Arthur Brooks nails it: what ails the GOP isn’t its policies, but in its approach to the less fortunate

Arthur Brooks writes in the Wall Street Journal an interesting piece analyzing what is really ailing the Republican Party. As you might imagine, he doesn’t put forth the issue of policies as the “number one” issue. His prescription is not to moderate Republican brand, but rather to reemphasize its attention to assisting the needy.

Conservatives are fighting a losing battle of moral arithmetic. They hand an argument with virtually 100% public support—care for the vulnerable—to progressives, and focus instead on materialistic concerns and minority moral viewpoints.

The irony is maddening. America’s poor people have been saddled with generations of disastrous progressive policy results, from welfare-induced dependency to failing schools that continue to trap millions of children.

Meanwhile, the record of free enterprise in improving the lives of the poor both here and abroad is spectacular. According to Columbia University economist Xavier Sala-i-Martin, the percentage of people in the world living on a dollar a day or less—a traditional poverty measure—has fallen by 80% since 1970. This is the greatest antipoverty achievement in world history. That achievement is not the result of philanthropy or foreign aid. It occurred because billions of souls have been able to pull themselves out of poverty thanks to global free trade, property rights, the rule of law and entrepreneurship.

The left talks a big game about helping the bottom half, but its policies are gradually ruining the economy, which will have catastrophic results once the safety net is no longer affordable. Labyrinthine regulations, punitive taxation and wage distortions destroy the ability to create private-sector jobs. Opportunities for Americans on the bottom to better their station in life are being erased.

Washington DC’s booming economy built on the backs of the country it leads

And interesting article in the New York Times details a recent development in and around our nations capital. During the past 10 to 15 years, there is been a massive economic boom within Washington DC, and the surrounding counties in Maryland and Northern Virginia.

How Washington managed this transformation, however, is not a story that the rest of the country might want to hear, because we largely financed it. As the size of the federal budget has ballooned over the past decade, more and more of that money has remained in the District. “We get about 15 cents of every procurement dollar spent by the federal government,” says Stephen Fuller, a professor of public policy at George Mason University and an expert on the region. “There’s great dependence there.” And with dependence comes fragility. About 40 percent of the regional economy, Fuller says, relies on federal spending.

Congress may have passed legislation to avert the middle-class tax increases of the so-called “fiscal cliff,” but it has only postponed what is known as the “sequester” — $1.2 trillion in budget cuts. And that’s on top of several hundred billion dollars in cuts that the Pentagon has already agreed to. The capital’s boom days, in other words, might be over. “Rather than leading the nation, we’re going to be lagging it going forward,” Fuller says.

The author goes on to explain why this came about, pinning much of the blame on the Reagan administration (curiously). Arguably, there are the multiple years of trillion plus dollar deficits that probably had an effect as well, though that is not emphasized very much in the article. The Cato Institute , in it’s usual clear style, add the following to say in the article:

David Boaz, executive vice president of the Cato Institute, told me: “Washington’s economy is based on the confiscation and transfer of wealth produced elsewhere. Out in the country they’re growing food, building cars and designing software — all these things that raise our standard of living. Here in Washington, everyone is writing memos to each other about how to take some of that money and which special interest should get it.” I asked him if he liked living in the city, which has become undeniably nicer. Boaz sputtered a bit. “I can’t walk to lunch from my office without having to avoid the construction projects!” he said. “For Washington, it does mean better restaurants and better entertainment, and the potholes get filled faster. But for the country as a whole? I don’t think it’s a good thing for America.”

A strategy for the looming debt ceiling fight

Karl Rove writes in the Wall Street Journal about how the GOP’s strategy should be in approaching the upcoming debt ceiling fight.  The core strategy that Mr. Rove argues for is for the coupling of debt increases and spending cuts.  We saw this strategy initially employed by John Boehner during the initial debt ceiling fight in 2011.

The GOP congressional leadership is right to say that they will not negotiate in private with Mr. Obama, and that tax increases are not on the table, especially after the president received $620 billion in new taxes to end the “fiscal cliff” crisis.

 

But this means House Republicans must pass a measure pairing specific spending cuts with a debt-ceiling increase that will have few, if any, Democratic votes. It would therefore be tactically wise for Republicans to draw many of these cuts from the recommendations of Mr. Obama’s own National Commission on Fiscal Responsibility and Reform (aka Simpson-Bowles).

 

It would be even better if much of the savings were achieved by moderating future spending increases or freezing outlays, rather than reducing them from today’s levels. Both are possible: Congressman Paul Ryan’s proposed budget plans—approved by House Republicans in 2011 and 2012—achieved most of their savings by restraining future growth.

 

Passing such a measure will require the GOP to accept less than total repeal of the Obama agenda, vote for spending cuts smaller than what they want, and support a debt increase all Republicans wish were not necessary. Republicans voting against a GOP plan because it’s not perfect would just be aiding and abetting Mr. Obama.

’Twas the Night Before Cliff-mas

http://blog.heritage.org/2012/12/24/morning-bell-twas-the-night-before-cliff-mas/

’Twas the night before Cliff-mas, and all through the House Not a member was working, no ideal to espouse; Their offices closed, the members all gone, No solution for a budget plan had yet to be drawn.

Our Congress had spent a year feuding again, While uncertainty and poor growth plagued businessmen; The economy had slowed, unemployment was high, Things weren’t looking up for a taxpayer, like I.

On December 31st tax rates were scheduled to rise, Which many agreed was not in itself wise. With this, another date caught the country’s fiscal fixation—The second of January was set for across-the-board sequestration.

I’d heard all the talk, all the senators saying, “If we’re spending this much, someone has to be paying!” The rhetoric from the news droned on in my head, As I turned off my light, and crawled into bed.

When out on the Mall there arose such a clatter, I sprang from my bed to see what was the matter. It was the President! His sudden arrival was thrilling, He went after the Congress, he called them by building:

“Now, Senate! Now, Hart! Now, Russell and Dirksen! On House! on Rayburn! on, Longworth and Cannon! The fiscal cliff is approaching! We need to make cuts! Bad policy and spending got us into this rut!”

Out came the lawmakers, their cheeks from sleep rosy, I saw Boehner, Reid, McConnell and Pelosi; They gathered together, their eyes straight ahead, Some seemed optimistic, as the president said:

“We need to end this uncertainty, if we are to stay strong, I know we can do it, if we all get along. We won’t hurt the middle class, we’ll raise taxes on the wealthy! It’s right for everyone to pay a fair share to keep our economy healthy!”

Reid stepped up as well, his voice rather hoarse, “We know that we need to include a few cuts, of course. This deficit spending hurts our economy in the long-run, But for now, raising some taxes will help everyone!”

“Now hold on one minute,” Boehner said with a sigh, “You know the tax increase you propose is too high! The wealthy you speak of—they aren’t you and me; They’re middle-class, and small business owners you see!”

“You won’t close the tax loopholes, you won’t lower our debt! You’ll create a situation where new investors will sweat! We need tax reform, to resolve all this clutter!” He stepped back with a nod—the crowd started to mutter.

Was he right? Was it true? Could reform solve it all? Or would a tax hike spur investment and keep us from a fall? It was the same talk I’d heard, the same from before—So I ran down the stairs, and I opened the door:

“You say you’ll manage the tax code, and cut wasteful spending, But it’s these political struggles that keep our economy pending! We need real reform, not this spending obsession; ‘Else this cliff should put us in another recession!”

The lawmakers started, they had not known I was there; And they sputtered and scattered and ran without care; I watched them go and yelled after them, as they took flight: “Avoid the fiscal cliff for all, and to YOU a good-night!”

Bring Back the Ownership Society – SmartMoney.com

http://www.smartmoney.com/invest/strategies/bring-back-the-ownership-society-1323110888277/

Why taxes don’t work, and why higher tax rates won’t support the entitlement state

Breitbart.com, May 2012, American Enterprise Institute

Arthur Brooks describes why increasing taxes won’t help facilitate economic growth. The three main reasons, he argues, are (1) there’s no evidence such increases have helped other countries (or in the past), (2) tax hikes on small population segments don’t raise significant amounts of revenue, and (3) the targeted tax rate group happens to be small businesses. Obama likely knows this, so why the push? In a word: “fairness.”

As far back as the 2008 presidential primaries, Obama said he’d be willing to raise capital gains taxes — even if it lost revenue — in the interest of “fairness.” In his famous speech in Osawatomie, Kan., last year, employed the term “fair” or “fairness” some 14 times in his arguments to raise taxes. He has spent months demanding that “millionaires and billionaires … pay their fair share.” Meanwhile, just a few days ago on the Today show, billionaire investor Buffett — a major proponent of his namesake tax proposal –argued that tax hikes on the rich would “have a great effect in terms of the morale of the middle class.”

In other words, taxes are an issue of “fairness,” not economics, to these gentlemen. And they see raising taxes on the wealthy as a good in itself. President Obama’s use of the term denotes equalizing economic outcomes more than at present — that is the nature of defending redistributive taxation as fair, per se. But this is not in line with the way most Americans understand true fairness.

Michael Barone argues in his recent Washington Examiner column, that higher tax rates won’t support the entitlement state.  If the current programs limp along without reform, no amount of tax increases will fund them.  The primary reason for this is because people who make the most money (the famed “1%”) don’t actually make enough money.  

Over that period of nearly three-quarters of a century, federal receipts have never exceeded 20.9 percent of gross domestic product. That was the number for the war year 1944.

The highest number since was the 20.6 percent of GDP in 2000, the climax of the dotcom boom. In the Obama years, federal receipts have hovered at 15 percent of GDP.

That’s just because tax rates are too low, Obama backers reply. Just raise the rates on high earners and the problem will be solved.

Actually, high earners don’t make enough money to close the current budget deficit. You’d need to raise taxes on middle-income earners too.

But we have had higher income tax rates in most of the years since World War II. What history and Table B-79 show is that even much higher rates — like the 91 percent marginal rate on top earners imposed from the 1940s to the 1960s — have never produced federal receipts higher than 20 percent of GDP.

Why is that? As the late Jack Kemp liked to say, when you tax something, you get less of it. When the government took 91 percent of what the law defined as adjusted gross income over a certain amount, not many people had adjusted gross income over that amount.

Veronique de Rugy: Raising Taxes on Everyone

Raising Taxes on Everyone – By Veronique de Rugy – The Corner – National Review Online.

Here’s an interesting quote from the article:

The U.S. generally has lower taxes than European countries but our overall federal tax system is unusually progressive. By contrast to the U.S. federal government, like it or not, European governments are raising lots of revenue from low-income people to pay for the services provided to them, as this article in The Economistclearly explains. The result is more revenue but also more government (and still some deficits). Americans like to think they are very different from Europeans. They claim to prefer smaller government and lower taxes. But what they’ve got instead is lots of spending that most taxpayers would rather not pay for.

This, by the way, is why I thought the Bush years were so toxic. Cutting taxes while increasing spending dramatically — Bush increased real spending by 60 percent, as opposed to Clinton’s increase of 12.5 percent — is a recipe for large deficits leading more taxes later or certainly intense pressure to raise taxes. My colleagues Matt Mitchell and Andrea Castillo have a new paper on this issue that I highly recommend for those considering the current debate. This mentality persists today: We are faced with large deficits but many lawmakers still aren’t serious about restraining spending, choosing instead to retreat behind a debate over the tax treatment of high-income earners.

States in a “death spiral” (in other words, don’t invest here)

Laboratories of Democracy: the rise of one-party control of state governments provide clear contrasts in what works

As usual, Michael Brown writes an interesting piece about America’s “laboratories of democracy.  One of the strengths of our Republic is the division of individual states with their respective sovereignty. Much like our economic system, built on underlying free-market and competition, these individual states are free to govern themselves and compete outside the direct control from Washington (well…for the most part). The results should be instructive.

First, we are starting to see the intraparty disputes, where factions within either political establishment are challenged. Second, we are seeing the overall product of either Democratic, or Republican rule.

For the national public, one-party Democratic and one-party Republican states provide a look at how each party governs — and the results.

In California, voters just gave Democrats two-thirds majorities in both houses and a tax increase, as well. We’ll see if their policies help California reduce its dismally high unemployment and resolve its enormous pension underfunding.

In Illinois, Democrats won again, despite increasing the state income tax from 3 to 5 percent in 2011, after which the state’s unemployment rate went up, while declining in neighboring states. Democrat Michael Madigan has been speaker of the Illinois House for 28 of the last 30 years.

Many Republican governors and legislatures have gone in another direction, holding down spending increases and seeking to cut taxes or hold rates even, rather than raise them.

Texas’ low taxes (no income tax) and light regulation have been followed by some of the most robust job creation in the nation. Texas’ population grew so rapidly in the last decade that it gained 4 U.S. House seats from the 2010 Census.

No-income-tax Florida gained two seats, and no other state gained more than one. California, for the first time in its history, gained none.

States are laboratories of democracy, Supreme Court Justice Louis Brandeis wrote. Citizens of every state can monitor their experiments and judge which set of one-party states is getting better results.

Bill O’Reilly echoed this sentiment on his show:

Balance the budget without raising taxes IS possible

The Washington Times describes how to close the deficit without raising taxes. Obviously, there are two competing thoughts on the subject: the Center for American Progress (left leaning think tank) proposes perpetually higher taxes and an actual increase in overall spending. On the other aide, the Heritage Foundation describes a way that balance can be archived without taking more funds out of the private economy.

Obama’s favorite think tank, the Center for American Progress, submitted a plan that calls for the federal government to eat up more than 20 percent of the American economy through taxation every year, in perpetuity. Being the liberals that they are, CAP calls for even higher levels of spending — above 22 percent of GDP by 2022 alone.

Contrast CAP’s plan with that of the Heritage Foundation. It returns taxation to just above the historical U.S. average at 18.5 percent of GDP. By cutting spending to pre-Great Society levels, the Heritage plan not only balances the budget but actually begins to lower our cumulative national debt.

Heritage achieves these savings by repealing Obamacare; making the wealthy pay more for their Medicare benefits and shifting the program to a premium-support model; capping Medicaid spending and turning the program over to the states; and transforming Social Security back into an anti-poverty program as originally promoted by President Franklin Roosevelt.