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I don't really care if you agree or not. Just saying what I think.

Monday, May 17, 2010

Liberal friends - please help me

This is a note to all of my Liberal or left-leaning friends. I am honestly trying to understand a few things that have been coming out of Washington. I am flabbergasted and dumbfounded by some of what is coming down the pipe and I seriously just do not know what I am missing here. I beg you, please help me understand how you can still support this.

1. Nancy Pelosi tells a group of people that it is OK to quit your job because the Gubment's got your back.
In this video:
Link
Nancy extols the virtues of the new Healthcare system and encourages people to just live off the government. Her words are if that you want to become a musician or an artist, it's okay to go ahead and quit your job because you have healthcare.
How is it ever, EVER right to tell people to go ahead and feel free not to work? How is this statement by the Speaker of the House not a Socialist invitation? My argument is that it seems that they want you to quit your job and become dependent on the state in order to expand government to a socialist economy. And if you believe in Socialism or "Social Justice" how do you rationalize that it will work this time despite its complete historic lack of success?

2. Obama wants to punish oil companies, specifically BP.
Link
Let's assume for the sake of this argument that all oil companies are evil. Tell me then, how a tax hike is NOT going to be passed along to you and me in the form of higher gas prices and higher cost of living.
*Note - keep in mind that when gas prices rise, the cost of shipping rises therefore the cost of goods and services rises

3. Lower tax revenue = lower taxes and an awesome economy?
Link
This article starts out:
"Amid complaints about high taxes and calls for a smaller government, Americans paid their lowest level of taxes last year since Harry Truman's presidency, a USA TODAY analysis of federal data found."
If you read on, you find that the federal data used also includes sales tax and property taxes.
There are a couple of things wrong here. First of all the tax burden has been shifted to a smaller portion of the population (read: rich folk). Second, income to the federal government is lower because of a couple of factors:
1. Less workers = less taxes paid
2. Poor economy coupled with inflation = less goods purchased
3. Housing market bust = fewer home sales
To quote one of my favorite economusts,
"It is important to distinguish between a change in tax rates and a change in tax revenues. Because higher tax rates discourage work effort and encourage tax avoidance and even tax evasion, the tax base will shrink as the rates increase. When something is taxed more heavily, you will get less of it. Therefore, an increase in a tax rate causes a less than proportional increase in tax revenue." (Gwartney 2002)
What this really means is that the administration's changes in tax policies have created a stagnant economy which performs poorer than ever. In fact so poor, that we are back to post WW2 levels of tax revenues. Surely the Obama administration is smart enough to know this or are they really this stupid?
In order to take this article seriously, you have to dispute the following statement (which is rife with historical, factual data)
"The critics of the eighties tax policy argue that the top rate reductions were a bonanza for the rich. The taxable income in the upper tax brackets did increase sharply during the eighties. But the taxes collected in these brackets also rose sharply. Measured in 1982-84 dollars, the income tax revenue collected from the top 10 percent of earners rose from $150.6 billion in 1981 to $199.8 billion in 1988, an increase of 32.7 percent. The percentage increases in the real tax revenue collected from the top 1 and top 5 percent of taxpayers were even larger. In contrast, the real tax liability of other taxpayers (the bottom 90 percent) declined from $161.8 billion to $149.1 billion, a reduction of 7.8 percent. These findings confirm what the supply-siders predicted: the lower rates, by increasing the tax base substantially in the upper tax brackets, caused high-income taxpayers to pay more taxes. In effect, the lower rates soaked the rich." (Gwartney 2002)

Please help me understand this. Either this administration is FAIL or I have missed something.

References:
Canto, Victor A., Douglas H. Joines, and Arthur B. Laffer. Foundations of Supply-Side Economics. 1983.

Federal Reserve Bank of Atlanta. Supply-Side Economics in the 1980s. 1982.

Henderson, David R. "Are We All Supply-Siders Now?" Contemporary Policy Issues 7, no. 4 (October 1989): 116-28.

Lindsey, Lawrence. The Growth Experiment: How the New Tax Policy Is Transforming the U.S. Economy. 1990.

Long, James, and James D. Gwartney. "Income Tax Avoidance: Evidence from Individual Tax Returns." National Tax Journal 50 (December 1987): 517-32

Gwartney, James D. "Supply Side Economics." The Concise Encyclopedia of Economics, 1st Ed. (2002)

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