Michael E. Newton's Blog, page 9
July 25, 2012
Do great droughts and great recessions coincide?
Anybody else find it odd that these great droughts occur during weak economic times? The Dust Bowl of the 1930s occurred during the middle of the Great Depression. Now this one during our Great Recession.
Or perhaps it is because a nation is able better endure these hardships when times are good…
July 24, 2012
Taxing offshore accounts would solve 6% of the problem. What about the 94%?
Proponents of big government and haters of the rich are making a big deal about $21 trillion that is being hidden in tax-free offshore accounts. The Observer reports:
A global super-rich elite has exploited gaps in cross-border tax rules to hide an extraordinary £13 trillion ($21tn) of wealth offshore – as much as the American and Japanese GDPs put together – according to research commissioned by the campaign group Tax Justice Network.
James Henry, former chief economist at consultancy McKinsey and an expert on tax havens, has compiled the most detailed estimates yet of the size of the offshore economy in a new report, The Price of Offshore Revisited, released exclusively to the Observer.
He shows that at least £13tn – perhaps up to £20tn – has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks, which vie to attract the assets of so-called high net-worth individuals. Their wealth is, as Henry puts it, “protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy”. According to Henry’s research, the top 10 private banks, which include UBS and Credit Suisse in Switzerland, as well as the US investment bank Goldman Sachs, managed more than £4tn in 2010, a sharp rise from £1.5tn five years earlier.
The information I wanted didn’t appear until paragraph eleven:
Assuming the £13tn mountain of assets earned an average 3% a year for its owners, and governments were able to tax that income at 30%, it would generate a bumper £121bn in revenues – more than rich countries spend on aid to the developing world each year.
That £121 billion is about $200 billion. The global budget deficit runs at about $3.5 trillion or 5.3% of GDP. (The United States leads the way with a deficit of $1.3 trillion or about 9.3% of GDP.) If these hidden assets suddenly became taxable, the global budget deficit would decline by about 6%, assuming the governments don’t just spend the newfound money.
No plan to “tax the rich” or “close loopholes” can possibly reduce the budget deficit by a significant amount. As I noted previously, the U.S. government would need to double income tax rates to close the budget deficit. Obviously, this is unfeasible because tax avoidance would rise when the “wealthy” are faced with a 70% income tax rate in addition to state and other taxes. Additionally, this doubling would also apply to the poor and middle class.
The government simply cannot raise taxes enough to make any significant dent in the deficit. The idea of taxing “hidden” money would only solve 6% of the problem and that excludes the cost of enforcement. Maybe we should focus on the other 94% of the deficit rather than the 6%.
July 19, 2012
James Madison on Obamacare
Obamacare is being threatened yet again as a new mistake is discovered in the 2,000 page bill.
States could dodge a key part of the health care reform law because of a little-noticed mistake in the lengthy bill, according to a white paper by conservative health care experts Michael Cannon and Jonathan Adler.
A missing word in the law’s definition of a health insurance exchange could prevent the federal government from doling out crucial subsidies to aid middle class and lower-income people in buying insurance in states that refuse to set up their own exchanges. (Only 14 states are close to setting up exchanges so far. The federal government will set up back-up exchanges in states that don’t have their own by 2014.) If Cannon and Adler are right, the federal government would also not be able to fine large employers in states without exchanges if their lack of coverage leads employees to buy insurance in a federal exchange.
The law defines a health insurance exchange as a “governmental agency or nonprofit entity that is established by a state” in one section of the law, and then says later that individuals who participate in exchanges under that definition are eligible for subsidies. Because the law only says a “state” and not “a state or the federal government,” Cannon and Adler argue that the federal government cannot legally dole out subsidies or tax breaks to people who buy insurance from federal exchanges.
All this reminds me of what James Madison wrote in Federalist No. 62:
It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood.
Our Founding Fathers would be appalled at 2,000 page bills that are rushed through Congress without a single Congressman reading it before voting nor the President before signing it.
June 28, 2012
Supreme Court approves of unlimited taxes
Logic holds that taxes cannot exceed the value of the thing being taxed. Income taxes cannot exceed 100%, though FDR wanted them to. Sales taxes can never exceed 100% because the value of the good must make up a certain percentage of the cost. Property taxes can never exceed the value of the property because the value of the property would immediately fall to zero and there would be nothing to tax.
But with today’s Supreme Court ruling on Obamacare, in which non-activity is being taxed, there is no limit to the taxes that could, in theory, be imposed. The government could, if it wanted to, implement a tax of whatever it wants, let’s say one million dollars per person, for not buying health insurance, or not buying a house, or not buying something else.
Alexander Hamilton argued that the Constitution should not limit the power to tax or the power to spend. He wrote in his Report on Manufactures:
The power to raise money is plenary and indefinite; and the objects to which it may be appropriated are no less comprehensive than the payment of the public debts, and the providing for the common defence and general welfare. The terms “general welfare” were doubtless intended to signify more than was expressed or imported in those which preceded; otherwise numerous exigencies incident to the affairs of a nation would have been left without a provision. The phrase is as comprehensive as any that could have been used.*
Nevertheless, he and all the other Founding Fathers understood that there are natural limits to taxation, as Alexander Hamilton explained in Federalist No. 21:
It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty, that, “in political arithmetic, two and two do not always make four.” If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.
Unlike Hamilton’s and the Founder’s system of relying primarily but not exclusively on consumption taxes, we now have a system wherein a tax can exceed a person’s income or net worth and be totally “constitutional.” The Obamacare penalty, I mean tax, can be set at whatever dollar level the politicians choose regardless of income or wealth. Or they can enact other similar taxes for not purchasing a given good or service. They have paved the way for unlimited taxes .
* For those who argue that this gives the government unlimited power, Hamilton added:
A power to appropriate money with this latitude which is granted too in express terms would not carry a power to do any other thing, not authorised in the constitution, either expressly or by fair implication.
– Michael E. Newton is the author of the highly acclaimed The Path to Tyranny: A History of Free Society’s Descent into Tyranny and Angry Mobs and Founding Fathers: The Fight for Control of the American Revolution. He is currently writing a book about Alexander Hamilton.
June 1, 2012
First they banned sugar, then salt, then fat, then…
With apologies to Martin Niemöller.
First they came for the sugary treats,
and I didn’t speak out because I didn’t eat sugary treats.
Then they came for the salty snacks,
and I didn’t speak out because I didn’t eat salty snacks.
Then they came for fatty foods,
and I didn’t speak out because I didn’t eat fatty foods.
Then they came for my meat and processed grains,
and there was nothing tasty left for me to eat.
The pen is mightier than the sword, and the liberals own all the dictionaries.
Alan Korwin, gun expert and author of After You Shoot: Your gun’s hot. The perp’s not. Now what?, argues that ‘Birther’ is the new ‘N’ word:
“Birther,” used by the media with impunity, is a derogatory slur, the equivalent of the “N” word used for another group to cast them as sub-human.
You apply this new “N” word to a huge group of politically-active Americans who’ve raised legitimate questions on a legitimate topic.
These Americans remember Sen. McCain was grilled by a Senate committee over the same issue — eligibility. The man currently in the White House, for reasons that remain unclear to this day, avoided such reasonable scrutiny. These people ask, “Why?”These citizens noticed that when Obama refused — flat-out refused — to release relevant documents you let him slide. These people noticed that when papers finally emerged, after unconscionable delays, irregularities were so great even amateur sleuths could spot them. The Maricopa County Sheriff’s Office found remarkable inconsistencies that point to deliberate fraud.
To demean and ridicule such socially-conscious, politically-active Americans with their own “N” word violates journalism’s codes of ethics (AP, NY Times, SPJ) that require you not only to be unbiased, but to avoid even an appearance of bias. Inflammatory use of this offensive denigrating smear and “birther bashing” announces your prejudice loudly.
Of course, Mr. Korwin is already being attacked for stating his opinion.
Alan: You are so naive. Don’t you know that the liberals own the English language? Tea partiers can be called terrorists and teabaggers, but you can’t say that Birther is like the N-word. Heck, liberals are even changing the 5,000-year old definition of marriage.
Calling George Orwell. The Ministry of Truth is standing by.
As the old saying goes, the pen is mightier than the sword. You may have some guns, but they own the pen, the paper, and the dictionaries.
I’m not birther, by the way. But I do I think Congress should require proof of eligibility before the presidential election. For that, I am often called a birther.
More important, it is a shame how skepticism has become so vilified. (Also see global warming.) Remember the halcyon days when one presidential candidate (John Kerry) said that dissent was the highest form of patriotism and misattributed it to Thomas Jefferson. Oops!
But we need to remember that dissent is only patriotic if you are a Democrat opposing a Republican administration. Off to the Ministry of Truth for me.
May 15, 2012
May 11, 2012
My laptop was stolen at Starbucks. How I will protect myself from now on.
I’m sitting in Starbucks the other night writing my next book, when a hoodlum sneaks up behind me, yanks my laptop away as I was using it, and races out the door. I immediately jumped up out of my seat and chased after him while trying to call the police on my cell phone. The thief had a friend waiting outside with him and they ran away together. Being quite fast myself, I kept up with no problem, though I had no intention of confronting them, not knowing if they were armed and outnumbered two to one. I was just hoping to keep them in sight and tell the cops what was happening.
After three blocks of chasing them (and unable to successfully dial the police while running and trying to keep an eye on them in the dark of night), they jumped in a car, in which a third person was waiting, and they drove away. Just as I thought I lost them, a cop pulls up and says not to worry because they had other cops on the ground and an airplane overhead following them. (This undercover policeman was waiting in the Starbucks and sat near a guy with a Mac since those are more valuable than my HP.) A good citizen in the neighborhood had told the police that a car parked a number of times in front of his house and suspected that they were up to no good. These criminals (or others like them) had stolen laptops from Starbucks customers a number of times in the Phoenix area (fifteen times according to one article) and once before at this Starbucks. The police staked out this Starbucks for two weeks waiting for these criminals to act. The thieves were immediately caught and will soon be prosecuted. My laptop was returned to me within an hour. However, the computer has some damage—a dent on the lid, the lid no longer closes perfectly, and the laptop wobbles when it is place on a flat surface. The laptop is still “usable” but it is just three months old and I don’t expect to use a broken computer for another two to four years. I’m not sure if this can be repaired or how much such repairs would cost. I may have to buy a new one, but I should be able to get some decent money for the old one, or donate it to a school or other charity.
I must congratulate the Phoenix police on a job very well done. Their great police work involved intelligence and perseverance. They not only saved my laptop, but they prevented other thefts by catching the criminals
Unfortunately, a number of other people had their laptops stolen and they never got them back. I feel bad for those victims. And while I feel unlucky that the same happened to me, I feel very fortunate that the thieves were caught and my laptop was returned with very little fuss.
Now for some advice: If you have a laptop and you are at Starbucks or another place like that, sit far away from the door so that the thieves cannot easily jump in and out. If you are in an open area (public park or food court), try to sit in a crowded area so that the thief has no clear exit path. This applies whether you are using your laptop, phone, or even if you have a briefcase by your side. As Wild Bill Hickok supposedly said, try to sit with your back to a wall and never sit with your back to the door.
Additionally, get yourself a laptop cable lock and secure your laptop to the table. Furthermore, you should never have your internet browser on your laptop remember your passwords to bank and credit card accounts. I don’t care too much if a thief gets into my facebook account, but I certainly don’t want him stealing all my money. And you should set the laptop to go to sleep when the lid is closed and require a password to get back in. The average thief is no hacker and this will help prevent your data from being stolen.
– Michael E. Newton is the author of the highly acclaimed The Path to Tyranny: A History of Free Society’s Descent into Tyranny and Angry Mobs and Founding Fathers: The Fight for Control of the American Revolution. He is currently writing a book about Alexander Hamilton and his legacy.
March 10, 2012
A proposal to satisfy Warren Buffett and raise his taxes
I'm tired of hearing Warren Buffett complain about not paying enough in taxes.
I propose a 10% property tax on all Americans with personal wealth in excess of $40 billion. This should bring the government about $10.5 billion in new revenue; $4.4 billion from Warren Buffett and $6.1 billion from Bill Gates.
What say you Mr. Buffett? Willing to put your money where your mouth is?
December 19, 2011
Today only! Free on Kindle: Angry Mobs and Founding Fathers.
Angry mobs launched the American Revolution when they protested against British acts of tyranny. These rebels threatened, harassed, and chased away British officials and Loyalists. The Founding Fathers agreed with the goals of these Patriots, but not with their methods. Fearing anarchy, the Founders channeled the passion of the mobs toward independence.
Working together, the angry mobs and Founding Fathers defeated the mighty British army and won independence, but the new nation that emerged was anarchic and chaotic, much like the angry mobs themselves. Meeting behind closed doors, the Founding Fathers conspired to depose the Confederation government, wrote a new constitution, and created the world's most successful republic.
Angry Mobs and Founding Fathers tells the little-known story of how these two groups fought for control of the American Revolution.
Direct link to Amazon: http://www.amazon.com/o/ASIN/B005CW51...
