Originally posted 2010-01-26 23:16:57. Republished by Blog Post Promoter

by Wenchypoo
Wenchwisdom.blogspot.com

If you ever wanted to see where we’re likely headed with the economy, oil use, work life, and self-sustainability, you should look to the Amish and their culture. Their past represents our possible future, and provides some wonderful clues about how to deal with it.

Some surprising and interesting facts about the Amish people:

• A fine distinction has been made between ownership and use. They can ride in or hire combustion-powered vehicles (with non-Amish drivers) to travel in, as long as they don’t own or operate them without special permission of the church. Certain work crews (construction-related) have special permission to lease work vehicles, operate heavy equipment and electrically powered tools as necessary for their job, as long as they don’t tap into the power lines from outside, or the 110-volt power from outlets.

• Most families have scaled back or abandoned farming completely, due to skyrocketing prices of land, equipment, and supplies. Population strains within communities have placed a high demand for farmland, right along with developers from the encroaching “outside” world. Being penned-in by land availability and affordability, church, and family constraints, most have turned to business for their livelihood. Amish micro-enterprises abound in large cultural homelands such as Lancaster, PA and others.

• Education beyond 8th grade home schooling is forbidden. Training for a specific job or job component is allowed, as long as it isn’t formal (for a degree program), and is available by other means (OJT, apprenticeship, workshops/seminars, etc.), because it’s feared that a formal education would encourage leaving the farm and community. Any occupation requiring the use of force (military, police, etc.) is forbidden. Membership in unions and engaging in litigation is also forbidden; it is seen as a horrific waste of money and resources.

• Amish workers and employers are exempt from Social Security and Medicare tax. Their culture does not allow for paying into or drawing from the system, because extended family and the church serve as their means of social support in times of need or disability/old age. They are also exempt from military service because they believe in non-resistance.

• Most Amish micro-enterprises are home-based, providing for a family/culture/church woven network in their daily lives. Men and women are encouraged into business equally, but family and church must take priority over economic needs (time off for weddings/funerals/Amish holidays/barn-raisings, etc.). Business is considered a “sideline” to their traditional farming work, despite many families leaving farming as their mainstay.

• If some component of business requires the use of electronics or combustion, they can contract it out to other firms—even non-Amish ones. They are also allowed to use “non-native” materials (not found on the farm) such as plastics, fiberglass, etc. with church permission. By outsourcing such things, the boss can work right alongside the employees–ensuring immediate access to production, staff, and customers throughout the day. If an electrically-powered item is absolutely essential to their business, an electrical source is created through the in-line use of a diesel engine, hydraulic and air generators, and an inverter—this cumbersome arrangement is called “Amish electricity” because it produces the power they need, albeit inefficiently, without tapping into the forbidden power lines or outlets of the outside world.

• With the declining availability and outright extinction of some elements of their lives, such as buggy parts, horse plow equipment, etc., these people have made an ingenious bargain with the modern world: they can take modern equipment and “modify” it for their use, with church permission.

• Since most work takes place during the light hours, industrious use of solar energy abounds in the form of skylights. A few Amish families have been given church permission to explore the modification, refinement, and creation of solar panels to use and sell. For the most part, sweat equity, propane, kerosene, natural gas, and firewood remain their energy sources.

• Participation in local and regional business associations (Chamber of Commerce, Rotary, etc.) is looked down on, but not forbidden, if used solely as a networking vehicle. Political participation is also looked down on, except when the goal is to become familiar with and voice concerns about regulations and ordinances. Voting at national elections is permitted and voluntary. Lobbying is forbidden. Local craft guilds are the preferred way of communing, networking, and learning.

Clever ingenuity has been the by-product of a population kept small and relatively quiet by church laws and cultural taboos…ingenuity we can all benefit from. Swaying church permissions, meant to keep people and businesses “small”, have helped rather than hindered their usher into the modern world, all in the name of encouraging enterprise.

It would seem to the average reader that the Amish have it together in the modern world, even though their lifestyle harkens back to the Elizabethan Era in Europe (1600’s). We would do a lot for ourselves by taking heed of what these fine people have to offer in the way of possible solutions to our impending problems–if only we’d look back in time for innovation inspiration. What DID people do before the advent of 110-volt power, refined oil, the various social service systems, and disposable “stuff”?

Perhaps the Amish hold many answers to some of our future pressing problems, like questionable oil supplies, environmental poisoning, Social Security and Medicare deficits, skyrocketing education costs, corporate greed, and self-sufficiency in general. Perhaps we outsiders need to look to the past for our future needs…or maybe the past is slowly, cleverly building itself to accommodate bits of the future on limited terms. So much of their “restrictions” make a lot of sense, and for logical reasons (church aside).

It’s interesting how some things in their world mesh with things in our world. Problems that we have incurred in the outside world have also been incurred and “cured” inside, such as:

• Corporate greed—when the Amish sense that they have too much (money, work, overhead), they either divide the business and sell divisions, turn divisions over to relatives, or sell off the entire business. The church lets them know when they’ve grown too big for their britches, but the church smiles upon success with humility. Unbridled growth is unsustainable, and only leads to waning demand and “Been-There-Done-That” Syndrome.

• Clutter and excess—drawing a fine line between ownership and use, they tend to keep down the number of things they own and may not use every day, keeping farm clutter to a minimum (as well as liability). Merely getting to use something to get a job done, rather than keeping around “just in case they need it again” saves space, money, and headaches.

• Over-education—in today’s world, more and more people spend more and more money to garner degrees for jobs that can be performed well without those pieces of paper…and then those jobs disappear, leading to yet more and different degrees. A basic education and hands-on training are sufficient for most jobs in this country, but it won’t make the kind of money we demand from the start for those jobs. A particular thorn in this area is the advent of women returning to the workplace…many women pursue expensive degrees, only to leave the workforce a few years later to raise children. At some point, we have to ask ourselves: is the return on education investment worth it in the end, or are we spending more for that degree than we wind up making in the workforce?

• Over-work—the Amish have made this part of their lives, yet we haven’t really begun to benefit in large numbers from the flexible hours and access to family that a home-based business brings. We prefer to indenture ourselves to corporations on their terms, and merely hope for the best when it comes to leaving our kids in the daycare and public school systems. Work has become the center of our lives, rather than the home and family.

• Insufficient government funds—we are currently facing a crisis of monumental proportion when it comes to the Boomer generation, retirement, and health care in regard to unfunded retirement and Medicare needs. Our current system is a pay-as-you-go one, meaning current workers pay taxes for current retirees and Medicare recipients to collect checks and benefits from. When the number of workers dwindles and the numbers of retirees and medically needy balloons, the payroll taxes will increase to accommodate their social service needs…and your paycheck decreases as a result. By relying less on others and more on our own resources, we can ease this burden somewhat, even though the money paid into the system already will be lost forever.

• Declining natural resources—there is talk that the current global oil supply will last for another 30 years or so, that oil drillers are already having a hard time finding and getting oil out of the ground, and OPEC certainly cannot keep up with current and future demands. If this is the case, we need to find large-scale inexpensive viable alternatives now, and something other than the expensive substitutes we currently have available as options.

By modifying existing equipment, the Amish have made clever use of hydraulics and pneumatics to avoid using the one power source forbidden by the church. By employing the use of modified equipment, and working with the sun, we would save tons of generated energy from outside and personal energy from within.

• Over-globalization–Rather than making contentious trade deals and questionable ad campaigns in pursuit of the almighty dollar, and succumbing to a 24-7 world in all its different time zones, perhaps we should be thinking about going back to work with nature and providing for ourselves what we really need right here at home. Over-technology, over-ownership, and unsustainability contribute to this need for global profit reach, and we need to ask ourselves what we’ll do with it all when the power goes out.

We need to get creative again, make ample use of what we already have, and satisfy demand here at home, rather than covering the globe with things nobody wants or needs (complete with culture-targeted slick marketing). Working efficiently within daylight hours and personal constraints leaves plenty of time to attend to other priorities, like family, home, and church, and working close to home insures easy access to family—the top priority.

• Over-regulation—by recognizing that government only serves as an interfering body when it comes to daily work, spiritual and home life, the Amish seceded from the outside world into one where their church and service to God is the regulator…no vote, no committee. Since coming to America to escape religious persecution by both Catholics and Protestants, a compact has been struck with Uncle Sam: no interference, except where elements of the outside world come onto the farm or into the business (zoning, health inspections for food-related businesses, sales taxes, business sign sizing, and payroll taxes for non-Amish employees). The church takes care of the rest.

Persecuted in Europe…settled and thriving in America…the Amish have been with us since before the Declaration of Independence was signed. They will likely still be here when the rest of us burn out and move on. Who knows? They may be our only guiding force in the end for flipping the dependency switch on technology once and for all.

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Wenchypoo writes for the Wenchwisdom blog

Article has been published with permission

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Originally posted 2009-10-11 16:50:46. Republished by Blog Post Promoter

by Andrew Syrios
SwiftEconomics.com
May 25, 2009

The financial crisis has long since turned into a severe recession, having just reached its 17^th month. Unemployment reached 8.9% in May and, despite recent upticks, the stock market remains in the tank. Why did this happen? A whole host of explanations have been given, from across the political spectrum. However, by far and away the most common is the relaxed lending standards in the mortgage market, which caused a housing bubble, collapsing the financial system in upon its deregulated self. In this first part of my multi-part series on the financial crisis, I will evaluate this claim. Did deregulation cause our economy to collapse? The answer is, well kinda.

Often, when deregulation is blamed, no specifics are given. In Barack Obama’s inauguration speech he only said, “…this crisis has reminded us that without a watchful eye, the market can spin out of control.” (1) When specifics are given, the finger is usually pointed at the Gramm-Leach-Bliley Act, which overturned much of the Glass-Steagall Act of 1933. Gramm-Leach-Bliley effectively eliminated barriers between investment banks, commercial banks and insurance companies. The idea behind keeping these institutions separate was to prevent conflicts of interest when evaluating risk. The lack of these barriers is blamed for some of the rampant speculation in the housing market.

Others point to a general lack of regulation in the mortgage industry. Most banking institutions gave what were called “stated income” loans. In essence, you told the bank how much money you made, they would take your word for it without a second thought, and give you several hundred thousand dollars to buy a home with. Since shockingly, people are not always honest, this put many homeowners in loans they could not afford. This also created the dreaded NINJA loan (No Income No Job No Assets). NINJA’s are typically bad at making their payments.

A lack of regulation is also blamed for allowing adjustable rate mortgages to become commonplace, especially in the sub-prime market. These loans would start out with a teaser rate and then, after a year or two, adjust to a much higher rate. When real estate was appreciating, this was fine, the homeowner could simply refinance. Unfortunately, once real estate began to depreciate, many homeowners found themselves unable to pay the increased mortgage payments, and without enough equity to refinance.

All of this makes a pretty compelling argument; however, it’s missing some key ingredients. First of all, there is already a lot of regulation. There’s a ridiculous amount of regulation in fact. As Austrian economist, Tom Dilorenzo clarifies,

“…we have 15 cabinet departments devoted to regulating different aspects of the economy. There are over 100 federal regulatory agencies. There are 73,000 pages of regulations in the federal register. And not to mention state and local governments that have hundreds and hundreds more regulatory agencies that regulate everything from zoning to anti-trust, to everything else.” (2)

Furthermore, the housing market was not only not deregulated, it was often regulated in the opposite direction. Many government programs (such as Fannie Mae, Freddie Mac and the Community Reinvestment Act, all to be discussed further in part 2) put as much pressure as possible on lenders to increase the availability of credit. All with the goal of creating what George Bush called, “an ownership society.”

If there still was a lot of regulation, what exactly are we blaming? What does deregulation even mean? Deregulation should mean to remove all government barriers from any given industry. However, whether they know it or not, this is not what anyone is referring to when they say “deregulation.” Unfortunately, the term “deregulation” is basically useless now. Let’s look back to the Enron debacle, which was also blamed on deregulation, to see how this misunderstanding plays out. Nobel Laureate, Paul Krugman, professed that Enron’s illegal behavior in California, which lead to rolling black outs, was caused by “…an attempt to give market forces freer rein, by deregulating the market for electricity, [which] turned into a disaster. The nature of the disaster was obscured by rigid free-market prejudices.” (3) However, what was touted as deregulation was nothing of the sort. As journalist Timothy Carney explains:

“What California tried, and Enron “gamed,” was really reregulation. It was freer than the old system, but in such a way that called for more government meddling and rules. Not only did the complex rules allow Enron to get rich, it also led to the price spikes, the energy shortages, and the blackouts that Californians suffered in 2000 and 2001.” (4)

Cato Institute Scholar, Jerry Taylor elaborates further saying, “On balance, Enron was an enemy, not an ally of free markets. Enron was more interested in rigging the marketplace with rules and regulations to advantage itself at the expense of competitors and consumers than in making money the old fashioned way.” Enron took advantage of price controls and tariffs to make a mess of California’s energy market. By definition, there can be no price controls and tariffs in a deregulated market.  By Taylor’s estimation, if Enron had been unable to take advantage of the strange new regulations, as well as other government support, “…Enron would probably still be a small-time pipeline company.” (5)

And what was true with Enron was even more true with major mortgage institutions. There was no deregulation in the lending industry. Instead, there was simply reregulation. Lending standards were loosened some, but many regulations were kept and many more were added. Deregulation was not the problem, but the regulatory framework certainly bares much of the blame. Liberal economist, Dean Baker, describes the key problem about as well as anyone:

“…Certainly most of what we’re seeing today was due to, I don’t know if I would say deregulation, I would sort of like to say misregulation of the financial sector. Because, one of the stories here is that we never really deregulated the industry fully, in the sense that the government always has been very heavily involved in the financial industry. You know, for example if you go to the bank your deposit is insured by the Federal Deposit Insurance Corporation [FDIC]. And there are many other ways in which the government is involved. The biggest way in which it is involved is what we’re seeing right now; that we have the too big to fail doctrine. That when things really go badly the government steps in and doesn’t just allow the system to collapse. And we all kind of knew that. And what is really going on is the “too big to fail” is really a form of insurance. The regulation that we put on the banks so that they don’t get involved in very speculative activities is designed, in effect, to limit the cost of that insurance. (6)

Everyone knows about the massive $700 billion dollar bailout and the second bailout built upon private-public partnerships. What is important to this discussion is not that it happened, but that everyone knew it would happen before it did. The federal government has been in the bailout business for a long time. They had already bailed out Long Term Capital Management during the Asian Financial Crisis, bondholders in Mexico and the Savings and Loans in the 1980’s. The Savings and Loans crisis was very reminiscent of what we are seeing today. Lending standards were loosened while the FDIC continued to back deposits. Thus, the Savings and Loans made riskier and riskier loans with higher payoffs. But with these riskier loans came, well, more risk. Luckily for the lenders, it didn’t matter, because when everything fell apart, the government was there for them. That’s how it’s been and that’s how it still is. Profits are privatized and risk is socialized, which leads libertarian economist, Tom Woods, to agree with Dean Baker, that “…a mixture of liberalizing banks’ risk-taking ability while maintaining a government guarantee may be the worst of both worlds.” (7)

Since the market was never completely deregulated, the housing bubble was not the result of a “free market.” Instead, it was the result of a market fettered with a new set of regulations, rather than the old set. The new regulatory framework reduced the oversight of lending standards (or didn’t address new issues, like adjustable rate mortgages), while continuing to back deposits, and with a wink and nod, let the banks know if anything went wrong, Uncle Sam would be there for them. All this leads Tom Woods to conclude:

“When the moral hazard of deposit insurance is combined with the “too big to fail” mentality, which will not allow large institutions to fail, the result (a conclusion compelled by common sense and bolstered by recent research) is that banks will take on considerably more risk than they would if they were subject to market pressures.” (8)

Thus lenders felt comfortable making more and more loans, to less and less suitable customers. As demand skyrocketed, housing prices soared upward in an unprecedented way. Builders took this as a sign to massively increase housing starts, thereby increasing supply. This was obviously a house of cards, and as soon as foreclosures began to spike, it all came collapsing down, creating the recession we are currently facing.

Deregulation is not the proper word, but the regulatory framework was a major contributor to the crisis. It is, however, only one factor, and not the biggest one in my humble opinion. The misregulation theory by itself leaves a few key questions unanswered. Why was it the housing sector that was hit so hard? And why was there so much credit to push into housing in the first place? Well you’ll just have to wait until part 2 to find out.

___________________________________________________________________________

(1) Barack Obama, Inauguration Speech, January 20th, 2009, Trascript found at http://www.nytimes.com/2009/01/20/us/politics/20text-obama.html?_r=1&pagewanted=2

(2) Thomas Dilorenzo, “The Great Depression: What We Can Learn From It Today,” The Mises Circle in Colorado, April 4th, 2009, http://www.youtube.com/watch?v=0UQUMYO9zt4

(3) Paul Krugman, The Great Unraveling, Pg. 295, Norton Books, Copyright 2004

(4) Tim Carney, The Big Ripoff, Pg. 204, John Wiley and Sons Inc., Copyright 2006

(5) Jerry Taylor, Enron Was No Friend of the Free Market, Wall Street Journal, January 21st, 2002

(6) Dean Baker, Interview with Mind Over Matters, KEXP 90.3 in Seattle, Washington, TalkingStickTv, January 3rd, 2009

(7) Thomas Woods, Meltdown, Pg. 47, Regnery Publishing Inc., Copyright 2009

(8) Ibid., Pg. 46

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Andrew Syrios writes for SwiftEconomics.com

This is Part 1 of his two part series addressing the effect of regulation/de-regulation on the state of the current economy. While these articles were originally published in May and June, their relevance continues to be strong today.

Look for Part 2 of this series, addressing issues with Fannie Mae and the Federal Reserve to appear here in the coming week

Articles have been published with the author’s permission.

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Originally posted 2009-07-26 19:18:49. Republished by Blog Post Promoter

by Scott Spiegel
ScottSpiegel.com

Five months after the stimulus bill was passed, we can now say that we’ve witnessed the following under-stimulating results.

Payrolls are falling more than forecast, with employers having cut 467,000 jobs in June, following a 322,000-job decline in May. Factory jobs fell by 136,000 after dropping 156,000 in May.

Unemployment is at 9.5%, the highest level in 15 years, and is projected to exceed 10% by the end of 2009.  Some economists expect it to remain at historically high levels for years.

The average workweek is at 33 hours, the lowest in 45 years.

Average weekly earnings are down to $611.

The national debt is $11.5 trillion.  The Congressional Budget Office projects the deficit for 2009 to be almost $2 trillion and for 2010 to be more than $1.4 trillion.

The Treasury is increasing its sale of debt to pay for spending.  Treasury offered $1 trillion in notes and bonds in the first half of 2009 and plans to offer another $1 trillion by the end of 2009.

Colin Powell, of all people, is alarmed that Obama’s spending orgy may be swelling government and the national debt: “I’m concerned at the number of programs that are being presented, the bills associated with these programs and the additional government that will be needed to execute them…  [We have] a huge, huge national debt that, if we don’t pay for [it] in our lifetime, our kids and grandkids and great-grandchildren will have to pay for…”  Now he tells us!

Jared Bernstein, chief economic advisor to Joe Biden, whose office is managing the stimulus, says, “It’s working, it’s demonstrably working.”  According to Bernstein, $200 billion in stimulus money has already been obligated or spent.  Case closed!

Note to Bernstein: In order to demonstrate causality, you have to show that: (1) there was a cause, (2) there was an effect, and (3) the cause influenced the effect.  Defenders of the stimulus bill are still stuck on #1: as of June, only 10% of all stimulus funds had been distributed.  Bernstein’s $200 billion “obligated or spent” figure—eerily reminiscent of the administration’s “jobs saved or created” trope—is untrustworthy, because the administration has already been caught lying about money committed to spending projects.

Given the miserable failure of the stimulus bill, naturally Congressional Democrats want… another stimulus bill!  According to House Majority Leader Steny Hoyer, “We need to be open to… further action.”  Democratic Senator Sheldon Whitehouse said that another stimulus would “probably take place towards the end of the year.”  Second-ranking Senate Democrat Dick Durbin said he would leave any decisions on passing another stimulus bill to “the president’s evaluation”—and we all know how cautious Barack “Fiscal Restraint” Obama will be.  Stan Collender, former Congressional budget analyst, said that another stimulus bill may be possible if the economy gets worse: “Right now it doesn’t seem to be justified…  Come September, it might be.”

The first stimulus package was “a bit too small,” according to Laura Tyson, member of Obama’s Economic Recovery Advisory Board.  Paul Krugman writes in the New York Times, “O.K., Thursday’s jobs report settles it.  We’re going to need a bigger stimulus.”  Biden advisor Bernstein says, “There is no conceivable stimulus package on the face of this earth that would fully offset the deepest recession since the Great Depression.”

Let’s see: the stimulus bill committed a record $787 billion in spending.  Tyson says it should have been “a bit” bigger.  Congressional Democrats and Krugman wanted it much bigger.  Bernstein admits it would have to be infinitely big to work.  Can we give Bernstein the award for inadvertent honesty on this one?

The clincher that the stimulus bill was an abject failure—and that another stimulus bill would be a repeat failure—is the fact that Wall Street has just hit a 10-week low after talk of a second stimulus package recently began.  Amateur analysts suggest that chatter about another stimulus bill is making investors nervous, because—get this—it shows that the economy might not be recovering.  According to Hugh Johnson of Johnson Illington Advisors, “When there’s talk about another stimulus plan, that adds fuel to that fire, it intensifies the concerns about the timing and strength of the recovery.”

Is it possible, just possible, that investors are nervous, not because Congress’ hinting at a second stimulus package implies the economy is not recovering—which I think they can figure out on their own—but because Congress is hinting at a second stimulus package?

If Democrats aren’t persuaded by Republicans’ argument, backed up by ample historical data, that spending vast quantities of wealth not yet created does not stimulate the economy in the long term, could they at least admit their little experiment failed and try the Republican option for a change?

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Scott Spiegel is the editor of ScottSpiegel.com

Article has been published with permission

Originally posted 2009-09-15 21:12:40. Republished by Blog Post Promoter

by Margaret Goodwin
Government is Not Your Daddy
September 14, 2009

The United States rose up from a handful of rebellious colonies to become the richest and most powerful nation in the world. Why? Because we led the world in production. For 200 years, America delivered the goods.

But, in the 1970’s, all that suddenly changed. For the first time in history, the U.S. started having trade deficits. That means our net consumption exceeded our net production. And, every single year since 1975, our nation has consistently consumed more than it produced. It doesn’t take a rocket scientist to know that’s not sustainable.

The depressing truth is America is no longer a world leader in production. We are trailing the pack. We are now a debtor nation, and our biggest creditor is China. — What the hell happened? And how will we ever recover? And, the more disturbing question is, what will happen to America if we don’t?

If we ever want to restore America to its proper place in the world, the first thing we need to understand is why we no longer have a productive economy. It’s pretty simple, really. — Because we no longer produce. Why not? – If we take a good hard look at the nature of production, maybe we can figure that out. The three key elements of production are capital, labor, and raw materials.

First, you need capital for research and development. To develop a new product that meets a real need in the marketplace takes a lot of research. It may take many years to develop. Research and development is extremely expensive, and there’s no guarantee of success. There has to be an enormous potential return on investment to justify that kind of risk.

That kind of return on investment is what our current administration refers to as “excessive profits.” And they have this notion that “excessive profits” should be punitively taxed. When government puts a lid on the potential for return on investment, what happens? The investors take their capital and invest it someplace else, — someplace that welcomes production, and wants to build up their economy and provide employment for their population. (Unlike the United States, it would seem.)

The second thing you need for production is raw materials. No matter what you want to produce, you need some combination of raw materials to produce it, whether wood, paper, metal, glass, fiber, or petroleum products. All raw materials come from the earth; they don’t come out of the air, or some genius’ imagination, or the printing presses at the Federal Reserve. They all come out of the ground, either through timber, mining, or agriculture.

Here, in Southern Oregon, we live in one of the richest areas in the country, in terms of natural resources. We’re rich in timber. We’re rich in minerals. But, if this part of the country is so rich, why is it so poor? Why is unemployment so high? Because we’re not allowed to use the natural resources with which we’re abundantly blessed. Overregulation, and the endless environmental litigation it has spawned, has all but curtailed the timber and mining industries, — the very industries that provide raw materials for every sort of production on which our economy relies. And the overregulation doesn’t stop there. It’s hobbling the manufacturing industries, too.

The third thing required for production is labor. We’ve actually got a surplus of that. Look at our unemployment numbers, nationwide. Private sector jobs are steadily declining because our industries are stymied by excessive regulation and punitive taxation. So how does our government address that issue? It tries to replace the jobs lost due to declining production by creating new jobs in the public sector.

The trouble is those jobs do nothing to restore our national productivity. Public sector jobs and service jobs don’t create any new wealth. They just swirl money around in the economy. And, as that money swirls around, more and more of it leaks out to other countries, as we buy foreign-made products because we can’t or don’t produce enough at home.

As the real wealth leaks out of our economy, the Fed prints up more and more new money, which only dilutes the value of the money we already have in circulation, leading to higher and higher inflation. As long as we consume more than we produce, there is no way to add real value back into our economy, and our currency will continue to lose whatever value it has. We must restore production to have a sustainable economy.

This country was founded on the sacred principles of liberty and freedom. Not just individual freedom, but economic freedom. America became a world leader because America delivered the goods. That’s what it’s all about. That’s what it’s always been about. We have to stay solvent to preserve our liberty. If our economy fails, we’ll lose our freedom. Stifling production smothers the economy. And that’s what our government is doing.

Contact your Congressmen and Senators and tell them we want our economy back. Government can’t solve the problem. Government is the problem. Give us back our economy, and get government out of the way!

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Margaret Goodwin writes for the Government is Not Your Daddy blog.

Article published with the author’s permission.

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Originally posted 2009-07-28 17:17:53. Republished by Blog Post Promoter

by Rick Sincere
RickSincereThoughts
July 16, 2009

As part of the gargantuan (1,000-page-plus) health care “reform” package introduced by members of the Democratic majority in Congress, the Obama administration proposes to raise taxes through a “surtax” on Americans who earn the most money.

The Washington Post explained this “soak the rich” policy in a front-page article on July 15:

The surtax would start at 1 percent and rise to 5.4 percent on income exceeding $1 million. Combined with the expiration next year of tax cuts enacted during the Bush administration, the surtax would drive the top federal tax rate to 45 percent, the highest level since lawmakers rewrote the tax code in 1986.

The Washington Times, for its part, points out that this raises U.S. marginal tax rates to their highest levels since the 1980s:

A new surtax of 5.4 percent in the health care bill, which would apply to married couples’ income above $1 million, would bring the top federal income tax rate to 45 percent.

After consideration of state and local income taxes and the Medicare payroll tax, which applies to all wage and salary income, taxpayers in 39 states would face a top marginal income tax rate of more than 50 percent, according to a study by the Tax Foundation, a nonprofit tax research group based in the District.

“That means government would be taking more than half of every additional dollar from high-income taxpayers,” said Tax Foundation President Scott Hodge. “The lowest tax rate would be 47 percent – and that’s in the nine states that don’t tax wages.”

Businesses say the surtax would hurt the economy.

“The intention of this plan is to tax high-income households, but the real victims would be America’s small-business owners,” said Thomas Donohue, president of the U.S. Chamber of Commerce. “Placing a big tax burden on the small-business community would rob them of the resources they need to create the jobs that will lead us out of the recession.”

President Obama would be wise to look to history to see what happened the last time a president made a surtax the centerpiece of his economic program. (Some might object that this is a “health care” program. That’s true, up to a point. The fact that the bill has been referred to the Finance Committee in the House suggests that this is really a revenue bill.)

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In Yanek Mieczkowski’s 2005 book, Gerald Ford and the Challenges of the 1970s, the Dowling College historian relates what happened when Ford proposed a 5 percent surtax on all incomes above $15,000 (more than it sounds like; remember, these were 1974 dollars) in his first major economic legislative package:

As what he termed “the acid test of our joint determination to whip inflation in America,” Ford pronounced the cornerstone of his new economic program, a one-year, 5 percent surcharge on corporate and personal incomes. The surtax was directed at individuals with yearly earnings of $15,000 or more for married taxpayers and $7,500 for the unmarried. (Taxpayers would have to figure out what they normally owed the government, then add the 5 percent surtax to it.) The advantages of the surtax were that it would be mildly progressive, since the rich would pay more, and temporary, lasting only the calendar year 1975. Nor was it onerous. For example, a single person earning $15,000 would pay a federal income tax of $2,549; the surcharge would add $78. (p. 121)

Despite its modest appearance, Ford’s proposal was met with strong opposition, especially from the Democrats who held a majority in Congress (a majority that would grow substantially after the midterm elections a few weeks after his proposal was announced). Republicans were not too fond of it, either.

Ford took a political risk by proposing a surtax less than a month before congressional elections. Unveiling a tax increase at such a time was like unleashing a skunk at a picnic; representatives and senators ran in the opposite direction, refusing to embrace or even come close to it. Officeholders facing difficult reelection battles, such as GOP senators Bob Dole of Kansas and Marlow Cook of Kentucky, deserted their president rather than support the proposal….

The program itself was a political bomb. The jumble of proposals gave the whole thing an eclectic feel, and the centerpiece — a tax increase — fell flat. One poll showed that Americans opposed the surtax, 58 to 34 percent. Members of Congress resisted it. Just two days after the speech, William Baroody warned Ford that it was “in serious trouble on the Hill and very unpopular politically” and that Congress was in no mood to reduce spending. Two weeks before the election [William] Seidman publicly acknowledged that the surtax faced an uphill struggle on Capitol Hill and called its prospects “uncertain.” The overwhelming Republican repudiation in the ensuing elections turned “uncertain” to “doomed.” Ford’s policy making was off to a rocky start. (p. 124; footnotes omitted)

In one of the more significant parenthetical partial paragraphs of any work of recent history, however, Mieczkowski writes:

(One economist’s skepticism about the surtax generated what later became a mainstay of Ronald Reagan’s “supply-side” economics. Arthur Laffer doubted that the 5 percent surtax would generate much revenue, and while dining at a restaurant with Ford administration members Don Rumsfeld and Dick Cheney, he drew a graph on a napkin to illustrate his belief that tax cuts — rather than increases — would raise more revenue because of increased business activity. His illustration became known as the “Laffer Curve.”) (p. 122)

Apparently other economists caught on, even if they hadn’t seen the napkin. Yanek Mieczkowski writes on page 130:

By November, many economists, realizing that Ford had miscalculated, urged him to drop the surtax proposal and switch his focus to fighting the recession. The president stuck by the surtax and still urged budget cuts.

In the end, the surtax proposal crashed and burned. Mieczkowski notes on page 131:

A political science axiom says that “the president proposes, Congress disposes.” Congress certainly disposed of Ford’s surtax, and quickly. Although he developed a fiscally balanced program incorporating many recommendations from the economic summit conferences, it was also like a multipronged barb that Congress could not swallow. And it soon became incongruous. The deteriorating economy, coupled with the inherent unpopularity of a tax increase, doomed Ford’s first major economic initiative. But that failure was fortunate; as events played out, a surtax would have aggravated the downturn. (emphasis added)

History teaches us, and not just in this example from the mid-1970s, that raising taxes during a recession is a bad idea.

Barack Obama and congressional Democrats have not absorbed this lesson of history and economics. Should they succeed in raising taxes to finance their ambitious program to socialize medicine, they — or, rather, we — will live to regret it.

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Rick Sincere is the editor of RickSincereThoughts

Article has been published with permission