STUCK IN THE MUD

Christopher MarkowskiArticle, Research & The Economy0 Comments

stuck

APRIL 2014

“Reaganomics means you start a business in your garage; Obamanomics means you move into your parents garage.”

Senator Ted Cruz

I did an interview post election back in November 2008 and was asked what I thought Americans could expect as far economic growth under President-Elect Barrack Obama.  The metaphor I used to describe what I knew was coming our way was of Vinny Gambini’s 1960’s convertible Cadillac being stuck in the Alabama red mud from the film My Cousin Vinny.  The tires would spin and spin but the car was going nowhere.  Obamanomics has been all about spending and regulating, both of which have proven futile in getting our economy out of the mud.

The stimulus package added almost one trillion dollars to our nation’s national debt.  Obamacare has had a paralyzing effect on job creation.  Dodd-Frank has helped destroy small community banks and has made the too-big-to-fail institutions more powerful then ever.  Making Homes Affordable and Cash for Clunkers have proven to be an enormous waste of taxpayer funds.  The Green Jobs initiatives taken on by this administration has been an enormous ruse perpetrated on the American taxpayer.  The effect of these programs and the Keynesian policies of the current Administration are not only harming our current prospects, but if we do not change course it could be very damaging in the not so very long run.

Simon Black from Sovereign Man writes…

By the 19th century, the Ottoman Empire had become a has-been power whose glory days as the world’s superpower were well behind them.  They were supplanted by the French, the British, and the Russian empires in all matters of economic, military, and diplomatic strength.  Much of this was due to the Ottoman Empire’s massive debt burden.  In 1868, the Ottoman government spent 17% of its entire tax revenue just to pay interest on the debt.  And they were well past the point of no return where they had to borrow money just to pay interest on the money already borrowed.  The increased debt meant the interest payments also increased.  And three years later in 1871 the government was spending 32% of its tax revenue just to pay interest.  By 1877, the Ottoman government was spending 52% of its tax revenue just to pay interest.  They defaulted that year. 

Total United States interest payments in fiscal year 2013 were $415 billion, which is 17% total tax revenue.  The same place the Ottoman’s were in 1868.  It is not getting better…The latest budget produced by the administration according to the Congressional Budget Office will produce deficits of $6.6 trillion over the next ten years.  The CBO report states that federal debt will soar from $17.7 trillion to $27 trillion over the next ten years.  The CBO states, “Such high and rising debt would have serious negative consequences.  Federal spending on interest payments would increase considerably when interests rates rose to more typical levels.  Moreover, because federal borrowing would eventually raise the cost of investment by businesses and other entities, the capital stock would be smaller, and productivity and wages lower.” 

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Where will the revenues come from to pay for our profligate ways? 

Tax the rich? 

Go after the evil one percent?

We are already doing that! 

The latest increases in taxes that took effect at the start of 2013 have included a bump in the top ordinary income rate to 39.6%, limits on itemized deductions, an increase on the top rate on investment income.  The health care law contains some 20 new increases including another hit to investment income.  The result is that overall tax receipts from the top 1% of earners rose 1.3 percentage points to 29.3 of all federal tax revenue.  The increase in the individual income tax burden that is placed upon the top 20% of earners has gone to more than 90% according to the CBO.

Tax Freedom Day, the day when the nation as a whole has collectively made enough money to pay its total tax burden for the year falls three days later in 2014 on April 24th.  On April 21st according to the Tax Foundation, Americans will have made enough to pay the $3 trillion plus in federal taxes and $1.5 trillion in state taxes.  We spend more money on taxes as a nation then we do on food, clothing, and housing combined!  On a side note:  The Obama administration has proposed an additional 442 other tax hikes that have yet to be passed.

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Do you want to know of an industry that is really booming?

The regulation business!  Washington D.C. regulators are killing it.  They set a new record in 2013 by issuing final rules consuming 26,417 pages in the Federal Register.  These unelected lawmakers created 3,659 “final” rules, which mean they now must be obeyed, and 2,594 proposed rules on their way to becoming orders.  I remember watching as a kid a Schoolhouse Rock cartoon infomercial that aired Saturday mornings that showed the plight of a bill working its way through Congress.  The jingle went like this…

I’m just a bill

Yes, I’m only a bill

And I’m sitting here on Capitol Hill

Well, it’s a long, long journey

To the capital city

It’s a long, long wait

While I’m sitting in committee

But I know I’ll be a law someday

At least I hope and pray that I will

But today I am still just a bill

Regulators do not go through the grueling but necessary legislative process.  They operate like mini-dictators.  Unfortunately for us their countless decrees add up.  Wayne Crews from the Competitive Enterprise Institute estimates that the overall cost of regulatory compliance and its economic impact is $1.9 trillion annually.  Compliance with all of these regulations costs roughly the annual GDP of Australia, Canada or Italy.  Crews states that not only does it make it that much tougher on businesses to compete, but costs every American household to the tune of $14,974 in hidden regulatory costs that are embedded in the products we buy.

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Mona Lisa Vito while being cross-examined by Vinny Gambini explains why the two boys could not have killed anyone at the Sack of Suds.

Mona Lisa Vito: The car that made these two, equal-length tire marks had positraction. You can’t make those marks without positraction, which was not available on the ’64 Buick Skylark!

Vinny Gambini: And why not? What is positraction?

Mona Lisa Vito: It’s a limited slip differential, which distributes power equally to both the right and left tires. The ’64 Skylark had a regular differential, which, anyone who’s been stuck in the mud in Alabama knows, you step on the gas, one tire spins, the other tire does nothing.

President Ronald Reagan explained back in 1981 why our economy was stuck in the mud and how we could free it…

“Our Government, has no power except that granted it by the people. It is time to check and reverse the growth of government which shows signs of having grown beyond the consent of the governed.” The old Constitution, with its restraints and emphasis on limited government, allows individual freedom to work for the common good. “In this present crisis, government is not the solution to our problem; government is the problem.”

President Ronald Reagan

Inaugural Address January 20, 1981

Note:  Reagan did not deliver his message with a heavy Brooklyn accent.

 

Editors Regulator Without Peer Wall Street Journal 4/16/14

Editors Obama Has Proposed 442 Tax Hikes Since Taking Office Americans for Tax Reform 4/15/14

May Caroline Tax Freedom Day Falls Three Days Later This Year Daily Caller 4/7/14

McKinnon John Top Earners Feel The Bite Of Tax Increases Wall Street Journal 4/13/14

Editors CBO On Obama Budget: Higher Deficits Than Claimed Breitbart 4/14/14

Durden Tyler The U.S. Is Now Spending 26% Of Available Tax Revenue To Pay Interest Zero Hedge 3/25/14

 

 

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