senator Harry "The War is Lost" Reid of Nevada "a good man" more than once on his show. Brinker loves the guy.

How is it that Brinker can assert, as he did today, that advocating against raising the debt ceiling, as certain Republicans are doing presently, disqualifies one for the presidency when Obama actually voted against raising the debt ceiling in 2006, along with all the rest of his Democrat colleagues in the Senate? The Roll Call vote is here.

The minions of liberals in the federal workforce might actually have to THINK going forward and prove their competence for their exorbitant salaries by PRIORITIZING spending for a change if Republicans muster the courage to force them TO DO THEIR JOBS and leave the debt ceiling where it is. Raising the debt ceiling is the true default: It means you can't pay your bills without more borrowing.

Maybe Bob Brinker is afraid the Democrats are not really up to it. They certainly haven't been in the past. We're still waiting for a budget proposal from the Senate. The Senate under Reid hasn't passed one in over two years.

'If Obama Cuts Medicare or Social Security, I'll Vote Communist'

Chicagoan Mary Ellen . . . Croteau was asked if she would still vote for Obama, "No I won't . . .. Not if he cuts Medicare and Social Security. I'm 61. I'm looking at retirement in a few years."

". . . I will vote for someone. Whether it's a Green candidate, whether it's a Communist, I don't care. Somebody who's going to stand up for people. This is disgusting. [Obama] has given away everything he pledged to stand for."

Read the full entry here.