Rejecting Restraint: President's Budget Punts on Prudence
By Mattie Duppler • Monday, February 14, 2011 1:02 pm
Obama's FY2012 Budget: Taxes, Taxes, and More Taxes
By Ryan Ellis • Monday, February 14, 2011 12:00 pm
Top Policie
By Mattie Duppler • Monday, January 24, 2011 2:13 pm
On Tuesday evening, President Obama will deliver the annual "State of the Union" address. Below are ten items Americans for Tax Reform is urging him to include:
Obamacare: Near Retirees to Face Limited Ability to Deduct Medical Expenses
By Ryan Ellis • Tuesday, January 18, 2011 4:09 pm
Obamacare imposes two dozen new or higher taxes on American families and small employers.
Obama’s Policies Lead Only to Pessimism among Business Leaders
By Jeremy Weltmer • Tuesday, August 3, 2010 9:37 am
There need no longer be any speculation about how businesses view the present economic climate. As Veronique de Rugy of the Mercatus Center has indicated,
“The above chart illustrates one of the greatest economic costs of the current recession: lack of businesses investment. Using data from the United States Federal Reserve Bank, Mercatus Center Senior Research Fellow Veronique de Rugy shows the changes in American businesses’ cash reserves since 1975. Billions of dollars in cash reserves is shown in red and cash reserves as a percentage of total business assets is shown in blue to provide historical parity. By both measures, companies are holding onto more cash than they have in 48 years, over $1.8 trillion.”
Historically, companies do whatever they can to optimize their return on capital, whether it be in terms of R&D, expansion, hiring, or acquisitions, yet in the present climate, they have chosen to sock away an unprecedented proportion of their revenue to protect against a rainy day. Now, one could chalk this up to an extremely dour outlook on the present economy, but the NFIB’s monthly survey of business leaders offers more insight.
Click to read more.
Obamacrats Pursue Policies That Keynesians Would Spurn
By Jeremy Weltmer • Friday, July 23, 2010 2:57 pm
As much as scores of economists have refuted much of the framework of Keynesian economics, many of its tenets regarding the role of the government in stimulating the economy counter-cyclically remain widespread in discussions of policy. Yet even when deploying this framework, the proposal tendered by Secretary Geithner and President Obama to raise taxes on the highest-earners at the end of this year does not represent the greatest boost to the economy.
Under a Keynesian analysis, government should attempt to stimulate the economy during a cyclical recession by increasing aggregate demand. Usually, this takes the form of government-funded projects, but it can also involve transfer payments or other ways to increase demand. Naturally, government must pay for these policies, so Keynes would suggest a tax policy that has the least possible impact on demand.
Obama and his legislative cronies have asserted that taxes on those Americans who make the most have this sort of effect, often by invoking an image of some sort of tycoon or bank executive counting and hoarding massive amounts of cash. But as the New York Times reports,
“the Top 5 percent in income earners — those households earning $210,000 or more — account for about one-third of consumer outlays, including spending on goods and services, interest payments on consumer debt and cash gifts, according to an analysis of Federal Reserve data by Moody’s Analytics. That means the purchasing decisions of the rich have an outsize effect on economic data.”
So, in effect, taxes on the rich have the exact opposite effect of what sound Keynesian analysis would suggest: a tax increase has an outsize effect on demand by lowering the amount that those spenders would have to inject back into the economy.
Given that Keynesian economists (the last holdouts in the consensus that tax increases crimp growth and decrease tax revenues) must side against such a tax hike, one must consider why the Democratic leadership continues pursuing wrong-headed policy. Perhaps it comes from some Marxist notion of class warfare, perhaps it has to do with the fact that upper-income people tend to give more to the Republican rather than the Democratic party, but it is clear that it does not stem from a desire to make the American economy grow.
Financial “Reform:” the End of Free Checking
By Jeremy Weltmer • Friday, July 23, 2010 10:26 am
When most Americans think of financial reform, they envision some sort of abstract change in rules to cut the profits of cigar-smoking investment bankers jetting across the globe in private airplanes, yet the reality of the recent Frank-Dodd Act hits much closer to home. In response to Section 1075 of the legislation, introduced by Sen. Dick Durbin, the largest US banks, Bank of America, Wells Fargo, and Chase, have ended their free checking programs.
Section 1075 allows the Board of the Federal Reserve to establish “reasonable” limits to the interchange fees charged by banks to merchants when consumers use debit cards as a method of payment. Moreover, it allows the Federal government to assemble data on every debit card transaction without providing any explanation of how that information would be used or for what reasons it would be collected. But in setting limits on the amount of those fees that banks charge, the profitability of debit cards plummets for banks.
On top of the recent CARD Act, which prevents banks from charging massive overdraft fees for debit card transactions that go over an account’s balance, financial institutions have fewer and fewer sources of revenue to pay for checking account operations. Moreover, as the Wall Street Journal reports, “more than half of all checking accounts are currently unprofitable, according to a report issued last month by Celent, a unit of Marsh & McLennan Cos. It costs most banks between $250 and $300 a year to maintain one of the roughly 200 million checking accounts, according to industry estimates.” As government regulators and anti-commerce Democrats exert more and more pressure on banks’ sources of revenue for retail banking, firms have no choice but to find other sources of funding.
Because the accounts cost close to $300 per year, banks need to find some way to offset those costs through fees. For account owners with larger balances or high debit card activity, banks will waive the fees as an account perk, but this leaves lower income and low balance customers out to dry.
In short, this bill designed to “protect consumers” will cost those households least able to pay at least $9 per month. If Democrats actually want to help those most in need, they should reconsider their anti-businesses and anti-commerce stances, for economic growth cannot come from anywhere else.
Obama Debt Commissioner Calls for a VAT and Its Correspondingly Crippling Effects
By Jeremy Weltmer
While Barack Obama ostensibly created the Simpson-Bowles debt commission to address the presently untenable fiscal condition of the US, the latent motivation recently emerged when Erskine Bowles, co-chair of the National Commission on Fiscal Responsibility and Reform, spoke in favor of a consumption tax in an address at the Department of Commerce on July 14th.
As opposed to confronting the US overspending problem through the logical and necessary spending cuts, the Obama solution remains to raise taxes and stunt the economy, and Bowles is in lockstep. While he proposes some spending cuts (he asserts that an ideal reform package should include 75 percent spending cuts and 25 percent revenue increases), he ignores the fact that deals to raise taxes and cut spending always result in higher taxes and new spending without fail. As Grover Norquist, President of Americans for Tax Reform once asserted in an interview with the Hill, “At some point conversations about unicorns are tedious, because they don't exist in the real world. Budget deals where they actually restrain spending and raise taxes are unicorns.”
Yet to pay for his fantasy of a budget deal, Bowles advocated a...
Click to read more.
American Youth Wrongly Expect Nothing from Social Security
By Jeremy Weltmer • Tuesday, July 20, 2010 2:01 pm
As a USA Today/Gallup poll reported this morning, “Three-fourths of those 18 to 34 don't expect to get a Social Security check when they retire.” Thankfully, those 3 out of 4 young adults have too dire an outlook.
The article later asserted, “Last year, [the Social Security actuaries] projected the system would begin running in the red in 2016, as the Baby Boom generation retired, and the trust fund would be exhausted in 2037.”
But however much Social Security must be subsidized by the Federal government, lawmakers would never allow those promises to lapse for reasons of expediency. What is much more likely to occur is a general reduction of benefits over time such that Social Security pays for itself with small subsidies.
Of course, this strips away the entire point of Social Security: the reason to invest throughout life is so that the balances grow and compound over time rather than simply stuffing the money in a mattress. As Social Security simply becomes a transfer payment from the young to the old, benefit levels will drop correspondingly as the money has no chance to grow.
Today’s young adults will indeed one day receive checks from Social Security, but when those checks come, the recipients will only be able to laugh at the pitiably small amounts. The Social Security of today will be the latte-subsidy of tomorrow.