BeyondStageOnePolitics.com
“Our practical choice is not between a tax-cut deficit and budgetary surplus. It is between two kinds of deficits: a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy; or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, increase tax revenues, and achieve . . . a budget surplus.” John F. Kennedy

Voice-over

My recent political voice-over demo. See Contact for manager's information.

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

Dec 10 2012

“The Age of the Unserious”

C.M. Phippen

Our president claims that he is making an honest effort to negotiate with Republicans to avoid the fiscal cliff. He wants us to believe that they are the ones who simply won’t budge on their positions and won’t allow him to fix the horrific fiscal issues we face.

This is the president whom Tim Geithner claims is willing to go off the fiscal cliff if the Republicans don’t agree to his plan to raise taxes on the richest 2% because, in Geithner’s words, “remember, it’s only the top two percent.” Doesn’t unequal treatment under the law become a civil rights issue at some point!? Anyway . . .

This is the same president who has had his past two budgets shot down in Senate votes of 99-0 and 97-0, one of which looked an awful lot like Obama’s current proposal from which he is negotiating. He apparently expects Republicans to support the plan that his Democrat allies in the Senate refused to support?

In addition to major entitlement spending cuts, the greatest priority our government should have is that of allowing/encouraging/stimulating economic growth, which will in and of itself lead to the President’s desired revenue increases.

In fact, Bill Whittle recently made the point that “if you destroyed the entire government, burned every [public] building, fired every government worker, sank every aircraft carrier, even with no government to pay for – none – we’d still pay the same taxes that we’re paying today and still have to borrow or print money just to pay for entitlements.”

I would argue that if we do indeed have a shortage of money for schools, teachers, police and other government services, it is entitlement spending that is draining those resources, not tax cuts or wars.

Even Austin Goolsbee, former president of Obama’s Council on Economic Advisers, recently stated that any solution to America’s economic ills “cuts on discretionary and entitlement spending.”

In addition, Peter Orszag, former OMB director, recently came out urging his fellow Democrats to support reforming entitlements and putting “crucial programs on a sounder footing.”

I must assume that our president is well aware of the fact that nothing in his rejected budget plans or spending priorities will stimulate growth. And he has made it very clear that, despite his repeated declarations to the contrary, he is never going to cut any real spending.

Thus, his only plan to decrease the rate of growth of our historically unprecedented federal deficit seems to be an increase in revenue coming from the already over-burdened taxpayer. Unfortunately, the proposal on which he is willing to risk our entire economy, that of increased taxes on the top 2%, leads to enough revenue to cover expenses for about eight days! Brilliant!

Even the Obama-touted Buffet Rule, if implemented, would pay for about 28 hours of government spending. If you want to close the deficit through increased taxes on the two highest tax brackets – 33% ($178,650 – $388,350) and 35% (over $388,350) – it would be necessary to hike those rates to 159% and 166% respectively. I’m assuming most liberals would tell us that such rates would have absolutely no impact on economic growth or the willingness of those individuals to work!

AEI economists recently looked at the effect of tax increases v. entitlement reforms on fiscal crises management over the nearly three-decade period of 1970-2007. They found that countries that were able to successfully reform did so mainly with spending cuts; in fact, on average 85% of their budget gaps were closed this way. On the other hand, those with failed reforms were the countries that, on average, relied at least 50% on tax increases.

Just ask Jim Sinegal, co-founder of Costco, if those tax increases will most likely lead to greater or reduced revenue next year. He’s a supporter of Obama who preached the moral imperative of Obama’s tax plan, and of businesses large and small all “following the same set of rules . . .” while risking Costco’s credit rating to take on an additional $3.5 billion in debt in order to pay out dividends this year before Obama’s tax hikes kick in. Oh, and he is apparently the biggest beneficiary of this move.

Or ask Great Britain how a plan of tax increases worked for them last year when they raised rates on those making over £1 million (about $1.6 million) to 50%. The result was that they saw a £7 billion treasury loss as nearly two-thirds of the high earners were suddenly missing from the country or finding ways to shelter income.

Funny though, that even after the manifestation of the result of such policies, political supporters of the increased tax are now calling any reduction a “tax cut for millionaires,” as though resentment toward the wealthy is more important than the amount of money the government actually has for programs which benefit the less well-off.

Yes, Mr. Whittle, I think you’re right; this truly is “The Age of the Unserious.”


Nov 16 2012

Obama and the “Balanced Approach”

C.M. Phippen

Within days of his razor thin re-election, President Obama chose to inform us that he now has a mandate for his deficit reduction policies that include a “balanced approach.” In this case, balanced means he wants the wealthy to pay for the overspending of politicians in Washington; if the rich will just pay more, then the politicians will find the discipline to reduce their overspending by a tiny fraction.

Never mind that it wasn’t a “balanced approach” of irresponsibility that got us here – it was fully a result of Washington not living within its means. The increase in revenue from those taxpayers would amount to $82.3 billion annually, the equivalent of about eight days of spending.

According to a recent study by Ernst & Young, just allowing tax rates to go up on those making over $250,000 a year could cause a loss over the long-term of 700,000 jobs.

Are we really willing to exchange eight days of spending for 700,000 jobs in an economy that is barely making it? Does this make sense to anyone who’s not a community organizer?

Our economy needs to grow at about a 3 percent annual rate in order to just keep up with new workers entering the work force; under Obama we’ve experienced a GDP growth rate average of about 2 percent.

Even Thinkprogress.org, while denying that these increased tax rates will have any real effect on economic prosperity, has admitted that the US economy would take a .25 percent hit in growth if these taxes increase. Even if that is the worst of the economic consequences from such a policy of anything but “equal protection under the law,” are we really willing to take a 1/4 percent hit year after year just to cover eight days of expenses during each of those years, especially when the record under this president has been growth below what is necessary just to keep the currently high rates of unemployment stable?

Interestingly enough, when looking at the exit polling done on election day, only 33 percent of voters said they think taxes should be raised to deal with the deficit. A full 63 percent of voters responded “No” to the question of whether or not taxes ought to be raised to help cut the budget deficit.

Of course, no surprise that many of the people who probably voted for Obama were completely unaware of his plans. That would be because he didn’t run on his plans. He ran on demonizing Mitt Romney for being successful and rich, as evidenced by his 85.5 percent of negative ads in this campaign; ads that were mainly aimed at Romney personally rather than being aimed at his actions and principles, by the way. Translation – nearly all of his sizeable war chest was spent demonizing the most successful guy in the room.

There’s no better time in America to be a loser – we love the guy whose every promised outcome was a flop and who, at every turn, had an excuse handy as to why he just couldn’t accomplish what he wanted and why it was everyone’s fault but his own. The reason the stimulus didn’t work, according to the Obama administration, was that the recession was much worse than they’d realized; turns out it wasn’t as bad as we thought – 4.7 percent decline rather than 5.7 percent.

He truly is the president of the participation trophy generation. I guess though, that if the successful aren’t responsible for building their own success, it follows that the losers aren’t responsible for their own failures.


Sep 19 2012

Our Tax Dollars and Receipts

Let me get this straight – the US federal government is spending $20 million of our hard-earned money every year on “Afghan firewood,” and they’re doing it without any receipts or other form of documentation.

According to John F. Sopko, special inspector general for Afghanistan Reconstruction, when the auditors asked for documentation of how much was spent on Afghan firewood, the response was, “We don’t have the records, we just spend the money.”

Just wondering how far that would get you if you tried it on an IRS agent, auditing your finances. Next time you’re sitting down with an IRS auditor in order for him to determine if you paid enough of your portion of that $20 million, just give it a try, something like, “I don’t have the records, I just make some cash and spend some cash . . . I paid you guys exactly what I owe you though. I can feel it.”

Go for it.


Aug 31 2011

President Obama’s Bank of China

See my article about the national debt published in August 2011′s edition of Smart Girl Nation, entitled President Obama’s Bank of China.


Aug 6 2011

Household Debt, Washington Debt

Here’s the explanation of Dave Ramsey – the guy who’s built a business helping people get their finances under control – putting the Washington debt debate in terms the average guy can understand:

If their household income was $55,000 per year, they’d actually be spending $96,500—$41,500 more than they made! That means they’re spending 175% of their annual income! So, in 2011 they’d add $41,500 of debt to their current credit card debt of $366,000!

And S&P was the only one of the three rating agencies to downgrade our debt?


May 23 2011

The Debt Ceiling and Fiscal Responsibility

What is with the hysteria surrounding the debt limit? Why are the Democrats refusing to have a discussion regarding the issues surrounding the debt ceiling and fiscal austerity?

It is a fact that all things being equal, a growing economy brings in more taxes than a stagnant or shrinking one. It is a fact that reducing tax rates stimulates growth and leads to greater tax receipts (courtesy John F. Kennedy). It is a fact that we cannot continue on the current path of fiscal irresponsibility (courtesy Barack Obama).

If we want our federal government to have access to more money (I’m not sure I do), then reducing taxes to a point where optimum growth will occur is the best way to achieve that goal, not raising the debt ceiling so we can borrow more every time we max out the national credit card. I concur with John F. Kennedy,

Our practical choice is not between a tax-cut deficit and budgetary surplus. It is between two kinds of deficits: a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy; or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, increase tax revenues, and achieve . . . a budget surplus.

The next step would be to get spending in line. We all know that no matter how much money the treasury has, it spends more. Tax rates could be raised to 90%, 100% even, and not only would our federal government spend every dime of it, but they would certainly borrow against it to finance even more great projects to buy votes . . . ah, rather, to serve the people. I recently wrote about the idiocy of such a plan, entitled The Rich, Taxes, and Government Debt.

The most powerful tool of the politician has become our tax dollars. Our money, taken by the force of law, is spent to buy votes and power, and often in ways that work against the interests of those paying the bill. It only seems fair (the President’s ears should perk right up now) that those who are going to be on the line for this new spending (taxpayers) have the right to require some fiscal responsibility from those doing the spending.

President Barack Obama, in May of 2009, warned that the current level of deficit spending was unsustainable and would lead to skyrocketing interest rates for Americans and have a “dampening effect on our economy.” Of course, that was when it was George Bush’s spending.

Thank goodness we (or some of you, rather) elected a fiscally responsible president; one who did more deficit spending in his first three years in office than all presidents before him combined; one whose budget proposals will not only double our national debt within the next decade, but quadruple the net interest costs of carrying that debt (as a result of those increased interest rates, coupled with increased debt); one whose tax and spend philosophy will cause us to spend more money on interest payments than on “education, roads and all other nondefense discretionary spending combined” within eight years. Yet each year in office he has preached the virtues and necessity of decreased federal spending – 2009, 2010, and again in 2011 – and despite the soothing words, reality bears out a less than soothing picture.

According to budget analysis, “90 percent of the rising long-term budget deficits are driven by rising spending, and just 10 percent of the rising deficits are caused by falling revenues” and our President has admitted that our federal government has a spending problem, yet he is asking Congress for an increased ability to borrow without any limitations on their (and his) ability to continue spending recklessly.

How about this:

In the 1980s and 1990s, Washington consistently spent $21,000 per household (adjusted for inflation). Simply returning to that level would balance the budget by 2012 without any tax hikes. Alternatively, returning to the $25,000 per household level (adjusted for inflation) that Washington spent before the current recession would likely balance the budget by 2019 without any tax hikes.

Simple, really, and the easy part is the President claims to already agree with me.


Apr 19 2011

Signs of Destruction

C.M. Phippen

As I’ve tried to better understand the events leading up to the financial crisis of 2007-2008, I’m haunted by a comment made by Charles Gasparino in The Sellout. He stated that as corporate bond prices lost value in the rapidly declining market of June 2007, there was a dramatic “flight to quality of investors selling corporate bonds and snapping up supersafe Treasuries” (Gasparino, p 265), the bonds considered the safest available.

At about the same time, in June of 2007, the rating agencies (Standard and Poor’s, Moody’s) began downgrading mortgage-backed securities, despite the fact that they had been showing signs of deterioration for a year or two prior while still maintaining consistent AAA ratings.

One-and-a-half years earlier, in late 2005, AIG made the decision to no longer insure CDOs underwritten by US financial institutions because of the lax standards in US subprime lending (Gasparino, p 226). At about the same time, Bill Gross of PIMCO was warning about falling housing prices and defaults.

Now let’s jump to 2011. Over the past two years, the Fed has pumped nearly $3 trillion into the economy by purchasing US treasuries (QE1, QE2, and reinvestment of maturing treasuries). This in addition to all those purchased by private investors fleeing toxic CDOs.

In February, Bill Gross of PIMCO, “one of the largest investors in the Treasury market,” announced that he would be selling Treasuries and just one month later, with no holdings of US government debt, began shorting them.

In a major shift, China has begun pouring money into hard assets and away from US government debt.

A former advisor to China’s central bank, Yu Yongding, recently “likened the U.S. Treasury market to a ‘giant Ponzi scheme,’ arguing that Federal Reserve buying of Treasuries has artificially kept bond prices high, but that they would eventually fall to levels which reflected fundamentals of the U.S. economy.”

S&P just lowered the outlook on US debt from stable to negative, signaling the potential eventual loss of the AAA credit rating and “a sign that the ratings agency has doubts about prospects for taking effective action to curb deficits and debt.”

To argue that deficits and debt can be reduced by raising taxes as opposed to cutting spending would be to ignore the realities of history. Regardless of marginal federal tax rates, revenue raised has always remained fairly consistent, at about 18% of GDP. In fact, raising capital gains rates could likely have the opposite effect, as more people have historically sold more assets during lower-rate periods than higher-rate, when taxes collected on gains have historically plummeted. Interestingly, lowering capital gains tax rates in a high-growth business environment has been one of the only ways shown to actually create outliers in this equation – increased percentages of revenue above the 18% norm.

All the while, President Obama’s budget would add $9.5 trillion to the debt from 2011-2021, a near doubling in just 10 years! Just as many of the major players on Wall Street spent the years leading up to their firms’ meltdowns playing golf and entertaining, we seem to have a president equally oblivious to the eventual destruction being sown all around him. While it looks like many of the American people have learned from the mistakes of the past decade and are willing to accept the changes that entails, the lack of foresight and leadership emanating from the capitol is the very essence of Nero fiddling while Rome burns.


Aug 18 2010

The Battle for Freedom and Fiscal Responsibility, Yet Again

This cartoon was originally published in the Chicago Tribune in 1934.

David Horowitz succinctly summed up this seemingly never-ending battle when he explained that our history is one of two “distinct revolutionary traditions,” as opposed to the idea of an old order (conservatism) and a new revolution (progressivism). Our two-hundred year history, that which has shaped our nation, is a history of two disparate revolutionary paths to the modern world, “two different paradigms of the European Enlightenment that took root, respectively, in America and France.”

He goes on to say that, “the radical ethos of the French Revolution became the wellspring of a socialist revolt against bourgeois order that culminated in the creation of the Soviet empire. On the other hand, the libertarian ethos of the American Revolution inspired the conservative opponents of the Soviet tyranny, a counterrevolution based on individual rights, free markets and democratic constitutions.”*

You’d think once the battle had been won by the historic experiences of the past century, the debate would be over; that, unfortunately, would be asking too much. So the same arguments must be won, the same battles must be fought, and the same truths must continuously be told.

*The Politics of Bad Faith, David Horowitz, The Free Press, 1998, p. 142.


Aug 6 2010

Unemployment, With or Without the Stimulus

C.M. Phippen

While listening to an interview with Joe Biden’s chief economic advisor, Jared Bernstein, I heard what sounded like an admission that the White House hadn’t necessarily expected the stimulus bill to hold unemployment at a rate any lower than was already the “consensus” estimated rate.  Larry Kudlow, on The Kudlow Report, asked Bernstein about the promise made by the White House that if the stimulus bill were passed quickly, the unemployment rate would not exceed 8%;  it currently stands around 9.6%.

Mr. Bernstein responded by saying that during the fourth quarter of 2008, the consensus was that 8% would be the height of unemployment in this country.  He went on to say, “We were right with the central forecast.  We did not know that the, nor did any other, hardly any other economists, that the unemployment rate was headed up so quickly, that the economy was headed off a cliff . . .”

Okay, I get it.  You spoke before you realized the extent of the recession, and hey, who knew a consensus could be wrong, right?

But wait, Obama wasn’t yet in office in the fourth quarter of 2008.  The president had not at that time even submitted a stimulus plan to be considered by those formulating the “consensus,” had he?

I’ve attempted to contact the White House to for clarification; I’ve rewound my TiVo and watched it again; I’ve emailed The Kudlow Report to see if they can get clarification.  If this administration made a promise to us that unemployment wouldn’t exceed the level they now claim was the “consensus”  maximum even before a stimulus bill, if we would only spend over $800 billion, then we all just got shafted.

Not only did unemployment far exceed the promised 8% maximum, but I can only assume the administration didn’t  have much confidence in the effectiveness of their own bill, the one that just had to be passed right now!  If they did believe it would actually “create or save” a significant number of jobs, it only makes sense that they would have taken the consensus peak unemployment rate and reduced it by the percentage of jobs they planned on saving or creating.  I understand, though, not wanting to overpromise.

On the other hand, the fact that they took the consensus peak and assured us their $860 billion bill to reduce unemployment would keep us below that already assumed high, and then it still didn’t, doesn’t bode well for all of us who weren’t close enough to the administration to get our own big fat stimulus check.  Nor does it bode well for our children and grandchildren, who will be paying for those checks for years to come.

Watch the video here (the portion I reference starts right around 6:10 if you don’t want to watch the full 12 minutes):


Jul 29 2010

70/30 Nation

C.M. Phippen

So, 36% of the American public thinks Obama is doing a good job on the deficit. In fact, 23% didn’t think the stimulus package added to the deficit at all. That level of miseducation is astounding to anyone even the slightest bit economically informed. The federal deficit for the 2010 budget is projected to be 10.6% of GDP, with an expected increase even higher next year. This, even though according to our President, we’re in the middle of recovery.

Federal discretionary spending increased over 80% from 2008 to 2010, thus resetting the baseline at an extraordinarily high level. Every new budget going forward starts at that point and goes upward from there; any reductions are considered cuts – something that almost never happens in Washington. What does tend to happen is that spending will increase each year, thus ensuring greater and greater deficits, and an exploding national debt as far as the eye can see.

Deficits under George W. Bush were in the 1-3.5% range until 2009, for which President Bush and President Obama were both responsible. Most of us believed spending was out of control under Bush, only exacerbated by the $800 billion (ten year) price tag on Medicare Part D.

President Clinton was elected to his first term in office with a minority of the popular vote, which had been split by Ross Perot with 19%. What was the issue that so divided fiscal conservatives and was the basis of Perot’s campaign? Concern over a deficit of approximately 4% of GDP.

A quick review of articles written during the Bush administration attests to the fact that liberals have been consistently concerned with out-of-control deficits during periods of time when they’ve been a fraction of what they currently are. I certainly hope this concern is genuine rather than political and we’ll soon see wide-ranging support for massive spending cuts in order to meet the historically consistent level of spending at 18-20% of GDP.

Politicians from both parties have been selling out the future of our country in order to buy votes in the here and now, and the rest of us just can’t afford this party any more.

In The Battle, Arthur C. Brooks outlines a consistent 70/30 split among the American population. That is pretty much what we see in this support for current policies dealing with budget and spending issues.

Nearly 70% of Americans agree that they’re better off in a free market economy than not, “despite its severe ups and downs.” Fifty-six percent of Americans believe their income taxes are too high, while 33% believe they’re just right. Astoundingly, while many Americans believe that the rich should pay more taxes, 69% believe that the top tax rate should be 20% or lower! Seventy-six percent believe the strength of America is based on the success of American business and 66% believe that when “big business” earns a profit it helps the economy; alternately, 18% believe it hurts (where did they go to school?) When asked if they would prefer larger government with more services and higher taxes or smaller government with fewer services and lower taxes, only 21% of Americans chose larger, more expensive government while 69% preferred smaller.*

There is a minority of the population, the 30%, who will, due to lack of understanding or pure ideological drive, charge ahead in attempts to completely redefine and transform this nation of freedom and wealth which was unimaginable in the world just a few centuries ago. It is the rest of us, the 70%, the mainstream of America, who stand in their way. It’s time for the politicians to represent us.

(Polling data excerpted from The Battle by Arthur C. Brooks, Basic Books, 2010, pp. 3-12)