Food For The Sowell Chapter 2

Political Cartoons by Robert Ariail

President Obama today issued a stern warning to Republicans in Congress threatening to use the debt ceiling as a bargaining chip in deficit negotiations, saying “it is not a game that I will play.”

“I want to send a very clear message to people here: We are not going to play that game next year. If Congress in any way suggests that they’re going to tie negotiations to debt ceiling votes and take us to the brink of default once again as part of a budget negotiation, which, by the way, we have never done in our history until we did it last year, I will not play that game,” Obama told some of the nation’s top CEOs at the Business Roundtable in Washington. “We’ve got to break that habit before it starts.” (ABC)

Detroit wants expects a bailout.

City Council member JoAnn Watson said Tuesday the citizens support of Obama in last month’s election was enough reason for the president to bailout the struggling the city.

“Our people in an overwhelming way supported the re-election of this president and there ought to be a quid pro quo and you ought to exercise leadership on that,” said Watson. “Of course, not just that, but why not?”

Oh goodness.

“After the election of Jimmy Carter, the honorable Coleman Alexander Young, he went to Washington, D.C. and came home with some bacon,” said Watson. “That’s what you do.” (WP)

Detroit is $1.6 Trillion in debt. Detroit has always been a liberal haven, it’s ruin by Unions mostly (yes that was a Freudian slip :)). But this is nakedly, unashamed liberal narcissism.

Bribe them, and they will come (to vote for you) now they want their Ton of bacon! And they want it now!!!!

So they can spread it to all the little bacon-nippers they’ve bribed.

The Circle of Liberal life!

Thomas Sowell: One of the big advantages that President Obama has, as he plays “chicken” with the Congressional Republicans along the “fiscal cliff,” is that Obama is a master of the plausible lie, which will never be exposed by the mainstream media– nor, apparently, by the Republicans.

A key lie that has been repeated over and over, largely unanswered, is that President Bush’s “tax cuts for the rich” cost the government so much lost tax revenue that this added to the budget deficit– so that the government cannot afford to allow the cost of letting the Bush tax rates continue for “the rich.”

Joseph Goebbels: If you tell a lie big enough and keep repeating it, people will eventually come to believe it.

The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.”

And with a  24/7/365 Ministry of Truth it is a LOT easier to do.

It sounds very plausible, and constant repetition without a challenge may well be enough to convince the voting public that, if the Republican-controlled House of Representatives does not go along with Barack Obama’s demands for more spending and higher tax rates on the top 2 percent, it just shows that they care more for “the rich” than for the other 98 percent.

What is remarkable is how easy it is to show how completely false Obama’s argument is. That also makes it completely inexplicable why the Republicans have not done so.

The official statistics which show plainly how wrong Barack Obama is can be found in his own “Economic Report of the President” for 2012, on page 411. You can look it up.

You may be able to find a copy of the “Economic Report of the President” for 2012 at your local public library. Or you can buy a hard copy from the Government Printing Office or download an electronic version from the Internet.

For those who find that “a picture is worth a thousand words,” they need only see the graphs published in the November 30th issue of Investor’s Business Daily.

http://www.nber.org/erp/ERP_2012_Complete.pdf

IBD: Turn to Pages 411-413 of his 2012 Economic Report of the President, published by the Council of Economic Advisers. They show that “the math,” as Obama is wont to say, in fact does add up for tax cuts.

After President Bush in late May 2003 signed the largest tax cut since President Reagan — including dropping the top marginal rate to 35% from 39.6% — government receipts from individual income taxes rose from $793.7 billion to a peak of $1.16 trillion in 2007, when the mortgage crisis began, a 47% jump.

Stronger economic growth expanded the tax base and brought in so much revenue that Bush more than halved the deficit over that period. The budget gap plunged to $160.7 billion from $377.6 billion, according to the president’s report.

Perhaps the most impressive statistic appears on Page 412, one that undercuts Obama’s core argument against continuing the Bush tax cuts.

The post-tax-cut surge in economic growth and tax revenues helped drive down the deficit from 3.5% of gross domestic product in 2004 to 2.6% in 2005, to 1.9% in 2006 and to a manageable 1.2% in 2007.

Based on Bush fiscal policies, the nonpartisan Congressional Budget Office projected budget deficits of 0.7% to 1.5% of GDP for the years 2008 through 2011. The CBO even predicted surpluses for the subsequent years through 2018.

What derailed the forecast was the subprime mortgage crisis of 2008.

This financial anomaly threw the economy into a deep recession, beginning in December 2007, and forced a collapse in federal tax revenues.

As a result, the deficit-to-GDP ratio shot up to 10% in 2009 and has remained around that level, thanks to record Obama spending.

(The recession technically ended in June 2009.)

Obama’s economic report shows that the average deficit-to-GDP ratio during the entire Bush administration — 2001 to 2009 — was 2%, which is well below the 50-year average of 3%.

During the Obama years, in contrast, the same deficit ratio has averaged 9.1%.

The Bush tax cuts did not “cost” the Treasury revenues. Nor did they increase income inequality.

When fully implemented, they increased the portion of the income tax burden that fell on the wealthiest Americans.

The top 1% of taxpayers went from paying 38.4% of overall taxes to 39.1%, while the bottom 50% saw their share drop from 3.4% to 3.1%.

And as a percentage of the economy, deficits shrank to historically low levels.

Record red ink flowed much later as the housing market toppled and government spending shot up.

New spending on welfare programs and Obama’s $1.9 trillion national health care entitlement threaten only to compound the budget crisis.

Yet he proposes backloading any promised spending controls while front-loading “revenue increases” from tax hikes. (IBD)

What both the statistical tables in the “Economic Report of the President” and the graphs in Investor’s Business Daily show is that (1) tax revenues went up– not down– after tax rates were cut during the Bush administration, and (2) the budget deficit declined, year after year, after the cut in tax rates that have been blamed by Obama for increasing the deficit.

Indeed, the New York Times reported in 2006: “An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year.”

While the New York Times may not have expected this, there is nothing unprecedented about lower tax rates leading to higher tax revenues, despite automatic assumptions by many in the media and elsewhere that tax rates and tax revenues automatically move in the same direction. They do not.

The Congressional Budget Office has been embarrassed repeatedly by making projections based on the assumption that tax revenues and tax rates move in the same direction.

This has happened as recently as the George W. Bush administration and as far back as the Reagan administration. Moreover, tax revenues went up when tax rates went down, as far back as the Coolidge administration, before there was a Congressional Budget Office to make false predictions.

The bottom line is that Barack Obama’s blaming increased budget deficits on the Bush tax cuts is demonstrably false. What caused the decreasing budget deficits after the Bush tax cuts to suddenly reverse and start increasing was the mortgage crisis. The deficit increased in 2008, followed by a huge increase in 2009.

So it is sheer hogwash that “tax cuts for the rich” caused the government to lose tax revenues. The government gained tax revenues, not lost them. Moreover, “the rich” paid a larger amount of taxes, and a larger share of all taxes, after the tax rates were cut.

That is because people change their economic behavior when tax rates are changed, contrary to what the Congressional Budget Office and others seem to assume, and this can stimulate the economy more than a government “stimulus” has done under either Bush or Obama.

Yet there is no need to assume that Barack Obama is mistaken about the way to get the economy out of the doldrums. His top priority has always been increasing the size and scope of government. If that means sacrificing the economy or the truth, that is no deterrent to Obama. That is why he is willing to play chicken with Republicans along the fiscal cliff.

The end justify the means.  It’s only “fair” 🙂

Political Cartoons by Jerry Holbert

Political Cartoons by Chuck Asay

Political Cartoons by Chuck Asay

Political Cartoons by Bob Gorrell

Michael Ramirez Cartoon

 

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