Recently in Capitalism Category

Drew Carey and The Reason Foundation decided to look for ways to save Cleveland from its aggressively stupid political leaders and their refusal to heed the first rule of holes. The result is a video series called "Reason Saves Cleveland":

Keep checking back as new episodes premiere, because I'll add them to this playlist.

3/18 Update: Right on cue, Tim Russo (a standard-bearer for typical Cleveland progressives) posts a spittle-flecked screed that misses the points of the Reason video ... and indelibly beclowns its author. Statist hacks like Russo simply cannot admit (or even comprehend) that punitive taxation and suffocating bureaucracy are responsible for Cleveland's sorry decline.

Here I sit, trying to watch the premiere of "The Pacific" on HBO, and the signal from Time Warner Cable is hitching, pausing, and pixelated. I signed up for HBO on Thursday just for this. I've been calling customer support all day to demand assistance. The response?

Gee, sorry, our computers are down. Try rebooting your box. Besides, we're working on the "outage" and things should be fine by tomorrow.

Fail. This is what monopolies get you.

11:55 PM Update: This is almost exactly what it looks like. I'll try to record my own video soon.

They been goin' back 'n forth for a century ...

Set the markets free, yo.

Hat tip: Veronique de Rugy

Bravo to Zach Lahn, for having bigger balls than 99% of the media! I hope this young man's ready for the Joe The Plumber treatment, courtesy of ACORN and SEIU.

President Obama spent the majority of his "answer" restating the question, then talked about "opposing" the exact kind of public option that's in the House bill. ABC transcribed some of it:

"Certainly they can't compete if the taxpayer is standing behind the public option just shoveling more and more money at it," Obama said. "That's certainly not fair. And so I've already said I would not be in favor of a public option of that sort, because that would just mean more expenses out of our pockets and we wouldn't be seeing much improvement in quality."

...

"I think there are ways that we can address those competitive issues," he said. "And you're absolutely right, if they're not entirely addressed, then that raises a set of legitimate problems. But the only point I wanted to make was the notion that somehow just by having a public option you have the entire private marketplace destroyed is just not borne out by the facts."

Read the whole thing; ABC interviewed Zach afterward, and he kept the pressure on the president for regurgitating nothing but vague talking points. Ten bucks says Rush Limbaugh, Sean Hannity, and Glenn Beck are all over this within a week. Oh ... notice that Obama didn't accept Zach's challenge, either (wuss).

More coverage:
Politico

Stephen Glover admits that the truth hurts:

In treating almost every cancer, America apparently does better than Britain, sometimes appreciably so. According to a study in Lancet Oncology last year, 91.9 per cent of American men with prostate cancer were still alive after five years, compared with only 51.1per cent in Britain.

The same publication suggests that 90.1 per cent of women in the U.S. diagnosed with breast cancer between 2000 and 2002 survived for at least five years, as against 77.8 per cent in Britain.

So it goes on. Overall the outcome for cancer patients is better in America than in this country. So, too, it is for victims of heart attacks, though the difference is less marked.

If you are suspicious of comparative statistics, consult any American who has encountered the NHS. Often they cannot believe what has happened to them - the squalor, and looming threat of MRSA; the long waiting lists, and especially the official target that patients in 'accident and emergency' should be expected to wait for no more than four - four! - hours; the sense exuded by some medical staff that they are doing you a favour by taking down your personal details.

Most Americans, let's face it, are used to much higher standards of healthcare than we enjoy, even after the doubling of the NHS budget under New Labour. Of course, the U.S. is a somewhat richer country, but I doubt its superior health service can be mainly attributed to this advantage.

In other news: jumping into water leads to wetness, rocks fall downward, and there's no way to pick up a turd by the "clean end."

Do people treat rental cars better than their own cars? Is the office fridge cleaner than your home fridge? Does a public park have less litter than your back yard? Is a government housing project maintained as well as a privately owned apartment building?

The answer in each case is obviously "no", but have you ever wondered why?

If this unethical tactic for pushing an immoral policy doesn't justify a full-throated attack, what does? Via Drudge:

On the night of June 24, the media and government become one, when ABC turns its programming over to President Obama and White House officials to push government run health care -- a move that has ignited an ethical firestorm!

Highlights on the agenda:

ABCNEWS anchor Charlie Gibson will deliver WORLD NEWS from the Blue Room of the White House.

The network plans a primetime special -- 'Prescription for America' -- originating from the East Room, exclude opposing voices on the debate.

Hey, Ohio Republican Party bigwigs! What in the world are you waiting for? Blast this! Get aggressive. This is a no-brainer in at least two ways. 1) Americans don't want socialized medicine. 2) Americans hate biased media outlets that claim to be unbiased.

Couple that with cratering support for Obama's policies and you guys have a perfect opportunity to contrast the statist path of the Democrats with the traditional GOP values of rugged individualism, independence, and capitalism. Yes, Obama's popular. So what? Attack his policies and his plans, not him.

Stop worrying about being treated badly by the media. You lost that war in the 1960s. They'll never like you. Use it to your advantage. Say things that they can't afford to ignore, things that they'll have to cover. Call ABC "a wholly owned subsidiary of ACORN and the Democratic Party." Draw comparisons to Joseph Goebbels' "Big Lie" strategy. Remind people of what Pravda used to publish. The media and the statists on the Left have just exposed their weakest point of vulnerability to you. Hit it with a sledgehemmer!

Learn from Sun Tzu:

You may advance and be absolutely irresistible, if you make for the enemy's weak points; you may retire and be safe from pursuit if your movements are more rapid than those of the enemy.

...

Military tactics are like unto water; for water in its natural course runs away from high places and hastens downwards.

So in war, the way is to avoid what is strong and to strike at what is weak.

Get off your asses and attack!

Can you name one industry that runs more efficiently after it's been taken over by the government?

Uplifting "Hope & Change" shirts and sweats like these ...

... can be bought here.

Milton Friedman responds to Phil Donohue's well-meaning ignorance:

Are you listening, Barack?

Earlier today a rumor surfaced on Politico.com about House Republican leadership encouraging the Republican members of the House to vote against Barack Obama's monster wasteful pork stimulus bill. I have confirmation from a DC source that this is no mere rumor. Rep. John Boehner and Rep. Eric Cantor urged their caucus to oppose the stimulus-a-palooza when it comes to the floor tomorrow.

Cantor led a working group that came up with a "House Republican Economic Recovery Plan", which they released on Friday in one-page summary form. I received an e-mailed copy of a two-page version of the plan.

An unknown wit once said: "A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury." When it comes to voting ourselves goodies from the treasury, we Americans stand near the point of no return.

I've addressed this lopsided situation before in a post on war funding, but this is a much more general discussion.

The federal government levies taxes on some of us, and it sends handouts to some of us. Some Americans pay more in taxes than they receive in handouts. I'll call them "givers." Others receive more in handouts than they pay in taxes. I'll call them "takers."

The Tax Foundation studied taxes and handouts from 1994-2004 (see the FAQ), and came to some startling conclusions. Below you'll see a diagram of their 2004 breakdown of dollars received in handouts per dollar taken in taxes. Pay special attention to the blue bars (the total handouts per dollar of taxes). Look at the bottom 3/5ths of our population. Those groups get more in handouts than they pay in taxes; they're the takers. The top 2/5ths are paying more in taxes than they get in handouts; they're the givers.

Since the American form of government (thankfully a representative republic, not a democracy) responds fairly quickly to the will of American voters, we have the ability to force our elected representatives to give us tax dollars as handouts. If our representatives refuse our demands for goodies, a majority of us can replace them with more pliable politicians.

So what happens when the takers outnumber the givers at the polls on Election Day? We hit the "tax tipping point." Since everyone gets one vote (unless ACORN is involved) regardless of their tax-to-handout ratio, the takers force the government to soak the givers. Eventually, the givers get tired of being punished for their success. The result is predictable:

Calculating how far society's top earners can be pushed before they stop (or cut back on) producing is difficult. But the incentives are easy to see. Voters who benefit from government programs will push for higher tax rates on higher earners -- at least until those who power the economy and create jobs and wealth stop working, stop investing, or move out of the country.

...

The sequence is always the same. High-tax, big-spending policies force the economy to lose momentum. Then growth in government spending outstrips revenues. Fiscal and trade deficits soar. Public debt, excessive taxation and unemployment follow. The central bank tries to solve the problem by printing money. International competitiveness is lost and the currency depreciates. The system stagnates. And then a frightened electorate returns conservatives to power.

Barack Obama claims he'll give a "tax cut" to 95% of Americans (for the sake of argument, let's ignore the impossibility of doing that while also paying for his massive expansion in government spending). His magic "tax cut" for those who pay no income taxes is really a tax credit. That's a handout to the takers, funded by higher taxes on the givers. The chart above will get more lopsided, with the blue bars on the right shrinking and the blue bars on the left growing.

America cannot keep confiscating more and more money from the givers and sending it to the takers. There's no such thing as a free lunch. If you're one of the givers creating jobs and capital, you'll only tolerate punishment for so long before you take rational steps to reduce your vulnerability. You'll start shifting your capital away from productive uses and into tax shelters dictated by loopholes in the law. You'll cut costs by hiring fewer employees or getting rid of current employees. You might even decide to escape the punishment of the takers by closing down your business or moving it overseas to a country with friendlier tax policies.

Now multiply this scenario to include all of America's private sector, and you'll start to understand the inevitable result of a tax-and-spend policy like Barack Obama's. He believes he can tax and spend his way to prosperity, but he can't (or won't) see that he'll push our economy over the tax tipping point and into either a severe recession or an actual depression. Our current economic downturn is already worsening as Obama's victory grows more probable, and one hundred top economists recently warned of the impending disaster of Obamanomics.

Barack Obama is more than Jimmy Carter on steroids. He's about to repeat Herbert Hoover's tragically foolish response to an economic downturn. If Obama wins this election, he will drive us into a Second Great Depression.

You've no doubt heard the well-known story of the first Thanksgiving in Plymouth, Massachusetts. But did you know that what you've heard is drastically inaccurate?

According to the writings of William Bradford, the colony's first governor, the hardships and near-starvation of the entire population occurred because the colonists turned their backs on capitalism. They believed the old lie that an economy based on the concept of "from each according to his abilities, to each according to his needs" can actually work. They instituted a socialist system, and found out that socialism causes disaster:

The harvest of 1623 was different. Suddenly, "instead of famine now God gave them plenty," Bradford wrote, "and the face of things was changed, to the rejoicing of the hearts of many, for which they blessed God." Thereafter, he wrote, "any general want or famine hath not been amongst them since to this day." In fact, in 1624, so much food was produced that the colonists were able to begin exporting corn.

What happened?

After the poor harvest of 1622, writes Bradford, "they began to think how they might raise as much corn as they could, and obtain a better crop." They began to question their form of economic organization.

This had required that "all profits & benefits that are got by trade, working, fishing, or any other means" were to be placed in the common stock of the colony, and that, "all such persons as are of this colony, are to have their meat, drink, apparel, and all provisions out of the common stock." A person was to put into the common stock all he could, and take out only what he needed.

This "from each according to his ability, to each according to his need" was an early form of socialism, and it is why the Pilgrims were starving. Bradford writes that "young men that are most able and fit for labor and service" complained about being forced to "spend their time and strength to work for other men's wives and children." Also, "the strong, or man of parts, had no more in division of victuals and clothes, than he that was weak." So the young and strong refused to work and the total amount of food produced was never adequate.

To rectify this situation, in 1623 Bradford abolished socialism. He gave each household a parcel of land and told them they could keep what they produced, or trade it away as they saw fit. In other words, he replaced socialism with a free market, and that was the end of famines.

For more on the lessons the pilgrims learned, see this piece by Rick Williams, Jr.

Facts are funny things:

In one of the broadest and most authoritative studies to date, the Commodity Futures Trading Commission has offered hard statistical data that financial trading hasn't been driving price moves. The CFTC conducted an unprecedented Wall Street data sweep and scrutinized millions of transactions worth billions of dollars between January and June of this year.

Lo and behold, the CFTC found that index traders and swap dealers actually reduced their stake in crude oil futures as prices spiked. The number of contracts held by these investors betting that prices would increase -- the net long position -- fell by 11%, and more were shorting oil than going long over the six-month period. In other words, index traders and swap dealers were driving the future price of oil down.

Supply and demand, folks. Geez, we need competent economics education in this country.

Is it just me, or are the Congress and the President doing the usual two-step "we must be seen to be doing something about a recession because it is an election year" dance when it comes to "stimulus?" Think about it. As proposed, what would the stimulus really accomplish? We give individuals $600.00 ($1,200.00 to families or couples) to spend as they wish. It will cost approximately $150 Billion dollars. WHY?!?!? From what I have read, people are usually going to do one of two things with their checks, either pay off their credit cards (no new jobs) or go to Wal-Mart and spend it (most of the money going to China). If we are determined to put ourselves in debt that much more (and I personally don't think we should) why don't we address it differently?

If you want to truly stimulate the economy, do something that will help people long-term. This country is beginning to have major infrastructure problems. Why not propose it as a comprehensive Infrastructure Refurbishment Bill instead. Think of how many construction workers and American businesses would be hired with this amount of money? American Steel used to rebuild bridges. American families reaping the benefits of new jobs. All of the money would go into stimulus, and it would stay in the USA.

If you want relief for all Americans, then release 15% of the Strategic Petroleum Reserve over the course of a year to stabilize (reduce the price) of the oil markets. 15% is equal to 104 million barrels of oil (the current reserve level is at 697.5 million barrels). This would result in lower gasoline costs, lower heating oil costs, lower jet-fuel costs, etc. It would probably knock the price of oil back down into the $50-$60 range, which would translate to a savings of approximately $0.50 per gallon of gasoline for each consumer. Considering each family on average uses 15 gallons of gas a week (conservatively), this translates to a savings of nearly $400.00 per year per family, and jump starts the transportation industries (airlines, shipping, etc) by boosting their profits and allowing them to afford to create new jobs. It's not like we're draining the reserve, it will still be at a higher level than it was in 2001 (when it held 545 million barrels).

Looks like the swoon is fading.

Remember, the InTrade prediction market differs from opinion polls in a key way. The users are putting their own money at risk.

Joseph at Plunderbund sure does have a problem with a charter school making a profit and (*gasp*) paying its teachers less than teachers at public schools.

The education of our state’s children in the hands of a for-profit corporation- obligated NOT to the best interests of OUR CHILDREN but the best interests of THEIR STOCKHOLDERS!

This means the company’s primary goal is to make money- not to educate our kids. And they do this by spending less money on students and by paying their teachers…

Socialists like Joseph can be so stubbornly ignorant. If the facts don't fit their preferred narrative ("Powerful teachers' unions and huge education expenditures make for better educated kids!"), they throw temper tantrums about mean corporate interests and their dirty-greedy-money-grubbing-child-hating-wingnut-fascist shareholders.

Allow me to outline the profit motive for Joseph in simple terms, because he obviously hasn't got a clue about this. To serve its shareholders the school must maximize profits. It does this by maximizing revenue and minimizing expenses. Here's how that works.

Revenue

• To maximize revenue (tuition) the school must keep its customers happy.


• Its customers are happy when the quality of their children's education exceeds that available in the public schools.


• If the school charges more for an education than the parents think it's worth, they'll pull their kids out.


• Therefore the school has an incentive to provide a better education than the public schools offer, and at a reasonable price.

Expenses

• To minimize expenses, the school will try to reduce overhead and operate efficiently.


• Among other methods, the school will pay its teachers lower starting salaries than they'd get in a public school.


• Since teachers are free to seek employment elsewhere, the school must find other ways to make its teaching positions attractive.


• Apparently the school has found a way to attract teachers with more than just base salary. Perhaps it's less red tape, a safer and more disciplined classroom environment, merit pay, or some combination of the above.


• If the school cuts salaries too far, the teachers will leave.


• Therefore the school has an incentive to treat its teachers well.

Boy, this free market stuff is tricky. Competition sure isn't neat and orderly, like the typical centrally-planned economy.

At 9:20 AM this morning, Dave at NixGuy.com posted a blurb about Dell's XPS competing with the Apple iMac. At 10:51 AM, I left a comment criticizing Dell and explaining why I now own a Lenovo. At 5:05 PM, someone named RichardatDELL left the following comment:

Hi Dave, thanks for the feed back and glad to hear you are impressed.

Ruddle Pirate [sic], The XPS One as part of the XPS line has a specialized support team that is highly trained on XPS systems and based in North America. I just bought a new XPS and needing to just check a couple things. The hold times were nil and the agents great.

We dropped the ball in the past, but we heard you, our customers, and are onb the way back. Sorry we lost you as a customer.

Hopefully we will regain your confidence with time.

<Vader voice>

Impressive. Most impressive.

</Vader voice>

OK, I admit it: I wasn't being serious. Here are the top 5 myths about the U.S. economy:

Myth Number 5. The "need" for universal health insurance, or at least near-universal insurance for children.

Myth Number 4. America is de-industrializing, and manufacturing is dying.

Myth Number 3. We are in a recession (not heading for one, actually IN one).

Myth Number 2. Most people are just scraping by.

Myth Number 1. Income inequality is growing, the rich are getting richer, and they aren't paying their fair share of taxes.

Be of good cheer!

I hit the argument for Tax Cuts pretty hard when I wrote about it here. However, I did not mention one of the classic problems with the Supply Side Economic model when I addressed it. When the government fails to take in enough revenue to cover expenses, it creates a deficit. This is economics 101. When this occurs long enough over time, it causes inflationary conditions to develop, and it devalues the currency against the world market. Let's start this part of the discussion with the cost of oil.

Is it just me, or is it odd that the price of oil has spiked from $28.00 a barrel in 2001 to $88.49 in 2007? How about the fact that the 50 year trend in oil pricing prior to 2001 saw the median for oil at less than $24.00 per barrel with the exception of times when conflicts around the Middle East were occurring, yet it is projected to potentially go as high as $110.00 a barrel within the next year? You can find an analysis of the past 100 years worth of oil sales and figures here. The most common justifications that has been given for the increase in oil price are that a)more countries are consuming it (i.e. China and India), b) the market is just catching up for 30 years worth of inflation, and that the cost of oil is really low considering what was paid for it in 1980 and c) the weak US dollar is driving oil prices up, which means that the commodity in the world market is right where it is supposed to be.

Sorry, not buying it.

Can you honestly tell me that the chairmen of two oil companies, who just happen to be occupying the #1 and #2 political positions in this country, had absolutely no control whatsoever over the 300% increase in crude oil pricing over a 6 year period? Oil prices (and the corollary, gasoline prices) affect just about every aspect of the economy. The cost of gas is figured into everything from freight bills to school district budgets. Oil prices directly affect electricity and heating costs. Anyone paid any attention to the cost of milk recently? At the local grocery store, it will cost you approximately $3.50 for a gallon of milk. Contrast that with $1.40 in 2003. Why the rise? Increased costs for everything from cow feed to trucking to send the milk to market.

My point is that there are already inflationary storm clouds starting to form on the horizon. Do we really want to return to the economic model of the late 1970s, with 16% interest for a home mortgage and double-digit inflation? So how could the Bush administration prevent this from occurring? Simple. The National Strategic Oil Reserve currently holds 690 Million barrels of oil out of a possible 720 Million. In other words, it is currently holding over 95% of its capacity, which also happens to be the most it has ever held in history. OPEC affects the price of oil by setting price controls and then turning the tap on or off as appropriate to get oil to the level they want. Let's take a page out of their book. If the President was to release 15% of the existing reserve (100 Million barrels) in a controlled manner over the next year to two years, it would probably have a huge dampening effect on the market, bringing the cost of oil back down to around $50 a barrel (if not lower). The argument could be made that this is a garden hose next to the OPEC fire hose. It doesn't matter. The economic principles that drive the oil commodity market are keeping it artificially inflated. All it takes is puncturing the balloon for the prices to reset to where they should be. Will this administration even consider it? Probably not, because it is not in their political interests.

Let's talk about the free-falling dollar against world economies. In February 2001, then Treasury Secretary O'Neill made the statement that "We are not pursuing, as often said, a policy of a strong dollar. In my opinion, a strong dollar is the result of a strong economy." Federal Reserve Chairman Bernanke, when asked about it recently, made it clear that it is the role of the Department of the Treasury, and not the Fed, to control international currency valuation policy. Since 2001, this administration has given lip-service to supporting a "strong dollar," but always with the caveat that market conditions would set the price. In other words, where the dollar falls is where the dollar falls. This is the first time in history that the US has not used the Department of Treasury to ensure a strong dollar.

So where has it fallen? Let's look at the Euro for a price comparison. In February 2002, $0.87 bought €1.00. If you wanted to buy a new BMW from the factory in Bavaria that cost €50,000.00 it would set you back $43,500.00. In today's world, the Euro just closed at an all time high against the dollar, where it costs $1.43 to buy €1.00. That same BMW at today's conversion...$71,500.00. Pick a different currency? The Canadian Loonie reached parity with the US Dollar for the first time in over 30 years this month. In February 2002 $0.66 bought $1.00 of our northern Strange Brew cousin's money (Cool, eh'). What does this mean for America? In the short term, it means that the US gets to act like a kid in the candy store. Our goods cost less in other countries, which means we sell more. Other countries goods cost more, which means we buy less. Our trade deficit lowers and American manufacturing makes a comeback. Everybody sings Kumbaya.

Not so fast.

Remember oil? We buy it from other countries. A lot of it. We also happen to buy a lot of other products we use in our day to day lives from foreign countries. Most of our fruit and produce this time of year comes from South and Central America. Electronics from Japan, China and South Korea. You get the picture, there is a reason it is called the "Global Economy." In the long term, a devalued US dollar can cause long-term double digit inflation. There is no such thing as a free lunch. It is a lot like one of the scams you see advertised on TV. A company offers to give you a large lump sum as long as you sign away your monthly pension to them. They'll give you $100,000.00 right now, as long as you give them your retirement check of a paltry $800.00 a month. Of course, this means that at the end of 10 years, they'll continue to collect your pension for the rest of your life, a long time after you've spent the $100,000.00. If the math is confusing you, in 10 years at $800.00 a month, you would have earned $96,000.00 not including any compounding interest. For a short term gain, in the end you get royally screwed. In other words, the Bush administration has utilized a sledgehammer to attempt to dictate fine economic policy. And just like hitting a stained glass window with a sledgehammer, it's hard to put the pieces back once you're done.

As my co-blogger PuddlePirate wrote yesterday, he and I got into something of a spat over the presidency of George W. Bush. My position is that, in the past 7 years with him as president, he has done more damage to this great nation of ours than just about any other person in history.

Needless to say, my good friend the PuddlePirate turned beet red with rage and demanded to know how I could possibly justify a statement like that. It all went down hill from there.

He has put together a very nice argument for tax cuts and why supply-side economics are just what the country ordered. You can find that here. The problem with this, in my opinion, is that it is disingenuous and misses the point of my argument. Let me start by making a very broad disclaimer - I am not, nor do I pretend to be, an economist. Having said that, I trust the words of the economists who should be setting policy.

The justification for the 1.35 Trillion (yes, that is Trillion with a T) tax cut package that Bush passed through congress in the first part of his presidency was that the country was projecting 10 Trillion dollars in budget surpluses over the next decade. The goal was to spur the economy, create new jobs, and replace the tax revenues through growth. In this package, it accomplished some very good things, most namely eliminating the "marriage penalty" (i.e. two people with income would be better off not getting married due to higher taxes). It also increased the tax credit to lower income people with children (not that I am against this, but it smacks a little bit of a "buy your vote" kind of deal). The bottom line is that of the 1.35 Trillion dollars in tax cuts, according to the IRS's own statistics, approximately 70% is going to the top 0.5% of society (those individuals making over $1,000,000.00 in reportable income). The last time I checked, the last year the country had a budget surplus was 2001. It also just about completely failed in its stated purposes (create jobs), since approximately 5,000,000 jobs were lost between when it was passed in 2001 and 2004.

The argument has been made that the idea behind the tax cuts bears out, since tax revenues are up. This is, again, disingenuous. The reason tax revenues are up is that the top 0.1% (those making over $1.6M per year) account for over 10% of the nation's income and 19% of the taxes. Contrast this with 1979 when the top 0.1% accounted for 3% of the nation's income and 7% of the taxes. When income in this group goes up, tax revenues go up a lot faster than if income rose evenly across all tax brackets. This is borne out by the fact that, while income tax revenues are up significantly, Social Security and Medicare tax receipts have remained flat (indicating that the average wage earner's salary has not been rising, nor have there been additions to the average wage earner's numbers). In other words, the rich have gotten richer while the average person has stagnated. Where did this money come from? A large chunk came from Capital Gains taxes. Where did the capital gains taxes come from? Unfortunately, a very large chunk came from investments in foreign markets, where the returns have been up significantly due to the falling dollar (I don't even want to get started on that presidential economic fiasco). Think about that for a second, our tax revenues are up because the top 1% of the population has been investing their money in other countries. How do I know this? To quote an example, Warren Buffet, the "Oracle of Omaha," has made no secret of the fact that Berkshire Hathaway has been exploring the foreign markets as a primary source of growth for their investors.

My view on this is that, in a time of war when the country is running huge deficits (with most of the debt being bought by the Chinese, by the way) it is not the right time to continue giving the top 0.5% of people a tax cut that is costing the country more than the entire cost of the Iraq war. I have some folks who agree with me, too. Namely, some of the top economists in the nation who signed a letter in 2003 titled Opposing the Bush Tax Cuts. Like I said, I'm not an economist, but when 10 Nobel Laureates in Economics are calling the president to the carpet, I tend to take notice. If that particular piece of prose is a little dated, there is also the Briefing Paper from the Economic Policy Institute updated in March of 2006 titled THE BOOM THAT WASN'T - The economy has little to show for $860 billion in tax cuts. The long-term health and well-being of the country has been seriously compromised by this gift to the rich.

A couple of final notes. My friend quotes from his research that "Overall, we find that America's lowest-earning one-fifth of households received roughly $8.21 in government spending for each dollar of taxes paid in 2004. Households with middle-incomes received $1.30 per tax dollar, and America's highest-earning households received $0.41." My only issue with this is how do we come up with these numbers, since it is not explained? Are we talking about Social Security and Medicare for retirement? Income credits for the poor, or building highways that lower income people drive to work on? All of the above?

Let me put it another way. If a single person makes $30,000 a year, of that amount they will pay $3,159.00 in Federal Taxes and $2,295.00 in FICA (Social Security and Medicare). Not taking into account State or Local tax burdens, this means that already they have paid out 18.2% of their income in taxes. This is the standard deduction, because most people in this income range cannot itemize deductions (which require the ability to itemize more than the standard deduction of $5,150.00). This leaves them with roughly $2,050.00 per month to pay their bills and feed themselves (assuming no state taxes). Am I advocating lowering their tax burden further? No, I am not. But I am also not going to hold them to the same standard as someone who makes in a day what they make in a month. A serious reexamination of the tax code and all the tax benefits are necessary, including the sacred cows of "home mortgage interest deduction" and "State Income Tax deduction." Why should a millionare who owns a $750,000 house get to deduct $60,000.00 in mortgage interest because they chose to buy a bigger home? Most financial advisers will tell you it is better to buy a home with a mortgage rather than spend your money on it for the tax savings that you will realize (as long as the size of the mortgage allows you to itemize deductions), with the argument being "you can invest your money then into a mutual fund and receive a return of 8-12%, while the government subsidizes your home."

On the flip side, let's take a look at another example. A single lawyer who makes $250,000.00 a year and owns a $750,000.00 home will pay approximately $6,885.00 in FICA and $30,000 in Federal taxes after taking itemized deductions for his home, unreimbursed business expenses, charitable contributions, a home office deduction and the like. This equals out to approximately 14.8% of their income. It also means that they have only $17,760 per month to pay their bills and feed themselves (again, assuming no state taxes). You will notice that I state they will pay $30,000, not $66,303.00. The $66,303.00 is what they would pay if they took the standard deduction. I am making the argument that they would be able to shelter approximately $125,000.00 via deductions. Does this sound excessive? It isn't when you consider that as a small example your car can be deducted if used for business, and that the miles are deducted at $0.485 per mile not considered commuting. There's a reason CPAs get paid big money for working on people's taxes (which is also a deductible expense). Oh, and if they did take the standard deduction (foolish lawyer!) that would leave them with only $14,700.00 per month to live on. Someone needs to let them know where they have to go to get the food stamps.

Here is the bottom line, and the most important part of the debate in my mind. My daughter is 4 years old. All these deficits will come due to be paid when she reaches the work force. Her mother is currently serving in Iraq. The cost of that war, the crumbling infrastructure of this country and crippling debt that will occur in the future could be averted for the most part if we were to reset the tax rates for the top 1% back to what they were paying in 2000 before Bush took office. If we don't do something, we'll be leaving it to our children to shoulder the responsibility for our inaction. I'm sorry, telling people that the best way to support the troops is to go to the mall and buy a pair of jeans is not my idea of good policy. Ask them to sacrifice a little instead by paying what they were paying only a couple of years ago. That would be supporting the troops, because it would mean that the country they are fighting to defend will still be around when they grow old.

OK PuddlePirate, ready for Round 2?