Who Really Pays?

Just as I predicted, no sooner did we agree to feed the insatiable beast of government, Democrats were clamoring for more.  Nancy Pelosi is already casting her lustful eyes on even more tax increases, and President Obama immediately asserted that any spending cuts would necessarily be accompanied by more taxes.

See? The only way to truly understand Washington is through the addiction model.  We know that Obama said to John Boehner in the negotiations over the fiscal cliff, "we do not have a spending problem."  How many of us have seen the friend or relative reeling and reeking of gin assert, "I don't have a drinking problem," or "I can quit anytime I want."  Right.

Washington has an uncontrollable spending addiction.  It will never stop until we stop enabling it.  And right now, most of the Republicans are enablers (mostly because many of them secretly like to spend other peoples' money, too).  Kudos to the few brave and principled souls like Ted Cruz, Rand Paul, and Marco Rubio that had the courage to say no.  Because this deal will cost a lot, will not solve the debt and deficit problem, and the Big Government crowd has vowed to come back for more.

The Democrats, led by Obama, asserted that this tax increase was targeted at "the rich" who need to pay "just a little bit more."  But who really bears the brunt of this?  To be sure, some of it will be borne by the rich.  But the real consequences are more insidious.  You see, in the real world, people do budgets.  People work hard and take risks to achieve a certain lifestyle and a certain level of success.   And most business people have a certain standard of living that drives and motivates them, which is funded by after tax cash.

So, let me give you a few anecdotes of conversations I have had recently with actual people that run professional service firms.  Both have worked long and hard to build successful businesses.

One told me flat out that he was going to lay off at least one, maybe two people to make up the difference.  Both of these people were middling employees anyway, but the tax burden was enough to  make the decision to let them go more urgent.  This person told me, "I'm just not going to take the hit.  I've worked too hard for too long."

A second person, who is a fastidious personal financial planner, and budgets and tracks his family expenses monthly and who is VERY GENEROUS with his charitable contributions, told me, "At the end of the month, the spreadsheet has to balance.  The extra tax will come out of my charity."  So there you have it.  Government will now get what a private charity would otherwise get.

A third person, who runs a business at the edge of the Obamacare requirements has already laid people off to stay under the employee limit, and is working to outsource functions they would otherwise do themselves.  So Obamacare is incenting them NOT TO GROW.

I know these are just anecdotes, but when you get enough anecdotes, we call that data.  The Big Government crowd can crow all they wish about "the rich" paying their fair share.  But when you hit them with new taxes the parties that actually feel the pain are the middle class.  It's the laid off employee, the charity that will have to do with less, and it's the people that don't get hired because the business has been motivated to shrink.

Why Republicans can't make this argument is beyond me.  Until they can, Big Government will take more and more.  It doesn't think it has a spending problem.

Pantsed

In this iconic picture of Lucy, Charlie Brown and the football, can anyone guess what role John Boehner played last week?  In an incredible feat of incompetent negotiating, Boehner conceded a two decade Republican position on taxes and got NOTHING in return.

As I asserted in my prior post on the fiscal cliff, to understand the Statists, you need to view it through the addiction model.  Addicts and alcoholics will promise ANYTHING to get their next fix.  Similarly progressives will made all sorts of pledges on FUTURE spending cuts in order to get their fix (increased taxes) TODAY.  The taxes are immediate.  The cuts....well, they never quite get there.  They did it to Reagan.  They did it to Bush 41.

You knew it was going to end badly for conservatives when Boehner after the election stated, "Well, we're only 1/2 of 1/3 of the government."  Later, he adopted the language of Left and said that taxes would have to go up on "the rich."  Can you imagine Nancy Pelosi or Harry Reid making such statements at the outset?  Nonsense.  The correct position would have gone something like this, "Yes, Obama won the election, but the people also chose to maintain the body in which the Constitution vests taxing and spending authority in GOP hands.   President Obama's proposal to raise taxes, spend $60 billion MORE, and demand that Congress hand over unlimited authority over the debt ceiling to the executive branch shows how irresponsible and contemptuous the president is on fiscal matters and we have to be the adults in the room."

There were two positions that the GOP could have taken that were superior to where we ended up.  The first, and the one advocated by this writer, would have been to pass Simpson Bowles.  That would have put Obama in a terrible political box since it was HIS commission's proposal.  I wrote to my Congressman proposing that and two days later, he (along with Congressman Lapinski) proposed exactly that.   The second tactic would have been to allow the fiscal cliff to happen, and raise taxes on ALL taxpayers.  That would have had the double benefit of all taxpayers feel the brunt of the Big Government costs that they supposedly voted in and ensured there would be meaningful spending cuts.

Instead, Boehner and McConnell chose surrender.  I was so incensed that I tweeted conservative pundit Michelle Malkin, who commented on my tweet and retweeted it.

Michelle Malkin @michellemalkin No, they are pantsing US. RT @mkos66:@michellemalkin Boehner and McConnell got totally pantsed. 02:29 PM - 01 Jan 13

Best and Worst of 2012

No question that 2012 was a rough year for us conservatives.  Despite the worst recovery in the post war era and despite running moderate candidates for president and for our local congressional seat, we lost both races, enabling progressives to strengthen their claim that resources should be taken from the private sector and turned over to the public sector.  Our country remains as divided as it has ever been since the Civil War.

Still, there were some glimmers of hope and things to be pleased about in 2012--in the arts, music and sports.  So here is my annual Best and Worst of for 2012.

Best News of the Year:  The Housing Recovery.  After several years of precipitous decline, foreclosures, and several false starts, the housing market finally showed signed of sustained life.  Housing prices increased in almost all geographic areas, bringing at least some optimism to a segment of the economy that had taken such a tremendous beating.

Worst News of the Year:  Well, there was a long list to choose from.  But I chose the two Sandys:  Hurricane Sandy and Sandy Hook.  The first was a natural disaster, the second, a man made one, and one so horrific, I couldn't get my head around it. Curiously, progressives chose to respond to the Sandy Hook tragedy with an attack on the 2nd Amendment, notwithstanding the questionable effectiveness of gun control measures.  A more logical national conversation would have focused on the deplorable state of our treatment of our citizens with mental health issues and the fact that people with problems end up on the street or in prison.  That is a conversation worth having.

Best Nonfiction Book of the Year:  Behind the Beautiful Forevers by Katherine Boo.  The writing in this book was so good, I thought I was reading  a novel.   In America, we forget what real poverty is and this book about a family in a Mumbai slum reminds us that by world standards, our poor are not so bad off.

Best Fiction Book of the Year:  Coral Glynn by Peter Cameron.  This novel about a woman hired to care for a gentleman's ailing wife who then takes up with him after she passes was reminiscent of some of the best writing of Somerset Maugham.  Cameron connects superbly with the human emotions of loneliness, isolation, and realities of diminished expectations.

Best Film of the Year:  Lincoln.  Daniel-Day Lewis, Tommy Lee Jones, and Sally Field all turn in masterful performances in Spielberg's retelling of the story of emancipation.

Worst Film of the Year to receive critical acclaim:  Beasts of the Southern Wild.  I actually left this one early.  There is only so much viewing of a cute little kid being verbally abused that one can take.

Best Album:  Babel by Mumford & Sons.  Close your eyes and you and imagine yourself in an English Pub, listening to a modern day version of The Marshall Tucker Band.  I Will Wait is just a fantastic number.  I can't wait... to see them on tour.
www.youtube.com/watch?v=rGKfrgqWcv0

Biggest Loss:  Isaiah Sheffer, founder of Symphony Space.  I have listened to Selected Shorts for over two decades, on radio and podcasts, where actors read short stories live on stage.  I particularly loved Isaiah Sheffer's readings and will miss his sonorous voice, his wit and his devotion to the arts. Attending a live reading of his was on my bucket list and sadly, I will not have that opportunity.  His work definitely enriched my life.

Worst of America:  There were a number of strong contenders in this category from the Penn State scandal to the Benghazi Scandal.  But my vote goes to Sandra Fluke, who burst onto the scene at the DNC, demanding that the taxpayer underwrite her sex life,  evidently forgetting that the type of sexual activity that puts a woman at risk requires two people and that her significant other also has financial responsibility for all this.

Best of America: Is a young man who you do not know, but who I ran into yesterday.  I got to know him when he was a high school freshman.  He is a graduate of Boys Hope Girls Hope (www.boyshopegirlshope.org) in Chicago, a not-for-profit that provides support (including residence) for at risk kids.  This young man had an absentee father and a drug addicted mother.  He was an athlete in high school and was admitted to a Big 10 school.  Despite the hand he was dealt, he had the most positive attitude I've ever seen, always friendly, always sporting an infectious smile.  He told me he's graduating this spring and already has a job lined up with a major insurance company.  With all the craziness, anxiety, and strife in the world, when you see a kid like that up close, it gives you hope.

Have a great 2013!

Just Do It

Go ahead.  Do it. Go off the cliff.

That is almost the unanimous view of my conservative friends, despite the warning that it may trigger a new recession.

Why?

3 reasons.

First, there is almost a complete lack of faith in John Boehner's ability to negotiate with Barack Obama.  Spooked by the election results, he immediately signaled his willingness to roll over on taxes and several other Republicans have chimed in.  Grover Norquist is being treated as the Grand Wizard of the KKK.  Even Bill Kristol has gone wobbly.  And what will the results be?  Almost inconsequential for the budget.  Letting ALL of the Bush tax cuts expire runs the government for about 8 days.  The Democrats have proposed NO meaningful adjustments to entitlements.  Without that, we are getting nothing for our concessions.  Boehner simply is not up to the task.

Second, any tax increase will only be the start.  To understand this, you need to apply the addiction model to government.  Government is addicted to spending.  Addicts will say or do ANYTHING to get their next fix.  They always promise that they will quit tomorrow.  It is no different with government.  Obama will promise some token cuts to go into effect at some future date, or will promise to slow increases....if he can have his fix today.  He will pocket the money, but the cuts will never come or will be reversed out or will be managed by some budgetary accounting gimmicry.  And then they'll come back for another fix.  They always do.  They key to understanding this concept was Obama's assertions during the debates.  For years, he carped about the wars Bush waged that weren't paid for.  Then, in the debates he promptly asserted that half of the money "saved" (that we didn't have in the first place) from winding down the wars would  be used to "invest" in much -needed infrastructure.  Huh?  Setting aside the concept that the "stimulus" was supposed to be used for that purpose, how do we reallocate money we didn't have in the first place for other spending?

Third, assuming that we as a society have decided that Big Government is what we want, then we ALL have to share in the pain.  The "rich" and the middle class and the lower class.  We ALL need to share in this and feed Big Government because there simply aren't enough rich people to satiate the beast.  It is easy to tax YOU to pay for MY government goodies.  But if we ALL have to pay, perhaps we will make different choices at the ballot box.   Everyone needs to feel what it feels like to have government taking more of what they earn.  Then, if we are still happy with this state of affairs, so be it.  But we ALL need a dog in this fight.

In the final analysis, this should be an OK deal.  Obama would get most of what he really wants---higher tax rates and big reductions in the military.  The Republicans would get reductions in social spending.  What's not to like about this deal?

Unless we choose the fiscal cliff, we will get immediate tax increases and illusory cuts.

We might as well hold hands and jump together.

Catastrophe

I have slept little the last couple of nights - Monday night because of the anxiety over Tuesday's election, and tonight because of the reality of what has happened.  Charles Krauthammer tried to put a good spin on it and said this election was "unusual," that Romney was an "East Coast liberal" from a weak field of candidates and that "the future of the Republican party is bright."  I see this very differently.  Last night could very well have changed America permanently.

Think about the enormity of what has happened.  Obama was re-elected despite a moribund economy, persistently high unemployment, a chronic housing mess, youth unemployment at unthinkable levels.  Business formation is at historical lows.  And in the face of this, Obama promised more debt, choking regulation and higher taxes.  Overseas, our traditional alliances are in tatters, Iran moves ever closer to a nuclear weapon, Russia and China undermine us at every turn.  Horrifyingly, our embassy in Libya is overrun by terrorists and we do nothing.  Obama coldly explains it away as "not optimal."

And we rehired him.

I went to bed last night thinking about the last time I visited the neighborhood.  When I grew up, it was a fine, low crime, working class neighborhood of hard working Eastern European immigrants trying to scratch out a living so their children could have it a little better.  Today, it is crime and gang infested with burned out buildings and seedy stores.  Some things look vaguely familiar but the reality is that neighborhood I grew up in is gone.

So it will be after eight years of Barack Obama.   We may no be able to recognize the America we loved, the America of freedom and unbounded opportunity.

What will the next administration bring?  One only has to look at the last four.  Obama is no Clinton.  He is not an accommodationist.  He is a true believer in a slightly toned down Marxist model.   Capitalism exploits workers.  If capitalists gain, workers lose.  And he applies that thinking globally.   America uses a disproportionate share of natural resources and exploits third world countries.  He is no believer in individual sovereignty.  In fact, I have challenged my liberal friends to show me that he has ever used the phrase "individual liberty" in any speech.   Crickets.

What will the next four years look like?  More Big Government. More spending.  More debt. More regulation.  The EPA is already preparing for its assault on any industry related to fossile fuels.   The DOL is already implementing union card check.  Taxes will go up.  Unconstrained, Obama would love to be at French levels, and without a distinction between ordinary income and capital gains-- for he has no concept of risk.  For Obama, earnings from capital are of a lower order than earnings from the sweat of your brow anyway.  We can expect a much smaller military--America's ability to project power will be a shell of its former self.  Obama will deliver on his promise to Russia and to liberals here-- more flexibility (translated- unilateral disarmament, especially of our nuclear forces).

Opportunity will shrink.  Faced with increased taxes, regulation, and less flexibility with their workforce, more business owners will simply opt out.  I spoke with one managing director of a private equity firm last week who told me privately that if Obama is re-elected, he will opt out.  He's made enough money.  It will simply not be worth it.  Atlas will begin shrugging.

As disturbing as Romney's loss was, I was even more discouraged by the loss of Robert Dold to Brad Schneider.  I was a supporter of Dold's, had gotten to know him over the past couple of years, and my daughter interned for him.  Dold was a sensible, moderate Republican, a business owner and good listener.  Schneider was basically an unemployed liberal drone (supposedly he had his own "consulting" firm that showed no income.  The 10th district was gerrymandered last go around and Dold lost by less than 3,000 votes.  Dold was EXACTLY the kind of sensible guy we needed in Congress and represented our district well.

How did this all happen?  I fear that we have reached the tipping point.  We have become Europeanized.  I truly fear that instead of the independent can-do people, we have become a passive "I want mine now" society.  Damn the next generation and damn the "rich."  I want mine now.  And as more and more Americans get accustomed to that government check, and there are fewer and fewer that actually create wealth, society begins to grind down.  That is precisely why Obama never even talks about a serious attempt to constrain entitlements, and why there was such a kerfuffle over Romney's 47% remark.  People will never vote to cut their own benefits.  And when the 47% inches toward 50%,  the insurer of those entitlements gets a permanent majority.

What will the next 4 years bring?  Much more government.  Much less freedom.  Almost imperceptible growth.  Business will tough and nasty.  We will have a smaller, less vibrant America.

Maybe permanently.

America in Trouble

"America is in trouble."  So opened Hedrick Smith at the Union League Club luncheon in Chicago that I attended last month promoting his new book, Who Stole the American Dream?  "We're not facing decline.  We're already in it," proclaims Mark Steyn in his book After America.  Although these writers come to the same conclusion--America is rapidly sliding toward collapse, the similarity ends abruptly.  They ascribe very different causes to America's malaise and suggest starkly opposing paths to attempt to arrest our decline.

Hedrick Smith (who's literary achievements include The Russians and The Power Game) claims that we have become two Americas (echo John Edwards?). "We are today a sharply divided country-divided by power, money and ideology," he claims.  Smith dates the beginning of this schism to the Powell Memorandum, written in 1971 by Lewis Powell before he became a Supreme Court justice.  In it, Powell warned the business community that it was under attack by consumer advocates, taxes, government regulation and trade unions, and that it had better wake up and smell the coffee.  Hence began corporate lobbying in a big way.

Smith asserts that this lobbying effort ushered in a series of legislative changes that enabled a well-heeled plutocracy to tilt the tables, disempower the middle class and enrich itself at the expense of the vast majority of Americans, who struggled while their standard of living eroded (Smith could be thought of as an intellectual supporter of the Occupy movement, if such supporters exist).  He spins the narrative that expounds on the familiar villains of the Left: rich people that have too much legislative influence and thereby get themselves unwarranted "tax breaks" (notwithstanding that we have the most progressive tax code in the developed world), the bankers as the sole cause for the housing crisis, the high cost of imperial overstretch, rapacious CEO's plundering companies and shifting jobs overseas, and the rise of the Radical Right.  He dismisses global competition as overblown and does not consider the wage effect of hundreds of millions of Chinese and Indians on world labor markets.  There is no mention of government's role in the housing crisis.  Nor does he even mention the effect that teacher's unions have had on our abysmal education system.   Smith is a good writer, but I found his lack of balance astonishing.  It seemed to me primarily a tome of Obama talking points.  He concludes with a set of recommendations for the future that few could disagree with:  renew manufacturing, buy American, create a more efficient military, push innovation and science.  But he is silent about the corrosive effect of a growing government.

Not surprisingly, Mark Steyn also concludes that America is in trouble, but fingers an entirely different cause.  While Smith's posits that America's slide is caused by class warfare--the "rich cabal" grabbed the handle of government and drained wealth from the middle class, Steyn indicts the growth of the federal government.   The insatiable taxing and regulating nanny state have drained wealth and ambition from our nation. "America has been thoroughly unbalanced: thanks largely to distortions
driven by government, we have too much college, too much 'professional servicing'--accounting, lawyering, and other activities necessary to keep the fine print in compliance with the regulatory state.  All of these are huge obstacles to making productive use of even our non-borrowed money and to keeping America competitive with the rest of the world."  In Steyn's view, it is the bloat of government that is grinding America down--- the explosion of "entitlements," taxes, and the regulatory burden of the feds.  America's drive to innovate has been replaced by the higher value of multiculturalism.  He cites the downgrading of NASA as a prime example, as it recently killed manned space flight and substituted as part of its mission to recognize Muslim contributions to science. Huh?
"To boldly go where no diversity outreach consultant has gone before!," he intones, "What's 'foremost' for NASA is to make Muslims 'feel good' about their contributions to science.  Why, as recently as the early ninth century Muhammed al-Khwarizimi invented the first hoary quadrant!"

In  a previous generation, government did some good big things--putting a man on the moon, defeat Nazis, construct and interstate highway system.  Now, not so much.  "The bigger government gets, the less it actually does.  You think a guy like Obama is going to put up a new Hoover Dam (built during the Depression and two years ahead of schedule?).  No chance.  Today's Big Government crowd is more likely to put up a new regulatory agency to tell the Hoover Dam it's non-wheelchair accessible and has to close."

For Steyn, the demons aren't the rich, but the government class-- the faceless bureaucrats that regulate us, tax us, and force us to comply, often with rules and regulations that nobody actually voted on, but were promulgated by some 20 something lawyer in the bowels of the Department of Labor.

"Edwards was right about the "two Americas," but not about the division: in one America, those who subscribe to the ruling ideology can access a world of tenured security lubricated by government and without creating a dime of wealth for the overall economy; in the other America, millions of people go to work every day to try to support their families and build up businesses and improve themselves, and the harder they work, the more they're penalized to support the government class in all its privileges."

America is in trouble, I believe.  While Smith makes some valid points--China has become an economic threat due to its currency manipulation, its intellectual property piracy, and its product dumping--he completely misses many factors in our slide.  Globalization, our failed education system, and the ever intruding government.  Steyn is closer to reality. Each day, government makes hard work and risk taking less and less enjoyable and less and less rewarding, choking the vibrancy that made this nation great.

Pity the poor entrepreneur, slugging it out while a legion of regulators and taxing authorities torment him or her.  Pity the poor working stiff, hustling in a tough, boring job, making $45,000 a year, while his neighbor gets to stay home and enjoy a total benefits package worth almost as much.

It a few days, we will have an opportunity to choose whose thesis is correct.  If we vote for Obama, it will be Smith's and we will continue to policies of taking more from "the rich," downsizing our military, empowering unions and regulators, and growing government.  If we choose Romney, the results are less clear, but we will at least put a brake on hurling headlong into an ossified Euro-nanny state, drowning in its own debt and stuck in perpetual stagnation.

The Narrative

We are a little more than a week away from a historic election-- one in which we will choose between a European social democracy or a more free market oriented system.

This blog has been critical of President Obama, mainly for his disdain for business, the capitalist system, and individual liberty.  No statement by Obama encapsulates that more than his infamous, "You didn't build that."  He consistently derides wealth creation with comments like, "After a certain point, you've made enough money."

But even more distressing is his penchant for creating narratives that don't fit the facts.  He did this early on in his presidency when he jumped to the conclusion that the Cambridge police "acted stupidly" when they dealt with Henry Louis Gates.  Gates had a hissy fit while the police officer ascertained his identification when he tried to gain entrance to his own home.  Obama jumped to the conclusion that the Cambridge police were engaged in racial profiling when in fact they were simply following protocol.  Obama cooled the matter with his silly "beer summit," but the damage had been done.  Obama had invented a story.

Likewise, during the tragic shooting of Congresswoman Gabrielle Giffords, Obama ascribed its root causes to the vitriol of the political discourse.  The left wing media landed on this immediately and began to blame Sarah Palin for putting out ads with districts with bullseyes on them.  It turned out that the political discourse had nothing whatsoever to do with the shooting of Giffords.  It was simply a single mentally ill individual with no political motive.  Again, Obama takes facts and makes up a story to try to fit his agenda.

But now his yarn spinning has taken a deadly serious turn.  For weeks after the attack on our embassy in Libya, his administration tried to peddle the story that the murder of our ambassador and three other Americans was a consequence of a mob protesting an anti-Muslim film that got out of hand.  Susan Rice, Hillary Clinton, and Obama himself railed for weeks afterward that this film was disgusting and in concert, they clearly tried t o mislead the American people.  The facts now show that there was no "mob" and we knew early on that this was a terrorist attack.

Why did the administration falsely ascribe this attack to the film?  Because it fit the narrative.  The liberal script is that whenever there is aggression, it is America or Americans that are to blame.  It could not be that radical Islam is the aggressor.  We provoked them.  Is it any surprise that despite Obama's vows to bring the perpetrators to justice, the only person sitting in jail is the fool that made the film.

Taken together, these incidents tell us that Obama has a ready made view of the world that he attempts to mold facts to fit.   As we get closer to the election, I hope voters will taken these into account and decide that we want a commander in chief that deals with facts as they are, not as they would wish them to be.