Sunday, July 29, 2012

Tax Cuts for the Rich? Barely 4% of the $12 TRILLION Mess

Truly depressing…
The $12 trillion misunderstanding - The Washington Post: After the CBO issued its report, Sen. Rob Portman (R-Ohio), a former director of the Office of Management and Budget who is often mentioned as a vice presidential possibility, put out a news release saying that Bush tax cuts for wealthier Americans (generally $250,000 or more for couples and $200,000 for singles) explained only 4 percent of the debt shift. The CRFB checked his math and concluded that he was right. But all of Bush’s 2001 and 2003 tax cuts — which, except for benefits for the rich, are now supported by Obama — had a bigger effect, accounting for about 13 percent of the debt swing.
Tax cuts for the rich just don't seem to be the problem. What is the problem? Our system, which encourages favors for any and every group of voters. At some point, we will need to cut spending, cut spending, and cut spending. Then, we also need to incrementally return marginal tax rates to traditional levels, sans the idiotic loopholes that are social engineering.

Sunday, July 22, 2012

Obama vs the Successful Individual

There have been a great many blog posts and columns written since President Obama spoke on July 13, 2012. Many of his defenders have tried to "correct" any confusion about what his words meant, arguing that his statements were misinterpreted by the press and taken out of context by opponents.

As Charles Krauthammer rhetorically asks, "Did the state make you great?"
The problem for Pres. Obama and his supporters is that his argument is deeply flawed. We do succeed with the help of friends, family, church, non-profit organizations, and, yes, government (generally of the local variety). But, many people have the exact same access to all these various supports… yet some succeed and some fail.

Also, a simple point of fact: government is the people, not something outside and above the people. Without successful people paying taxes, there would be no way for government to do anything. Government depends on us, not the other way around; the president has this backwards.

Let us return to the much-analyzed speech, to which I will add some personal perspective.
Remarks by the President at a Campaign Event in Roanoke, Virginia
July 13, 2012

Roanoke Fire Station #1, Roanoke, Virginia
There are a lot of wealthy, successful Americans who agree with me -- because they want to give something back. They know they didn't -- look, if you've been successful, you didn't get there on your own. You didn't get there on your own. I'm always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something -- there are a whole bunch of hardworking people out there.
Mr. President, the blunt fact is that the successful — many of whom are rich, if that's how you wish to define success — do work harder. They work much harder. Even the New York Times found the One Percent work to maintain their wealth.
They [the One Percent] work longer hours, being three times more likely than the 99 percent to work more than 50 hours a week, and are more likely to be self-employed.
— New York Times, Among the wealthiest 1% many variations; January 14, 2012
Three times more likely. All those "idle rich" must not be so idle. My wife and I can attest to that. We work our "day jobs" and then we work some more on various freelance work, running our websites, posting to blogs, and anything we can think of to earn a few extra dollars for security. We aren't going rely on the hope and dream that someone, anyone, will care for us in future years.

This constant impulse to work means we won't have much leisure time. We are working to change that, but we also are among those naturally insecure people. We worry a lot. We count pennies and try to save money. We reuse whatever we can. When we do relax, we often feel guilty about the "wasted" time. Unsurprisingly, it seems we are "normal" among the successful.
Research by Daniel Kahneman, the Nobel Prize-winning psychologist, shows that "being wealthy is often a powerful predictor that people spend less time doing pleasurable things and more time doing compulsory things and feeling stressed." 
His study found that people who earn less than $20,000 a year, for instance, spent more than a third of their time in passive leisure, like kicking back and watching TV. By contrast, those earning more than $100,000 a year (more affluent than wealthy), spent less than a fifth of their time in passive leisure.
— The Wall Street Journal online, 2010
Yet, the president and his supporters imagine that being smart and working hard are only loosely associated with success. His attitude implies that success is more about luck and good fortune than hard work. That's an erroneous assumption, one challenged by a number of studies on class mobility and wealth accumulation. But, we tend to confuse mobility and accumulation: by definition, if everyone does better, there is little "mobility" from one quintile to another, yet there is wealth accumulation across the classes.

For some insight on the issue of accumulation versus mobility, read Robert Samuelson. While the United States is supposedly less mobile that some Western nations, that's because our "class quintiles" cover extreme ranges. I've written about this in the past, but the basic point is that lazy people inheriting wealth do not remain wealthy. Almost two-thirds of the children of the wealthy drop at least one quintile by the age of 40.
A new report from the Pew Mobility Project, a nonpartisan research group, compares the incomes of forty-somethings now with their parents at a similar age in the late 1960s and early 1970s. 
Along with higher incomes, there was much movement across class lines. Fully 60 percent of children born to the richest fifth of Americans in the late 1960s fell out of that category — 23 percent to the second-richest fifth and the rest scattered; 8 percent landed in the poorest fifth. As for upward mobility, about 57 percent of children born to the poorest fifth of Americans in the late 1960s moved up — 27 percent into the second-poorest fifth and 4 percent into the richest fifth.
So much for luck and fate. No, you have to work to either retain wealth or accumulate it. Only the super wealthy, the top tenth of a percent, tend to have better "luck" remaining rich. It takes two generations before most of their grandchildren to fall out of the top quintile. But, fall they do without hard work and the drive to be independently successful. That, Mr. President, is the key again: independent initiative. Intrinsic motivation matters.

Let us return the nonsense of campaign rhetoric. The following passage includes what is either the president's now infamous "grammatical error" (if you believe supporters) or his genuine belief that success is outside the individual.
If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you've got a business -- you didn't build that. Somebody else made that happen. The Internet didn't get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.
"Somebody" invested? How about the taxpayers — those rich and successful people you claim "didn't build that" in your speech. If by "that" you meant "roads and bridges" then you should remember pronoun antecedence in the future. But, the claim you made a mistake seems hollow. That's because the rich and successful in our nation are precisely the people responsible for many of its great institutions and structures.

The rich did build our steamships, railroads, and bridges. The New York subway system was private, until the government took it over. The Intercontinental Railroad also had a private system, but government decided to subsidize a different route and choose the winners. And for the things government builds, it relies mainly on taxes and fees… paid by working citizens. Those "rich" always pay to build our nation, one way or another.

As a computer geek, I am truly astounded by the false claim "Government research created the Internet so that all the companies could make money off the Internet."

No, government created the various networks that became the Internet for several reasons, and none of those reasons involved making money off the Internet. What nonsense. The military networks were designed to survive disruptions, ranging from natural disasters to acts of war. The research networks were designed to facilitate easy data sharing, using standard protocols. Neither of these were based on profit.

There are still secure, non-public networks used by the government. The Internet, as we know it, is old technology. Privatizing this technology was great, like privatizing what we learn from space exploration. Yet, the profit motive came later. Hard working, brilliant individuals had ideas and turned those ideas into something bigger than what the government had maintained. Simply compare the Web circa 1992, with 50 servers, to the Web today. By 1992, the Internet technologies were already 30 years old… and not advancing nearly as quickly as private sector networking technologies.

It is correct to state, "The Internet didn't get invented on its own," but there were networks of various kinds all over the world. The Internet standards helped, just as the IBM PC standards commoditized personal computing. What we call "The Internet" is an amalgamation of military, academic, and private networks that needed to interact and share data. Private individuals and companies developed ways to use the technology for commerce in new and wonderful ways.

As the president continued, he brought forth another partial truth:
The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together. There are some things, just like fighting fires, we don't do on our own. I mean, imagine if everybody had their own fire service. That would be a hard way to organize fighting fires.
Volunteer fire departments are not uncommon in this nation. The key word is "volunteer." Yes, we do things together, and local governments support these volunteers, but what really makes the fire departments work in many small towns is a sense of community. Not a sense of government, but a sense that we are connected via something far more meaningful to our daily lives. We are connected because we are neighbors.

I've seen neighbors helping each other during wildfires, earthquakes, and floods. I've seen people helping each other after tornadoes. No one waits for "government" to organize the neighborhood. We come together because it is the right thing to do. Period.

Conservatives and libertarians know the value of institutions that are outside government. It used to be that liberal and progressives understood these institutions were more reliable, more honorable, than centralized government, too. Government is not efficient, even when it does something it should do — just ask any military veteran.

Individual success is not owed to the federal government. It isn't owed to any government. If government led to my success, why are so many of my childhood classmates not in the top five percent? What stopped everyone else from my childhood community from attaining as much as I did? If "somebody" else built the infrastructure and provided the services, why did so few in my community do well?

If government is so great at creating success, why has it failed to so miserably to end poverty, while spending more and more? Because it tends to spend on the wrong things… consistently.

Sorry, but I know my wife and I have to depend on ourselves. We can't wait for government to get things right.

Back to work…