Reagan's Legacy and the Current Malaise: Lower taxes and a strong dollar could spur growth once again
Retired tax accountant Dick McDonald adds: "I suggest that the Revenue Act of 1981 that lowered the top marginal rate from 70% to 28% was a teaser but not the closer. It wasn't until his Revenue Act of 1986 when we closed down all the mainstream tax shelters and instead incorporated and used the ultimate in tax shelters -- the non-taxability of the appreciation in stock -- that we took off"
Reagan came into the White House facing an economy as troubled as ours-one that had even higher unemployment, catastrophic interest rates (18% for mortgages) and a stock market that in real terms had fallen 60% from its mid-1960s levels. When he left office eight years later, the U.S. had become an economic miracle: 18 million new jobs had been created; Silicon Valley had blossomed, becoming a global symbol for innovation; and the stock market was experiencing a bull run that, despite dramatic ups and downs, didn't end until the turn of the 21st century, after the Dow had expanded 15-fold. The expansion of the U.S. economy exceeded the entire size of West Germany's economy, then the world's third-largest.
How did this happen? You could make the case that Reagan's economic miracle had its origins at a Washington, D.C., restaurant in 1974. That December night, 34-year-old University of Chicago professor, Art Laffer, scribbled a single-and now legendary-curve on a cocktail napkin to illustrate to a group of President Ford's advisers why a proposed plan to raise taxes would not increase government revenues. Mr. Laffer posited that deep cuts in existing tax rates would stimulate the economy and ultimately lead to far higher government revenues. Conversely, increase the tax burden and government receipts would fall below expectations because of a weaker economy.
Mr. Laffer's curve headed off the tax boost, but the Ford people did not accept the conclusion that big reductions in tax rates were just what the anemic U.S. economy needed. However, when Reagan met with Mr. Laffer and other like-minded thinkers several years later, he quickly grasped the Laffer Curve's fundamental message.
The concept that a free market unencumbered by barriers, government regulation and taxation will create the most growth-friendly economic environment was simple but radical. After taking the oath of office, Reagan went to work to convince the American people of the benefits of supply-side economics: lower taxes, less regulation, and less government spending, as well as a monetary policy focused on ridding us of the seemingly incurable disease of ever-rising inflation.
Reagan's program was a resounding success. Its centerpiece was the Economic Recovery Tax Act of 1981, which dramatically cut income tax rates for everyone. He managed to pass the bill during his first eight months in office, with bipartisan support in a divided Congress.
Critics howled that Reagan was being financially irresponsible, but the president pressed on. Once his cuts were fully phased-in and the hard fight against inflation was won, the economy took off like a rocket. Reagan's achievements set up a great, long boom in the U.S. and the world that didn't end until the economic crash in 2007. (Yes, there were periods of slower growth rates before that year, but none can be compared to the crash of 2007.)
At the same time, Reagan's British counterpart, Prime Minister Margaret Thatcher, was accomplishing similar feats by taking an axe to Britain's draconian tax system. Almost overnight, Britain went from being Europe's economic weak link to being the continent's most vibrant large economy.
Unfortunately, Reagan was unable to permanently rein in domestic spending and many of his reforms were undone by his successors. Washington politicians slid back into their bad habits, cluttering the tax code with new brackets, exemptions, deductions, phase-ins, carve-outs and special breaks for special interests. And the crucial importance of a strong dollar has been forgotten during the last decade, with terrible results. Today we are once again beset by a Carter-esque malaise, wherein we must accept abnormally high unemployment and the notion that printing more dollars is the way to recovery.
Yet Barack Obama's 2011 State of the Union address was sprinkled with Reagan-like phrases, full of the 40th president's trademark confidence. "The future is ours to win," Mr. Obama said. "But to go there, we can't just stand still." He pledged to "knock down barriers that stand in the way of [American companies'] success." We were told that the president had held meetings with Reagan administration officials, and that he'd even read Lou Cannon's biography of Reagan during his winter vacation.
It's true that both men came into office facing turbulent economies. But there the similarities end.
Reagan aggressively embraced free-market, supply-side principles that empowered the American people to rebuild and creatively expand our economy and standard of living. In contrast, the Obama administration has expanded the powers of government over us and our economy on a scale never before seen in peacetime American history. President Reagan understood, and fervently believed in, the American spirit of free enterprise. So far, President Obama hasn't shown that he does. Mr. Obama still has time to learn the real lessons of Reagan's success. Will he?
Obama desperate to protect thug unions
National Labor Relations Board says Boeing can't build plant in South Carolina
By Rick Manning - In a stunning move well beyond the scope of their legal mandate, the Obama Administration appointee controlled National Labor Relations Board is suing Boeing Corporation for, get this, building a second production line for their new Dreamliner passenger plane in South Carolina rather than in Washington state.
At a time when corporations like General Electric are busily shutting down U.S. production facilities that manufacture items like light bulbs, in favor of Chinese made products, Boeing had the audacity to decide to create jobs in America. Although maybe the Obama appointed NLRB members missed the part of U.S. history class where the Confederacy lost, and South Carolina remained a part of the U.S.?
Rightfully, Boeing is going to fight the NLRB decision to sue them. One irony of the case is that Obama's recently appointed Chief of Staff, Bill Daley, served as a member of Boeing's Board of Directors when the company decided to create jobs in South Carolina by building a production line in the right to work state.
And that is the heart of the matter. South Carolina is a right to work state whose voters this past November overwhelmingly amended their state's constitution to ensure that a worker has the right to vote on whether they want to be represented by a labor union. The workers at the Boeing plant in South Carolina have also taken the bold step of booting out the union that represented them, effectively ending the International Association of Machinists and Aerospace Workers stranglehold on Boeing production.
Now, Obama's NLRB is attacking Boeing's job creation in South Carolina as "union retaliation" directly related to a 2008 labor strike which crippled Boeing's production in Washington state.
This isn't the first time that the NLRB has targeted South Carolina, as earlier this year they had threatened to use taxpayer dollars to sue the state, along with the states of Utah, South Dakota and Arizona, because their citizens had the audacity to put a workers right to a secret ballot vote in union elections into their respective state constitutions. In direct response to the NLRB lawsuit threat, Congressman Jeff Duncan of South Carolina has introduced legislation prohibiting the NLRB from proceeding with the lawsuit, and has already been joined by 30 co-sponsors.
On top of the dramatic overreach on behalf of the labor union directed board, which was designed by Congress to be a neutral arbiter in labor/management disputes, an astounding 176 members of the U.S. House of Representatives recently voted to completely defund the agency in an amendment offered by Rep. Tom Price of Georgia this past February.
The ultimate irony of the NLRB decision is that this government agency is attempting to tell a company where they can locate a plant in the United States. If successful, other U.S. companies will take note, and not make the mistake of building plants in right to work states, instead opting for more desirable overseas locations that are beyond the reach of Obama's union zealots.
Can anyone wonder why U.S. job creation has been virtually non-existent?
An example of how high tax rates work
At 35 percent, America's corporate tax rates are among the world's highest -- but such rates may well collect the least
General Electric, the nation's largest corporation, paid no federal taxes in 2010. The profitable company, which shaved 20 percent of its U.S. work force in less than a decade, should inspire a hard look at corporate tax rates and how taxes are collected and avoided. Cash-strapped working Americans are paying GE's bill.
OUTRAGE and envy still ripple from a report in The New York Times that General Electric, the nation's largest corporation, paid no U.S. corporate taxes in 2010.
Zero. Zip. Nada. Indeed, the company, with $14.2 billion in worldwide profits, claimed a tax benefit of $3.2 billion from Uncle Sam.
GE did not break the law, but the bill it successfully avoided was picked up by the rest of us, or put on the national credit card.
The top U.S. corporate rate is 35 percent, but virtually no one pays that. GE's tax rate is about a third of what other companies pay, and that the company is vulnerable to pay any taxes is hypothetical. GE would have to return profits to these shores from places it set up to avoid taxes.
Policymakers in Washington, D.C., need to reassess rates to bring them into line with the financial realities of the nation and basic equity. Set lower, unavoidable rates that do not complicate job creation, and have a statutory imperative to collect them. As it is now, the higher the rate, the more creative the credits, shelters and loopholes to avoid compliance.
GE has a team of 975 gilded tax-avoidance professionals in a department working to ensure that the rest of America picks up its tab. Oh, and that default jobs-creation rationale? The Times report also noted that since 2002, GE has eliminated a fifth of its work force in the U.S.
Washington Post columnist Robert J. Samuelson, a veteran financial journalist, would cut corporate tax rates, not increase them, and make up the difference by increasing individual tax rates on corporate dividends and capital gains, which he sees as a giveaway to the rich.
U.S. corporate rates are chasing profits offshore, and the only jobs created are for tax lawyers. Set and collect realistic rates.
Progressive Media and the War on the Unborn
A pathetic blogger at the left-wing blog Wonkette made fun of Sarah Palin's son Trig, who has Down syndrome. Dana Loesch of Andrew Breitbart's Big Journalism website has exposed this whole sordid affair, noting, "This is what happens when a little-known blogger who edits the literary equivalent of the bathroom wall in Walmart isn't clever enough to either write satire or convey why he doesn't like the Palins. And this is considered acceptable by progressives."
What drives a left-wing blogger to mock a little boy with a disability? Is it just hatred for Sarah Palin, a pro-life mother who exposes what is at stake in the battle over the "right to choose?" Or is it that a mother would bring a child with Down syndrome into the world?
This controversy is important because of what it says about the progressive mentality. The progressives, who like to think of themselves as guardians of the most vulnerable and defenseless among us, do not have any sympathy for people they believe should not exist or be born. They believe that a mother should terminate the life of a baby with potential defects. This is not only because of their belief that women's rights always trump the rights of the unborn, but because it is too costly to take care of them, once they come into the world. They support Big Government and higher spending, except on babies whose visible and active lives would make left-wing feminists, a key part of their constituency, feel uncomfortable.
The Wonkette controversy goes far beyond a blogger with bad taste and no conscience. It tells us a lot about the mentality of the progressives in charge of the federal government who are moving ahead with implementation of Obamacare.
It is a fact that when government takes more and more control over the health care of the people, the government will inevitably take over more and more decisions about who lives and who dies. This is the obvious danger that confronts us as Obamacare unfolds. However, in the U.S., at least for the time being, we can make most of those decisions for ourselves. The news is breaking that "Baby Joseph" has returned to Canada, after receiving medical treatment from U.S. hospitals that he couldn't get in his native country, which has socialized medicine. The costs of the medical operation, which left the child free from tubes and machines, were borne by Priests for Life.
In New Zealand, which also has socialized medicine, the situation is even more dire, as the government promotes the screening and killing of unborn children diagnosed with Down syndrome. As I noted in a previous column, "The new government policy in New Zealand was preceded by the completion of a report on the `cost effectiveness' of aborting Down syndrome babies. It was determined that it was just too expensive to allow these babies to live."
However, it appears that "60 Minutes"-the version that airs in New Zealand-may be turning a critical eye on what the government has been doing.
Mike Sullivan, a professional engineer in New Zealand, is the father of an almost-three-year-old girl with Down syndrome and an advocate for the rights of the handicapped. He says the upcoming New Zealand "60 Minutes" show covers the government's "quality improvement" program that was introduced last year and targets unborn babies with Down syndrome for eradication through preventing births. "For those who are not aware of this issue," he says, "the government's screening program is preventing the births of 75 percent of people with Down syndrome and is a gross form of discrimination against this group of people, treating these people as less human than others."
He says the documentary will cover these areas:
* The legal action that is being taken out by 23 parents and Right to Life of New Zealand against the government of New Zealand for crimes against humanity.
* Evidence that the government deliberately avoided public consultation on the new program and has excluded people with Down syndrome in their decision making.
* Evidence that the government understood the consequences of the program would be to reduce the number of births of people with Down syndrome.
* Presenting the everyday lives of people with Down syndrome, who are just "getting on with life like the rest of us."
Sullivan says that while it is not entirely confirmed, it looks like "60 Minutes" of New Zealand will air the story next Wednesday, April 27. While the audience is in New Zealand, the program could be a warning of what could happen to America's most vulnerable under Obamacare.
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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)