Do High Taxes Slow Growth?

(This is my response to a piece which appeared in the Wall Street Journal April, 24th on the Opinion page.  The original can be found here.)       

Peter Diamond and Emmanuel Saez make a weak case in “High Tax Rates Won’t Slow Growth” (April 24).  Unfortunately, economic statistics are not like baseball statistics; they cannot be compared over long periods of time without significant adjustment.  In baseball, statistics are easily compared going back decades since the variables have mostly remained constant.  Not so with pre-tax income, overall growth rates, or any other economic statistics which have undergone infinite variable changes and need to be put in the proper historical context.  

For example, the authors begin by saying; “The share of pre-tax income accruing to the top 1% of earners in the U.S. has more than doubled to about 20% in 2010 from less than 10% in the 1970s.”  What the authors omit is that back in 1970 there were very few S Corporations and today there are about 5 million.  S Corp. income is reported on individual tax returns thus inflating the reported incomes of S Corp. shareholders.  Diamond and Saez do not indicate that they have corrected for this, and if not, their opening premise is flawed.

   

A similar flaw taints their main point, which is that; “…growth…averaged 1.68% between 1980 and 2010 when top tax rates were relatively low, while growth averaged 2.23% between 1950 and 1980 when top tax rates were at or above 70%.”  As I recently heard Charles Krauthammer point out, Europe and Japan were still smoldering ruins in 1950!  Also, India and China were not playing on the world stage, the U.S. had modest regulations, and Americans were known for their work ethic.   

I would prefer economists find a more unified measurement which would encompass all taxes, regulations, laws, and trade issues affecting economic activity.  Hard as that might be to do, we could then compare 1950 with 2012 just as we do in baseball.

The G.E. Rule is still Right

 I've written before about how G.E. is Right in not paying taxes:

You may have seen that GE, despite having a massively profitable year, will pay zero federal income taxes for 2010.  That’s right, less than you!  And this is the second year in a row.  I have no love for GE and its hearty embrace of crony capitalism, but they are doing the right thing by not paying any taxes. How can I say this? Because I believe no business entity should pay taxes, and that includes behemoth GE.

Let me ask you a question: How many people do you think would die of cancer each year if all cancer cells could be somehow trained to start growing on the tip of your nose? Every morning the first thing you would do is look in the mirror and see if you had any cancer. If you saw something, you would immediately have it removed. That would be the end of cancer, right? 

The price of runaway government today is like cancer in that it hides undetected until the symptoms begin. By then, it’s often too late. If every citizen woke up every morning and could see the true cost of runaway government on the tips of their noses, they would never allow it to metastasize, and that would be its ultimate demise.

Business taxes are a good example of this disease. The fact is, businesses don’t actually pay taxes. Citizens do. Businesses merely collect taxes and pass the cost along to the next entity in the supply chain until an ultimate “end-user” buys the product and pays the cumulative tax. Economically literate politicians, (an oxymoron) know this full well, but will never end stealth taxes unless forced to because they are a perfect way to ensure that the cancer they caused stays undetected. 

Today, Jeff Immelt addressed this issue, but claimed the reports were wrong, and asserted G.E. did pay taxes.  That's a shame.  Regardless of the facts, I'd have preferred he embrace my G.E. Rule, which states that no business should pay more taxes than G.E., which allegedly pays zero.  "The G.E. Rule" would solve "The Buffett Rule" along with a plethora of other economic issues:

• Unemployment would plummet

• Growth would flourish

• Capital would flood into the US

• Your pay would go up

• Your company would be able to compete with the Big Boys who currently get special treatment

• It would end the deduction for employer health insurance freeing you to make your own health choices  

• You could leave your job and your health insurance would go with you 

• Obama’s  Buffett Rule could be satisfied as it would end double taxation on dividends and  capital gains which could then be taxed at the same rates as income 

• Overseas profits could be repatriated instantly

• It would end taxation without representation for businesses 

• It would deal a serious blow to Stealth Taxes (more taxes would be transparent to voters once and for all)

• Most corporate lobbyists would be out of a job

• Crony capitalism would be seriously curtailed

• Prices on all goods and services would plummet 

• Stock bubbles, like the Tech Bubble of the 90s, would not happen as stocks would be rationally valued and taxed once at the individual level.   

• Companies, even Warren Buffett’s Berkshire Hathaway, would pay dividends!

Of course your taxes would go up, but that would alert you to the TRUE size of government and how long would it be before you did something about that?

Jeff Immelt should be defending G.E.'s tax avoidance instead of denying it.  

Oil Speculation Explained

Oil Speculation Explained via Colombian Hookers

This Piece is not about Race or Racism

I thought about writing a piece about race and racism, but decided against it.  It’s just too hot.

If I had, I’d have written about the race prism through which Blacks and Whites can see the same event, like OJ Simpson and the Trayvon Martin shooting, in such different ways.

I thought I’d start by talking about my experience during the OJ Simpson trial:  Back then, I ran a company of about 100 employees split evenly between Blacks and Whites.  On the day of the OJ verdict, we put televisions in the lunchroom so that everyone could watch it live.  When the not-guilty verdict was read, the Blacks unanimously cheered and celebrated, while the Whites were unanimously depressed.  Then we all went back to work as if nothing had happened.  But, it forever changed my perspective on the racial divide. 

 

I thought about writing about that continuing dichotomy and the Trayvon Martin case.  How could the races see the same circumstances and come up with such disparate and unanimous conclusions?  (The Trayvon Martin case is mostly conjecture at this point, but nothing will change once the facts come out.  Trust me.)

If I had written about race, I’d have talked about how “culture” is the sum total of all the experiences of a group going back in time.  For instance, in the case of Blacks and Whites, I would have obviously pointed to slavery as the main cultural  point of departure in America. 

With that in mind, here’re some relevant facts from 1860, just prior to the Civil War:

• Virtually all Blacks in 1860 were either slaves, recently freed, or had slavery in their immediate ancestry.
• According to the US census, only 2% of Whites owned slaves nationwide in 1860.

It’s safe to say 150 years later, after multiple waves of immigration, and the civil rights gains of the 1960s, the cultures have not merged:

• Black culture, attitudes, and world-view in America are still 99% affected by a direct lineage to slavery.
• White culture, attitudes, and world-view in America are 99% detached from any direct lineage to slavery.

In other words, 99% of Blacks in America are the cultural descendents of slaves, and 99% of Whites are the cultural descendents of people who never owned slaves!   That does not put Blacks and Whites at opposite ends.  That puts them 200% apart; they occupy two different planes!

So what about discrimination, something Blacks have always dealt with in America? 

Unfortunately, discrimination is a human constant and not limited to White or Black Americans:

• Within African cultures, where virtually everyone is of shared ancestry, there is widespread discrimination and a caste structure.  
• In China, where virtually everyone is of shared ancestry, there is widespread discrimination and a caste structure.   
• In India, where virtually everyone is of shared ancestry, there is widespread discrimination and a caste structure.  
• I could go on about every single culture throughout history.

In other words, discrimination is a human constant and cannot be explained as racism.  That doesn’t make it any less real, but it does suggest that blaming it on race is intellectually lazy.

  

Why, I would have asked, had I written about this, did Barack Obama get a higher percent of the vote than recent White Democrats Bill Clinton, Al Gore, and John Kerry?  Perhaps discrimination here is based on something other than race, just as it is around the world?  Perhaps we are similar to other cultures, only exceptional perhaps in that discrimination here can be overcome by ability and achievement?

      

I thought I’d write about all this, but then I decided not to.  This message is probably just too hopeful and too controversial, all at the same time.      

It's Likability Stupid!

"If all you have is a hammer, everything looks like a nail."  This nugget of psychology, often attributed to Abraham Maslow, is particularly relevant to today's politics.

Two cases in particular:  

On one side is all the conservative hand-wringing over Mitt Romney's apparent victory in the GOP primary.  Conservative analysts are almost unanimous in their disdain for Mitt Romney claiming he is not a "real conservative" and will certainly lose a general election like other "moderates" John McCain, George H. W. Bush, and Bob Dole. 

In the telling of these analysts, Ronald Reagan's victories were all about ideology and contrast.  According to them, the American people got all analytical, just like them, and carefully weighed the policies of the candidates.  In the end, after all the analysis, they were won over by the sensible, logical conservative policies of Ronald Reagan.  Bunk.  

Reagan got elected because the American people liked him.  If ideology and contrast were the winning formula, Barry Goldwater would have been President too!  

On the other side, Barack Obama is making a similar error.  He got elected in 2008 because the American people liked him, not because they liked divisive rhetoric and class warfare.  Yet, with a dismal record on the economy, a long line of broken promises, low polls on ObamaCare, Dodd-Frank, and foreign policy, his campaign is entirely based on three negative emotions: hate, envy and guilt. 

According to Saul Alinsky's "Rules for Radicals", which is Obama's tactical bible: 

If the organizer begins with an affirmation of love for people, he promptly turns everyone off. If, on the other hand, he begins with a denunciation of exploiting employers, slum landlords, police shakedowns, gouging merchants, he is inside their experience and they accept him. 

Electoral politics is different from Community Organizing, and Obama may be squandering the one thing he had going for him, likability.  

The 2012 race will ultimately come down to a contest between two men who will fight it out, not on some ideological battlefield contesting the brains of voters, but rather the way it's always been done: over hearts.  

It's likability stupid!   

      

  

Inception

I was watching the movie “Inception” last night and was struck by the following quote: 

Cobb: “What is the most resilient parasite? Bacteria? A virus? An intestinal worm? An idea. Resilient... highly contagious. Once an idea has taken hold of the brain it's almost impossible to eradicate.”

In case you haven’t seen the movie, “Inception” refers to the implanting of ideas by entering the subconscious during an induced dream state, and then manipulating the dream to get the implanted idea to take hold. 

The elements of inception are these:

• An induced dream state
• A willing subconscious
• A compelling dreamscape
• Active manipulation of the dream
• An idea to implant
• A strong defense against competing ideas  

Political liberals have either consciously or unconsciously understood this concept, and used it to make their ideas “resilient… highly contagious…. and impossible to eradicate”. 

Here’s how liberals have achieved inception success: 

• First they induce a dream state:  With their dominant position in entertainment, academia, and news media, liberals have unique access to the subconscious.  Whether sitting in a classroom, living room, or theatre, the captive subject is in a state of relaxed “suspended disbelief” where the critical mind is on standby. (How else could you believe in talking toys, Jedi Knights, or time travel?  The “willing suspension of disbelief” is one of the keys to entry into the subconscious, which is why it's key for hypnosis too.)
• Next they make the dream appealing:  Utopianism, Hope and Change, Free Stuff, Social Security, Social Justice, and Equality of Outcomes.  Who in their right mind wouldn't find a one-sided presentation of these ideas appealing?   
• Next, they manipulate the dream:  To advance their ideas, liberals employ bogus statistics, sophistry, and outright lies.   I realize this is a serious charge that requires some backup.  A full accounting would take years, so in the interest of brevity, I’ll just cite a few examples from...    yesterday:  
• The President stated that if the Supreme Court overturns ObamaCare, it would represent an “unprecedented, extaordinary” act because the law passed congress.  This is a lie:  The Supreme Court routinely overturns unconstitutional legislation.  In fact, that is its purpose.
• The President indicated The Supreme Court lacks credibility because they are “unelected”.  This is a lie: The Constitution deliberately insulates the Supreme Court from politics by creating a court of lifetime appointees.
• The President stated that if ObamaCare is found unconstitutional, that would be an act of “judicial activism”.  This is a lie:  Judicial activism is when judges find new rights and powers not specifically enumerated in The Constitution.
• Finally, liberals work very hard to destroy any competing ideas, regardless of merit.   Sarcasm, snark, propaganda, and fear, are just some of the tools utilized to make any competing idea toxic.  Perhaps the best illustration of this comes from the following quotes from Saul Alinsky’s “Rules for Radicals”, the tactical bible for today’s liberals:

 

“One acts decisively only in the conviction that all the angels are on one side and all the devils on the other.”

“…Pick the target, freeze it, personalize it, and polarize it.”

“…Ridicule is man’s most potent weapon.”

Ever since these ideas entered the community, in an organized manner, polarization and demonization have been the rule from liberals. 

Conservatives have a marked disadvantage when it comes to inception:     

• Conservatives do not have access to the subconscious.  Conservatives have almost no voice in the pop culture, pop academia, or pop media - the entry points into the subconscious.  
• If conservatives had access to the subconscious, they still could not easily make their dream appealing.   Personal responsibility, accountability, and hard work suck!  Moreover, these behaviors never offer immediate gratification.
• Conservatives are programmed to tell the truth. That's not to say they always do.  Nobody’s perfect.  But I would argue, this one characteristic is the defining difference between most liberals and most conservatives.  [UPDATE:  This is one reason Donal Trump is so unnerving to liberals;  he's co-opted their main tactics!]  
• Conservatives are pre-disposed to avoid gratuitously destroying their enemies.  Decorum, manners, honor, and tradition are all conservative concepts.  Liberals have no similar fealty to such antiquated notions of behavior.  [UPDATE:  Ditto above.]         

In order to deal with this imbalance, conservatives must find new ways to implant their ideas. 

Perhaps the best example of this today is Glenn Beck who has combined education, comedy, internet distribution, live performance, publishing, and even God to get his conservative message out.  Others in the fray are a few internet-based media-focused groups who also use comedy, news, entertainment and education, to get their messages out.

Conservatives do have a voice in some traditional media outlets like talk radio and cable news.  And thanks to the internet, a conservative revolution in news and commentary has already occurred there.  But, to a large extent all of this is currently preaching to the choir. 

What is still needed is a concerted effort to potentially reach everyone, and to do that, conservatives must produce more high quality general entertainment content.  Some of it is out there no doubt, but much, much more is needed.  Movies, music, comedy, and theater: only through more of this will conservatives be able to break into the vast subconscious that liberals currently have near exclusive access to.          

Until Conservatives figure out how to generate much more quality content in general entertainment, they will forever be losing to liberals in the war of inception.  For my part, I'm going to take a stab at a screenplay.  Maybe you should too?   

Magic Bullets Part IX

Ruth Bader Ginsburg unwittingly said a most ironic thing during the oral arguments this week regarding ObamaCare: 

"It's a choice between a wrecking operation … or a salvage job," groused liberal Justice Ruth Bader Ginsburg. "And the more conservative approach would be salvage rather than throwing out everything."

Apparently Justice Ginsburg has never tried to renovate a run-down building.  Anyone who has, knows that demolition and starting from scratch are always the most conservative ways to end up with a building that meets the need at the lowest cost.  The only reason to salvage a run-down building is for nostalgia or coercion.   

The healthcare bill known as ObamaCare was itself an attempt to salvage federal control over a mess of tangled laws and regulations dating back at least to the 1940s:

 

• WWII wage controls sparked the practice of employer provided health insurance, which killed the individual market.  Businesses could deduct health insurance for tax purposes, and to this day individuals cannot.
• The McCarran-Ferguson Act of 1945 effectively allowed states to prevent the purchase of out-of-state health policies, giving insurers state monopolies and further trapping individuals. 
• Then came Medicare, which placed half the medical industry under a socialized system and forced all the profits to come from the other half, driving up costs and largely creating the current “crisis”. 

In other words, “a salvage operation” is what got us into this mess in the first place!   At some point we must stop adding new construction on top of an old run-down building and commence with a “wrecking operation” and then construction of a new modern structure. 

The Supreme Court may give us that opportunity.  If they do, here are some Magic Bullet solutions to fix the healthcare market and solve each of the major problems we have today: 

Question:  Why don’t Americans buy their own health insurance, and why does everyone think health insurance is someone else’s responsibility?

• Re-establish an individual market by allowing individuals to deduct their health insurance expenses in the form of refundable tax credits.   (With refundable tax credits, lower income individuals who do not qualify for Medicaid, AND don’t make enough to pay taxes, would get a check.  This is only one of many ways to undo the damage from the uneven tax treatment which has gutted the individual market:  See The Healthcare Gecko )

Question:  Why is it that you can buy almost anything you want from another state except health insurance?

• Repeal The McCarran-Ferguson Act and allow health insurance to compete across state lines.  (Follow the “commerce clause” as it was intended!)

Question:  If Medicare was an outgrowth of everyone getting their health insurance at work (After all, how could we ask retirees to enter the healthcare market for the first time at age 65?) and it shortchanges providers, is rife with fraud, and is bankrupt, do we need it anymore?

• Repeal Medicare and phase it out for younger Americans who will be accustomed to insuring themselves in the new individual interstate market. 

Question:  Why is it that if you walk into a grocer and steal food, it is an obvious crime.  Yet, if you drive to a hospital in a Ferrari, demand to be treated by a team of doctors, and then refuse to pay, it is not?

• Make theft of Medical Services a crime. 

Question:  How can we prevent insurance companies from dropping coverage for high risk individuals? 

• How do we prevent car companies from selling dangerous or inferior cars?  Of course we can’t, but the market, the courts, and some level of regulation do the job quite well. 

Question:  What can be done about pre-existing conditions? 

• Medicaid must be a viable option for those who become ill while uninsured, or refuse to obtain insurance until after they become ill.  Part of Medicaid’s role should be insurer-of-last-resort, but it should not be free to those who can pay.  

Question:  What about the poor? 

• Once an individual interstate market is established, Medicaid will be less burdened and easier to rebuild into a better safety net. 

Question:  What about quality, cost, and availability of healthcare?

• A vibrant individual interstate market is the only way to insure high quality, low cost, and abundant healthcare services in the future.     

Of course, there is a limit to the building analogy when it comes to laws.  Unlike buildings, laws don’t exist as distinct stand-alone entities.  They are more like electricity grids with tentacles going into every aspect of our lives and interactions, and each branch has a vocal constituency demanding it be preserved as is.  Laws almost never get repealed. 

The wrecking operation is going to take a political revolution.  As for the new construction, the market will do that overnight.    

A Tragedy No Matter What

Here are the pertinent facts that we know about the tragedy in Florida:

• A seventeen year old boy is dead
• The shooter claims self-defense
• Six witnesses saw or heard part of the struggle
• It is unclear if anyone saw the entire event
• More than one witness corroborated part of the shooters account 
• It is unclear if any witness contradicted the shooter's account, though at least one had their positions reversed during part of the struggle  
• The police on the scene recommended charging the shooter
• The state did not initially charge the shooter
• A Special Prosecutor has been assigned to the case
• The State is collecting the facts and preparing the case for either a Grand Jury or the Special Prosecutor to make a recommendation

Here's what we know about the tragedy in Washington:

• The dead boy was black and the shooter was "white hispanic" (according to the NYT) and may have said "fucking coon" or "fucking goon" while in pursuit.  This has given the incident racial overtones, and before all the facts were known, the President made comments reinforcing that perception    
• The New Black Panthers have put a bounty on the head of the shooter and the President has said...nothing
• Spike Lee, a supporter and financier of the President's tweeted the address of an innocent couple claiming it was the shooters, endangering the couple and forcing them to flee their home while the President said...nothing
• Congressional Black Caucus members have used racially charged rhetoric and made irresponsibly accusatory statements from the floor of Congress and to the media, while the President has said...nothing
• Black leaders like Louis Farrakhan, Al Sharpton, and Jesse Jackson have incited anger and used violent rhetoric in promoting this as a racial incident and the President has said...nothing
• Death threats have been issued to the shooter, friends of the shooter, the family of the shooter, and witnesses who've come forward corroborating the shooters account, and the President has said...nothing  
• Angry protesters ransacked a store, and the President said...nothing
• Social media accounts have sprung up calling for the murder of the shooter, and the President has said...nothing

It may take a Special Prosecutor, a Grand Jury, and a trial to sort through the Florida tragedy, but justice will eventually be served.  

Meanwhile, the Washington tragedy proceeds apace until possibly the November election.  

Photo Journalism

Trayvon in a Hoodie...According to the Pop Media

The War on Women

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