Taxes


By: Brian Sikma

Buried deep within the verbosity of the 1,990 page healthcare reform bill meandering to passage in the Democrat controlled Congress on Capitol Hill, is a significant provision that will cost the American people billions of dollars more in bailouts.  The recipients of this bailout will be unions such as the AFL-CIO and the Service Employees Internal Union.  These unions are struggling to sustain the insurance plans they have provided for retired union members.  By seeking to make the federal government the backstop for any insurance insolvency they face, the unions are refusing to acknowledge that they are the ones responsible for the situation they now find themselves in. 

Other provisions in the bill give unions standing to advise the Secretary of Health and Human Services on healthcare matters and participate in some policy-making processes.  As programs are developed and contracts awarded as part of the massive reshaping of the nation’s healthcare system, it will be very hard for non-union organizations and businesses to effectively compete and win the new contracts.  If these unions cannot responsibly manage their own insurance programs, nothing makes them qualified to assist in a nationalized health insurance effort. 

Writing in the Huston Chronicle, a Texas-based attorney and healthcare expert has effectively sounded the alarm to the wide array of dangers posed by these relatively unknown and obscure provisions.

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By: Brian Sikma

In order to be mainstream and successful, American political candidates and office holders must profess a strong faith in freedom and declare in resounding terms their belief in the idea and principle of liberty.  Yet often two very different understandings of freedom seem to be present when opposing sides, the right and left, offer their policy proposals to the American people.  Not every opposing, or competing, set of solutions or proposals find themselves rooted in two distinct understandings of freedom.  But often enough it is quite clear that although two very different policies are advocated for with the same language of freedom, it is not possible for the advocates to be sharing the same understanding of that principle.

As our nation continues to struggle economically, the economic and fiscal proposals outlined by President Obama and the Democrats in Congress on one hand, and House Republicans and conservative thinkers on the other hand, give us an insight into the ramifications of competing understandings of freedom.  Although both sides offer us their plans by saying that they are consistent with freedom, it could well be that each side is talking past the other by agreeing on the terminology but not sharing in the same definition.

It is not possible for a plan that involves stimulus plans that must be paid for either by debt or higher taxes, and arbitrary bailouts that are sometimes forced on companies and give the federal government the power to pick winners and losers in the private sector, to be consistent with freedom when freedom is understood to mean the liberty to pursue one’s own choices consistent with a moral order.  Freedom of opportunity and the freedom to rise to one’s full level of potential and meet one’s own destiny requires that government not interfere with and over regulate individuals as they pursue this goal.  Freedom is not a right to do whatever you want to do, it is a right to do what is right.

Those who advocate for stimulus plans, bailouts, and bigger government do not share this view that freedom means freedom of opportunity and the freedom to live up to one’s potential.  In their view, freedom means being free from certain pressures and restraints like individual responsibility and fiscal discipline.  It means an equality of outcomes regardless of the varying levels of investment put in by different people.  It means that we have a “freedom” to achieve the same level of subsistence, no less, and certainly no more.  Using your talents and work ethic to get ahead, to set goals for yourself, and to achieve great things and improve the lives of those around you is not allowed under this very narrow view of freedom.  Just as this view removes the pressures of risk and limits the level of responsibility one must assume, it also imposes a firm and unyielding ceiling on what individuals can do.

When government turns the right of opportunity into a “right to succeed” it must impose a basic floor that allows everyone to have equal, or nearly equal, resources and assets.  But whenever a floor is imposed, whenever a basic minimum of tangible assets is determined to be a right, there is also a cap and a limit imposed on how far one can rise above the mandated minimum.  If failure is unacceptable or even illegal, so is success.

To apply these two distinct understandings of freedom to an issue, let’s consider the matter of Fannie Mae and Freddie Mac. To the left, these entities were expanding freedom by making home ownership more accessible and more common by relaxing credit standards and encouraging-and in some cases mandating-that lenders make loans to individuals who would have normally been denied a loan. The program was a success at expanding “freedom” because it resulted in more Americans owning homes, never mind the fact that it did so by placing them in homes that they could not afford and put a tremendous amount of stress on the mortgage industry.

Conservatives viewed Fannie and Freddie as antithetical to freedom because they coerced banks and other lenders to make loans to people who’s financial standing was not yet strong enough to sustain a mortgage, even a modest one. They believe that lenders and their depositors should be free to decide how much risk they want their assets to assume as part of an investment.

If you work for your assets, then you should have some say in how those assets are maintained and invested. The theory of owning your own property actually means something to conservatives.

This does not mean that conservatives mean that people should not be able to obtain mortgages and start on the path of home ownership.  It does mean that conservatives want people to be responsible enough to work hard and earn the status of home ownership, not be handed the opportunity at the expense of someone else’s success.  People value what they earn, and they take care of what they work for.

To the left, freedom means helping people “get ahead” even when that means mandating that other people act against their own interest and against the best interest of the system (in the case of Fannie and Freddie, the loan and mortgage system). To the right, freedom means giving people the opportunity to actually own what they own, and have the ability to pursue upward mobility and set and achieve personal goals-be they educational, financial, or something else-without the government telling them what they can and can’t do.

As the American people sort through the speeches, proposals and actions that surround the debate over the economy and what to do about it, they should bear in mind these two very different interpretations of freedom.  One definition was realized in the founding of our country, with the seeds of this mature tree being planted long before 1776.  The other definition has been around for some time, too.  It has not always been labeled freedom, but well meaning and yet misguided individuals have often tried to persuade people that equal outcomes, and the comfortable chains of paternal government, are the highest form of liberty.  Philosophers can hold either view and harm few, government leaders can hold only one view and be serving the best interest of the people.

In order to survive this economic downturn and climb out of this economic morass and return to the upward leading road of economic prosperity, the American people will need to stand and let their leaders know that while some government action is necessary and warranted, a far reaching expansion of government’s role in business, finance, and personal economic choice will not be tolerated.

The freedom of our founding is not an easy freedom.  It is only worth something to vigorous, rugged, rough and tumble people.  It does not prevent failure, but it does allow for unparalleled  success and it does allow you to work hard, earn, save and invest and own your own property and prosperity.  It allows you to fulfill your own destiny and help your community as you see fit.  We are Americans, and we have chosen true freedom in the past and we must do so again today.

WPA Poster

WPA Poster

By: Brian Sikma

Over the weekend Larry Summers, President-elect Obama’s director of the National Economic Council, made the claim that the national unemployment rate will not climb above 10% thanks to the stimulus bill that is being negotiated in Congress right now.   Not only will unemployment not climb above 10% according to Summers, but the relief provided by the $825 billion spending bill will be felt immediately as “people see more income in their paychecks.”  These predictions come a little while after it was announced that an early version of the stimulus bill would entail the hiring of 600,000 new government employees.

Congressman Mike Pence pointed out in an interview with the Howey Political Report that he believes government spending will not bring our country out of this economic downturn.  To back up his point Pence cited Amity Shlaes work analyzing the Great Depression, “The Forgotten Man“, where Shlaes makes the case that the Great Depression was prolonged by inconsistent government attempts to lift the economy out of its depressed state.  Government spending that threw money at various problems in an attempt to create employment did not work then and it will not work today.

The greatest legacy of the New Deal programs that were supposed to end the Great Depression is that they outlived their original need and played a major role in inserting the federal government into areas that were formally the realm of states or the private sector.  While many of the alphabet soup agencies and measures have become paragraphs in history books (arguably the programs and their outcomes should be studied on more than a paragraph level), some of them remain with us today.  Social Security is a prime example of a program that was designed for a specific purpose but ended up outliving that purpose and morphing into a general government-run retirement guaranty program.  Suddenly eliminating Social Security is not the point here, the point is that we need to be careful during this extensive economic downturn that we do not create programs that over the long term are unsustainable and very vulnerable to political exploitation.

Back to the present proposal to spend $825 billion of your money and the contention that it will put money in your pocket and save existing jobs and create new ones.   The Government does not have any money of its own.  Yes it has printing presses, but ultimately money comes from one place and has two routes of getting to the government.  First, the government takes it from you by taxation.  Second, the government takes it from you by inflation.  With taxation the money transfer is direct: from your pocket to the government’s pocket.  With inflation the transfer is indirect, but just as effective.  The government prints (or the electronic equivalent thereof) more money and increases the amount of money moving around the economy.  Since this money is not backed up by new productivity or the creation of work, it means that its value must come from something else.  That something else is money in your pocket that got there because of your hard work.  By printing more money the government makes the money you earned as a result of your work literally worth less than it was when you earned it.

Assuming that government spending will jolt the economy out of a downturn fails to consider where the government gets the money from in the first place and what the costs of pursing this course are as compared to a more freedom embracing mode of economic recovery.  If Congress does pass the $825 billion proposal being bantered around right now, it will have effectively doubled the amount of discretionary spending it deals with on a yearly basis.  This is no small thing.  Additionally, it will be spending money it does not have to produce results that cannot be obtained by this activity.

The jobs that are created as a result of this injection of money into the economy will not be more than the jobs that could be created by giving permanency to the 2001 and 2003 tax cuts, reducing the corporate tax rate to 25%, and allowing the American people to keep more of their hard-earned money.

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If you’ve kept an eye on the U.S. Senate this week you know they’ve been debating the merits of the largest tax increase in human history.  Only in the Senate would the merits of a tax increase running into the trillions of dollars be given serious consideration.  

Of course, supporters of the tax increase don’t call it a tax increase.  The call it a ”cap-and-trade” policy that will help the country fight global warming.  What they don’t like to talk about, and what has taken the Heritage Foundation, among others, to figure out, is that the Lieberman-Warner climate change bill contains mandates for a new government bureaucracy (actually one of 45 new bureaucracies) that will oversee the operation of 85% of the American economy.  The last time a large country practiced top-down management of an economy millions of people suffered and, ultimately, the economy collapsed on a massive scale.

As of today, the Senate failed to end debate on Lieberman-Warner (a bill, by the way, who’s basic policy concept is endorsed by John McCain) and so it is highly unlikely that the Senate will continue to debate this bill.  It takes 60 votes to end debate on a particular matter and only 48 Senators voted to end debateand move to the next phase, which would be an up or down vote on the entire bill.  Unfortunately, Sen. Evan Bayh (D-IN) voted to end debate and keep the measure moving forward. 

Read more below the fold.

Over the past few days the Heritage Foundation has been posting on its blog a state-of-the-day analysis on the impact of Lieberman-Warner on a particular state’s economy.  Yesterday the state they focused on was Indiana.  According to their research, Indiana would lose 11,917 jobs in the year 2025 alone as a result of “cap-and-trade” policies to combat “global warming”.

Below is the text of a letter that I submitted to Sen. Richard Lugar on Wednesday presenting to him the case for why he should oppose Lieberman-Warner.

Dear Sen. Lugar:

As a staunch supporter of Republican candidates and as one who deeply cares about the future of this country, I am writing to you in regard to a significant piece of legislation that relates to climate change and the American economy. The legislation, submitted by Senators Lieberman and Warner and titled America’s Climate Security Act of 2007, contains serious flaws premised on dubious assumptions about the best way to combat climate change.

Under S. 3036 the American economy would be subjected to a new and unprecedented era of regulation that would burden our industries, cripple our current energy market, and saddle many average Americans with indirect taxes in the form of higher energy bills and indirect cost of living increases. Not to be overlooked are the thousands of jobs that would be lost as a result of the new federal regulations.

While proponents of S. 3036 declare that the revenues from the cap-and-trade program will be used to establish new “green-collar” jobs, what they fail to acknowledge is that the hundreds of pages of regulations and the astronomical collective impact of tax increases (in the form of carbon credit auctions), a significant drop in GDP, and soaring energy prices (according to the EPA gasoline prices could increase more than 53 cents simply as a result of the policies contained in this bill) will combine to create an economic nightmare for our country.

The theories of collective central control of industry and commerce were discredited by the spectacular failure of the old Soviet Union, yet today Lieberman-Warner sets up a regulatory body that will regulate 85% of the American economy. This proposed venture stands in stark contrast to America’s heritage of freedom and free enterprise. A system where entrepreneurs are free to dream and pursue a better way of doing things; a system where hard-working, freedom-loving and God-fearing folks can make a better life for themselves and their children.

Senator, I submit to you that we cannot tax our way to prosperity or regulate ourselves into a robust economy. The provisions of Lieberman-Warner are inconsistent with the American dream and the ideals of our founding. America doesn’t need more government regulation and interference. America needs strong leadership that will reject policies and proposals that will lead to failure and hardship. Senator, I humbly and sincerely ask you to cast a “Nay” vote on the Lieberman-Warner climate change proposal.

Sincerely,

Brian Sikma

By: Brian Sikma

“Congressman Donnelly Opposes Democratic Budget” states the headline of the most recent press release from Rep. Joe Donnelly (D). To be strictly and technically accurate, that statement is true. In a roll call vote on March 13, Donnelly (and the two other Indiana Blue Dogs: Rep. Baron Hill and Rep. Brad Ellsworth) voted against HCR 312, the Democrat supported budget resolution for fiscal year 2009.

HCR 312, the Democratic budget resolution, is the largest tax increase ever. If enacted, taxes will rise by about $682 billion. The Heritage Foundation did a study of how those taxes would impact individual congressional districts both from a tax standpoint and from an economic standpoint. Tax increases have two affects, first, they directly take money from the taxpayer, second, they have economic costs like job losses and increased production costs which are passed along to the consumer in the form of higher prices.

In Indiana’s 2nd Congressional District, Rep. Donnelly’s district, the impact of the tax increase would be an additional $1,618 in taxes per taxpayer. Counting the economic costs would mean that individual taxpayers are out a total of $3,148 per capita as a result of the tax increase. It is also estimated that 2,111 jobs would be lost in the 2nd District as a result of the Democrats budget. Click here to see the data for your own congressional district.

To look at the entire situation surrounding that dismal budget resolution, however, presents a slightly different picture. Rep. Donnelly and his fellow Blue Dogs have proclaimed themselves to be fiscal conservatives. At times they have cast conservative votes. There is a difference though between casting occasional conservative votes or even just conservative votes on key votes, while neglecting the overall series of actions that a true fiscal conservative would take.

On March 12 the House considered and voted on a resolution to consider HCR 312, the budget resolution. That March 12 resolution was not the budget resolution, but if it had been defeated it would have at least slowed down the passage of the actual budget resolution. On that roll call vote, Joe Donnelly, Baron Hill, and Brad Ellsworth joined their Democratic majority and voted to allow the House to consider the fiscal year 2009 budget resolution.

Here is why that vote was not a good vote: everyone who voted on that measure realized that even if they voted against the actual budget resolution, the tax raising unemployment generating budget resolution would pass because a Democratic majority controls the House. Therefore, if one was going to be wholly principled on the matter, he or she would have to vote against the initial resolution and the actual budget resolution.

Donnelly and his fellow “conservative” Democrats were only half-principled on this matter of the budget and it is disingenuous of them to portray themselves as advocates of the hard-working middle class American.

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