Pushing America over the fiscal cliff
Tuesday, November 6, Barack Obama was re-elected president by winning both the Electoral College and the popular vote at 50 percent. But before his supporters get overly ebullient, they should keep in mind that on a bell curve, half of the curve is below average.
However, on Friday the celebratory parties were cut short by one killer of a hangover. That’s when most of the country (50.6 percent to be precise) woke up to learn about the “fiscal cliff” the country is facing. This did not come as a shock to most Romney supporters, but after Tuesday’s drubbing, not much would.
As a brief review, “fiscal cliff” is the term used to describe the expiration of the Bush-era tax cuts, automatic federal spending cuts and a significant reduction of the federal deficit that is set to go into effect at the end of 2012. In other words, taxes will increase, federal spending will decrease and there will be a sudden reduction to the deficit.
One may ask: what does this mean for the country? According to the Congressional Budget Office, the net effect of the fiscal cliff is a short-term recession. Unfortunately, the long-term effect is not certain. On paper, the recession would be short lived and America would soon be in a better fiscal situation with a greatly reduced federal deficit and lowered federal spending. However, since economics is comprised not only of financial models but also human behavior, it is equally as likely that the short-term recession could turn into something far worse, such as a long recession or even a depression.
Therefore, officials in Washington are clamoring that something needs to be done. Republicans and Democrats are trying to outdo each other in pointing the blame and offering solutions to forestall the fiscal plunge. Both parties are stating that the situation requires a bipartisan solution; they just don’t want to give in to the other major party to achieve it.
This was the backdrop for President Obama’s economic speech last Friday, in which he laid out his plan to avoid falling over the fiscal cliff. Not surprisingly, he called for bipartisan cooperation to achieve a solution. Equally unsurprisingly, that solution had to include raising taxes on the wealthiest Americans, which is defined as anyone who makes $250,000 or more per year.
While raising taxes on the wealthy is a progressive mantra that Republicans are increasingly buying into, it is not a solution to any fiscal problem. Though pitched as raising taxes on “those who can most afford it,” in reality it is really raising taxes on those who already pay the most; according to the Tax Policy Center, only 54 percent of Americans actually pay Federal income tax. Thus, while the call is for the wealthy to pay “their fair share,” in reality they are already paying their fair share and the share of the 99 percent as well.
Secondly, there are at least two ethical issues involved in singling out a group of people based solely on their income. One is the implication that the wealthy are indebted to the rest of America for their wealth and therefore are obligated to return it via Washington. The second ethical issue is more subtle: by alienating individuals, including most small business owners, and labeling them “wealthy,” the door is open to envy and an “eat the rich” mentality. This mentality does not foster unity in America but only further divides us.
Lastly, raising taxes on the wealthy will have a stifling effect on those who desire to better themselves. Why should anyone strive to make more money when they will be forced to give more of it back to the government? Would it not be easier to accept mediocrity rather than to work hard to achieve more? The answer for many will be “Yes.”
Elected officials are working to avoid the fiscal cliff that faces this country at year’s end. To some, including the president, this is a perfect opportunity to push the progressive agenda of raising taxes on the wealthy and make them pay their “fair share.” The long term effect of such a move will be detrimental to America and runs counter to our basic economic freedom. Obama’s proposal will not help avert the cliff; it will actually push us over it.
Capitalism and the Swiss (near) miss
Prior to the start of last week’s World Economic Forum in Davos, Switzerland, founder Klaus Schwab said that “Capitalism in its current form no longer fits the world around us.” It would be naïve to dismiss this statement as merely the words of a Swiss economist because it reflects the opinions of most Western political leaders, including the Obama administration.
How often are American citizens told by their government that the latest recession was the result of capitalism run amok? How many times was “big business” castigated while the administration portrayed itself as working hard to protect its citizens from the egregious abuses of a free-market economy? With these questions as background, it is understandable why disillusioned citizens, possessing degrees from progressive universities, have taken to the streets in protest. After all, who in their right mind would want to maintain a system where only the rich (the one percent) get richer and the poor (the 99 percent) get poorer?
Playing largely on popular opinion, progressives in authority, both in the U.S. and the E.U., have increasingly begun to include the descriptor “crony” to capitalism-at-large in order to further influence the general populace. Once all capitalism becomes crony capitalism in the eyes of the public, the call for a fundamental economic shift, away from a free market and toward a state-controlled system, becomes easier to sell.
The irony of this line of reasoning would be laughable if it weren’t so galling. To believe that more government economic control is needed to correct the mistakes of current governmental interference requires a leap of faith that even Benny Hinn would call excessive. Yet that is precisely what was being promoted last week at Davos and what the White House has been calling for since 2009.
An advanced degree in economics isn’t necessary to understand the basic tenets of capitalism. At its heart, capitalism is simply a system of profits and losses; both aspects are equally important.
Unfortunately, the administration and American media constantly portray profit as evil and losses as avoidable. However, according to Thomas Sowell, “the losses are equally important for the efficiency of the economy, because losses tell producers what to stop producing.” Sowell’s words are a harsh slap in the face to a society where winning and losing are no longer valued, where “empathy tables” actually exist and where elementary schools are increasingly abandoning grades so as not to harm students’ self-esteem.
Though profit and loss is capitalism at its heart, there are many different variations of capitalism depending on the level of government participation. What is considered capitalism in the West is more a form of state capitalism. Would the U.S. have a majority stake in General Motors or the administration be allowed to limit executive’s pay via a “pay czar” if America was truly a laissez-faire economy? Absolutely not.
The reader now returns to Schwab’s words: “Capitalism in its current form no longer fits the world around us.” Schwab’s pre-conference statement was intended to set the tone for the discussion, primarily concerning the sluggish economic recovery in America and the E.U. member-state defaults and bailouts. Based on pronouncements made by the Germans, the French and IMF Chairman Christine Lagarde, the desired result was to incite greater government intervention in Western economies, a la China (whose economic model was greatly fawned over by the Western delegates).
However, there is also an ironic truth to Schwab’s words. Capitalism “in its current form” (emphasis mine) is not working. Though I doubt he meant it this way, he is correct- government interference in capitalism is hindering the recovery it claims to desire. In order to correct the problem, Western governments should release their holds on their economies and allow the markets to determine what succeeds and what doesn’t. That alone will produce real and lasting recovery.
Klaus Schwab, founder of the World Economic Forum, is a prophet, albeit an accidental one. His statement that capitalism “in its current form” isn’t working is completely true. While his goal may have been more government intervention, Americans should look to the past and see what works best: less government involvement in the market.
Conservatives have the opportunity during the election to insist on less government involvement in the economy. Will they? Let us all hope so, for our future’s sake.
Newt Gingrich the Jacksonian
Since the start of his campaign Newt Gingrich has cast himself as a man of the people and a Reagan Republican. Newt resembles a former president, alright, but it is not Reagan. Newt Gingrich seems to be a 21st Century return of President Andrew Jackson.
This thought first occurred to me in the aftermath of Gingrich’s assertion that, as president, he would ignore the Supreme Court, a sentiment similar to a phrase attributed to Andrew Jackson: “[Chief Justice] John Marshall has made his decision, now let him enforce it.” Eventually I saw five ways in which Gingrich is similar to Jackson. They are his: 1. ambition, 2. appeal as a populist, 3. history of dealing with the national debt, 4. judicial mistrust, and 5. belief in the supremacy of state’s rights (when convenient).
Ambition
In and of itself, ambition is not bad, especially when it is tempered with restraint. Jackson was born and raised in rural western North Carolina. He practiced law on the Tennessee frontier but was never content to stay there; he was elected to the House, the Senate and eventually as president. Likewise, Gingrich started his career as a professor in western Georgia but, as The Wall Street Journal recently reported, he had plans far beyond the small school. He has served in the House as a member and then as Speaker. Now, like Jackson, his sights are on the presidency.
Populist
Jackson was a populist who was well liked by the common men of America. Jackson’s popular appeal is best typified by his first inaugural ball, which he opened to the public. The attending crowd became so large and disorderly that he was given the nickname “King Mob.” In a similar way, Gingrich is running as a populist standing against the political elite. Without any apparent irony, he describes himself as a “Washington outsider” who brings a viewpoint that most “traditional politicians” don’t have. Jackson was popular with the common man though he was a rich slave-owner; Gingrich describes himself as a Washington outsider in spite of serving in the House for 20 years, including four years as Speaker.
National debt and banking
During Jackson’s presidency, the national debt was paid off. He also opposed the national bank and vetoed its charter. Unfortunately, due to Jackson’s actions, local and state banks overextended themselves in credit and speculation. This eventually led to a national depression that lasted from 1837 through 1844. Similarly, Gingrich was partially responsible for balancing of the federal budget while Speaker. However, he was later a consultant for Freddie Mac from 2001 through 2010. Sadly, Freddie Mac’s lending practices led to the housing bubble which, when it burst, led to the current Great Recession.
Judicial mistrust
Jackson is historically associated with judicial mistrust. Not only did he famously clash with Marshall, he also believed that the executive branch was independent of judicial controls in certain situations. Gingrich seems to share this judicial defiance. On his campaign website he states his plan to nominate conservative judges as well as combat judicial activism by “utilizing checks on judicial power Constitutionally available to the elected branches of government.”
Supremacy of states’ rights
Jackson was a descendent of Jeffersonian democracy which had a historical emphasis on states’ rights. While he was president, though, he increased the power of the executive branch and the overall federal government. Gingrich is running as a conservative Republican, a position which has traditionally been pro-states’ rights. However, at Huckabee’s Presidential Forum last December, he implied that the 10th Amendment was a source of federal power and explained that the federal government can go around states to empower boards in cities and towns. It seems states’ rights are convenient when campaigning but are easily forgotten when in office.
Newt Gingrich is promoting himself as a man of the people and a Reagan Republican. Nevertheless, I believe he more closely resembles Andrew Jackson than Ronald Reagan. He and Jackson share many core values and it is no stretch to believe a Gingrich presidency will resemble Jackson’s, the long-term effects of which include a serious depression, the Civil War and the modern Democratic Party. Is this the type of conservative Republicans are looking for? I doubt Reagan would think so.
Note- this column first appeared on AmericanThinker.com
From Persia, with love
Iran is a country with a Napoleonic complex. Like the infamous French dictator, the leaders of the Islamic Republic of Iran desire to conquer and control, except they have their sites set on the Middle East. It’s as though they want to rebuild the Persian Empire, only with a Supreme Leader rather than a Shah.
Since the 1979 revolution, the response to Iran from the liberal left has been a mixture of praise and silence. TIME magazine named Ayatollah Khomeini its “Man of the Year” in 1979, yet they were quiet when he supported the hostage-takers in the Iranian hostage crisis and when he called for the death of Salmon Rushdie, a British Indian citizen, after Rushdie published The Satanic Verses.
Awarding the Ayatollah the title “Man of the Year” is so ironic that it’s absurd. That’s like giving Al Gore or Barack Obama a Nobel Prize…hold on, they did. My bad.
I believe that the most liberal and progressive Americans don’t really dislike the extreme fanaticism of the Islamic Revolution or its current leadership. In their minds, they would rather live under strict Shi’a rule in Iran than be governed by a conservative Christian in America. After all, Iran may require women to wear head-to-toe burkas, deny them the right to vote or drive and execute them for adultery, but conservative Christians? They are, gasp (!), pro-life. Unenlightened Neanderthals!
The last few years, mainly since Obama’s election, have witnessed an increase in troublesome activity by the Iranian leadership. In response, President Obama has maintained economic sanctions and given them many stern lectures which have been supported by Western leaders (think Jeremiah Wright preaching to his choir) yet, for some reason, Iran has continued its acts of defiance. Nuclear fuel rods are being enriched, short and medium range missiles are being tested and now Iran is threatening to close the Strait of Hormuz.
I can’t imagine why repeated sanctions and stern lectures have only emboldened the Iranian leadership. Think with me for a moment, what can be done that will really send them a message? Hmm…I know! What this situation needs is another economic sanction.
Lo and behold, they got one! On New Year’s Eve Obama signed into law a new economic sanction that would, according to Reuter’s, “cut off any financial institutions that work with Iran’s central bank from the U.S. financial system, blocking the main path for payments for Iranian oil.” Step aside, boys, there’s a new sheriff in town.
So what is the media’s response to Obama’s “tough” stance? I hope you’re sitting down, because most outlets are reporting that his actions are …wait for it…a success. Who would have guessed? Apparently there is runaway inflation and a demand for American dollars in Iran, so three days of unilateral American actions (Europe has yet to impose the sanctions, China and India still buy Iranian crude oil) have begun to cripple Iran. Right.
Sadly, the media and the president, as well as many in Congress, are extremely shortsighted and are not students of recent American history. At the start of the hostage crisis, President Carter froze Iranian assets in the U.S. Within six months, wealthy foreign investors began to wonder about the safety of their American investments and started converting their dollars into gold and other currencies; as a result, the demand for the dollar began to plummet worldwide. This directly triggered the financial panic of 1980, which took most of Reagan’s presidency to recover from.
That’s only recent history. Let us not forget the long-term sanctions imposed on North Korea and Cuba, which did nothing but hurt the average citizens. Did these result in the overthrow of Kim Jung-Il or Fidel Castro? No.
Worse, misapplied economic sanctions can sometimes hurt those who impose it more than just financially. One example- the economic punishment of Germany after World War I directly led to the rise of Hitler. Will our current actions actually popularize and promote Ahmadinejad to that level?
I do not support Iran’s actions; neither do I support increased American sanctions. Whatever response America takes, it needs to be quick and decisive. An ill-planned, knee-jerk economic reaction may backfire and end up hurting us financially or even lead us into war. That would be Ahmadinejad’s dream. To him, war would be a gift to America from Persia, with love.
Ask the cupcake lady
This is my last column of 2011, which has been a good year to write political commentary. We’ve seen Democratic Wisconsin lawmakers go for the cheddar, O’bama explore his Irish roots and Occupy Wall Street get sponsored by Unilever. Here’s hoping 2012 will be as good or better and, since it’s a presidential election year, I feel pretty good about the odds.
I recently watched the Jerry Seinfeld comedy special, I’m telling you for the last time. Recorded before 9/11, it featured some of Seinfeld’s classic routines, including a few about air travel. While most of them could have been written recently, one bit dealt with shaving in an airplane bathroom. Thanks to the heightened security of the Transportation Security Agency, gone are the days of shaving with a disposable razor while flying. After all, that much shaving cream would never be allowed to pass through security.
Airport security is getting out of hand. Nowadays almost anything is considered a risk if it has a liquid base and weighs more than two microns. I find this ironic given that the average human body is composed of about 60 percent water. It’s a wonder that people are allowed to board a plane at all. That’s probably because officials at the TSA don’t have a grasp of basic physiology.
I read a news report the other day about a woman who had a red velvet cupcake confiscated by an airport TSA agent. The reason? The agent “told her its frosting was enough like a gel to violate TSA restrictions on allowing liquids and gels onto flights to prevent them from being used as explosives.”
Thank you, Betty Crocker, for your vigilance in protecting our skies from the perils of cream cheese frosting on red velvet cupcakes. Air travel is safe once again thanks to your quick thinking.
Unfortunately, confiscating a cupcake is not the worst accusation to hit the TSA this holiday season. In early December, an 84 year-old woman with heart problems and an implanted defibrillator travelling from New York to Florida asked to skip the body scan and voluntarily submitted herself for a pat down instead. She received neither; rather, two female agents took her into a private room where they strip-searched her.
What, did they think her dentures were lined with C-4 instead of Sea-Bond? No, kids, grandma may not have gotten run over by a reindeer, but she was humiliated by government agents. The TSA has since apologized but maintains she was never strip-searched.
To those of you who realize these are two examples of government intrusion but think you are ok because you rarely fly, I say, think again. Now the TSA has a program that will bring all the joys of airport security to you without the pesky plane ride at the end. It’s known as the VIPR program, which stands for the Visible Intermodal Prevention and Response, and it is already at work.
According to the L.A. Times, there are currently 25 VIPR teams that “have run more than 9,300 unannounced checkpoints and other search operations in the last year.” One team was in North Carolina. checking train passengers after the recent Carolina Panthers and Atlanta Falcons game. At the Charlotte Amtrak station, three agents and a chemical detecting dog checked passengers for concealed nuclear materials. Not surprisingly, they didn’t find any. Common sense would have told them that the only bomb in Charlotte that day was the Panthers’ second half performance.
Is this what a free society looks like? Not in the least. In this post-9/11 Orwellian world, freedom is constantly being compromised in the name of safety, and no agency is more effective at it than the Dept. of Homeland Security.
Is Secretary Janet Napolitano bothered about these intrusions committed by her agents? Apparently not. Instead, she is upset with Congress for “turning a deaf ear to her pleas not to slash DHS’s” budget. Napolitano is turning a blind eye to the violations of personal privacy and freedom that are committed by the TSA. After all, it’s for our own good.
Therefore, to anyone who doesn’t like the treatment they receive from the TSA, let them eat cake. Just not the cream cheese icing.
