Monthly Archives: January 2012

Commentary

How well did Obama-style tax hikes on the rich work for Illinois?

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Central United States
Central United States

From the Wall Street Journal.

Excerpt:

Run up spending and debt, raise taxes in the naming of balancing the budget, but then watch as deficits rise and your credit-rating falls anyway. That’s been the sad pattern in Europe, and now it’s hitting that mecca of tax-and-spend government known as Illinois.

Though too few noticed, this month Moody’s downgraded Illinois state debt to A2 from A1, the lowest among the 50 states. That’s worse even than California. The state’s cost of borrowing for $800 million of new 10-year general obligation bonds rose to 3.1%—which is 110 basis points higher than the 2% on top-rated 10-year bonds of more financially secure states.

This wasn’t supposed to happen. Only a year ago, Governor Pat Quinn and his fellow Democrats raised individual income taxes by 67% and the corporate tax rate by 46%. They did it to raise $7 billion in revenue, as the Governor put it, to “get Illinois back on fiscal sound footing” and improve the state’s credit rating.

So much for that. In its downgrade statement, Moody’s panned Illinois lawmakers for “a legislative session in which the state took no steps to implement lasting solutions to its severe pension underfunding or to its chronic bill payment delays.” An analysis by Bloomberg finds that the assets in the pension fund will only cover “45% of projected liabilities, the least of any state.” And—no surprise—in part because the tax increases have caused companies to leave Illinois, the state budget office confesses that as of this month the state still has $6.8 billion in unpaid bills and unaddressed obligations.

It’s worth contrasting this grim picture with that of Wisconsin north of the border. Last winter Madison was occupied by thousands of union protesters trying to bully legislators to defeat Republican Governor Scott Walker’s plan to require government workers to pay a larger share of their health-plan costs, and to shore up the pension system by trimming future retirement liabilities. The reforms passed anyway.

In contrast to the Illinois downgrade, Moody’s has praised Mr. Walker’s budget as “credit positive for Wisconsin,” adding that the money-saving reforms bring “the state’s finances closer to a structural budgetary balance.” As a result, Wisconsin jumped in Chief Executive magazine’s 2011 ranking of each state’s business climate—moving to 17th from 41st. Illinois dropped to 48th from 45th as ranked by the nation’s top CEOs.

And in Ohio, Republican Governor John Kasich also saw success.

Excerpt:

Ohio’s new fiscal responsibility is getting noticed and rewarded.

Standard & Poor’s upgraded the state’s credit forecast from “negative” to “stable,” in time for a $417 million bond sale last week to refinance at a lower interest rate and restructure debt.

Ohio’s lean budget will pay off with lower costs for borrowing, saving taxpayers as much as $1 million or more over the course of a year, according to the state’s Office of Budget and Management. It’s like having a credit-card company lower its annual percentage rate: The borrower can either accelerate the payoff or spend the savings elsewhere.

So essentially, cutting state programs spared money for state programs.

This is vindication for the Kasich administration. When Gov. John Kasich took office this year, the state was $8 billion in the hole and its rainy-day fund totaled $1.78. That’s not a typo; Ohio barely had enough in the bank to buy itself a cup of coffee. A small one.

[…]Investors pay attention to these ratings, especially since Ohio stands out as other states continue to struggle. “There are a lot of jitters in the credit market; I can’t imagine it won’t be helpful,” said Robin Prunty, primary credit analyst with Standard & Poor’s.

[…]Most states still are struggling with the economic recovery and phasing out one-time money from the federal stimulus program that Kasich’s predecessor used to paper over the deficit. S&P’s revised outlook reflects its view that Ohio’s economy “is steadily recovering.”

“The outlook revision reflects the state’s progress in moving toward structural budget balance through fiscal 2013 and the modest economic recovery under way,” its report says.

Republican tax policies work, and Democrat policies don’t. Taxing the rich sounds good, but it doesn’t help the poor. To help the poor, we need to encourage people with capital to risk it by engaging in enterprises for profit. That is what causes workers to be hired and wealth to be created – forming valuable products and services through ingenuity and labor.  Workers who build skills and experience while working have more confidence and can be more productive, making them more free because they can succeed independently of government handouts.

News

Assessing Obama’s claims about income inequality in America

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From Zero Hedge.

Excerpt:

Tonight’s stunning financial piece de resistance comes from Wyatt Emerich of The Cleveland Current. In what is sure to inspire some serious ire among all those who once believed Ronald Reagan that it was the USSR that was the “Evil Empire”, Emmerich analyzes disposable income and economic benefits among several key income classes and comes to the stunning (and verifiable) conclusion that “a one-parent family of three making $14,500 a year (minimum wage) has more disposable income than a family making $60,000 a year.” And that excludes benefits from Supplemental Security Income disability checks. America is now a country which punishes those middle-class people who not only try to work hard, but avoid scamming the system. Not surprisingly, it is not only the richest and most audacious thieves that prosper – it is also the penny scammers at the very bottom of the economic ladder that rip off the middle class each and every day, courtesy of the world’s most generous entitlement system. Perhaps if Reagan were alive today, he would wish to modify the object of his once legendary remark.

And it gets worse for those who don’t report their income:

If the one-week-a-month worker maintains an unreported cash-only job on the side, the deal gets better than a regular $60,000-a-year job.  In this scenario, you maintain a reportable, payroll deductible, low-income job for federal tax purposes. This allows you to easily establish your qualification for all these welfare programs. Then your black-market job gives you additional cash without interfering with your benefits. Some economists estimate there is one trillion in unreported income each year in the United States.

This really got me thinking. Just how much money could I get if I set out to deliberately scam the system? I soon realized that getting a low-paying minimum wage job would set the stage for far more welfare benefits than you could earn in a real job, if you were weilling to cheat. Even if you dodn’t cheat, you could do almost as well working one week a month at minimum wage than busting a gut at a $60,000-a-year job.

SSI pays $8,088 per year for each “disabled” family member. A person can be deemed “disabled” if thy are totally lacking in the cultural and educational skills needed to be employable in the workforce.

If you add $24,262 a year for three disability checks, the lowest paid welfare family would now have far more take-home income than the $60,000-a-year family.

Why am I getting up early every morning and going in to work to pay for the lifestyles of these other people? Well – this is how the Democrats are able to get elected. They buy  votes from the people who are dependent on government by paying them off with money taken from people who work for a living. And they think that this Robin Hood redistribution of wealth is noble and compassion. I am “greedy” because I want to tax cuts to keep more of what I earn.

News

What happened to the ethics charges against Newt Gingrich?

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Here are the facts from Legal Insurrection.

Excerpt:

So Romney is going on attack.  The centerpiece will be Newt Gingrich’s consent to a single ethics violation (out of 84 charged) in the 1990s.  The process was highly politicized by Democrats, including Nancy Pelosi.  Newt ultimately was vindicated by the IRS on the issue, but you wouldn’t know it from Romney’s speech yesterday in Florida:

“Speaker Gingrich has also been a leader,” the former  Massachusetts governor said. “He was a leader for four years as speaker of the  House. And at the end of four years, it was proven that he was a failed leader  and he had to resign in disgrace. I don’t know whether you knew that, he  actually resigned after four years, in disgrace.

Romney continued:

“He was investigated over an ethics panel and had to make a  payment associated with that and then his fellow Republicans, 88 percent of his  Republicans voted to reprimand Speaker Gingrich. He has not had a record of  successful leadership.”

In 1999, Brent Bozell wrote a great column about how the media covered up Newt’s vindication, Newt Is Vindicated, But Nobody Knows It:

The judgment is in. After three and a half years of investigation, the IRS has cleared Newt Gingrich and his allied nonprofit groups of any violation of the tax laws in the controversy over his television history course “Renewing American Civilization.”

So after having run countless news reports highlighting the accusations that ultimately forced Gingrich to pay a $300,000 fine, did the media correct the record with a decent airing of the decision? Are you ready? ABC, CBS, and NBC devoted exactly zero seconds to Newt Gingrich’s vindication. Only CNN’s Brooks Jackson filed a decent TV report, on the early-evening show “Inside Politics.” …

Gingrich issued a statement that clearly expressed his feelings: “I consider this a full and complete vindication. I urge my colleagues to go back and read their statements and watch how they said them, with no facts, based on nothing more than a desire to politically destroy a colleague.”

But the damage hadn’t been done simply by devious politicians like Bonior, but by journalists. In the face of Newt’s innocence, some reporters couldn’t muster even a regret.

Bozell followed up that column last month, noting that the media continues to hide Newt’s vindication.

It has been 4,689 days since the IRS formally cleared Newt Gingrich of any  violation of tax law.  It’s been 4,689 days since ABC, CBS, and NBC have  had the opportunity to report it. What the heck.  Why not today?  Now  is the time for these networks to report the truth for once.  The networks  owe it to the American people to report the fact that in 1999 the IRS completely  vindicated Gingrich.

Between December 15, 1996 and January 31, 1997 the network morning and  evening newscasts filed a staggering 244 stories. Total number of network  stories on the news that Newt was completely innocent? Zero. That’s beyond  pathetic. Oh and what about CNN?  We found that the cable  network filed one — count ‘em, one — story. They’re probably exhausted by all  that effort, so we’ll let them off the hook.

Now you can add to the list the Romney campaign, which uses the worst of Nancy Pelosi’s machinations to its advantage, and like the mainstream media, hides the truth.

What does it say about Romney that he would smear Newt with charges that were obviously politically motivated – pressed by radical leftist Democrat Nancy Pelosi? Well, it says that Romney is desperate and lacks honesty and integrity.