Thursday, November 15, 2012

Media Spin, Taxes, a Cliff, & The Shrugging Titan



Several Mainstream Media outlets, such as Rachel Maddow, as well as their lap-dog liberal supporters in the new media, such as the Huffington Post, claimed that the CBO's report on raising Capital Gains Taxes, Income taxes on the more affluent, and other socialist/progressive fiscal measures would not harm our economic prosperity. If they had actually read the report and understood basic 100-level economics, it would be obvious that they are either incompetent or lying.

The CBO's report on raising CGT, overall, and income taxes on the "top 1%" (any household that earns an annual income over $250k) paints a rather dim picture. The bottom line is a projected drop of GDP by approximately 1.3%. The latest GDP numbers showed the GDP at 0.5%. A drop of 1.3% would mean a GDP of -0.8%. Given the increases in labor costs due to the PPACA, increased regulatory fees, and decreased production leading to lower profits, it is highly likely that real GDP could be in the negatives.

The report also states that the higher taxes will not generate enough revenue to even make a dent in the deficit. In fact, the raised rates will not garner an increase in revenue anywhere near the projected increases in spending.


That may appear a lot better than many countries within the so-called "Eurozone" who reported negative GDPs recently.

The report also did not take into account the recent market declines that started after the report was prepared. Less capital is already being invested. The CBO anticipated a decrease in capital investment of 2.4% after the tax rates increase. They did not see the drop starting so early.

Second and third order effects will lead to an even greater decrease. The CBO report did not address the fact that your middle-income-bracket wage-earners will now have lower propensities to save and invest. Those who believe that your average middle-income earner doesn't invest is somebody who has no idea what an IRA is or a 401K account is. They will have lower disposable incomes, therefore less that they can invest. The maintained low prime rate that was meant to reinvigorate the housing market leave low interest paid to savings accounts. So, the marginal propensity to save is also decreased.

Banks use the money in those accounts to provide loans and investments that generate capital. With less saved in their institutions, there will be less available to loan or invest.

The report states that average household incomes for the middle-income bracket will drop even further than it has over the past 4 years. It predicts an increase of unemployment of up to 0.5% more unemployed, with an even lower workforce participation rate. The Marginal Effective Tax Rate on middle income earners will increase under the additional 21 taxes that the PPACA will impose. Add that to the decreased wages, and Americans will see their disposable incomes dwindle to scraps as their standards of living decline.

Due to the PPACA, many businesses are shrinking their labor forces and reducing productivity. Some are reducing their workforces to under 50 employees. Others are reorganizing the positions to part-time positions working less than 25 hours a week. 

That is not prosperity.

That is the opposite of the American Dream.

What this means is that the raised tax rates will generate lower revenue, decrease productivity, and increase deficit spending. The only way to avoid deficit spending is to actually cut spending. That does not mean you will increase spending less. It means decreasing spending all together. It means wasting money on fewer subsidies. It means spending money only in accordance with what the Constitution intends -- national defense and defraying operating costs.

The way it's going, when the lazy come to beg for their daily fish, there won't be any. Not only will the fisherman not have one to give, he won't have one for himself. In fact, he'll owe fish to people who won't loan him bait or a hook until he pays what he is unable. That means three people are starving.
Tootles & Thanks For The Flounder

That is allowing the left to pilfer and waste the "blessings of liberty" for "ourselves and our posterity" that the US Constitution was implemented to secure. That means that Obama and congress are failing to do their job. Worse, they are doing the exact opposite of  their jobs. Their jobs are not to pilfer those blessings, but to make sure that nobody pilfers them, especially the government.

As some in government look to step on the brakes in order to slow our "progress" to that so-called fiscal cliff, others seek to grab the emergency brake. The socialists that cling to Keynesian economics and ignore the Laffer Curve look to cut the cable to the e-brake, while also attempting to step on a pedal. They think the gas pedal is the brake. It isn't, despite the left-wing lap-dog media's having labeled it as such. Changing a sign does not change the fact that the brake is the pedal on the left... and it is the left that must be stomped on hard! Stomping hard on the right one will just accelerate us towards that cliff even more.

As we head there, the center of gravity shifts and a titan struggles to maintain his grip on the unbalanced, cumbersome world. His trapezoids are cramping. His deltoids spasm. Atlas must either shrug or drop this fragile ball.