It's About Jobs, Stupid!
America has a growth deficit. As the latest job report shows unemployment reached 9.2%-- the highest rate of 2011-- investors and employers continue to react negatively to this bad news.
During the three years of the Obama administration, in this dismal economy millions of Americans have been forced to take jobs which they are overqualified for or they have simply given up looking for work entirely. If you include those workers, the real unemployment rate is higher than 16.2% by conservative estimates.
These numbers are far worse depending on geography, with the most glaring examples of misguided economic policies being in poor urban communities.
Capital always follows the path of least resistance and greatest opportunity. But not only has President Obama’s continuation of endless deficit spending not resulted in so-called Keynesian “pump priming” and economic growth, it has discouraged private investment as money continues to flow into safe havens like Treasurys.
As the debt-ceiling debate rages on and some in the Senate Republican leadership seem ready to negotiate with big-government Democrats, the proverbial 4.2 trillion dollar gorilla in the room continues to grow while trampling over our economy and the formation of small businesses. To be clear, there are two distinct paths:
We can go the route which President Obama favors, which includes an ever-increasing debt ceiling which will continue to crush economic activity.
Or, we can force government to “eat their peas” and use the force of law to handcuff legislators to policies which spur economic growth and job creation.
And the time to choose a path is today, before August 2, when the Federal government will officially run out of money to pay outstanding obligations.
According to Michael Tanner of CATO, the Treasury Department will collect roughly $203 billion in taxes during August, but have liabilities totaling more than $307 billion. You certainly could not run your family budget with this type of recklessness. And as America runs at lightning speed toward a Greek-like financial catastrophe, as our debt is on the verge of consuming our nation’s entire output.
Throughout American history, we have never failed to increase the debt ceiling. And as irresponsible politicians grow government for their own political gain, they have left us with a financial cancer which is metastasizing rapidly.
Therefore, conservatives must act boldly and proactively. Not only must we sit at the bargaining table and demand cuts, but there must be cuts in all levels of government which amount to an immediate reduction in the deficit. Anything less is unacceptable.
The second step is to use tough statuary caps which will tie the hands of future politicians from spending beyond the historical, pre-Bush average of 18% of the Gross Domestic Product. Politicians in both parties have proven themselves untrustworthy to reduce spending, so breaking that limitation would mandate simultaneous spending reductions.
And finally, we must have Congress approve the Hatch-Lee Balanced Budget Amendment Balanced Budget Amendment, and send it to the states for ratification. Not only would it mirror most states which have their own requirements for expenditures equally revenue, but it additionally requires a 2/3rds supermajority to approve tax increases. And once the amendment is official, it would be quite impossible in the modern era to ever repeal it.
These proposals would have been impossible in any previous congress, including the 1994 Gingrich Revolution. But things have changed now that every man, woman, and child in the United States owes $46,000, and with our debt on a path to double within 10 years.
Thanks to Tea Party activists providing the necessary backlash to an ever-expanding federal government, the proposals put forth in the Cut, Cap, and Balance pledge are not only entirely possible, a majority of Americans understand they are necessary to put America on a path to new jobs and prosperity.
Skyscraper "Loophole" Creates Jobs
When Michael Moore looks at a skyscraper, he sees a bloated monument to rich investors. He becomes nauseous and his lunch floats back up into his throat as he imagines the tenants who can afford Class A rent: Tenants like a semi-retired banker and his entrepreneurial son who watch the sun rise from their 92nd floor office suite while their assistant pours cold, crystal-clear water into tall glasses holding cucumber slices.
“Hmmm, how can I knock that tower down and humble those richies?” Moore wonders to himself. “I certainly can’t push it over. I’d have to give up my breakfast of chocolate covered bacon and hit the gym every morning. Way too much work for a big boy like me. … I’ve got it! I’ll ask the President to push for eliminating the carried interest tax break!”
Moore detests buildings that stand as public monuments to capitalism. In fact, he wrapped the New York Stock Exchange building in crime-scene tape for his movie, Capitalism: A Love Story.
Hollywood elites like Moore and his fans at The New York Times imply that legitimate tax incentives for entrepreneurial risk—like the carried interest tax break—are “loopholes.”
The term “loophole” confuses Americans into thinking that wealthy entrepreneurs are cheaters on par with the 5th grade bully who brazenly steals little Ashley’s sandwich out of her hands and takes his first pilfered bite before her astonished eyes.
Rush Limbaugh explained the carried interest tax break on his July 8 talk show:
“Obama … has made this official in 2009 budget documents he’s presented that he wants to get rid of the carried interest tax break for hedge funds, private equity groups, and commercial real estate people. …essentially carried interest is profits for original investors in hedge funds, private equity firms, (and) commercial real estate that is at present taxed at capital gains levels, and they want to convert this to ordinary income, which would move it up to about 35 (percent) and then eventually 39.6 if Obama gets his tax increase wish, which would shut down commercial real estate investment.”
Limbaugh is right. Unlike other investments, commercial real estate cannot easily move overseas. U.S. developers can’t just start developing in India or China overnight. Commercial real estate investment thrives or dies here in America.
Entrepreneurial ventures such as commercial real estate developments are risky. If we want to create jobs, we must incentivize entrepreneurs to take risks.
Let’s say you want to develop an office, retail or industrial building. Before you can build, you must accept long-term, unforeseeable risks from environmental contamination, lawsuits, debts and construction delays. These liabilities mean your income stream is uncertain. You will want a financial incentive to accept these risks.
The current carried interest tax rate sits at a capital gains rate of 15 percent to incentivize general partners like developers to put their names and fortunes on the line to build projects that create countless jobs.
The commercial real estate industry directly creates white-collar jobs for leasing agents, property managers, mortgage brokers, owners, investors, bankers and asset managers. It also sustains jobs for those who depend on the health of commercial real estate such as architects, lawyers, consultants, insurance brokers, appraisers and marketing professionals. Lastly, a multitude of blue-collar resulting services such as construction and landscaping depend on commercial real estate.
The mainstream media contends that eliminating the carried interest tax break would only hurt hedge fund managers on Wall Street. Yet, the largest commercial real estate development association, NAIOP, reports U.S. Treasury data showing that over 46 percent of all partnerships are real estate partnerships, and carried interest plays a vital role in a large number of them. Furthermore, when the economy is healthy, commercial real estate creates over nine million American jobs and accounts for nearly one-third of U.S. GDP.
Sadly, June’s job report revealed that the U.S. added a meager 18,000 jobs and lost 9,000 in construction. “…with the national economy’s accelerating recession, non-residential building construction outlays fell by 20.4 percent in 2009,” explains Dr. Stephen S. Fuller in his 2010 NAIOP study on the economic contributions of commercial real estate development and construction. So why would the White House want to remove entrepreneurial incentives?
The Washington Times offers a solution: Comprehensive tax reform that improves economic performance, not arbitrary tax hikes on industries like commercial real estate just to cut a budget deal.
In Ayn Rand’s novel The Fountainhead an entrepreneurial developer predicts: “The age of the skyscraper is gone. This is the age of the housing project. Which is always a prelude to the age of the cave.”
Americans prefer working in office towers to bat caves. It’s time for Michael Moore, journalists and politicians to acknowledge that incentives like the carried interest tax break create jobs and fuel our economy.
Can you name five formerly poor countries that have grown rich through wealth transfers from more economically advanced nations?
No? Okay, then just name one. Still stumped? As you probably suspect, not a single nation has ever grown wealthy by way of financial handouts from other, more well-to-do societies. That's worth remembering when we consider how best to pull people out of poverty.
Last week, the United Nations issued a report on its Millennium Development Goals (or MDGs, for short). One important goal is to "eradicate extreme poverty and hunger," with a chief target being to cut in half the proportion of the world's people whose income is less than $1.25 a day by 2015.
According to an article in the Vancouver Sun, The Millennium Development Goals Report 2011 "grudgingly admits" that "wealth creation and not wealth redistribution is the main driver behind reduced levels of extreme poverty around the world." Seems most of this very welcome decline has occurred in East Asia (mainly China) and in India -- areas benefitting not from foreign aid but from massive economic growth.
The findings released by the UN's Economic and Social Affairs Department show that the percentage of Chinese citizens living on $1.25 a day or less has already been reduced by more than half -- from 60 percent to just 16 percent. The report goes on to state, "The fastest growth and sharpest reductions in poverty continue to be found in Eastern Asia, particularly in China, where the poverty rate is expected to fall to under five per cent by 2015."
India's economic expansion has also had a major impact on alleviating world levels for poverty and hunger. "In that country," the document says, "poverty rates are projected to fall from 51 per cent in 1990 to about 22 per cent in 2015."
On the other hand, sub-Saharan Africa receives the largest amount of the world's overseas development aid, per capita, yet those living there in extreme poverty dropped only modestly between 1990 and 2005, from 58 percent to 51 percent.
But to Ban Ki-moon, the UN's Secretary-General, the success of homegrown economic growth means simply that, "Already, the MDGs have helped lift millions out of poverty." Shazam!
And what to make of the lackluster track record of development aid?
Secretary-General Ban and those running the United Nations continue to push for increased wealth transfers from richer to poorer nations. In 2010, wealthier countries gave $129 billion in aid. The MDG report argues this is far short of the money that should be shifted each year from rich to poor nations.
If those making a lifelong living off redistributing wealth can so cavalierly ignore their own statistics, they'll have little trouble ignoring a lifetime of work by Peter Bauer in development economics. Bauer argued that legitimate investment, rather than foreign aid, would flow in ample amounts to countries with a safe and productive climate for business.
"Development aid is . . . not necessary to rescue poor societies from a vicious circle of poverty," Bauer found. "Indeed it is far more likely to keep them in that state."
Still, another UN report issued last week provides a different rationale for taking money from rich countries to give to poor ones. The World Economic and Social Survey 2011 called for "investment" of $72 trillion over the next four decades, much of it in green technology, with most of it going to developing countries. That's five times the U.S. annual GDP of $14.7 trillion.
Animating this report is the convenient notion that the world's wealthier, industrialized nations owe a "climate debt" to less developed nations. Ottmar Edenhofer, the German co-chair of one of the working groups of the UN's Intergovernmental Panel on Climate Change, explained:
"[D]eveloped countries have basically expropriated the atmosphere of the world community. But one must say clearly that we redistribute de facto the world's wealth by climate policy. Obviously, the owners of coal and oil will not be enthusiastic about this".
Neither should buyers of coal and oil. Or anyone else, since these two energy sources undergird so much of modern life and progress.
And progress -- material progress -- matters. Poverty is reduced through economic growth, not through redistributing wealth from rich to poor countries.
So of course the United Nations intends to ignore the policies that lead to economic expansion -- stable rule of law, property rights, minimal government interference in normal work and trade -- and concentrate, instead, on dramatically increasing redistribution.
The SEIU NLRB Serial Job Killer
In just another example of the Obama administration making law by fiat, the National Labor Relations Board head Craig Becker is proposing new rules that would shotgun the formation of new union shops in as quick as ten days.
After the defeat of card check at the legislative ballot box, the former SEIU goon is acting creatively in order to implement portions of card check unilaterally.
What would one expect from a guy appointed to his position despite his nomination being rejected by the Senate?
“He never satisfactorily answered a series of questions that I posed to him – failing to reassure me that his years of service to labor unions would not color his decisions at the NLRB," Senator Orrin Hatch (R.,UT) said in a statement as reported by the Washington Post.
Becker couldn’t answer questions for a number of other Senators either so they scrapped his nomination.
Obama then made a recess appointment of Becker to the NLRB, the presidential equivalent of Enron accounting for political appointees.
Becker is losing no time now in answering the questions and concerns Hatch and his fellow Senators had. The answers are about as bad as they feared.
NLRB and Becker have been in the news lately because they’ve attacked Boeing for opening a plant in South Carolina, a state that is less accommodating to union employment but more accommodating to workers and management with project deadlines to keep.
But the attack on Boeing is nothing compared to the attack that Becker and organized labor are going to launch against the rest of us starting today.
“On July 18, the NLRB is holding a hearing on its proposal to overhaul virtually the entire manner and set of rules by which union-representation elections are conducted in the workplace,” says labor expert Geoffrey Burr in the Washington Times. “To the surprise of no one who can read federal election donation reports, all of the agency’s changes appear to help union bosses at the expense of everyone else.”
First up is making sure union elections happen quickly. The longer it takes for employees to become informed, the less likely they’ll join a union.
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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)