Tag Archives: Economics

New study: Bernie Sanders’ budget would raise taxes $13.6 trillion over a decade

Democrats took control of government spending in 2007
Democrats took control of government spending in 2007

It’s very strange to me that young people seem to like Bernie Sanders’ rhetoric so much. Have they really considered what his budget would require?

Here’s an article from the Washington Free Beacon that talks about a non-partisan study from the Tax Foundation think tank.

Excerpt:

(I., Vt.) proposed tax plan would raise taxes by $13.6 trillion over the next decade and reduce the economy’s size by 9.5 percent, according to an analysis by the Tax Foundation.

While on the campaign trail, the senator has proposed $18 trillion in spending over the next decade. His plan includes $15 trillion for a government-run single-payer health care plan and trillions more for Social Security, roads and bridges, higher education, paid family and medical leave, and private pension funds, to name just a few.

Sanders’ proposed tax plan will increase marginal tax rates and the cost of capital, a move that will significantly reduce GDP, lower wages, and eliminate jobs.

According to the Tax Foundation, Sanders aims most of his tax provisions at high-income households, creating four new income tax brackets with rates of 37 percent, 43 percent, 48 percent, and 52 percent. Additionally, Sanders would tax capital gains and dividends for households with income over $250,000 and create a 2.2 percent income-based health care premium.

However, as Sanders has admitted, his plan also includes tax increases on the middle class. “We will raise taxes. Yes, we will,” Sanders said at the CNN town hall last weekend.

“A majority of the revenue raised by Sanders plan would come from a new 6.2 percent employer-side payroll tax, a new 2.2 percent broad-based income tax and the elimination of tax expenditures relating to healthcare,” the analysis explains.

According to a recent report from the Congressional Budget Office, even without Sanders’ tax plan the nation’s economy is projected to expand at a rate much lower than in recent decades. Sanders’ plan would lower the growth rate further, as its proposed marginal tax rate increases on labor and capital would reduce GDP by 9.5 percent in the long term.

“At the center of my campaign is how we’re going to raise wages,” Sanders said at the first Democratic debate. “Yes, of course, raise the minimum wage, but we have to do so much more, including finding ways so that companies share profits with the workers who helped to make them. And then we have to figure out how we’re going to make the tax system a fairer one.”

“And in my view what we need to do is create millions of jobs by rebuilding our crumbling infrastructure; raise the minimum wage to $15 an hour; pay equity for women workers; and our disastrous trade policies, which have cost us millions of jobs; and make every public college and university in this country tuition-free,” he said.

After accounting for reductions in economic growth, Sanders’ plan would lead to 12.84 percent lower after-tax incomes for all taxpayers, 6 million fewer full-time jobs, and an 18.6 percent smaller capital stock.

Let’s take a look at a few of these from the perspective of a non-clown.

Minimum wage

You know, you don’t have to be an economics genius to understand that this man is a fool – the equivalent of a clown trying to take control of a nuclear power plant. Just look at his position on minimum wage. Every economist understands that raising the minimum wage causes businesses to lay off workers. Why? Because they have to pay for the higher minimum wage somehow. Either they lay off workers and scale back their business, or they charge consumers more. When you charge consumers more, they buy less of what you’re selling. So, usually it means laying off workers.

This Daily Signal article explains what happened when liberal cities raised their minimum wage rates.

Payroll tax

Raising the rate o the employer payroll tax means that employers will basically have to pay more for the same labor. They X labor out of their employees now, and paying Y wages. After Sanders, they will be getting X labor still, but paying a higher Y in wages. What will they do? They will simply let go of their least productive employees and scale back their business, maybe expanding abroad and sending jobs to a country where they are taxed less.

This article from the Fraser Institute explains what happens when companies have to pay more to employ workers.

Tariffs

Bernie Sanders thinks that consumers should pay more for consumer goods. That’s what happens when you slap tariffs on goods manufactured in other countries. Consumers and businesses end up paying more for the same product, leaving less money for other things that you need for your family.

Here’s a post that explains why free trade is best for consumers.

Single payer health care

Single payer health care is supported by economic illiterates in the Democrat and Republican parties – both Sanders and Trump support it. What single payer does is allow government workers to take a cut of every transaction between you and your doctor, effectively imposing a tax on medical treatment without adding any value. It would be as if every transaction between you and Amazon.com were to be funneled through the government to see if you were allowed to buy what you wanted, and for how much. Obviously, we would have to hire government workers to make decisions about your Amazon purchases, to make you wait in line behind others who wanted the same items, and to process payments to Amazon.

Just read this Boston Globe article about the costs of Vermont’s (failed) proposal to have single-payer health care.

Public Works

Henry Hazlitt’s book “Economics in One Lesson” explains the problem with taxing the private sector to build public works.

Henry Hazlitt’s Economics in One Lesson, chapter 4, entitled “Public Works Mean Taxes”.

Excerpt:

Therefore, for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $10 million taken from the taxpayers. All that has happened, at best, is that there has been a diversion of jobs because of the project. More bridge builders; fewer automobile workers, television technicians, clothing workers, farmers.

And consider Chapter 5 as well, entitled “Taxes Discourage Production”.

In our modern world there is never the same percentage of income tax levied on everybody. The great burden of income taxes is imposed on a minor percentage of the nation’s income; and these income taxes have to be supplemented by taxes of other kinds. These taxes inevitably affect the actions and incentives of those from whom they are taken. When a corporation loses a hundred cents of every dollar it loses, and is permitted to keep only fifty-two cents of every dollar it gains, and when it cannot adequately offset its years of losses against its years of gains, its policies are affected. It does not expand its operations, or it expands only those attended with a minimum of risk. People who recognize this situation are deterred from starting new enterprises. Thus old employers do not give more employment, or not as much more as they might have; and others decide not to become employers at all. Improved machinery and better-equipped factories come into existence much more slowly than they otherwise would. The result in the long run is that consumers are prevented from getting better and cheaper products to the extent that they otherwise would, and that real wages are held down, compared with what they might have been.

There is a similar effect when personal incomes are taxed 50, 60 or 70 percent. People begin to ask themselves why they should work six, eight or nine months of the entire year for the government, and only six, four or three months for themselves and their families. If they lose the whole dollar when they lose, but can keep only a fraction of it when they win, they decide that it is foolish to take risks with their capital. In addition, the capital available for risk-taking itself shrinks enormously. It is being taxed away before it can be accumulated. In brief, capital to provide new private jobs is first prevented from coming into existence, and the part that does come into existence is then discouraged from starting new enterprises. The government spenders create the very problem of unemployment that they profess to solve.

Why anyone would consider a man who has never held a private sector job for any length of time is beyond me. That article explains that Sanders has only ever collected unemployment or worked in government jobs. My cashier at Chick-Fil-A understands more about economics than this fool.

Trump supported the bank bailout and auto bailout, Cruz opposes all bailouts

Donald Trump and his friends, the Clintons
Donald Trump and his friends, the Clintons

I have two friends who are Trump supporters. I’ve been going over Trump’s record with them, and I thought that I would blog some of the evidence I presented here.

Now, the conservative view of bailouts is that we should not have them, because in a free market economy, companies that cannot serve customers efficiently (low price, high quality) must be allowed to go bankrupt. That includes banks and auto manufacturers.

Where does Trump stand? Here is a transcript of an appearance on Fox News from 2008, where he embraced the bank bailouts:

NEIL CAVUTO, HOST: Well, Donald Trump saying, anything close to that $700 billion bailout would be a black eye for an economy he says rushing into one big depression.

Real estate mogul Donald Trump joins me now on the phone.

[…]

TRUMP: […]Now, I did not know about a $700 billion bailout, in all fairness. And I think probably, it is something — it’s sad, but, probably, it’s something that has to get done, because your financial system is most likely going to come to a halt if it does not. So, it is a pretty sad day for this country.

This Daily Caller article explains Trump’s view on auto bailouts:

Faced with crushing debts caused by poor management and high labor costs, GM and Chrysler requested federal assistance to keep the firms afloat, and were granted a $25 billion loan in the fall of 2008. President George Bush then secured more than $17 billion for the companies.

This occurred months before the birth of the Tea Party, but conservatives were outraged.

Not Trump. A longtime advocate of sweetheart deals between corporation and state, the real-estate developer went all in for the deal.

“[Y]ou have to try and save the companies,” Trump said in a separate 2008 Fox News interview. “And I think you can easily save the companies.”

Ted Cruz opposes auto bailouts and bank bailouts.

Cruz was asked in a 2012 run-off debate if the federal government should have bailed out General Motors, and here is his answer:

Of course we shouldn’t have. We’ve got a problem in Washington. We’ve got career politicians in both parties that spend the taxpayer money. That’s how we’ve gotten a $16 trillion dollar debt that is bankrupting our country. I don’t support bailouts, period. I don’t support the bailout of the auto companies. I don’t support the bailout of the banks. Government shouldn’t be in the business of spending taxpayer money to help private corporations. The role of government is to protect our rights, to protect our national security, to ensure rule of law and to stay out of the way and let entrepreneurs create jobs. And the problem with Washington is career politicians spending money and digging us into a hole that is threatening the economic future of our nation.

Cruz doesn’t even like the government giving companies subsidies, much less bailouts. It’s taxpayer money, it should not go to corporations that cannot compete fair and square.

Trump also supported Obama’s pork-filled stimulus spending bill:

President Obama held his first prime-time press briefing — designed to build support for the economic stimulus package that was his top priority upon taking office — on Feb. 9, 2009. Later that same night, real estate mogul Donald Trump took to the airwaves to sing the plan’s — and the president’s — praises.

“I thought he did a terrific job,” Trump told Fox News’s Greta Van Susteren. “This is a strong guy knows what he wants, and this is what we need.”

“First of all, I thought he did a great job tonight,” said Trump. “I thought he was strong and smart, and it looks like we have somebody that knows what he is doing finally in office, and he did inherit a tremendous problem. He really stepped into a mess, Greta.”

Van Susteren then asked Trump if a simple payroll tax holiday might be a better way to stimulate the flagging economy. Trump, however, held firm in his support for Obama’s plan, which he praised for the wide breadth of approaches it took to combatting the crisis.

[…]“Well, I have analyzed the bill as closely as it can be analyzed in this quick a period of time, but he’s really got a combination of both,” Trump replied. “He is doing the taxes, he is doing rebates, and he is also doing lots of public works.”

His support for public works spending reminded me of a chapter from Henry Hazlitt’s “Economics in One Lesson” on public works, in which he explains that public works can never stimulate the economy, since it takes money out of the productive private sector and spends it in the wasteful and corrupt public sector. The chapter is entitled “Public Works Means Taxes”.

It says:

Two arguments are put forward for the bridge, one of which is mainly heard before it is built, the other of which is mainly heard after it has been completed. The first argument is that it will provide employment. It will provide, say, 500 jobs for a year. The implication is that these are jobs that would not otherwise have come into existence.

This is what is immediately seen. But if we have trained ourselves to look beyond immediate to secondary consequences, and beyond those who are directly benefited by a government project to others who are indirectly affected, a different picture presents itself. It is true that a particular group of bridgeworkers may receive more employment than otherwise. But the bridge has to be paid for out of taxes. For every dollar that is spent on the bridge a dollar will be taken away from taxpayers. If the bridge costs $10 million the taxpayers will lose $10 million. They will have that much taken away from them which they would otherwise have spent on the things they needed most.

There is no free lunch. Someone has to pay.

Listen to me. This economy is not doing well. We are going to have more debt, higher taxes, and lower public services the further we go down the path of socialism. It’s fun to spend money on all sorts of bailouts, but the money is not unlimited. Bailing out private businesses and giving them subsidies costs taxpayer money. Eventually, that runs out. We need a candidate who understands this, and that candidate is Ted Cruz, not Donald Trump.

New study: incomes of the poorest 20% of households are much lower than in 2007

Is Barack Obama focused on protecting the American people?
Does Barack Obama’s knowledge of policy match his confidence?

Now, many American voters like to think that if the President expresses concern about things like poverty and income inequality, then that means that whatever he does to “fix” it will automatically work to benefit the poor. Is it true?

Here is an article from Investors Business Daily, which talks about a study from the respected, leftist Brookings Institute.

Excerpt:

President Obama’s upbeat assessment of the economy is not likely to sit well with low-income families living in major urban or metro areas. For them, economic decline is a harsh reality, not “fiction.”

In his State of the Union speech, Obama declared that “anyone claiming that America’s economy is in decline is peddling a fiction.”

But a new report from the liberal-leaning Brookings Institution finds that incomes among the poorest fifth of households was significantly lower than it was in 2007. Of the 100 cities it examined, incomes fell an overall average of 12%, according to the report’s data. In some, the drop was huge — 34% in Stockton, Calif., 31% in New Haven, Conn., and 30% in Lakeland, Fla.

At the other end of the spectrum, the top 5% of households saw incomes climb, but not by much. The average income for this group was basically unchanged over those years.

As a result, income inequality has increased, but not — as Obama, Bernie Sanders and the chorus of liberal Democrats would have you believe — because the rich are getting richer.

“It’s really about the poor losing ground rather than these upper-class households pulling away,” Brookings senior fellow Alan Berube told AP.

[…]Added to this, many of the cities that saw the biggest increases in income inequality — like Boston; New Orleans; Providence, R.I.; New Haven, Conn.; San Francisco, Washington, D.C. — have been bastions of “spread the wealth around” liberalism.

Another example of this would be Obamacare. Obama got up in front of his teleprompters and told everyone that he was going to make changes to health care policy. He promised that it would not add one dime to the deficit, that we could keep our doctors, that we could keep our health plans and that our health insurance premiums would go down. Every single one of those promises were lies.

We don’t know if Obama knows that he is lying when he says these things. I prefer to think that he is just too stupid to know what he is talking about. He says things that make him feel good. Things that would have pleased his professors in college. But since he has no practical experience of achieving results in any of these areas, he fails again and again. He is confident because he assumes a knowledge of how to obtain results that he does not actually have, owing to his lack of experience. And yet we elected him, then re-elected him.

He is in his own little world, where the people around him carefully insulate him from a reality where all his confident prescriptions have failed to produce what he intended.

Could it be that the free enterprise system of economics that was “built in” to America at the founding actually works better than the failed systems of socialism and communism that Obama was taught in college? Could it be that if we just stuck with the free enterprise system that made us the most powerful economy in the world, that things would be better for the poor than in places where capitalism is rejected for socialism?

We don’t have to guess at what the economic policies of the left produce. You can see it with your own eyes in socialist countries like Venezuela, Cuba, North Korea, Argentina, and so on.

Liberal Party has made Ontario’s economy a disastrous failure

Liberal Party has dominated Ontario since 2003
Liberal Party has dominated Ontario since 2003

I like to follow the economic situations in the most liberal Canadian provinces to see how bad things can get when liberals are in charge. This article is by Joe Oliver, who I have mentioned before on this blog.

Here’s the article from the Financial Post:

The numbers tell the story. Ontario is the largest sub-national debtor in the entire world, just one alarming distinction. Its debt is more than twice that of California, a state with three times the population and one that has its own severe fiscal problems. Its debt is $294 billion, or over $21,000 per capita. Net debt to GDP is up 48 per cent in the past 10 years to almost 40 per cent, second only to Quebec. Last year’s interest obligations totalled $11.4 billion, about the same as the cost of community and social services. I doubt many Ontarians realize how much they are paying just in interest on the provincial debt. It averages $840 per person every year and rising. Not surprisingly, Standard and Poor’s downgraded Ontario’s bond credit from AA- to A+, citing a very high debt burden and very weak budgetary performance

The energy sector is nationalized in Ontario – there is no free market competition, it’s all government-run. Consumers have one choice when they want to purchase electricity – the provincial government. How well has nationalizing the energy sector (“Ontario Hydro”) worked out?

Some of its biggest problems are self-inflicted. Recently, we received a stunning revelation from Bonnie Lysyk, the province’s Auditor-General. In the past eight years, electricity cost $37 billion above market price. Even more staggering, it will pay a further $132 billion above market by 2032. The by-now infamous Green Energy Act guaranteed the price for wind and solar, so that they cost double and 3.5 times the U.S. market price respectively. As a result, energy costs have skyrocketed by 70 per cent, a regressive tax that hurts lower income earners disproportionately and depresses personal consumption. Higher energy costs also render businesses less competitive, which discourages job-creating capital investment.

Surprise! Green energy doesn’t lower electricity bills. But that hasn’t stopped the Liberal government from jumping into it with both feet.

There is no respect for the taxpayer in Ontario… every dollar earned there is seen by the ruling elite as more fuel for her vote-buying schemes. They want to spend their way to prosperity, as if spending money in the right way will cause economic growth. Well, here’s the truth: the government can never cause the people who start businesses and create value to produce more by taking more from them. The more the government takes from job creators, the more job creators scale back their productivity.

We should learn from the failure of socialism in other countries so that we don’t repeat their mistakes here.

Related posts

Does the free market work to reduce poverty?

Economist Walter Williams
Economist Walter Williams

From Investors Business Daily.

Excerpt:

There has never been a purely free market economic system, just as there has never been a purely communist system. However, we can rank economies and see whether ones that are closer to the free market end of the economic spectrum are better than ones that are closer to the communist end.

Let’s try it.

First, list countries according to whether they are closer to the free market or the communist end of the economic spectrum. Then rank countries according to per capita gross domestic product. Finally, rank countries according to Freedom House’s “Freedom in the World” report.

People who live in countries closer to the free market end of the economic spectrum have far greater income than people who live in countries toward the communist end — and enjoy far greater human rights protection.

According to the 2012 “Economic Freedom of the World” report by James Gwartney, Robert Lawson and Joshua Hall, nations ranking in the top quartile with regard to economic freedom had average per capita GDP of $37,691 in 2010 compared with $5,188 for those in the bottom quartile.

In the freest nations, the average income of the poorest 10% of their populations was $11,382. In the least free nations, it was $1,209.

Remarkably, the average income of the poorest 10% in the economically freer nations is more than twice the average of those in the least free nations.

Free market benefits aren’t only measured in dollars and cents.

Life expectancy is 79.5 years in the freest nations and 61.6 years in the least free.

Political and civil liberties are considerably greater in the economically free nations than in unfree nations.

Leftists might argue that the free market doesn’t help the poor. That argument can’t even pass the smell test.

Imagine that you are an unborn spirit and God condemned you to a life of poverty but gave you a choice of the country in which to be poor. Which country would you choose?

To help with your choice, here are facts provided by Robert Rector and Rachel Sheffield in their report “Understanding Poverty in the United States: Surprising Facts About America’s Poor.”

  • Eighty percent of American poor households have air conditioning.
  • Nearly three-fourths have a car or truck, and 31% have two or more.
  • Almost two-thirds have cable or satellite TV.
  • Half have one or more computers.
  • Forty-two percent own their homes.
  • The average poor American has more living space than the typical non-poor person in Sweden, France and the U.K. Ninety-six percent of poor parents stated that their children were never hungry; in other words, they could afford food.

The bottom line is that there is little or no material poverty in the U.S.

At the time of our nation’s birth, we were poor, but we established an institutional structure of free markets and limited government and became rich.

This might be a good article send along to people who want to bash our free-market system. It’s easy for them to make assertions that we have to do this or that policy to redistribute wealth. But the real solution to helping the poor is not to take from one and give to another, it’s to put into place a system that causes wealth to be created for all. That’s what happened in the United States, and you can see how it happened in other capitalist economies like Chile, Hong Kong and Singapore. Capitalism turns poor nations into rich nations.