Monday, May 09, 2011

U.S. Tipping Point: 51% of Households Now Pay No Income Taxes

The portion of U.S. households paying zero federal income taxes has been steadily climbing, and has reached the 51% tipping point.
“A democracy cannot exist as a permanent form of government. It can only exist until a majority of voters discover that they can vote themselves largess out of the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been two hundred years.”

Let’s see… Promises of ever-increasing benefits from the public treasury, loose fiscal policy, increasingly dictatorial central government... Beginning to sound familiar?

The preceding wisdom has been variously attributed to Alexis de Tocqueville and Alexander Tytler through the years, but debate and uncertainty continue. Regardless of its source, however, the observation gained even greater immediacy this week, some 35 years since America’s own two-hundred-year milestone.

Namely, the portion of U.S. households paying zero federal income taxes has been steadily climbing, and has reached the 51% tipping point.

That alarming number formed the centerpiece of this week’s U.S. Senate Finance Committee official “Is the Distribution of Tax Burdens and Tax Benefits Equitable?” hearing. Although the news of Navy SEALs heroically raiding Osama bin Laden’s lair naturally dominated the news cycle, our increasingly lopsided tax burden will likely prove the more consequential civic dilemma for 2012 and onward.

Senate Finance Committee member Orrin Hatch (R – Utah) wisely noted, “Most taxpayers are skeptical that the answer to our fiscal problems is for them to sacrifice more, when more than half of all households are not paying any income taxes and an increasingly smaller group of Americans is shouldering the burden for an increasingly larger group of Americans.”

Yet that is the answer that liberals continue to offer. As the federal government once again approaches its debt limit and the presidential campaign begins, Barack Obama hypocritically maintains his soak-the-rich prescription of higher taxes for “millionaires and billionaires.” We say “hypocritically” because Obama himself paid taxes under the existing 35% top rate, rather than the 39.6% rate he claims to support. That decreased his overall tax payment by $74,000. Obama also opted to itemize rather than take the standard deduction, further reducing his tax liability by $127,000.

If Obama and other liberals believe that “the rich” don’t pay enough taxes, why don’t their actions ever seem to match their words?

Moreover, Obama’s talking point is glaringly dishonest, since the “millionaires and billionaires” population he claims to target actually includes families earning $250,000 or individuals earning $200,000. Shouldn’t the man who raised deficits into the trillion-dollar stratosphere possess a clearer concept of numerical definitions?

Additionally, many of “the rich” Obama and liberals continue to scapegoat are actually small businesses that create most new jobs in America. As the nation’s economy continues to struggle, if small businesses are forced to pay even more to the federal government they’ll by definition have less to invest or hire.

Another metric to consider: In 1980, the top income tax rate was 70%. The top rate is now half that, at 35%, yet the portion of the nation’s income taxes paid by the top 1% has more than doubled from 19% to 38%.

In fact, that 38% portion of income taxes paid by the top 1% is nearly double its 20% share of the nation’s income. Similarly, the top 5% earned 35% of the nation’s income for the most recent year available, but paid 59% of the nation’s total income taxes (up from 37% in 1980). That means the top 5% pay more in taxes than the entire remaining 95% of taxpayers combined. For its part, the top 10% earned 46% of the nation’s income but paid 70% of income taxes (up from 49% in 1980), while the top 25% earned 67% of the nation’s income but shouldered 86% of the nation’s income taxes (up from 73% in 1980).

Simply put, the rich pay a higher portion of the nation’s income taxes today than ever. And now that 51% of American households pay no income tax at all, we face the ominous tipping point decline envisioned above.

“Soak the rich” may sound appealing as a short-term electoral slogan, but it’s a path to national decay. Fortunately, Congressman Paul Ryan (R – Wisconsin) and other conservatives offer greater long-term prosperity via lower tax rates and a broader base. The time for choosing is nearly upon us, America.



Truth vs. Ideology

Frustrating! That's the appropriate word for what is happening in the wake of the Osama bin Laden raid. Besides the precision of the Navy SEALs, the big story to emerge from the action is that coerced interrogation gave the CIA vital information used to track bin Laden to his lair. Current CIA Chief Leon Panetta has confirmed that.

Of course, that exposition is embarrassing to the left, including President Obama, Vice President Biden and Secretary of State Clinton, who are all on record as saying coerced interrogation does not work. Apparently, they were wrong in a big way.

The nails-on-the-blackboard part of this story is that some liberal pundits are trying to deny the undeniable. The spin they are using is that a "mosaic" of intelligence led the CIA to bin Laden. It was not just waterboarding or whatever. To paraphrase Panetta: We'll never know if we could have gotten the same intel without the water.

That's true, but who cares? It is the duty of the federal government to protect Americans from harm. And that's what the Bush administration did when it signed off on coercive questioning.

The record shows that just three men were waterboarded: Khalid Sheik Mohammed, Abu Zubaydah and Rahim al-Nashiri, all al-Qaida big shots. Under duress, KSM gave up vital information that crippled his terror group and ultimately led U.S. authorities to watch bin Laden's top Pakistani courier. Eventually, that man led the CIA to the compound outside Islamabad.

But still, the far left won't budge. No matter what the facts are about the effectiveness of coerced interrogation, they will deny them. Infuriating.

The sane policy going forward is this: The president and only the president should have the power to order coerced interrogation, including waterboarding, if national security is endangered or American lives are on the line. One man makes the decision, and his orders are carried out by an elite intelligence team answerable directly to him.

So if Obama doesn't want to order waterboarding, fine. That's on him. But the elected leader of the nation should have the power to make the decision.

It is ironic that many on the far left openly celebrated the death of bin Laden. So, guys, let me get this straight: It's OK for U.S. forces to shoot a terrorist in the head, but it's not OK to waterboard him if lives are in danger? Good grief.

It is long past time for Americans to reject ideology that endangers human beings. We live in a dangerous world chock full of doomsday weapons. Common sense should dictate how the federal government defines strategies to protect us. How many times have you heard ideologues say that coerced interrogation does not work?

Well, it does. Ask bin Laden. Wait, we can't.



Evidence at bin Laden’s home raises nuclear concerns

Pakistani government links suspected

Intelligence analysts are sifting through phone numbers and email addresses found at Osama bin Laden’s compound to determine potential links to Pakistani government and military officials while U.S. officials and analysts raise concerns about the safety of Pakistan’s nuclear materials.

According to three U.S. intelligence officials, the race is on to identify what President Obama’s top counterterrorism adviser, John Brennan, has called bin Laden’s “support system” inside Pakistan. These sources sought anonymity because they are not authorized to speak to reporters.

“My concern now is that we cannot exclude the possibility that officers in the Pakistani military and the intelligence service were helping to harbor or aware of the location of bin Laden,” said Olli Heinonen, who served as the deputy director general of the International Atomic Energy Agency (IAEA) from 2005 to 2010.

“What is to say they would not help al Qaeda or other terrorist groups to gain access to sensitive nuclear materials such as highly enriched uranium and plutonium?”

The U.S. has worried quietly about the infiltration of Pakistan's Inter-Services Intelligence (ISI) and military for years. Those concerns heightened in recent months when the CIA learned that bin Laden’s compound in Abbottabad was a stone’s throw from Pakistan's military academy.

Politico first reported this week that CIA Director Leon E. Panetta told members of Congress that bin Laden’s clothing had two phone numbers sewn into it at the time of the raid. Those numbers and other contacts found at the compound are key clues in an effort to determine what elements of Pakistan’s national security establishment provided support to bin Laden and al Qaeda.



“No Nation Was Ever Ruined By Trade”

More trade means more jobs

The headline is a quotation from Benjamin Franklin, who added, “Even seemingly the most disadvantageous.” Franklin believed that free trade was good for everybody. In the 21st century lots of Americans and their politicians believe the opposite: Being open to trade allows rapacious corporations to “ship jobs overseas.”

In the 2010 mid-term elections, the Democratic National Committee rolled out a television ad campaign accusing various Republican candidates of favoring policies that shipped jobs overseas. More recently, Senate Majority Leader Harry Reid (D-Nev.) declared, “I think we should do a lot more to stop shipping jobs overseas.” In the meantime, the Doha Round of international trade negotiations has been on the brink of collapse for a while, sparking fears the freer trade system painstakingly built over the last 50 years might begin to unravel.

A new study, Trade and Unemployment: What Do the Data Say?, by three European economists published in the journal, European Economic Review in March, forthrightly asks the question: Does exposure to international trade create or destroy jobs? Their answer strongly backs the observation made by Franklin more than 230 years ago. “A 10 percent increase in total trade openness reduces aggregate unemployment by about three quarters of one percentage point,” they conclude. To be a bit more precise, they find, “A 10 percentage point increase lowers the equilibrium rate of unemployment by about 0.76 percentage points.” Trade creates jobs.

In general, the higher a country’s volume of international trade, the higher is its degree of openness. Trade openness is generally measured by adding together the value of both exports and imports and dividing that sum by total gross domestic product (GDP). Crudely, let’s say an economy imports $10 billion annually and exports $10 billion annually and has a total GDP of $100 billion. That would yield a trade openness index figure of 20 percent. Another country with a GDP of $100 billion exports $15 billion and imports $15 billion, yielding a trade openness index of 30 percent.

Roughly speaking, U.S. GDP was $15 trillion in 2010, and exports and imports combined totaled just over $4 trillion, yielding a trade openness index figure of 27 percent. Without going into detail, the European economists derive a real trade openness index by taking differing price levels among countries into account.

The researchers then compare the relative trade openness of 20 developed countries in the Organization for Economic Cooperation and Development with their unemployment rates over time. They take into account other factors such as union membership, national employment protection policies, tax rates on wages, and the generosity of unemployment insurance.

The researchers report that generous unemployment benefits correlate slightly with higher unemployment, suggesting that workers have less incentive to look hard for work. Also, high unemployment correlates with the size of the tax wedge, that is, the difference between what employees take home in earnings and what it costs to employ them. Basically, this means the higher the income tax rate, the higher the level of unemployment.

The researchers go on to analyze the effect of freer trade on a selection of 62 developing countries. They take into account features like the size of the black market economy and whether a country is landlocked or not. Again, they find that openness to trade boosts employment, concluding that “the effect of a 10 percentage point increase in openness lowers unemployment by about 1 percentage point.”

So why does free trade create more jobs? The study suggests that freer trade boosts overall productivity, enabling companies to hire more workers. Trade enhances competition which weeds out inefficient firms and allows more productive ones to expand. As the average efficiency of firms in a country increases, they can earn more revenues by boosting production. And that leads to hiring additional workers.

To get some idea of how much opening international trade further would benefit people, economists at the Peterson Institute for International Economics in Washington, D.C., calculate that concluding the Doha Round of free trade negotiations could boost global GDP between $165 billion and $283 billion per year.

So why do people, especially politicians, believe the opposite? The 19th century French economist Frederic Bastiat explained this sort of disheartening policy myopia his brilliant essay, “What is Seen and What is Not Seen.” People tend to focus on the seen consequences of a policy, in this case, competition from trade eliminating some jobs at relatively inefficient companies.

But they miss the unseen benefits, such as new jobs that result from increased average productivity. Naturally, the people who lose their jobs are worried and angry, so they call their member of Congress to complain about “unfair” trade. Fearing that they may lose their jobs, the denizens of Capitol Hill seek to enact legislation to block imports or mandate “Buy American” to protect their complaining constituents against “unfair” trade. In politics, as in much of life, the squeaky wheels get oiled.

The seen result of this political dynamic is that a few workers get to keep their jobs while the unseen outcome is that more people are out of work than would otherwise have been. In addition, protectionist legislation makes other Americans worse off by forcing them to spend more because they are denied access to cheaper and better exports. Our politicians get it backwards: Trade creates jobs for Americans and everyone else.



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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)


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