Why No More Job Creation? Talk To The Twelve-Year Old

by Austin Hill
“So, what did you do during your summer break?”  If you happen to be a certain 12 year old boy from Pocatello, Idaho, you spent the summer being productive and successfully carrying on an entrepreneurial venture, and then experiencing your state government cracking-down on you for not being licensed and demanding a portion of your revenues.

The 12 year old son of Jason Weeks is who we’re talking about. Weeks’ son announced at the beginning of the summer that he wanted to acquire a motorcycle. Weeks had the good sense to tell his son to earn money and purchase one for himself. So the son took the father’s advice, and – presumably with some help from some adults – he launched a fruit stand, right near a Red Wings Shoe store in small town Pocatello.

But soon after Weeks’ son launched, the Idaho State Tax Commission lunged.  
“They confronted him first and he called me” Weeks told the Idaho State Journal newspaper.  “It was the second day that my son was in business.”


According to Weeks and the local newspaper, the state is demanding payment for a 6% state sales tax that they claim should have been collected by the boy from cash paying customers that bought his raspberries. Weeks would not return my calls prior to the writing of this piece, but, without commenting specifically about the incident, the state tax commission acknowledges that it happened and notes that they have to enforce the law with everybody.


Americans everywhere should make note of this situation and learn from it.  Lesson number one is that nobody should attempt to launch any sort of business in the United States without making certain that they are in full compliance with city, county, state and federal regulations.  That’s a tall order, but that’s how costly it has become to do business in America.


Governments nationwide and at all levels are almost universally on the hunt for money, and many of them are broke.  There is no limit to governments’ willingness to turn people upside down and shake cash out of their pockets, and they’ll even do it with children (the Idaho state tax commission had a similar run-in with a 6 year old back in 2010!).  If a business is being operated without the proper licensure and permitting requirements being met, and without proper taxation procedures in place, an operator no matter their age will likely be fined for being out of compliance, and fined retroactively for however long the non-compliance has been happening.  Business owners, beware.
The other great lesson in this situation is to realize that we live in an era of abusive government.

Agents of city, county, state and federal government often don’t know any limits to how they can and will exercise their powers over the lives of private individuals, and the cause of the problem is we, the people. With often less than 50% of the American population participating in U.S. presidential elections, voter turn-out for state and local elections is usually even smaller. Such ambivalence is emboldening to bureaucrats and politicians who have power and enjoy using it.


Abusive government won’t stop until Americans wake up and choose otherwise.  Hopefully the young Mr. Weeks from Pocatello – and others in his generation – will someday choose more wisely than today’s adult population.


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The Lying King

This nation began with a President of whom it was said that he could not tell a lie.

At this moment in times, it looks as though the nation will end with a president who cannot or will not tell the truth.

In his most recent series of gratuitous lies, Obama makes it sound as if the ‘Sequestration’ will trigger the ‘Apocalypse‘.

Let’s get a few facts established:

1. The Sequestration clause was inserted into a finance bill because Obama demanded it.

2. The Sequestration will be a mere 2.4% of the entire budget (if we actually had a budget).

3. The Pentagon is bearing 50% of the total cuts.

Note: Every agency’s budget has a built-in baseline increase before Congress acts on a budget. As a result, every department other than the Department of Defense actually has more money, after Sequestration, than they had in 2012.

If the 2.4% reduction in growth will cause all the havoc that Obama claims, what in hell does the other 97% do? May be, the Congress should give back the all damaging 2.4% and reduce the 97% that according to the administration is doing nothing.

Obama and his butt kissing friends in the media are blaming the Republicans for the Sequester. In truth, it was at Osama’s insistence that the Sequestration clause was inserted into “The Budget Control Act of 2011”. The clause specified an incentive for Congress to act. If Congress failed to produce a deficit reduction bill with at least $1.2 trillion in cuts, then Congress could grant a $1.2 trillion increase in the debt ceiling but this would trigger across-the-board cuts (Sequestration”, as of January 2, 2013.

The House submitted several budgets that met these goals, but none were brought to the floor in the Senate and Obama made it clear that he would not sign a budget with any spending reductions.

If a 2.4% cut were mandated across the board, every government entity could absorb the cut with zero effect of the public. In fact, most agencies could handle a 10% reduction in their annual budget. Some, like the ‘Department of Energy’, could be cut 100% with no ill effect what-so-ever.

The Department of Defense is a different story. They already faced a massive budget reduction which when combined with the Sequestration ‘cut’ results in a1 trillion dollar cut over 10 years! That is a very large cut for them to absorb.

To make matters worse, the Commander-in-Grief will not grant any of the services the authority to manage where the cuts are made.


The Democrats have over the past few days expressed fear that the ‘cuts’ won’t cause the panic that they seek, and therefore, the public won’t turn on the Republicans in Congress. Even worse, they fear that the ‘workers’ might see ‘cuts’ as a good thing.

The Democrats keep telling us that we need a ‘comprehensive agreement’. The problem with that is that they already have lots of new taxes but there have been zero cuts. Let’s catch up on those cuts so that we have a ‘balanced /comprehensive agreement’.

Obama is out to destroy this nation and will continue to push his tax-of-the-month campaign.

If you want a shot at saving the country, keep letting Congress know that you want more spending cuts!


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Obamanomics And The Jewish Deli Dilemma

by Austin Hill
Did you hear the big news from the world of small business? Jewish delis are closing in both Los Angeles, and New York City.

The trend has been a long time in the making, especially in New York City where Jewish delis’s used to number in the thousands and now total less than one hundred. Yet the Los Angeles Times reported this “news” just this past week, and the details that the report included – and the details that were ignored– point to some far greater problems.

The article, written by Journalist Tiffany Hsu, notes that the decline of the L.A. area Jewish delis “seems to be accelerating partly because of health concerns over the schmaltz-spread fare...” This may very well be the case – certainly American adults are inclined to being more “health conscious” with their dietary choices, rather than less, and food categories of all types that are perceived to be un-healthy are probably headed for a declined in consumption.

From there, the article suggests that “skyrocketing” food costs have driven some delis out of business. That may be true, too, but what has caused that to happen? The article suggests that “mass exports” of food to Japan is the culprit on the price spike. The story also blames the decline of LA-area Jewish delis on “the recession,” “too much competition” from other restaurant sectors, and the notion that younger consumers “don’t understand delis and comfort food.”

It was only one small news story in the LA Times. Bu let’s think through some of the ideas in this news story – ideas reported as “facts” – and consider what they mean from an economic standpoint. Consider, for example, the notion of “too much competition.” What exactly does this mean?

Obviously the more competitive a marketplace is, the more difficult it is for any particular business entity to survive and thrive. But how do we know when the level of competition is appropriate, and when it is “too much?”

Americans are accustomed to fierce competition in other arenas – in sports, especially, and even in the arts and entertainment. Similarly, most of us would never say “my favorite team didn’t make it to the Super Bowl this year because there was too much competition in the NFL.”

But when it comes to local small businesses, we often succumb to this vague, un-defined notion that there is this magical amount of competition that’s “just right,” and if our favorite business can’t compete, then therefore there is “too much” competition.

Yet in our free market economic system, we understand that competition is a good thing. If competition means that certain business entities or entire business categories decline because of the competition, then so be it. It is fairer and more just to allow businesses to rise and fall according to the market demands of consumers, rather than imposing artificial “limits” on the number of people who are to be permitted to participate in an industry.

But what are we to make of this idea that the delis’ failure is because consumers “don’t understand?” If a consumer chooses to “not understand” any particular business, and therefore chooses not to patronize it, then that consumer has made their choice – haven’t they? We’re all better-off if, win or lose, we honor and respect the choices of consumers, rather than presuming that they are ignorant if they make a choice that we don’t like.

And guess what the LA Times article about the delis completely ignored? The impact of government policy on small businesses. Nowhere did it reference the expansive and onerous mandates placed upon business via Obamacare, the impact on business owners of the President’s payroll tax hike, or his income tax increases on “rich people.”

No, the LA Times apparently wasn’t interested in how the President’s income tax hikes have taken money away from what the I.R.S. designates as “Subchapter S Corporations” (sometimes abbreviated as “S-corps”), and how this has effectively taken money directly out of small corporations, many of which operate small businesses. Likewise, the article made no reference to the fact California voters approved an increase in state income tax rates for “rich people” (thus leading to even less revenue in Subchapter-S Corporations) on their ballot last November, nor did it acknowledge that California has for years been on a trajectory of higher and higher unemployment insurance and workers’ compensation mandates for businesses.

It is perhaps more comfortable to pretend that our current government policies are not problematic, and blame the struggling economy on “too much competition” and consumers who “don’t understand.”

But how many more delis must fail, before we get honest and acknowledge that government is our problem?

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France Wakes Up To A Socialist Reality: Will America?

by Austin Hill
“People call this the ‘new normal.’ Let me assure you there is nothing normal about this at all. It’s the new ‘abnormal,’ and it won’t last, because as free people we won’t stand for it…”

With those remarks, business magnate and former presidential candidate Steve Forbes drew thunderous applause from his audience.

It was October of 2012, about 2 weeks before our last presidential election. Forbes was speaking to a crowd of 10,000 in the comforts of a beautiful indoor sporting area (the “Idaho Center”). He was headlining the “Power Up!” business and motivational seminar with Sarah Palin, Rudy Giuliani, and Zig Ziglar protégé Krish Dhanam (fyi-we need more native-born Americans to understand American liberty as well as this guy from India named “Krish” understands it).

Forbes had just finished explaining why a confluence of cheap credit, billions of dollars in stimulus spending, lots of new taxes on “rich people,” and a growing-by-the-second government debt have all failed to stimulate our economy. He was confirming with his technical explanation, what many of us instinctively know in our hearts: the reality that no organization- no individual or family, no business, no government – can spend its way out of debt and re-distribute its way to prosperity.

We should all hope that Forbes will be proven right – that, eventually, “as free people, we won’t stand for it.” Because in the election that occurred two weeks after Forbes’ speech, Americans didn’t merely “stand for it” - we asked for more of “it.”

Yet here is our reality: if Americans continue to vote (either blindly or intentionally) for politicians who viciously take expanding portions of wealth away from our society’s producers, and then selfishly redistribute that wealth to the people of their choosing, eventually the producers will stop producing as much wealth, the politicians will run out of other’s people’s money to redistribute, and we will all suffer the consequences.

The social disorder and collapse of Greece and Spain could be our future in the U.S., if, “as free people,” we don’t choose more wisely.

For those who have eyes to see and ears to hear, examples abound in this present day of how not to construct a national economy. Greece and Spain qualify, yes, and so does Venezuela. And within the last few months the news from France, another bureaucratic, debt-laden, and not-so-free-anymore part of the world, should be a wake-up call to Americans, as well.

After five years of service from President Nicolas Sarkozy, a leader who sought to reduce government controls of the economy and to stimulate private enterprise, French voters tossed him aside last May in favor of a presidential candidate who was nominated jointly by both the French Socialist Party, and France’s “Radical Left Party.” Francois Hollande campaigned with a set of 60 propositions - referred to as his “manifesto” – which included raising taxes on corporations; raising taxes on banks; raising taxes on “rich” individuals; lowering the official retirement age back down to age 60 from 62; hiring 60,000 new government school teachers; and establishing government subsidized “youth jobs programs” in regions of high unemployment (does any of this sound familiar?).

Today, many French citizens seem horrified that – shock! – President Hollande is doing precisely what he pledged to do. “The situation is very serious” noted Laurence Parisot, head of France’s largest labor union MEDEF in an interview with the London Telegraph. “Some business leaders are in a state of quasi-panic” he claimed, as the Telegraph reported that “France is sliding into a grave economic crisis and risks a full-blown ‘hurricane’ as investors flee rocketing tax rates.”

Within his first six months in office, French President Hollande managed to raise national capital gains taxes from 34.5% to 62.2%, and now the French people are freaking-out. Juxtapose that with the hatred that American Golfer Phil Mickelson experienced when he acknowledged last month that, between federal and California state income taxes, he’s having “62, or 63%” of his earnings taken away each year, and the reality-check is even more striking.

In short, the French apparently now believe that this level of taxation is a dangerous and destructive thing. In America, however, “rich guy” Phil Mickelson is a dangerous and destructive thing.

And consider this: Laurence Parisot, a major, national labor union leader (arguably a counterpart of Teamsters leader James P. Hoffa here in the U.S.) is upset because a Socialist President is taking more money from “the rich” and re-distributing it to others via government employment programs. Such policies would seem like a dream come true for the AFL-CIO, yet the union leader in France seems to understand that the “rich” in his country play a vital role in other people’s livelihoods, and simply seizing more of their money is harmful for everybody – even unionized workers.

The backlash that the Socialist President is enduring suggests that maybe the citizenry is waking up and facing reality. But are Americans facing economic reality yet?

We observed in the so-called “fiscal cliff negotiations” that President Obama’s political abilities to raise income and capital gains taxes are limited. And the suffering among lower and middle income Americans from the infliction of higher payroll taxes, and Obamacare taxes and penalties is so real that last week, even the New York Times had to report on it.

Let’s hope that Steve Forbes is right – that this is not our “new normal;” that we will reject politicians who are vicious with society’s wealth creators. It may, however, have to get much worse in America, before we embrace reality.

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Fiscal Crisis Bill Is Full Of Special-Interest Tax Breaks

In another of those, "You have to pass it to know what's in it", last-minute deals Congress passed a bill to prevent the U.S. from going over the "Fiscal Cliff".  The Bill, it was claimed, would spare spare the middle class from tax hikes.

 

The bill was however, loaded special-interest tax breaks!  That's correct.  The Administration added more than 50 'temporary tax breaks worth more than $75 billion.

 

These tax breaks went to Hollywood, Puerto Rican rum makers, alternatibve energy and General Electric., among many others. A sampling foillows:

• Allows motorsport race tracks to more quickly write off improvement costs. (value  $78 million)
• Allows TV and film producers to write off the first $15 million in production costs inside the U.S. (value $248 million)
• Allows for 50 percent tax credit for expenses related to railroad track maintenance through 2013 (valued $331 million
• Allows for increased tax rebates to Puerto Rico and the Virgin Islands from a tax on rum imported into the United States. (vaalue $222 million /10 years) 
• Allows for a credit of up to $2,500 for buying electric-powered vehicles was expanded to include electric-powered motorcycles, at a cost of $7 million.  
• Allows a tax credit for the production of wind, solar and other renewable energy. (value $12.2 billion)
• Allows for a large number of tax credits for research and development,
• Another provision allows exelerated write-off for the costs of expandsion of restaurants and other retailers.

 

Sen. Bob Corker, R-TN voted for the bill and desribed it as a "terrible vote to have to take.  The package is a reminder of why we need tax reform to do away with those loopholes."

 

Sen. John McCain, R -AZ also voted for the bill stated,"It's hard to think of anything that could feed the cynicism of the American people more than larding up must-pass emergency legislation with giveaways to special interests and campaign contributors,"

 

It has been noted that the tax breaks in the package were already in the law, and were merely extended for another year by Tuesday's vote.

 

McCain quipped, "They were just crammed into the bill literally in the middle of the night. The American people deserve better and we have now earned their well deserved disdain about the way we do business."

 

So we increased taxes on the so called rich so we could give to the administrations friends -- And Obams
a wants to up the tax the same group again

 

 

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Thou Shalt Not Covet: Warren Buffet And The Corrupting Of The American Soul

By Austin Hill
“Bottom line…would raising taxes on the wealthiest Americans have a chilling effect on hiring?”

It was Matt Lauer’s final interview question for his guest, on last Tuesday’s episode of NBC-TV’s “Today” show.

“No,” the guest adamantly replied. “No… and I think it would have a great effect in terms of the morale of the middle class..”

The guest was famed investor Warren Buffett, CEO of the Berkshire Hathaway holding company and a personal friend of President Obama (and by the way, did you know that Obama calls him, and not the other way around? Mr. Buffett would want you to know). He was spouting the usual “it’s time to raise taxes on us rich folks” rhetoric for which he’s become famous.

But Buffett’s closing comments were a bit different this time. Higher taxes on the rich will provide a “morale boost” for those of us in the middle class? How is that so? Why would I, a mere middle class guy, be made to feel better simply because my government is confiscating greater portions of somebody else’s money?

Buffett’s remarks during the NBC TV interview, while in-step with prevailing political sensibilities, were nonetheless mostly illogical. Earlier in the interview Lauer brought up a recent quote from Honeywell CEO David Cote who had noted on another national TV program that he (Cote), and others like him, were feeling a lack of confidence in the political process, so much so that the uncertainty was making them keep their money on the sidelines and preventing them from making additional investments and hiring new workers.

“Well,” Buffett responded, “At Berkshire Hathaway, we're investing 9 billion in plant equipment, that’s a record, breaking last year's record.” That was an interesting response, and it was certainly a nice “plug” Mr. Buffett offered for his own company.

It was also a very artful “dodge” from the facts, and rather irrelevant to the discussion. Cote has articulated some grave concerns about a lack of leadership at the White House, and in Congress, and has noted how this lack of leadership has created serious, stifling uncertainty in the business market. So has Cisco CEO John Chambers, Wynn Resorts CEO Steve Wynn, and Intel CEO Paul Otellini (who, ironically, serves on President Obama’s Council on Jobs and Competitiveness). Buffett would prefer to ignore this (it’s always uncertain” he told Matt Lauer).

Buffett also reiterated in the interview that people like him have not been paying their “fair share” of taxes for all these many years. This is where his illogic hits a crescendo. If Mr. Buffett (or anybody else) isn’t paying enough in taxes, then he’s only got himself to blame. He could easily choose to make an extra contribution to the I.R.S. He could also instruct his staff of lawyers and accountants who represent him to the I.R.S., to stop calculating all the legal, allowable tax deductions that are available to him. All of these methods, and others, would allow Mr. Buffett to pay more in taxes – if that’s really what he wants.

But then Buffett had to go and perpetuate the same myth that he and the President have been perpetuating for over two years, when he alleged (once again) that his secretary pays more in taxes than he does. This is not only a myth, it is a lie. Buffett, and wealthy Americans like him, don’t draw “income” like most working Americans do; they get paid with investment dividends. Dividend earnings are created when somebody takes money that they have already earned, and they invest that money. That it is to say, dividend earnings are produced with money that has already been taxed as income, and when dividend earnings are taxed, the original investment capital is, in essence, being taxed for the second time.

This is why our government taxes dividends at a lower rate than it taxes income. It is to create an incentive for people to put their capital at risk, and invest in business enterprises (rather than merely holding on to that money and enjoying it in les

s risky ways). When Buffett compares his secretary’s income tax to his own dividend tax, he’s comparing apples and oranges, and 18% of Buffett’s dividend earnings no doubt amounts to a lot more money than 30% of his secretary’s salary. Dividends and income are treated very differently, and for good reason – but his comparisons make for amusing soundbytes.

As for Buuffett’s assertion about an alleged “morale boost” – this, also, makes for amusing soundbytes and headlines, and allows Buffett to provide some political cover for the President (you know, the President who calls him). Yet the real disgrace is if he is right about this.

Are Americans really so petty and covetous that we are comforted when “rich” people have their money taken away from them? Or do sufficient numbers of us still understand America to be a meritocracy – a society where we all achieve in different measures, yet we are all blessed with the freedom to try and achieve all that we can?


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Obamacare 2013: Now Playing At A State Capitol Near You

by Austin Hill
If elected, Mitt Romney vows to “end” it.

If re-elected, Barack Obama says he’s “open to amending” it.

But regardless of who wins the presidency next month, conscientious voters need to know this: Obamacare is already costing taxpayers lots of money, and within the next few months it will cost millions of dollars more.

It’s bad enough that President Obama’s “if you like your Doctor, you can keep your Doctor” promise has proven false. And it’s bad enough that his promise to “bend the healthcare cost curve downward” has proven to be fictitious, as well (according to MIT Economist Jonathan Gruber prices for private insurance will likely increase 30% by 2016 – this, despite Gruber’s support of the President’s claims in 2009).

Now, state governments are spending taxpayer-funded time and resources figuring out how to comply with the federal mandates. The Obamacare law has imposed a deadline of November 16th, whereby the states must explain to the U.S. Department of Health and Human Services what they intend to do about the establishment of their respective “healthcare exchanges” - the government organized group of standardized health insurance plans from which citizens private citizens and organizations will be permitted to purchase health plans – and the states are deciding now how to proceed.

According to the law, each state can choose one of three options when it comes to setting up an exchange: A) the state can establish an exchange on its own; B) the state can let the federal government set up an exchange on the state’s behalf; or C) the state can choose a “hybrid” approach, and co-mingle both state and federal authorities and resources and produce an exchange together.

Back in August of this year, members of the U.S. House of Representatives heard testimony about the exchanges from Michael Cannon, Director of Health Policy Studies at the Cato Institute. Cannon noted at the time that, given the way the Obamacare law is written, the sitting Secretary of Health and Human Services (whomever that happens to be at any given time) has broad authority to impose requirements and restrictions on a “state exchange,” regardless of whether the individual state government constructs the exchange or if the federal government does it for the state. In cases where a state seeks to set up an exchange, the federal government will ultimately determine which health insurance plans will be “allowed” to be bought and sold in that state, and what those health insurance plans will cover.

Cannon spelled-out this reality in no uncertain terms: “If what you want is a federally run health insurance exchange in your state – a government agency controlling the private health insurance market – if what you want is the federal government to control your state, the best thing you can do is establish an exchange” he told the congressional members. He also noted that once a state makes the overture towards creating an exchange, there is probably no turning back on that decision, legally speaking; the state at that point will have forfeited its sovereignty and will likely not regain it.

For states that don’t want a “federally run health insurance exchange,” Cannon had a fascinating suggestion: don’t do anything. “If the state does not establish an exchange then there might not be an exchange at all” Cannon noted. The reason for this is simply because Congress never approved any funding for the state health insurance exchanges, and given how politically unpopular Obamacare is today, Congress probably won’t approve any such funding for the foreseeable future.

Meanwhile, state government officials are consulting with outside “experts,” and each other, in hopes of determining how to proceed. Just last week, a task force selected by Idaho Governor Butch Otter met and heard over six hours of testimony from both private consultants, and officials from other states.

Bruce Greenstein, secretary of the Louisiana Department of Health and Hospitals, told the Idaho task force that Louisiana has chosen not to create its own exchange.“There is really no way to effectively estimate the state’s costs for creating an exchange and the provisions in the law are vague,” he said. His associate, Carol Steckel, added that “we view this law as a ‘one size fits all’ effort that cannibalizes the private insurance markets. It doesn’t work for us here in Louisiana.”

Jonathan Hurst, a policy advisor to Texas Governor Rick Perry, described the insurance exchange mandate as a “logistical and administrative nightmare,” and noted that “90 percent of the rules that will govern these things have yet to be written” (the hastily drafted Obamacare law makes reference to “future rules” that haven’t been established yet). Hurst said that Texas is not pursuing a state exchange, noting that there are “too many risks and unknowns” in the law, and a state that pursues an exchange today could be held liable for violating rules that will be established sometime later.

Perhaps most striking was the testimony heard in Idaho from representatives of KPMG, the global accounting and professional services firm. Hired by Idaho to research the costs of creating a state exchange, KPMG reported the price to be approximately $77 million to design and implement the exchange, with recurring operational costs estimated to be $10 million annually.

When asked by one of the Idaho task force members what the state would get in return for this estimated $77 million expenditure, KPMG representative Andrew Gottschalk was vague: “It’s hard to explain exactly what you get…It’s hardware, it’s software, there’s infrastructure, there’s people and staffing” he stated. “There would likely be a call center. It’s all kinds of things… there’s a lot of stuff….but it’s hard to be specific.”

But there are two things we can be specific about. As states spend taxpayer dollars crafting programs and plans, the cost of healthcare continues rise.


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Taxes: J.F.K. Vs. B.H.O.

“It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now … Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.”

– John F. Kennedy, Nov. 20, 1962, president’s news conference

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To paraphrase Joe Biden--

"Who are you going to believe-

The ones that have been lying to you for 4 years?

  or the new guys with proven ideas?"

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,

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Job Creation Nation: America Faces Harsh Realities In 2013

by Austin Hill
The political conventions have passed, the August jobs report is out, and many Americans are said to be “giving up hope.”

So how can we jumpstart our greatest engine of economic growth – the American small business market – and get our economy growing again?

Regardless of which presidential candidate wins this November, in 2013 Americans will have to focus on saving, and expanding, the small business marketplace. The sector of our economy that makes up nearly 60% of the entire American private sector workforce, and creates between 60 and 80% of all new jobs, has been under attack over the past few years by politicians who have created lots of bad laws.

And if Americans are serious about expanding actual employment (rather than merely expanding government welfare and entitlement programs), then we will have to make better choices at the ballot box, and hold our elected leaders responsible for making serious changes. To start, let’s consider consider this harsh reality: the so-called “fiscal cliff” is real, and President Obama’s proposed solution to it is potentially lethal.

Under current federal law, both income tax rates and Social Security tax rates are set to rise dramatically on January 1st of 2013. Along with these tax increases, a dramatic reduction in government services will take hold at the same time.

This confluence of private citizens having more of their money taken away (higher taxes), and a reduction of government services (which means that private citizens will have to fill the gap and spend more of their own money) is expected to trigger a new recession next year. As a means of preventing a “double dip,” both Republicans and Democrats in the Congress have proposed that taxation rates be frozen where they are at, and held steady in 2013.

But President Obama has insisted that taxes should be raised on so-called “rich people” next year, and has refused to do what most economists and many members of his party have said is the one thing that could save us from another downturn.

And with the President polling as well as he is, it seems apparent that millions of Americans are far more excited about his “make the rich pay” rhetoric than they are aware of the consequences of his proposals. Obama supporters may get their wish in November, but it will come at a painful price – a price that all of us will pay.

And here’s another harsh reality: Americans need to get comfortable with other people’s financial successes. Since the early days of his first presidential campaign in 2007, Barack Obama has been pouring fuel on the fires of resentment and envy towards the wealthy. As a political strategy this has worked well for the President, but as government policy this has been bad for all of us.

The President’s tax-hike push is a perfect example, as many of America’s small businesses are set-up under the I.R.S. code as “Sub-chapter S” corporations. These are businesses wherein the company profits are reported to the I.R.S. directly as personal income by the business owners and are subject to personal income tax rates – and many of these business owners are being targeted by President Obama for an income tax-hike.

If the President gets his wish, and the government begins confiscating more money from the owners of Sub-chapter S corporations, by definition this leaves less money in these corporations for hiring and expansion. Thus Americans have a choice to make – do we want to employ our President for another four years so he can satiate the hatred some of us have towards “the rich” and take away more of their money? Or would we like private business owners to have money available to employ more of us? From the way things appear right now, we probably can’t do both.

And here’s harsh reality number three: Americans have to stop Obamacare from wiping-out small businesses. A central feature of this law is the mandate that businesses provide healthcare insurance to their workers. It sounds great – workers will now be “guaranteed” health insurance – but once again, the “make somebody else pay” approach is heaping more weight on the shoulders of small business owners.

Americans must decide how serious they are about job creation – even if it means that some jobs won’t include health benefits. If we honestly want employers to employ more, we must force the Congress and the President to fix this devastating component of Obamacare next year.

And here’s yet another harsh reality: Americans must stop making small businesses a scapegoat on illegal immigration. Roughly two-thirds of Americans want our national borders secured and a coherent immigration policy, yet for over a decade Washington has refused to do the former and has scarcely attempted the latter.

Amid the frustration, businesses have become the target of Americans’ wrath. If business owners would simply quit hiring illegals -so the reasoning goes -the illegals would go away.

Mitt Romney has pledged that, if elected, he will seek to require American employers and workers to register with the federal government’s “e-verify” website, as a means of policing the problem. But this adds even more bureaucratic burdens to small business owners, and ignores our failed immigration policies and un-secured borders.

Do we want politicians who merely tell us what we want to hear? Or do we want leaders in our government who can actually enable businesses to grow? Americans must become more discerning-and face some harsh realities.
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Questions For A Nation That Has Lost Its Way

By Austin Hill
A new poll shows that 73% of Americans think our country is on the wrong track.

Are you one of the seventy-three percenters?

The poll from Reuters/Ipsos Public Relations was conducted between August 4 and August 8. Given the turmoil over the federal government “debt deal,” the downgrade of federal government debt, and the dramatic shifts in the global stock markets during this period, it’s not surprising that the “wrong track” figure leaped ten percentage points – up from 63% - compared to the same poll conducted exactly one month prior.

What was a bit surprising, however, was that this relatively high percentage of Americans reported “wrong track” status for the country, despite the fact that there were slightly more registered Democrats surveyed than there were registered Republicans. Given that Democrat ideology rules the U.S. Senate and the White House, it would make sense that registered Democrats in America would be more pleased with the leadership of their fellow Democrats who hold elective office.

But if the United States is on the wrong track – if our nation has truly lost its way - then a couple of other questions should follow: A) what is the “right track” for America ? And B) How will we know when we’re “on” it?

Rather than try to quickly answer these two questions, I’m suggesting that we all should first contemplate several other questions. As the title of a famous sales training book once noted, “questions are the answers” – so here are a couple that can help move the process forward:

Who manages wealth the best – private individuals and groups, or politicians and government bureaucrats? For most of my adult life – that is, since the days of the Reagan presidency - the United States federal government has been fairly respectful of every American’s right to create, and possess monetary wealth, and has mostly avoided being punitive towards the wealthiest in society.

Additionally, our government’s leadership has been fairly accepting of the notion that when Americans are permitted to keep more of their own wealth, rather than less of it, they usually do productive things with it that ultimately benefit the overall economy. Even Democrat President Bill Clinton’s Council of Economic Advisors noted in 1994 that "It is undeniable that the sharp reduction in taxes in the early 1980s was a strong impetus to economic growth."

Yet today our nation is afflicted with a terrible philosophical malaise – I call it “the politics of envy.” With a President who campaigned on a pledge to “spread the wealth around,” many Americans today make the assumption that the wealthiest among us achieved their earnings by questionable if not immoral means and deserve to have ever-increasing portions of it taken from them in the form of “higher taxes.” Likewise the assumption is made that when individuals possess large sums of wealth they only do “selfish” things with it, whereas politicians can force wealthy people to expand their businesses and “create jobs” and can spend people’s money in ways that benefit “everyone.”

This esteemed view of government seems terrific – but is it really accurate? The agenda of President Obama and his Democrat party has helped create an environment where roughly half of the population pays no income taxes, so presumably the President has spread at least some wealth “around.” But have the new controls and mandates and regulations placed on businesses – all in the name of the “collective good” – really been beneficial to anybody? As Steve Wynn, CEO of Wynn Resorts, LTD recently noted, “those of us who have business opportunities and the capital to do it are going to sit in fear of the President…” Indeed treating business owners and “the wealthy” as though they are something less than dignified respectable human beings has produced a stagnant economy, and the constant threat from the President to raise taxes on the wealthy makes matters worse not better.

And here’s another soul-searching question for a nation that is on the “wrong track:” is America strengthened when growing portions of its citizens are content to live off of the largess of others? According to the Congressional Budget Office, the signature domestic agenda item of our current President – “Obamacare,” if you will – has led many of our fellow Americans to believe that they simply no longer need to work for a living because of all the “free” assistance they can get from our government.

This is not just political “spin” or partisan punditry. It comes directly from Douglas Elmendorf, the Director of the non-partisan C.B.O. It was none other than Mr. Elmendorf himself who noted in late 2010 that, outside the healthcare sector of our economy, the greatest impact of the Obamacare agenda will be in the labor market as the program incentivizes people to not work. Is this really something that puts America on the “right track?” It may be helping to bring down the unemployment rate, but it is certainly not leading our country to prosperity and productivity.

The pain of a stagnant economy and high unemployment is quite evident, while the flaws of bad government policy are not always so obvious. Americans should be contemplating these, and lots of other questions, as we seek to get our nation back on course.

Email: Austin Hill


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“Job Killing Tax Cuts” And A Guy Who Called Rush

By Austin Hill
What’s more important: the wellbeing of each individual citizen in America, or the wellbeing of government?

One of the reasons that the United States occupies a distinguished place in the world is because the American founders prioritized the wellbeing of the individual person. Government, the founders believed, should be the servant of individual people. This was a rather significant departure from the view that individual people should be the servant of their all-important government.

Unfortunately, many Americans today prioritize the wellbeing of government above all else. Take for example our President, Barack Obama.

Throughout the debate over our nation’s debt and deficit, President Obama has made it clear that politicians and bureaucrats must be permitted to go on spending money as they see fit. Any limitations on government borrowing or government’s ability to collect taxes will result in calamity, whereas borrowing and taxing will enable all the societal goodness that can exist.

The President’s vision defies historical fact. But here’s a quote from a press conference on July 16th, where he addressed the public pressure to curb government spending, that he and the Congress have been facing:

“….Some of these decisions are tough…but they don’t require us to gut Medicare or Social Security…they don’t require us to stop helpin’ young people go to college…they don’t require us to stop, you know, helpin’ families that have got a disabled child…they don’t require us to violate our obligations to our veterans…and they don’t require quote-un-quote job killing tax cuts…”

Much of this is simply rhetorical. Nobody has proposed “gutting” Medicare or Social Security. Nobody in Congress has suggested that college students or parents of disabled children should be abandoned.

But notice President Obama’s choice of words about taxation – “job killing tax cuts.” Nobody who has even a remote acquaintance with basic economic concepts actually believes that allowing private individuals to retain more of their own wealth decreases “job creation.” Indeed it’s just the opposite – the more wealth that individuals can keep for themselves, the more likely it is that they will invest money in business enterprises that will lead to employment opportunities. Yet, there he is, the leader of the free world, fussing over alleged “job killing tax cuts.”

This “government is everything” mindset doesn’t begin and end in Washington. Last week I happened to catch Rush Limbaugh engaged in conversation with “Carl,” a 24 year old caller to his talk show who was arguing that we all must sacrifice more (especially “rich” people) to keep the government goodness flowing. A portion of the conversation went like this:

Carl: A tax cut depletes necessary revenue needed to keep the government operational and functioning.

RUSH: Carl, that's not what a tax cut is. A tax cut is you work for a living, and you are paid X. At the present, you have a tax rate -- let's just pick one, may not be accurate -- of 30%. Which means that 30% of every dollar you earn goes to Washington, but the money starts with you. It's yours. You earned it. You did what was necessary to be paid that money.

Carl: Exactly.

RUSH: If a tax cut happens, and your tax rate goes to 20%, then all of a sudden you get to keep 80¢ of every dollar you earned rather than 70¢ of every dollar you earned. How in the world is that spending?

Carl: Because when I spend that money out of my own paycheck, that's money that I spend on my own life. When the government spends my tax dollars, they're spending it on necessary infrastructure that's to keep the entire government running, to keep schools running…

RUSH: No... Wait a minute. So are you telling me that you believe that it is more important for government to spend whatever money it has than it is for you to spend whatever money you earn?

Carl: The government spending tax dollars benefits everybody, whereas me spending my own money benefits me…

Apparently Carl hasn’t been taught that when he spends his own money, it benefits the person who grows his food, manufactures his clothes, and so forth.

Rush’s conversation reminds me of a question I recently encountered while serving as a panelist at a university forum on economic growth. As a student took to the microphone and noted that she had read my bio on my website, she stated “your degrees are in literature and philosophy, and you’re not even an economist, so why do you think you have the right to speak about economics?”

I reminded the woman that in America, I have the right to speak about nearly anything; the university had the right to not invite me; and she had the right to not listen. I also suggested that the question about which is more important – individual people, or the government – is really a philosophical question more than anything else, so as a trained philosopher I was probably qualified to participate in the event.

President Obama will likely never embrace this “people before government” philosophy. But will America ever return to it?

Email: Austin Hill
 
 
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California,The “Failed State”

By Austin Hill
“Failed state.”

That sounds harsh, doesn’t it? Do a web search with the words “failed state” and names like Somalia, Haiti, and Sudan will appear on your computer screen.

Unfortunately, the 31st state in our union – California – is looking more and more like a “failed state” as well. And this should matter to every American, because like it or not, California is both a global economic epicenter and a spectacular place in the world.

My native homeland of California is home to the highest mountain in the contiguous forty-eight states (Mount Whitney), the lowest valley (Death Valley), Facebook, “Surf City, U.S.A.”(Huntington Beach), Apple Computers, The World Champion San Francisco Giants, the most fertile farm land in the world (San Joaquin Valley), eBay, Legoland, Cisco Systems, “the entertainment capitol of the world” (Hollywood), three U.S. Presidents (Richard Nixon by birth, and Herbert Hoover and Ronald Reagan by “adoption”), and Mitsubishi Motors of North America. It remains a global leader in the agricultural, information technology, and aerospace sectors. If it were its own country, it would comprise the eight largest national economy in the world.

This is to say that California can be and should be a place of robust economic opportunity across multiple sectors. But politicians and government employee labor unions have a stranglehold on the state (sound familiar?). Businesses and capital are now leaving while actual economic output is slumping.

Most academicians and government bureaucrats who keep track of the world’s “failed states” still won’t admit that Greece belongs on their lists, so the idea that California has in any sense “failed” isn’t even considered. But if we take seriously the criteria for determining a “failed state,” then the sad truth about California becomes painfully clear.

One of the most often quoted authorities on failed states is The Fund for Peace, a Washington, DC-based non-profit think tank organization, and among the many indicators of a failed state that “FFP” notes is “uneven economic development among group lines.” This notion of “uneven economic development” often has “life or death” implications in places like Zimbabwe or the Democratic Republic of the Congo, yet the idea is every bit as real in California as it regards the disparity between the government, and the private sector economy.

For the record, the government of California presently entails a budget deficit of somewhere between $10 and $15 billion – a deficit that is expected to swell to about $25 billion by the middle of 2012. With this as his backdrop, Governor Jerry Brown took office in January noting at the time that California had a history of “kickin’ the can down the road” with its budget woes, and that his plan to solve California’s dreadful fiscal problems would involve both cuts in government spending, and – if California voters approved – tax increases.

Yet Governor Brown is a life-long government employee, and will have nothing to do with cutting state spending where it is most problematic – in the arena of government employee salaries, benefits, and retirement pensions. In fact, while he has been completely unable to implement his plan of “temporarily extending” certain “temporarily inflated tax rates” (which de facto amounts to a tax increase plan), he has continued lining the pockets of unionized government employees with more lavish expenditures on their salaries, benefits, and retirement pensions.

In April, for example, Brown approved a new contract for the California Prison Guard’s union, which allows guards to accrue unlimited numbers of un-used paid vacation days each year. When a guard retires, the un-used vacation time can now be “cashed-in” at the guard’s highest salary rate- a sweet pay-off from Governor Brown to a labor union that spent nearly $2 million on his campaign last year.

And here’s where yet another set of criteria comes in to play for determining a “failed state.” According to the Fund for Peace, failed states often exhibit “a disappearance of basic state functions that serve the people, including a failure to protect citizens from terrorism and violence…” The high-minded folks at the FFP may not know this, but – shocking news! – California has so horribly mismanaged its prison system that it can’t afford to facilitate all of its prisoners.

After being taken to court over the conditions in which they were detaining convicts – which included as many as 54 prisoners sharing one toilet – the California government was ordered by the U.S. Supreme Court in May of this year to release huge numbers of prisoners. This is to say that California’s leaders had plenty of money to spend on their unionized prison guards, yet it doesn’t have enough money to properly facilitate prisoners so as to comply with federal requirements.

Is this “failure enough” to get anybody’s attention? By the FFP’s own criteria, California has failed to fulfill a “basic state function” and to protect “citizens” from “violence.”

The Fund for Peace needs to sound the alarm bells over the California government’s failures, but they probably won’t. It’s up to the state’s citizenry to demand better leadership in Sacramento – before it’s too late.

Email: Austin Hill


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The Feds, The Economy, Your State And Your School Board

By Austin Hill The wisdom of the American people is prevailing in some of the most unlikely places.

Unfortunately, the local public school board is typically not one of those places.

As the federal government goes deficit-crazy and state governments continue to feel the recession’s impact, some good things are actually starting to develop. Fiscally conservative ideals are emerging in states as diverse as Wisconsin, Idaho, New Jersey and Ohio.

In these states and in others, governors and legislatures have stood-up to the ever-expanding demands of government employee unions, reigned-in employee compensation growth, and have cut state spending. Even in liberal Massachusetts the Democrat-led House of Representatives voted last week to limit the powers of their state government employees’ unions.

This is good news for the American taxpayer, and good news for the overall U.S. economy. But when state governments start to spend fewer tax dollars, that often means fewer state tax dollars are flowing to local public school districts. And when that happens, the affairs of local public school districts can get especially outrageous.

Your local school district may be the exception, and its collective behavior may be entirely “above the board.” But the sad reality for teachers, students, and parents, is simply this: in the face of tight budgets, most local school boards across the nation would rather fire teachers, than reign-in other school district expenses. The reason for this is simple: when teachers lose their jobs, students suffer – and “student suffering” gets parents and other voters in the mood for a tax increase.

It sounds cynical, I know. But think about it from the vantage point of political strategy. if school boards actually tried to manage the taxpayers’ money in such a way as to serve the students, first and foremost, then every effort would be made to retain good teachers and keep class sizes small. This would mean that school boards would look “up the food chain” in to the administrative ranks, rather than “down to the classrooms,” when the need arose to cut the budget.

But that’s generally not what happens in most public school districts. The preference for board members is usually to eliminate teacher positions, or at least to “threaten to eliminate” teacher positions – because when budget cuts are felt in the classroom, voters become more amenable to tax hikes – and tax hikes usually provide more money for the school district to spend.

Consider the case of the Mount Diablo School District in the San Francisco suburb of Concord. Like every other public school district in California, Mount Diablo is being threatened with a dramatic shut-off of state tax revenues, as the bankrupt state government grapples with a budget deficit of somewhere between $10 and $15 billion – a deficit that is expected to swell to about $25 billion by the middle of 2012.

So the elected members of the Mount Diablo School District met in open session last week. They heard public testimony, with local residents pleading to “spare the teachers jobs” at the open microphone. Members of the board even offered their own impassioned dissertations about how “every one of our teachers is a human being,” and many of the teachers “have their own families,” and they all “touch our families in such important and necessary ways…” And then the board voted unanimously to terminate one-hundred eleven of those “human being” teachers. Unanimously. No dissenting voters.

After getting the “dirty work” completed, the elected board members at the Mount Diablo School District then proceeded to vote in favor of spending over $9 million on school building upgrades. All in the same school board meeting, all on the same night.

The board made it clear that the $9 million or so that they were spending on structural enhancements was money approved directly by voters and designated for such purposes, and could not possibly have been spent on retaining teachers. Legally speaking, it was probably accurate that the revenues could not simply be used for “more urgent purposes.”

But doesn’t this speak to a degree of mismanagement by the district board? Why wouldn’t a school board in California be anticipating a shortfall in state tax revenues, given that the state government is broke, and begin strategizing a way to retain teachers, rather than enhancing buildings?

The mismanagement of the Mount Diablo School District becomes even more apparent when you turn the calendar back a couple of months. In March of this year, the district board voted to raise the salary paid to the district legal counsel by $28,000.00 (that person now takes home $190,000 annually), the facilities and projects manager got a raise of $11,000, and the director of certificated personnel got a nice $6,000.00 annual income boost (each one of these employees also receives taxpayer funded healthcare and retirement benefits).

If school districts genuinely cared for students, then budget cuts would more often happen at the district office rather than in the classroom. But nobody wants to raise their taxes just so the Superintendent or the staff Attorney can keep their six-figure salary and benefits. Thus, “firing teachers” becomes the best political strategy.

Students, parents, and teachers deserve much better.

Email Austin Hill

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Spare Us the Hypocrisy, Mr. President

By Linda Chavez
Friday, April 15, 2011
President Obama offered few concrete suggestions for spending cuts this week in his much-anticipated speech on reducing the federal debt, but he had lots to say about raising taxes.

"As a country that values fairness, wealthier individuals have traditionally borne a greater share of this burden than the middle class or those less fortunate. Everybody pays, but the wealthier have borne a little more," the president said. So he wants to raise the top marginal tax rate to 39.6 percent and eliminate itemized deductions for the top 2 percent of earners.

What the president didn't say is that he has taken full advantage of each and every tax deduction available to him in order to lower his taxes on his more than $5 million per year income. No one forces Obama to take these deductions, which he objects to so strenuously for everyone else in his income bracket. So let's take a look at the deductions he took last year (the president's 2009 return and that of Vice President Joe Biden are available online):

In 2009, Obama took itemized deductions of $514,819, a foreign tax credit of $59,372, and a deduction for interest on his home of $52,195. He was also able to take a deduction for $49,000 he contributed to his self-employed retirement fund. If he had not taken these deductions, he would have paid taxes on an additional $675,386, which in his income bracket would have meant he owed somewhere in the neighborhood of $200,000 more in taxes at the top marginal tax rate of 35 percent.

Furthermore, he instructed the Nobel committee to donate his entire $1.4 million Nobel Prize directly to 10 charities, thereby avoiding the necessity of declaring the money as income on which he would have owed an additional $490,000 in taxes.

If the president is so appalled at the rich and their ability to hire accountants to take advantage of each and every deduction, why doesn't he simply take the standard deduction on his tax return, like most Americans? In 2009, he could have claimed an $11,400 standard deduction for married couples, as well as an additional $7,300 for his two daughters. Admittedly, that's a loss of more than $650,000 in deductions -- but at least he could avoid looking like a hypocrite by advocating one thing for everyone else and doing quite another himself.

Obama might even get a few of his liberal millionaire and billionaire friends to go along if he leads by example. Obama supporter Warren Buffett is famous for declaring his taxes are too low. Maybe Buffett would be willing to forego filing all those additional schedules on his tax return and simply take the standard deduction instead. Last year, Buffett claimed he paid an effective rate of 17.7 percent on the $46 million he earned, or roughly $8 million. But if he'd simply taken the standard deduction, he would have paid almost twice that in taxes. No one stopped him from doing so.

And then there's Obama's good friend Jeffrey Immelt, General Electric CEO and chairman of the White House Council on Jobs and Competitiveness. Mr. Immelt's firm will pay no federal income taxes on the more than $5 billion it earned in the U.S. in 2010. It's all perfectly legal. The company can take net operating losses to offset its tax liabilities, including certain carryovers from previous years. What's more, Immelt has a fiduciary responsibility to shareholders to take advantage of all tax deductions the company is entitled to.

But there's nothing that stops Immelt from paying additional taxes on his personal income if he chooses to forego deductions. According to GE's annual filings with the Securities and Exchange Commission, GE paid Immelt $7.3 million in cash and perquisites worth almost $400,000, in addition to stock currently worth $7.4 million, which vests over time.

Perhaps Obama should ask Immelt to skip his itemized deductions for the year and fork over $5 million to Uncle Sam. Somehow I don't see that happening. Like most limousine liberals -- who fly private jets to global warming conferences and live in 10,000 square-foot houses -- President Obama talks a great line but lives very differently.

When the president voluntarily gives up his deductions and asks his wealthy donors to do the same, he'll have some moral authority to argue, as he tried to in his speech, that he wants a tax code that "is fair and simple -- so that the amount of taxes you pay isn't determined by what kind of accountant you can afford." Until then, spare us the hypocrisy, Mr. President.

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