Major candidate's tax plans compared

Greg Mankiw, an economics professor at Harvard, walks us through the following exercise:

Let me try to put each tax plan into a single number. Let's suppose Greg Mankiw takes on an incremental job today and earns a dollar. How much, as a result, will he leave his kids in T years?

The answer depends on four tax rates. First, I pay the combined income and payroll tax on the dollar earned. Second, I pay the corporate tax rate while the money is invested in a firm. Third, I pay the dividend and capital gains rate as I receive that return. And fourth, I pay the estate tax when I leave what has accumulated to my kids.

Let t1 be the combined income and payroll tax rate, t2 be the corporate tax rate, t3 be the dividend and capital gains tax rate, and t4 be the estate tax rate. And let r be the before-tax rate of return on corporate capital. Then one dollar I earn today will yield my kids:

(1-t1){[1+r(1-t2)(1-t3)]^T}(1-t4).

For my illustrative calculations, let me take r to be 10 percent and my remaining life expectancy T to be 35 years.

If there were no taxes, so t1=t2=t3=t4=0, then $1 earned today would yield my kids $28. That is simply the miracle of compounding.

Under the McCain plan, t1=.35, t2=.25, t3=.15, and t4=.15. In this case, a dollar earned today yields my kids $4.81. That is, even under the low-tax McCain plan, my incentive to work is cut by 83 percent compared to the situation without taxes.

Under the Obama plan, t1=.43, t2=.35, t3=.2, and t4=.45. In this case, a dollar earned today yields my kids $1.85. That is, Obama's proposed tax hikes reduce my incentive to work by 62 percent compared to the McCain plan and by 93 percent compared to the no-tax scenario. In a sense, putting the various pieces of the tax system together, I would be facing a marginal tax rate of 93 percent.

It should be pretty obvious that the only people who should legitimately call themselves democrats are either billionaires or poor people; both groups are the only ones that will benefit under Obama's plan. Billionaires are what you could call "recession-proof"and can therefore afford the high cost of social engineering; and if you're poor you have nothing to lose under any tax scheme. It's interesting how businessmen such as Bill Gates and Warren Buffet(there are many other examples) belatedly find the virtue of socialism after they've spent their entire lives accumulating vast sums of wealth in a decidedly un-socialist manner. It reminds me of an aging rockstar who has spent 25 years chasing booze, drugs and women only to become a spokesperson for abstence after their liver has failed.

A filibuster-proof democratic Congress aligned with a President who's scant 2 year Senate voting record that is the most liberal in that chamber will be able to deliver the one-two punch to our wallets, for our own good of course. Surely when Obama speaks of change he really means "redistributive change." When that happens, we can all be equal and poor together.

If the Democrats succeed in keeping the wool over the eyes of the electorate long enough to win the White House and Obama becomes our President, I will respect the office, if not the man. But I would strongly recommend that Senator Reid, Madame Speaker Pelosi, and President Obama read the following essay by somebody who's been there too; and remember that it is "not yours to give."

The rise of the Welfare State

The Claremont Institute put out an excellent piece that chronicles the rise of big government since 1940.

One of the Office of Management and Budget's (OMB) historical tables tracks annual federal outlays beginning in 1940, using enormous categories ("superfunctions") composed of smaller but still vast "functions." The two main superfunctions, National Defense and Human Resources, have together accounted for at least 61.7% of federal outlays in every year since 1940. The superfunctions that account for the rest of federal outlays are:

• Physical Resources (e.g., Energy, the Environment)
• Net Interest on the National Debt
• Other Functions (e.g., Science, International Affairs, Agriculture, General Government, and the Administration of Justice)

If we group those three final superfunctions as "Everything Else," we can see the changing makeup of the federal budget over the past 67 years in Chart A.

OMB's Human Resources superfunction is made up of the following six functions:

• Education, Training, Employment, and Social Services
• Health (excluding Medicare)
• Medicare
• Income Security (excluding Social Security)
• Social Security
• Veterans' Benefits and Services

Let's leave the final category off the list, since veterans' programs don't figure prominently in the arguments liberals and conservatives have conducted over the size and scope of government. What's left is an imperfect but useable approximation of the welfare state. (The chief imperfections are that we're looking only at federal expenditures, which leaves out state and local welfare state spending; and that the costs imposed by regulations, like the minimum wage laws, don't show up in the federal government's outlays.)

Anybody that says war is bankrupting our nation needs to take a good look at the chart above. Human resource outlays account for approximately 65% of federal outlays, while national defense outlays account for approximately 20%.

The long political advance of liberalism has coincided with the refusal of any prominent liberal politician or writer to specify or even suggest the welfare state's ultimate and sufficient size. Instead, liberals have denounced our shockingly insufficient welfare state every year since the beginning of the Progressive era. When Max Sawicky did so in 2004, real, per capita expenditures on Human Resources were more than twice as large as they had been in 1975.

Yet it would be absurd to argue that the sort of economic insecurities the welfare state exists to alleviate were twice as severe in 2004 as in 1975, or that America had been little better than a Third World country during Gerald Ford's presidency. The percentage of Americans who owned their own homes increased between 1975 and 2004 from 64.4% to 69.1%. Average life expectancy became 5.2 years longer. In 1975 the proportion of Americans aged 25 or older whose educational attainments included the completion of at least four years of high school was 62.5%, and 13.9% had completed at least four years of college. By 2004 the percentages were 85.2% and 27.7%, respectively.

Numerous consumption items that had been luxuries or Research-and-Development daydreams in 1975 were parts of the furniture of American life in 2004, even for millions of Americans with incomes below the median: e.g., color televisions receiving dozens of channels by cable or satellite, home computers accessing the internet, air conditioning in homes and cars, cell phones and microwave ovens. None of these developments give pause to liberals who say that a welfare state that doubles its outlays in the 29 years separating a prosperous era from an even more prosperous era needs to grow dramatically faster.

Nor do liberals ask hard questions about how the persistence of shocking and shameful poverty relates to this inexorable growth of the welfare state. Americans were jarringly reintroduced to their economically vulnerable and socially isolated countrymen by Hurricane Katrina. Ask any hopeful Democrat leaving an Obama rally what we should do about such poverty, and you'll be told that the federal government ought to spend a lot more money to help these people. What you won't be told is that a welfare state that grows 4% a year for six decades and still hasn't eliminated the nation's worst poverty might have problems that more money can't solve. Specifically, you won't hear serious consideration of the possibility that the benefits already dispensed by the welfare state are not so much scandalously inadequate as scandalously misallocated.

Our elected officials never consider doing a comprehensive review of any program, they just keep asking the taxpayer for more money. I am reminded of this every time I go to the polls and there's a bond measure on the ballot for schools, parks, bridges, hospitals etc. that I could have sworn I voted on in the prior election. No matter how much money is asked for, it never seems to be enough.

Representative Dennis Kucinich of Ohio is sponsoring H.R. 808 which would establish a Department of Peace and Nonviolence. There are 70 co sponsors, all democrats.

Department of Peace and Nonviolence Act - Establishes a Department of Peace and Nonviolence, which shall be headed by a Secretary of Peace and Nonviolence appointed by the President with the advice and consent of the Senate. Sets forth the mission of the Department, including to: (1) hold peace as an organizing principle; (2) endeavor to promote justice and democratic principles to expand human rights; and (3) develop policies that promote national and international conflict prevention, nonviolent intervention, mediation, peaceful resolution of conflict, and structured mediation of conflict.

Establishes in the Department the Intergovernmental Advisory Council on Peace and Nonviolence, which shall provide assistance and make recommendations to the Secretary and the President concerning intergovernmental policies relating to peace and nonviolent conflict resolution.

Transfers to the Department the functions, assets, and personnel of various federal agencies.

Establishes a Federal Interagency Committee on Peace and Nonviolence.

Establishes Peace Day. Urges all citizens to observe and celebrate the blessings of peace and endeavor to create peace on such day.

Yay, yet another government program that I will be obliged to pay for if it ever gets passed into law. What I want to know is how one enforces the rules that will surely be established by the Department of Peace and Nonviolence? Will they force people to conform to peace and nonviolence by using peace and nonviolence? It sounds positively Orwellian to me, or rather, sounds like a good job for Obama's Youth Brigade.

The single best idea I can think of for reforming the behemoth that is our government would be to establish a house in Congress whose sole function was to review and repeal laws and programs. For every new bill that was slated to pass, one would have to be repealed; and the bottom performing 5% of all government workers and any irrelevant positions would be eliminated every year.

The One We've Been Waiting For

Gotta love capitalism:





I wonder how long the seller would tolerate me if I went over to the flea market on Hayes and Octavia next Sunday and bought one, then accidentally dropped it, then bought another one, and "oops", dropped it again, etc...?

The Problem with Polls

During the weeks leading up to the Presidential election 4 years ago, my wife and I were on our honeymoon, far away from any television or newspaper. It was a welcome relief from the non-stop jibber-jabber of the television talking heads, the hyper-analysis of political "experts", and the endless polling that seemed to take place after every new sentence that was uttered by either candidate. I especially did not miss the polls. What's the point of a poll anyhow? They are useful as blunt tools for measuring a general trend, but beyond that they can be inaccurate and misleading even when well intentioned, and when ill-intentioned manipulating the data to fit a preconceived result is possible. Besides, the only poll that counts is the one taken at the ballot box on election day.

It has been my suspicion that Obama supporters have been using polls to reinforce the notion that victory is a foregone conclusion for The One. Can't you see? Even the whole world wants Obama to win! Climb on board the Hope and Change Express before it leaves the station without you. You don't want to be on the wrong side of what the polls tell us is the likely outcome of this election, do you? As Getty Lee once sang, "conform or be cast out."

I found this piece over at Zombietime today that describes in great detail what I've felt to be the problem with polling.

Because it all boils down to this: Obama supporters presume that increasing Obama's perceived support will induce informational conformity in the American public. In other words, Obama supporters operate on the assumption that individual McCain supporters or undecided voters will in actuality change their minds about who to vote for if they perceive that a majority of people are supporting Obama. The imagined line of thinking is, "Gee, if so many people like this Obama guy, then my impression of him must be wrong; I trust the group's wisdom more than my own impressions."

I submit that this assumption is a catastrophic blunder. To the extent that there is any conformist behavior being exhibited by McCain supporters and undecided voters, it is much more likely to be normative conformity. In other words, people who are confronted with apparent overwhelming support for Obama may indeed announce that they too support Obama, but do so only in order to avoid ostracism or accusations of racism. Inside, however, they have not changed their minds. On November 4, they will go into that voting booth, and in total privacy and anonymity, they are free to vote for whomever they want, without fear of social condemnation for doing so. And in such a setting, normative conformity disintegrates, because there is no "norm" to conform to when your vote is anonymous.

I find it difficult to get excited about McCain; but I prefer him over Obama. At least McCain does not think I'm rich and therefore feels entitled to take an even larger share of my earnings in order to "spread the wealth around" to the people that would elect him to office, like Obama will. The only things I want from my next president are somebody who will build aircraft carriers, veto pork and play a lot of golf. By those measures, McCain scores 2 out of 3. Obama doesn't pass the sniff test, and the creep-factor is high among his supporters .

There's a Spanish saying that goes something along the lines of, "show me who your friends are and I will show you who you are." Suffice to say, I don't like the crowd that Obama rolls with. The number of hard left people and organizations that have skin in the game for him should be enough to give any rational person pause. Then again, it is obvious that the bulk of his supporers have cast all semblance of rationality aside.

With any luck, the hubris displayed by his supporters and manifested in the pre-election polling process will be enough to force the silent majority into action and spare our nation from at least four years of an Obama administration.