A Lesson for Congress: The Only thing Worse than Your Constituents Pink Slip Is Your Own!

With more than 10% of the workforce now Unemployed, and a greater number underemployed it's seems very odd to me that the Majority party has spent the last 10 months promulgating policies to reform nearly every aspect of the economy with the exception of those that would bolster economic growth and create jobs. Included in their "REFORM" of health care are the very tax policies that will stifle economic growth and Job creation. There is No Bigger Job Killer that I can think of , than their proposal to raise the capital gains tax rate.

The Capital Gains tax is a Success tax, and is only levied on economic actors who have risked their capital and succeeded. There is no federal tax on the loss of capital. The folks from whom these taxes are extracted are the people who have built or enabled others to build successful enterprises by providing the necessary capital. I like to call them the Job Enablers. They enable entrepreneurs to create wealth by creating jobs, a commodity that is in rather short supply lately.

Politicians like to pretend that the damage done by the Success Tax is limited only to the small number of people who actually pay the tax, but it is not. There are three other groups who pay an even greater price as the result of an increase in the Capital Gains tax and they are the very groups Congress pretends to champion. The first are the unemployed who will remain so. Their numbers are rising monthly and are easy to see. The second group are the Entrepreneurs who run small businesses and would provide the additional jobs needed except for the lack of available capital.They are not as noticeable, but are critical in relieving the problems of the first group. At his upcoming "Jobs Summit" the President would do well to understand this fact. It would give him another one of those teachable moments he's so fond of. Perhaps with his formidable skills behind the teleprompter he could persuade his democratic colleagues who are itching to raise this and other tax rates not to deploy this job killer of a tax.

Raising the tax on capital reduces it's supply, increasing the cost and availability of capital at the margin. It really is as simple as that. If there are five red balls on the table representing the total capital available to fund businesses and the jobs that go hand in hand with economic expansion and if the government confiscates two of them through increased taxation, it is clear to everyone that there are fewer red balls left to fund economic growth. Which brave politician wants to step up to the mike and make the argument that another dog park, or retrofitting a government building with green technology is more important than the real economic growth provided by this country's entrepreneurial class? When capital is made scarce through increased taxation it is the small and newer businesses, the country's job creation machines, who are left without capital as the government crowds them out of the market, not the politically well connected GE's and GM's of the country.

In their attempt to support a return to higher tax rates of the past, the Democrats frequently point to the boom years of the Clinton Administration as proof that higher tax rates promote economic growth. That they can make this argument with a straight face indicates how truly ignorant of economics and human behavior they are. It also reveals them to have an advanced degree of selective memory syndrome.

The Clinton Tax hikes came in 1993, and the boom years which they credit to those increased taxes didn't begin until 1997. Why was there a four year lag? If increased taxes are such a potent economic stimulus why didn't the boom years start in '93 or '94 or '95? Why was there only tepid economic growth? Their claim doesn't pass the smell test, especially when you consider the economy was coming out of a recession when growth typically is more pronounced. And Why did the more robust growth of the 90's come at what would normally have been the tail end of an economic expansion, which is usually when growth is more subdued? Finally, if as they claim tax increases are so good for economic growth, why wasn't that their first agenda item? Why wait to let the Bush era tax cuts expire in 2010?

What the few Democrats who understand economics, and apparently there aren't many of them, conveniently forget to mention in their "taxes are good for the economic growth" argument is that it was the significant reduction in the Capital Gains tax rate, from 28% to 20%, that was passed in 1996 and became law in 1997 that was responsible for the boom, not as they like to claim their 1993 tax hike. The last two times the Capital Gains tax was increased it was followed by sub par economic growth. The first increase was in 1969, which along with an inflationary dollar helped usher in the stagflation of the 70's, which is where we seem to be heading now. The second time the rate was increased was as a part of the 1986 Tax Act , which subjected Capital gains to the same tax rates as ordinary income.

Why limit the ability of successful investors to grow the economy by confiscating the capital needed to do so? There are some folks who defend the capital gain tax as a measure of fairness. What's fair about eliminating jobs? These are the people who fund expansions, and you want to slow them down? We can never know how many Microsoft- type enterprises, along with the jobs they produce, died in the lobbies of Venture Capitalist in the 1970's and late 80's, never making it to the board room and the decision makers as a result of dramatic increases in the capital gains tax.

Who is the third group that get's mauled when Capital and the jobs it creates are scarce? Just have a look in the mirror Mr. Congressman. Come next November when a sub par recovery has not produced the needed jobs, it might well be your turn to stand in the unemployment line. Good Luck with that, we'll see you next Fall!

Tracking Obama On The Way To His Own "Little Big Horn"

Senator Jim Demint earlier this year said that the Health-Care Bill would be Obama's Waterloo. I only partially agree with him. He's right that it will ultimately bring an end to his reign, but the Waterloo analogy doesn't begin to capture the scope of the defeat. At the battle of Waterloo, Napoleon, who like Obama was thought to be a genius, was defeated by conscripts of the combined armies who fought to protect their own nation states. During this era of warfare, armies fought in formations on either side of the "battle field" training their weapons on the opposing army's soldiers, and firing volley after volley until their opponents had either been killed or had broken ranks and fled leaving a bloody battle field strewn with dead and dying men. The Midterm elections in 2010 won't resemble that at all. It won't be near that pretty.

A better analogy might be Custer's annihilation by Sitting Bull at the Little Bighorn. The Democrats, as did Custer, will be fighting against the guerrilla tactics of the indigenous tribes: Custer the Sioux and Cheyenne; the Democrats the Tea Party Patriots and other conservatives who feel as the Indians did that their way of life is being taken from them. Custer and the Democratic Leadership both underestimated the strength of their opponents and overestimated their own resources, counting heavily on reinforcements that in Custer's case didn't and in the Democrat's case won't arrive. The real distinction between the two battles is that when Napoleon and his army were defeated at Waterloo he was merely banished to the isle of Saint Helena, while Custer and his troops were massacred by Sitting Bull and his warrior braves. They weren't given a Political time out. They were wiped off the map, and that is what is in store for the Democrats in 2010.

The big turn out at the polls that wasn't, by Obama's reinforcements, proves that they won't fight for any one but him and he isn't running in 2010. They didn't turn out in the Battle for Virginia and were also no-shows in the fight for the NJ Governorship. That's the problem with troops who are lead by the force of charismatic personality and not motivated by principal. The Democratic warriors fight only for an extra ration, while the Tea Party Patriots and Conservatives are fighting to protect their way of life.

There will be no Decisive Battle as there was at Waterloo and in the National Elections of 2008. Instead there will be, just as in the battle of the Little Big Horn, a series of smaller skirmishes. The battle fields will be the State and Congressional Districts; the battle will be fought by the voters who reside there, many of whom have changed sides in the past year. The voters who had sought hope and change in 2008 have now gotten a taste of that change and found it not to be the sweet taste of liberal progressivism they were promised, but rather the bitter taste of socialism and have lost all hope in The One. They've come to reject the promise of higher taxes on nearly everything and the greater government involvement in almost every aspect of their daily life.

The Democrats who will have been the Majority party for 4 years come next November's election will by then own the economy, along with at least one automaker and it's financial arm, the two mortgage giants Fannie and Freddie, several banks, the insurance company AIG and possibly a newspaper company or two. If they get their way with the health care bill, you can add your doctor's office and the local Hospital to a growing list of wards of the government.

To quote the Democrats very own savage pundit James Carville, “It's the Economy Stupid!” In the mid terms it's always the economy and a recession that was caused by bad government policies to begin with won't be cured by equally bad, but different government polices. With an unemployment rate that tops 10% and is rising, it won't be flesh wounds they'll be tending come November, it will be scalpings. Here's hoping that the government run health-care program they covet has plenty of sutures in the ready.

The Crony Capitalism Cafe..... Yes Senator I'll have the Free Lunch Also!!

Everyone wants a free lunch these days, and it seems that in the Cafe of Crony Capitalism, sometimes know as Washington, the free lunch special is being handed out as openly as the candy given to children who knock at the door on Halloween. But alas, not everyone gets a treat, because there really is no such thing as a free lunch. Someone has got to pay. That's why you, the taxpayer, are always the one who is tricked into picking up the tab.

Turns out you, the taxpayer, don't qualify for the free lunch. Just how does one qualify for the free lunch? Well, in this bold new era of hope and change "we all have embraced" it's nice to see that the more things change the more they stay the same. You need to be a Crony (one who plys Congressmen with cash) or you're going to go hungry.

How does one become a Crony with benefits? Is it based upon need, as in GE needs their $139 billion debt guaranteed or their profits won't look as good? Or is it based upon some other metric such as literally keeping the Gold in Goldman Sachs? It was the President of the New York FED who intervened in the negotiations between the two parties to a contract to ensure that the taxpayers ponied up enough cash to make sure Goldman Sachs got paid back 100 cents on the dollar on the bets they placed with their bookie AIG, and not just the measly 60 cents they were trying to settle their claim for. No, it's not based on need, it's pretty much just based on cash, it's campaign contributions that matter.

It seems that there are all sorts of companies that qualify for Crony Benefits. If you're an automaker and you run your business off the road and into the ditch you need to just wait patiently for the taxpayer tow truck to pull you out of the ditch, provided that is that your membership in the Crony Capitalist club is up to date and you have ponied up enough for the right campaigns. If you're a banker, it is a little trickier. Of course you need to start out the same way, by lending money to folks who won't ever pay you back, but you need to be very nimble if you want to end up like JPMorgan and not like Lehman Brothers.

If you are a professional Crony Player like the folks at Fannie and Freddie, you get to play by your own personalized set of rules where it doesn't matter how badly you have screwed the pooch, you still get to walk away with $90 million, give or take.

Even if your not a profit making Enterprise you can qualify to be a Crony with benefits. You can have the Attorney General of your state over-look your criminal activity and instead bring charges against the Whistle blowers, especially if that AG is Running for Governor of California and your fraudulent non profit is tight with SEIU .

The list of Cronies gets longer each day. Come to find out most of the jobs saved by the Gargantuan "stimulus" package weren't saved at all. They were there all along, but you got to give them extra credit when it comes to creative math skills, counting cost of living raises for State workers, and funding for undergraduate students to hand out pool cues in the college rec center as jobs created or saved!

Next week in the house you can watch the Democrats in control pay off the AMA with the so called doctors fix for Medicare. They will debate the $210,000,000,0000 bill for 1 hour, with no amendments allowed and then pass it on a purely partisan vote. Want to knkow who is going to pick up the check on this Free Lunch? Why you, the taxpayer are, of course! Not a bad payday for supporting the farce of a health care bill the President is so desperate to pass.

But take heart all you lesser folks who don't qualify for Crony benefits. At least this President and his advisors aren't making the same foolish mistakes that Roosevelt did when he was confronted with his Congressionally induced recession. Oh no, they've learned their lesson! This time there will be no run away spending programs in an attempt to prop up excessive wages, nor increased taxes and price controls. They're a thing of the past. You can also be confident this time they won't let the dollar go to hell. Please someone tell me they won't let that happen .Could you imagine where we would be if they made the same mistakes this time? This time is different, right? Someone please tell me it'll be different this time!

Note to Unions... Don't Drink the Kool-Aid

In 1978, 913 followers of Jim Jones, the leader of the People's Temple Cult sipped on what they thought were cups of Kool-Aid, and died in a mass suicide. Their deaths were the tragic result of believing so completely in a leader who proclaimed to have their best interest in mind. The recent actions of unions across the country make me wonder if they don't share the same total belief in their leadership as the followers of Jim Jones. Could it be in their DNA?

With unemployment at near record levels in the modern economy, the unions are gulping down the sugary sweet promises of their leaders, not realizing these promises are economic suicide.

Last week, the Transportation Workers in Philadelphia went on strike. It seems they and their leaders wanted more of just about everything. They wanted more than the 11.5% pay increase offered over 5 years. They'd rather have 20% and a $1250.00 signing bonus. A signing bonus? Isn't that precious? Who do they think they are? They wanted bigger pensions than what they were offered and they didn't want to have to contribute any more to their health care insurance payments than they already did, which by the way is 1% of their salary. With an average salary of $52,000.00 per year that's $520.00 per year for healthcare, or $10 bucks a week. Can you understand their outrage now? Neither can I!

With a recently announced unemployment rate of 10.2%, you'd think the union leadership would be smarter, wouldn't you? Their actions betray a sense of privilege, not very much different than that of Marie Antoinette who exhorted her subjects, starving due to a shortage of bread, to "Let them eat cake." With the private sector continuing to hemorrhage jobs, and health insurance premiums increasing by double digits, these folks seem to claim rights once reserved only for Royalty.

The Unions are demanding superior pay for inferior performance, an unfair arrangement in any employment environment, let alone one with better than 10% of the workforce looking for jobs. As more and more unions show their true colors and seek to claim privilege over their private sector counterparts, they run the risk of a public execution, similar to that which befell the former Queen of France.

Their reckoning won't come at the hands of an Executioner and his Guillotine, but rather in secret ballot votes like the one that de-certified the Union at Boeing's North Charleston plant in South Carolina. If you think the 20 point swing in the vote in the recent Virginia elections was sending a message, how about the 199 workers who voted to kick the union out, compared to only 68 members who voted to continue union representation.

It's no coincidence that the announcement to locate the second assembly line to produce Boeing's 787 in that North Charleston plant, and not the Union shop in Seattle, came only 48 day after the vote de-certifying the Union. It aint Kool-Aid guys!

It's a Surreal Day in the Neighborhood ... How Do You Like My New Car?

It certainly is a surreal day in the neighborhood and I don't think it has got anything to do with Rush Limbaugh criticizing the President, as David Axlerod, one of the President's advisor's would like you to believe. What I find surreal is all the attention being paid to the Public Option as well as Al Sharpton's assertion on This Week with George Stephanopoulos that Liberals are the real conservatives. Yes, he actually said that with a straight face. That line was about as surreal as it gets, boys and girls.

Back to the Public Option. The public option argument is no different and just as silly as me arguing with my wife that the pin-stripping should be gold and double lined on our Ferrari Enzo. What makes these arguments different is my wife and I both know we joking, whereas Al Sharpton's conservative wing of the Democratic party is deadly serious. What makes the argument surreal is that we know we can't afford what we want and so do they, but that is not stopping Al's pals.

It gets even funnier when they begin to explain how they will afford the unaffordable. They want you to believe that they are going to cut Medicare. Let me say that one more time, only slower.

The Democrats in Congress lead by the President are going to cut Medicare.

The idea that this Administration is going to cut spending is laughable. The notion that they will take a meat cleaver to Medicare and hack 50 billion dollars from it's budget each and every year for the next ten years is a side splitter. A solemn pledge of fiscal prudence from the leader of the gang that is projecting Trillion Dollar Deficits for as far as the eye can see isn't all that reassuring. But it's comforting to know that their lack of fiscal discipline has some limits, or does it?

Their spin on the deficit is every bit as surreal as their foolish public option debate. The President says he won't sign a bill that will increase the deficit. That's pretty rich, don't you think? What he means to say is get ready for big tax increases, both the direct and indirect kind.

Forcing, excuse me, mandating (that's more PC) that everyone must purchase health insurance while at the same time imposing a tax on medical device manufacturers is merely a stepped transaction. It is a tax increase disguised as a fee extracted from the medical device manufacturers, which they pass on to the insurance company in the form of higher prices, who then passes it on to you through higher insurance premiums. Raising the top marginal rate by 5% is well, it's just a tax increase. Hey good thing that recession is over and the economy is surging ahead, cause we all know that raising taxes in a recession is a recipe for disaster!

What they want you to believe and what is reality in this debate occupy positions that are polar opposites on the reality continuum!

Reality: government programs always cost more than originally projected. Congress has an abysmal record when it comes to cutting spending and raising tax rates, never produces any where near the amount of tax revenue that Congress believes it will.

Surreality: Congress can provide quality health care for everyone without bankrupting us all along the way.


Congress should do what I did when I realized that I couldn't afford the $1,000,000 Ferrari. I settled for just the pinstripes instead. Now I'll be the first to admit they don't look as good on me as they would on that Ferrari, but they don't look that bad, and on the plus side I won't have to hire a bankruptcy attorney.

When you Shake Hands with the Devil, Healthcare Style

When they cut their deal with the Administration the insurance companies rolled the dice and came up snake eyes. They traded away proper insurance underwriting practices in order to capture a larger customer base, one that would be guaranteed through government force. Like their auto company brethren who struck their own Faustian bargains before them, they have come away a several fingers shy!

After promising the insurance companies a government mandate that would force young people under penalty of fines to purchase insurance (not very American sounding, is it?) the administration's minions in the Finance Committee said Oops, we lied. They watered down their mandate, delaying it's start date and reducing the penalties enough as to make it ineffective, leaving the insurance industry hanging out to dry.

Don't get me wrong. I'm not going to shed a single tear for the insurance companies. The bargain they sought with the Administration was despicable. They know how insurance works and doesn't work, and have played the go along get along game with the government for far too long, instead of being a force for positive change. This time it came back to bite them, and they're going to need stitches to close the wound.

The Government in it's extremely finite wisdom is doing exactly the wrong things to fix the problem of rising health care costs.

A quick history lesson for those who have forgotten. It was the Government's involvement in health care, subsidizing employer sponsored insurance payments by making them tax deductible, in order to cure other problems it created by imposing wage and price controls during World War II, that started us down the road to health care ruin in the first place. When you subsidize something the demand for it goes up. It's like having a clearance sale! The very same politicians who believe so strongly in incentives when they are handing out $7,500 of your tax dollars so their fellow eco-warriors can drive green in a $40,000 electric vehicle are just undone by the fact that subsidizing health care has lead to an increased demand for it.

The solution to rising health care costs is LESS GOVERNMENT, NOT MORE!

The government needs to let insurance companies get back to selling insurance, which is a protection against a loss that is not economically recoverable from. Insurance is not a payment system designed to take the brain power out of the decision to go see a doctor simply because the cost of that visit is near zero.

The government needs to Stop subsidizing health care via the tax code. When consumers of health care start to pay the real costs of the health care they purchase they will respond, like they do when the price of any other commodity they purchase increases. They will reduce their demand for it.

The Government mandating what procedures need to be included in an individual's policy needs to end. Only the consumer can know what is of real value to them, and what they are willing to freely exchange their hard earned dollars for. When they are able to shop and compare costs and benefits, they will.

We need to let doctors be doctors and practice medicine again, instead of having to practice the bizarre form of health care CYA that an out-of-control trial lawyer lobby has forced upon them through outrageous malpractice awards.

Until we get the Government out health care, no real reform will be possible, and Government will continue to play their game, which is to shift costs onto what ever group happens to occupy their demon of the day spotlight.

Below is a link with the fax number of every senator who is voting on the bill today. Send your senator a note and let him know how you feel.

http://www.grassfire.org/1122/targets.htm

Pump Primining is Nonsense..... Tax Reform is What's Needed

To hear our Representatives in Washington and their economic guru's talk, the economy works like a pump, which they have been busy priming with large amounts of government spending, courtesy of taxpayer canteens. Their theory is that once they have primed the pump sufficiently business activity will flow and end the current economic drought.

This kind of thinking betrays Congress's ignorance of the working of both pumps and the economy. The mere act of priming a pump does nothing to produce the desired outcome, a greater supply of water. Using a lot of water to prime a pump when only a small amount is necessary is wasteful and does not pay off in an increase in the amount of water produced. What really creates the flow of water is the effort of the individual who forces the pump handle down, then up, and down once more.

Whether pumping water or increasing economic activity, it's really all about the individual and his effort. We should be doing everything we can to encourage this effort, but instead our government is hell bent on doing just the opposite. The return an individual receives from his efforts is his incentive, and is being reduced year after year, with the government taking a greater share of his production. The unwieldy mess that our current tax system has become discourages those who would generate the increased economic activity we need.

The greater the number of buckets an individual pumps from the well, the less he is allowed to keep from each additional bucket. If increased economic activity is the goal then our tax system is backwards. The first bucket or two pumped are the easiest of the day and also have the lowest tax cost to the individual. Our progressive income tax that takes a bigger share of each additional bucket , discourages the individual precisely at the point that an incentive to produce more is needed. The basic premise embodied in the tax code says the harder you work the less you get to keep! If that is not a system rigged to stifle production, what is?

Hiring additional employees to help increase one's output has it's own code of discouragement. Let's start with the sponge of a tax called Social Security; it soaks up 15% or so of each and every bucket you fill. If the Democrats have their way with health care and you're a small business you can count on losing another 8% to pay for the government run health insurance plan. That's almost a quarter of every bucket gone before you've even had a chance to wet your beak.

That's just for starters, if you're not discouraged yet there is still the progressive income tax structure which will sop up another 35+% of what's left in your bucket today, and 40+% after the Bush tax cuts expire in 2010. That is unless the various surtaxes that have been proposed are imposed, draining even more from YOUR BUCKET. That's without considering State, County and local income taxes, which with very few exceptions are on the rise. That will mop up more of what is left from your day at the well .

The biggest problem our Nation faces is the government's never ending thirst for a greater share of your labor and mine. While the rest of the world lowers tax rates making them more competitive, our leaders are constantly finding news ways to make you and I less competitive through higher taxes that discourage production.

We need to scrap the Tax on Labor, that we refer to as the Social Security Tax, all together. The tax money that Washington takes from us is fungible; it doesn't matter what label they put on it. It's no secret that Social Security receipts in excess of Social Security payments are spent as soon as they are collected on other items in the government's budget. There should be only one low, flat rate income tax, spread over the broadest base possible, to encourage a revival of economic activity.

Competing in the global marketplace of the 21st Century will require us to either attract the necessary capital or cut wages to be competitive. Only one of those alternatives produces rising incomes for American workers. Yet the Policies to make the US a country that is capital friendly are nowhere to be found. The anti capital accumulation tax called the capital gains tax should be yanked from the tax code. Doing so will ensure that capital will once again be in greater supply relative to labor, and will result in rising wages and providing the higher standard of living all working people seek.

In order for the US to once again become the low tax, high wage economic juggernaut of the past, something's got to give. That something is run away government spending. Lowering the Tax rate and making the base as broad as possible will give everyone an incentive to help their representatives in government understand what is a good use of taxpayer money and what is not. Just as Congress is now getting an earful from the folks who aren't enamored with the Government Health Care Option. The kind of political push back they are sure to receive, once all working citizens have an interest in how their tax money is being spent, will make it easy to chop a trillion or two from an insanely bloated Federal Budget and then restrain it's growth after that.