Wednesday, September 17, 2008

Taxes, Taxes, Scandals and The American Dream?

What happens if the “rich” are taxed 50% or more and their charitable loopholes are eliminated? The $95.5 billion or 79% of US foreign aid US citizens give to charities around the world would be a lot less. The world would be a very different place after that. That amount does not include domestic charities. So the total amount is even higher. The US is by far the most generous country in private donations given. That is just one of the many things to consider when taxing the American dream.

That $95.5 billion also includes corporations and foundations. So the same loss of giving applies if you eliminate some corporate loopholes as well. If you raise taxes and think you can compensate with government aid. Think again. The government spends twice as much money to do the same thing that can be done in the private sector. Another way to put it, as soon as the government has your money half of it disappears. It is more efficient to give incentives for private giving than to let the government do it. This is by the way one of several reasons not to tax oil companies profit “windfalls”, but rather give them an incentive to invest some of their profit directly in renewable energy. This is also one of many reasons to stay away from nationalized programs or any centrally planned program.

If a politician talks about raising taxes, even if they say it is only on the “rich”. You better be prepared for tax hikes for everyone. Another thing to remember, many Americans are living beyond their means, they have too much debt. So if taxes are raised on the rich and it starts at the $100 to $250K income level, you may be hurting those with a high debt-to-income ratio.

A fair tax is good, as well as eliminating many loopholes for individual and business. Just be thoughtful when doing it or there will be unintended negative consequences. If taxes are raised the economy slows, if taxes are lowered the economy grows. When the economy grows the government’s tax revenue increases, which can help lower the deficit. If we keep government small, cut spending and cut taxes then the economy will boom, everyone will make more, more people will have jobs and unemployment will be even lower than it is now. Then we will be able to help those that really need help. Citizens will be free to give even more money to charities than they do now. When citizens have liberty and freedom of every kind including economic and the human spirit is allowed to soar, people can achieve extraordinary things which translates into a strong, robust economy. Government is not there to give us a handout it is there to ensure that each and every citizen is free and has every opportunity to be all they can be.

It is rather remarkable that the US economy came out of the recession after the last administration and has been growing unexpectedly for the past 8 years, despite high gas prices, the weak dollar, the September 11 terrorist attacks, the Iraq war, the worst congress ever, the housing market bubble bursting bringing to light the housing and financial scandals and the media and politicians reporting mostly negative information about the economy. Only reporting negative economic information affects consumer confidence, which is an important factor that affects our economic growth. It is also dishonest to imply that the country is in a recession. A recession is negative growth for two full quarters. The growing economy can be attributed to President Bush’s tax cuts over the last eight years. There is actually quite a bit of positive stats and info that can give hope to those in states and areas that are hard hit and/or in a recession. The positive should not be ignored. It is necessary to take into account the negative and positive in order to see our countries' true economic health. Growth was back up last quarter after slowing a bit. The median household income rose recently. Consumer confidence has been unexpectedly up and it has been up so far this month. Unemployment rates have been close to their lowest levels, they have gone up a bit recently. There is more positive and negative data as well. If Bush and congress would have cut spending instead of increasing it, the deficit would be lower and we would be in better shape. Of course, lower taxes would help even more. The latest IRS Stats came out in August. They show there is already significant tax redistribution. Some say the top 10% pay more of the tax burden than ever before and the top 40% carry most of the tax burden.

The groundwork was actually laid for the housing market scandal during the late ‘90s when the government encouraged mortgage lending to people who could not afford it, under the guise of affordable housing for all. Fannie Mae and Freddie Mac were pseudo government entities that were rife with corruption. Basically congress caused this melt-down and then has the audacity to blame it on the free market. This is one of many examples of what happens when government gets involved instead of letting the free market regulate itself. In reality, there are laws and regulations already on the books that if enforced would provide sufficient regulation. If the government was not involved these bad loans would never have been made. There was no accountability because the federal government was backing and encouraging these bad loans, loans that would never be paid back. The fall-out was inevitable. Many republicans in congress including John McCain warned of this outcome. They and the president tried several times to pass legislation to reform oversight, but it was always blocked and filibustered by Chris Dodd, who is the head of the congressional finance oversight committee, Barney Frank and many other democrats. If you follow the money you will find that many democrats and liberal organizations received the bulk of the many generous contributions doled out by Fannie Mae and Freddie Mac. These companies were turned into political fundraising machines for politicians. Chris Dodd is at the top of the list receiving the most contributions; Barack Obama received the second highest amount for his political campaign. Frank Raines, the CEO of Fannie Mae and a Clinton appointee, stepped down because of an ethical accounting scandal. He left after running the company into the ground while taking multi-millions of dollars from the company. This is probably the largest government scandal in history yet no one is demanding an investigation. While Obama and fellow democrats are blaming the free market and republicans for this scandal, democrats in congress are not crying for an investigation the way they usually do. A lot of democrats, republicans and many companies would be implicated if they did. The very people these bad loans were supposed to help are even worse off now. This is the classic example of big government helping its citizens. While it was necessary for the federal government to step in and take over Fannie Mae and Freddie Mac in order to avoid a run on the banks and a major collapse, the very people who caused this problem are now directly in control. Even after all this, many of the corrupt executives of these companies are still receiving multi-million dollar severance packages. This will happen again unless they split up the companies and completely privatize them. Why is it that we need oversight committees to oversee the congressional oversight committees that oversee these government programs? The American people should demand that these members of congress resign and that an investigation be done. If they don’t resign they should be voted out of office. This is major news; the media should be demanding this as well. These scandals and crisis will happen more and more as socialism and its nationalized programs creep into government. The collapse of the Social Security and Medicare systems is inevitable as well, unless we fix them. It’s just a matter of when. How can we expect government to “fix” healthcare when they refuse to fix social security, especially in light of the recent financial scandal. If they nationalize healthcare, they would just be creating another time bomb for future generations. The only way to minimize the threat of corrupt government is to keep it as small as possible. It is time for us to wakeup and learn from history and our mistakes.

[1] Ten Myths About the Bush Tax Cuts
Obama's Plan For A Debt-Ridden Future

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