Monday, April 25, 2011

Debt, Waste, And More Fairness Talk

First, let me say that I will be hitting some non-political topics this week. I've got a couple really cool things I want to share that have nothing to do with the 'p'-word, so come back soon for a change-up.

For now, though, we need to once again address the economy. I think it's safe to say that one thing we can all agree on is that we should trim government of all unnecessary fluff, right? Yeah, we'll have some disagreements over what exactly is 'unnecessary', but can we agree on unused federal buildings? Huge and unused stockpiles of gold (that just happen to be at historical high prices and are almost certainly on a bubble that is about to pop)? Those things alone would dump hundreds of billions of dollars into the federal Treasury. How about half a trillion dollars worth of unused land grants, or another half trillion in unspent TARP/direct loans? We're talking some serious debt that could be paid off with these unused assets. Why do you and I have garage sales or list things on Craigslist? To get rid of junk that we don't use or want, and to make a little money doing it. Same concept applies here, and the government should get on it right away.

But cutting government waste and excess with things like this -- and other measures that you and I would consider common sense -- will never happen, at least not while liberals are in charge. It's simply not a part of how they view the world. Heritage explains (emphasis mine):
Congress does not have a vault of money waiting to be distributed. Every dollar Congress injects into the economy must first be taxed or borrowed out of the economy. No new spending power is created. It is merely redistributed from one group of people to another.

Congress cannot create new purchasing power out of thin air. If it funds new spending with taxes, it is simply redistributing existing purchasing power (while decreasing incentives to produce income and output). If Congress instead borrows the money from domestic investors, those investors will have that much less to invest or to spend in the private economy. If they borrow the money from foreigners, the balance of payments will adjust by equally raising net imports, leaving total demand and output unchanged. Every dollar Congress spends must first come from somewhere else.
This is the economic reality that conservatives understand, but liberals either can't grasp it or refuse to do so. Here's the bottom line:
Conservatives believe that the federal government should have limited powers and that—beyond providing for the common defense and enforcing contracts— government should stay out of economic affairs as much as possible. Conservatives believe most federal spending is suspect and should be cut if it has not proven to be effective (such as on programs like COPS, FEMA fire grants, and Head Start). Progressives, on the other hand, see the federal government as a giant jobs program so that any cut to any federal program, no matter how ineffective or wasteful, would be a harm to the economy.
That's why liberals will never tolerate cuts to government, reductions in redundant government programs, or anything of the sort. If you've been paying attention, you know that the only sector that has seen significant job growth since Barack Obama and the Democrats took over in 2008 is in government jobs. Everything else is either flat or still declining. And, if you were paying attention to the whole stimulus madness, you know that there really was no actual empirical data backing up the administration's claims of jobs 'saved or created'; instead, the administration simply used a formula like this:

Number of dollars spent = number of jobs saved or created

That's all they needed to think about because that's what their worldview dictates: government increase equals economic increase, and government jobs equals overall jobs. Never mind the reality that government produces nothing and therefore by definition cannot increase economic output, and never mind the reality that that increasing government actually taxes the economic output of the country through increased taxation, regulation, and more people sucking money out of the economy (by working for a non-productive entity, the government)...never mind all that. All liberals want to acknowledge is their demonstrably false idea that more government is a good thing.

The notion of people paying their 'fair share' is repugnant to conservatives because they understand that the 'fair share' being paid by successful and productive citizens is vastly greater than that of the 'fair share' being paid by those working for the government, and especially those relying on government assistance. For example, here's a visual comparing the percentage of income earned to taxes paid for various income groups:

This is fair? It's obviously not. And yet...liberals think the rich should be paying even more!

This is my favorite common sense explanation of how our system of taxation works:
Bar Stool Economics
Suppose that every day ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. He said, "Since you are all such good customers, I'm going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80."
The group still wanted to pay their bill the way we pay our taxes, so the first four men were unaffected. They would still drink for free. But what about the other six men -- the paying customers? How could they divide the $20 windfall so that everyone would get his "fair share"? They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay! And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before, and the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

"I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth man, "but he got $10!"

"Yeah, that's right,' exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than I!"

"That's true!!"shouted the seventh man. "Why should he get $10 back when I got only $2 ? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"

The nine men surrounded the tenth and beat him up. The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up any more. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

Author unknown
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.
It's not rocket science. Just remember this the next time you hear a liberal whining about how the rich should pay more, or that the rich don't pay their 'fair share'.

Finally, we must once again examine President Barack Obama's policies in relation to the economy. Like it or not, as President he's in the driver's seat for another year and a half, so what he believes about the economy is something that we have to consider. Unfortunately, he doesn't appear to be engaged enough to even know his own economic plan:
When Barack Obama gave a much-anticipated speech on the budget and deficit spending last week, it turned into a disappointing mix of ambiguities and demagoguery. Most people couldn’t discern any “plan” at all in the speech, only hazy promises with few specifics. As it turns out, Obama himself doesn’t appear to be aware of even those few specifics he did offer. In yesterday’s Facebook townhall event, Obama not only mischaracterized the scope of the Republican plan to cut deficits, he also mischaracterized his own:

That’s actually wrong on three counts. First, Obama’s plan doesn’t reduce the national debt at all. It reduces by $4 trillion dollars the amount that Obama originally promised to add to the debt through deficit spending in his earlier budget projections. Obama’s plan adds at least $7 trillion to the national debt by its end, with projections rapidly increasing thereafter. Secondly, Republicans have a plan to cut deficit spending — not debt in the short term — by over $6 trillion, using the far less rosy baseline figures of the CBO over the Pollyannaish predictions of growth coming from the OMB.

And thirdly, Obama promised a twelve-year plan, not a 10-year plan, a point he made repeatedly in last week’s speech ...
And even Democrats are perplexed by this idea of a 12-year plan. I'll let you know if I ever hear of a rational explanation of it; until then, I suspect it's some kind of number-jiggering going on, similar to how they jiggered the numbers on Obamacare to make it appear (using faulty assumptions and irresponsibly optimistic economic projections) to save money over the long haul by starting the higher taxes at the beginning of the 10-year window and only kicking in the 'benefits' in year 4. Still, I think Hot Air's conclusion is dead on:
It’s bad enough to have a President who confuses debt and deficit. It’s worse to have a President who can’t keep his own plan scope straight.
If he can't do that, can we really expect him to make good on it? And can we reasonably expect him to have a well-designed, sound economic plan in the first place? And the fact that he's a liberal only compounds the problem.

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