Posts Tagged ‘politics’

How to respond to the IRS scandal

Wednesday, May 15th, 2013

Washington DC seems to be convulsed this week with scandals. Most of us were well aware of the Benghazi disaster and coverup. The IRS scandal is new and does a lot to explain the quiet status of the Tea Party groups that were so active in 2010. Many of us expected to see more of them last year in the run up to the 2012 presidential election, as well as the other races for Senate and House. Now we know what happened.

The Tea Party groups that filed for 501 (c) 4 status were harassed and threatened by the IRS. 501 (c) 4 status does NOT grant tax exemption to donations, contrary to the statement of Nancy Pelosi, not a good source in any situation. It only allows tax exemption for activities intended to education the public on issues of interest to the organization. From the IRS web site:

The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. However, a section 501(c)(4) social welfare organization may engage in some political activities, so long as that is not its primary activity. However, any expenditure it makes for political activities may be subject to tax under section 527(f).

The Tea Parties were organized for political and educational activity, not as lobbies. There are plenty of lobbies. Other organizations singled out by the IRS in this scandal included those concerned with “The Constitution” or other philosophical topics. Several examples are included in this article.

Kookogey’s organization, Linchpins of Liberty, is one of several groups still awaiting approval of their applications for tax-exempt status after more than three years. Linchpins, a conservative mentoring program for high-school and college students, has received extensive and intrusive requests for information about the organization. Unlike most of the groups targeted, however, Linchpins of Liberty was seeking status as a 501(c)(3) educational non-profit, as opposed to a more overtly political 501(c)(4) “social welfare” group, and had no direct “tea party” affiliation. The group’s stated mission is “to challenge the imagination of the rising generation” through “the study of books about the human condition and about civic order.”

I see no evidence of lobbying intent there.

The agency sent him more than 30 questions in response to his application, including some that defied comprehension. “They asked me to identify the students I’m teaching and what I’m teaching them,” he says. “Now, imagine the disservice I’d be doing to the parents of these kids if I reported their children to the IRS. It was clearly meant to intimidate.”

This is far beyond the role of a tax agency.

How do we deal with this ?

First, donations to 501 (c) 4 organizations are NOT tax deductible for the donor. The organization benefits from the fact that its own activities are tax exempt. It cannot conduct a business that returns profits to the organization although educating members and charging for that service may be permissible.

Under this technical instruction program (pdf) the social welfare group would be allowed to engage in business as a means of financing the social welfare program. The business might consist of holding seminars on politics.

I was president of such an organization years ago. It was the Orange County Medical Association. It was tax exempt and, when we began to organize a subsidiary that would provide health care for low income persons, we made the subsidiary a for-profit company and allocated all business expenses related to the provision of health care as expenses to that subsidiary. We had no IRS trouble although Reagan was president and the IRS was not political as it is under Obama.

My suggestion is to contribute and help the Tea Party and similar organizations to organize themselves under another model. Perhaps legislation to allow educational organizations to function free of harassment would be in order although Democrats in the Senate would probably try to block it. Complaining about the IRS will only accomplish so much. The history of misuse of the IRS is long and goes back to Roosevelt

President Franklin Roosevelt used the IRS to harass newspaper publishers who were opposed to the New Deal, including William Randolph Hearst and Moses Annenberg, publisher of the Philadelphia Inquirer. Roosevelt also dropped the IRS hammer on political rivals such as the populist firebrand Huey Long and radio agitator Father Coughlin, and prominent Republicans such as former Treasury Secretary Andrew Mellon. Perhaps Roosevelt’s most pernicious tax skulduggery occurred in 1944. He spiked an IRS audit of illegal campaign contributions made by a government contractor to Congressman Lyndon Johnson, whose career might have been derailed if Texans had learned of the scandal.

Andrew Mellon, Treasury Secretary under Coolidge, was harassed by FDR until he died. After his death, Mellon was exonerated completely.

The administration of President Franklin D. Roosevelt subjected Mellon to intense investigation of his personal income tax returns. The US Justice Department empaneled a grand jury, which declined to issue an indictment. Roosevelt hated Mellon, as the embodiment of everything he thought was bad about the 1920s; Mellon vehemently denied the charges. A two-year civil action beginning in 1935, dubbed the “Mellon Tax Trial”, eventually exonerated Mellon, albeit several months after his death.

We should support the Tea Parties and get tax lawyers to construct a standard application with responses to legal and appropriate questions.

Conspiracy Theories

Sunday, May 12th, 2013

Last week was a week for the conspiracy theories. First, we had Benghazi and the hearings which interviewed career State Department officers, most of whom probably vote for Democrats. The fact that they were ordered not to talk to Congressmen and denied any attempt at help when under attack, even from as close as Tripoli, invites speculation about motive. Peggy Noonan, a little unusually, hits this one out of the park.

Since it is behind a pay wall, I’ll quote a few bits.

What happened in Benghazi last Sept. 11 and 12 was terrible in every way. The genesis of the scandal? It looks to me like this:

The Obama White House sees every event as a political event. Really, every event, even an attack on a consulate and the killing of an ambassador.

Because of that, it could not tolerate the idea that the armed assault on the Benghazi consulate was a premeditated act of Islamist terrorism. That would carry a whole world of unhappy political implications, and demand certain actions. And the American presidential election was only eight weeks away. They wanted this problem to go away, or at least to bleed the meaning from it.

That sounds about right to me.

Because the White House could not tolerate the idea of Benghazi as a planned and deliberate terrorist assault, it had to be made into something else. So they said it was a spontaneous street demonstration over an anti-Muhammad YouTube video made by a nutty California con man. After all, that had happened earlier in the day, in Cairo. It sounded plausible. And maybe they believed it at first. Maybe they wanted to believe it. But the message was out: Provocative video plus primitive street Arabs equals sparky explosion. Not our fault. Blame the producer! Who was promptly jailed.

If what happened in Benghazi was not a planned and prolonged terrorist assault, if it was merely a street demonstration gone bad, the administration could not take military action to protect Americans there.

Yup. That has to be it unless someone comes up with a better rationale. Maybe one of those additionla whistle blowers who are asking to testify.

Why couldn’t the administration tolerate the idea that Benghazi was a planned terrorist event? Because they didn’t want this attack dominating the headline with an election coming. It would open the administration to criticism of its intervention in Libya. President Obama had supported overthrowing Moammar Gadhafi and put U.S. force behind the Libyan rebels. Now Libyans were killing our diplomats. Was our policy wrong? More importantly, the administration’s efforts against al Qaeda would suddenly come under scrutiny and questioning.

The military disgraced itself, as well. Why no plans for evacuation or reinforcement ?

Maybe those generals and admirals who were relieved in the weeks after Benghazi were too willing to do something when the orders were to do nothing.

On October 18, Secretary of Defense Leon Panetta appeared unexpectedly at an otherwise unrelated briefing on “Efforts to Enhance the Financial Health of the Force.” News organizations and CSPAN were told beforehand there was no news value to the event and gave it scant coverage. In his brief remarks Mr. Panetta said, “Today I am very pleased to announce that President Obama will nominate General David Rodriguez to succeed General Carter Ham as commander of U.S. Africa Command.”

AFRICOM was the area command that was asked for help.

The information I heard today was that General Ham as head of Africom received the same e-mails the White House received requesting help/support as the attack was taking place. General Ham immediately had a rapid response unit ready and communicated to the Pentagon that he had a unit ready.

General Ham then received the order to stand down. His response was to screw it, he was going to help anyhow. Within 30 seconds to a minute after making the move to respond, his second in command apprehended General Ham and told him that he was now relieved of his command.

The story continues that now General Rodiguez would take General Ham’s place as the head of Africom.

That sure sounds like it. However:

On Monday October 29 General Martin Dempsey, Chairman of the Joint Chief of Staff, released the following statement:

“The speculation that General Carter Ham is departing Africa Command (AFRICOM) due to events in Benghazi, Libya on 11 September 2012 is absolutely false. General Ham’s departure is part of routine succession planning that has been on going since July. He continues to serve in AFRICOM with my complete confidence.”

Well, that tells us more about Dempsey than about Ham. In 1964, as he edged into Vietnam, Lyndon Johnson repeatedly sidelined war fighters and replaced them with politicians like JCS Chairman Earle Wheeler, who spent six years presiding over the Vietnam debacle. Wheeler had no command or combat experience in WWII. He had always been a staff officer. It makes me think of Courtney Massengale, the villain of “Once an Eagle, Anton Myrer’s wonderful novel of military life. It is still required reading for military officers of all branches. I have often wondered if Myrer chose the name of his villain from the name of a popular douche at about the time he was writing the novel.

There were flag officers relieved right after Banghazi. Nothing to see here. Move along.

We will learn more about the Benghazi story and Democrats dishonor themselves by their transparent efforts to divert attention and discredit honorable officers.

The next scandal that erupted last week was the IRS auditing expose. Tea Party groups have been complaining about selective harassment by the IRS since 2009 when Obama joked about doing just that.

A BEDROCK principle of U.S. democracy is that the coercive powers of government are never used for partisan purpose. The law is blind to political viewpoint, and so are its enforcers, most especially the FBI and the Internal Revenue Service. Any violation of this principle threatens the trust and the voluntary cooperation of citizens upon which this democracy depends.

So it was appalling to learn Friday that the IRS had improperly targeted conservative groups for scrutiny. It was almost as disturbing that President Obama and Treasury Secretary Jack Lew have not personally apologized to the American people and promised a full investigation.

And that was the Washington Post !

And then we have the spectacle of the HHS Secretary asking health executives to fund Obamacare with donations.

“Nice little insurance company you’ve got there. It would be a shame if something happened to it.”

Over the past three months, Sebelius has made multiple phone calls to health industry executives, community organizations and church groups and asked that they contribute whatever they can to nonprofit groups that are working to enroll uninsured Americans and increase awareness of the law, according to an HHS official and an industry person familiar with the secretary’s activities. Both spoke on the condition of anonymity to talk openly about private discussions.

Yes, it was all voluntary.

Young said that Sebelius did not solicit for funds directly from industries that HHS regulates, such as insurance companies and hospitals, but rather asked them to contribute in whatever way they can.

But the industry official who had knowledge of the calls but did not participate directly in them said there was a clear insinuation by the administration that the insurers should give financially to the nonprofits.

And so goes another week of Obamaworld. And I didn’t even mention “immigration reform.”

An interesting update on Benghazi.

Thursday, May 2nd, 2013

Today, another blog has an interesting post on the Benghazi fiasco and some informed speculation on why it happened.

On the night of the Benghazi terror attack, special operations put out multiple calls for all available military and other assets to be moved into position to help — but the State Department and White House never gave the military permission to cross into Libya, sources told Fox News.

The disconnect was one example of what sources described as a communication breakdown that left those on the ground without outside help.

“When you are on the ground, you depend on each other — we’re gonna get through this situation. But when you look up and then nothing outside of the stratosphere is coming to help you or rescue you, that’s a bad feeling,” one source said.

The Special Ops community has been particularly angry about what happened.

Once the alarm is sent – in this case, from the consulate in Benghazi — dozens of HQs are notified and are in the planning loop in real time, including AFRICOM and EURCOM, both located in Germany. Without waiting for specific orders from Washington, they begin planning and executing rescue operations, including moving personnel, ships, and aircraft forward toward the location of the crisis. However, there is one thing they can’t do without explicit orders from the president: cross an international border on a hostile mission.

That is the clear “red line” in this type of a crisis situation.

No administration wants to stumble into a war because a jet jockey in hot pursuit (or a mixed-up SEAL squad in a rubber boat) strays into hostile territory. Because of this, only the president can give the order for our military to cross a nation’s border without that nation’s permission. For the Osama bin Laden mission, President Obama granted CBA for our forces to enter Pakistani airspace.

On the other side of the CBA coin: in order to prevent a military rescue in Benghazi, all the POTUS has to do is not grant cross-border authority. If he does not, the entire rescue mission (already in progress) must stop in its tracks.

That permission was never given. Did he go to bed so he would be bright and ready for the fund raiser the next day ?

Or did he watch them die like they were rats in a maze?

The Special Ops community has a few opinions.

As The Whistleblower Revealed: Obama Knew Who Was Behind Benghazi, FBI Now Releases Photos

The FBI has posted the photos of three individuals who were on the scene during the Sept. 11, 2012 attacks on the U.S. mission in Benghazi.

The three individuals, who were not named in the FBI announcement, are suspected to have more information on the attacks. Here’s the FBI’s notice:

The United States Federal Bureau of Investigation appreciates that the Libyan people and the government of Libya have condemned the September 11, 2012 attacks on U.S. Special Mission personnel and facilities in Benghazi, Libya.

The FBI is now asking Libyans and people around the world for additional information related to the attacks, which resulted in the deaths of four Americans, including the U.S. ambassador to Libya.

From the Foreign Policy website.

benghazi

The FBI is now looking for them. The trail is pretty cold by now. “What does it matter now ?”

Immigration and the Gang of Eight.

Wednesday, April 24th, 2013

The Senate has served up another in Harry Reid’s menu of bills with no hearings and no amendments except those he approves. This is not how the Senate is supposed to work and is a large part of the reason that Congress has produced such bad legislation since 2008. Now, we have another massive bill which is being presented with minimal hearings and debate.

The “Gang of Eight” has written this bill and it is supposed to be fast tracked with no argument. Marco Rubio has been pressing for approval and now Paul Ryan is aboard.

In an interview last week with the Catholic television network EWTN, Ryan recalled his history at Kemp’s side and how they worked together to fight Proposition 187, a California ballot initiative that prevented non-citizens from using the state’s social services.

One reason why immigration worked in this country for 150 years was the fact that immigrants were here to work and support themselves. There was no welfare for them. Prop 187 in California was passed with 60% of the vote and even had majorities on heavily Hispanic districts. It was ruled “unconstitutional” by the California Supreme Copurt and the decline of the “Golden State” had followed. His reasoning at the time ?

“I actually campaigned with Jack Kemp against a thing called Prop 187,” Ryan told host Raymond Arroyo. He said they both worried that the proposal would burn Republicans within the immigrant community, and “make it so that Latino voters would not hear the other messages of empowerment.”

(more…)

Same Sex Marriage or whatever it is.

Friday, March 29th, 2013

I have been kind of neutral on the whole gay marriage issue. I think it began as an artifact of the AIDS epidemic and an attempt to curb the promiscuity of male gay life. It has been taken over by activists who are determined to validate their life style and to force conventional society to accept it as equivalent to heterosexual family life, which it is not. It is surprising the success they have had with the young who seem to accept the argument that it is a civil rights” issue, which is, of course, nonsense. Mark Steyn usually has something worthwhile to say on most subjects and this time is no exception.

Gays will now be as drearily suburban as the rest of us. A couple of years back, I saw a picture in the paper of two chubby old queens tying the knot at City Hall in Vancouver, and the thought occurred that Western liberalism had finally succeeded in boring all the fun out of homosexuality.

He does have a sense of humor amid reflections on a dying culture.

In the upper echelons of society, our elites practice what they don’t preach. Scrupulously nonjudgmental about everything except traditional Christian morality, they nevertheless lead lives in which, as Charles Murray documents in his book Coming Apart, marriage is still expected to be a lifelong commitment. It is easy to see moneyed gay newlyweds moving into such enclaves, and making a go of it. As the Most Reverend Justin Welby, the new Archbishop of Canterbury and head of the worldwide Anglican Communion, said just before his enthronement the other day, “You see gay relationships that are just stunning in the quality of the relationship.” “Stunning”: What a fabulous endorsement! But, amongst the type of gay couple that gets to dine with the Archbishop of Canterbury, he’s probably right.

The problem, as pointed out years ago by Vice President Dan Quayle, is that the elites set the pattern for those whose lives cannot succeed without the structures of traditional society. They set the pattern, unfortunately, by what they say, not what they do.

If the Right’s case has been disfigured by delusion, the Left’s has been marked by a pitiful parochialism. At the Supreme Court this week, Ted Olson, the former solicitor general, was one of many to invoke comparisons with Loving v. Virginia, the 1967 case that struck down laws prohibiting interracial marriage. But such laws were never more than a localized American perversion of marriage. In almost all other common-law jurisdictions, from the British West Indies to Australia, there was no such prohibition. Indeed, under the Raj, it’s estimated that one in three British men in the Indian subcontinent took a local wife. “Miscegenation” is a 19th-century American neologism. When the Supreme Court struck down laws on interracial marriage, it was not embarking on a wild unprecedented experiment but merely restoring the United States to the community of civilized nations within its own legal tradition. Ted Olson is a smart guy, but he sounded like Mary-Kate and Ashley’s third twin in his happy-face banalities last week.

These facts are never mentioned in the debate, swiftly being lost by those trying to preserve traditions. I have no credibility here, as I have been divorced twice. The issue for me is not the religious status of marriage but the dissolution of traditional morality as a utilitarian mechanism of civilization. My older son, who considers me hopelessly out of date, was married in the Catholic Church and will mostly likely lead a life of conservative virtues while he attacks those who try to defend them. I know he resents the fact that his mother and I are divorced and I don’t blame him. Had I recognized the terrible damage done to children by divorce, I might have reconsidered. However, I have children born of another marriage and would not wish them away for anything. The dilemma is insoluble but I could afford to take care of everyone, even though it has left me somewhat strapped in my old age.

The reality that no one wants to confront is as follows:

Meanwhile, social mobility declines: Doctors who once married their nurses now marry their fellow doctors; lawyers who once married their secretaries now contract with fellow super-lawyers, like dynastic unions in medieval Europe. Underneath the self-insulating elite, millions of Americans are downwardly mobile: The family farmers and mill workers, the pioneers who hacked their way into the wilderness and built a township, could afford marriage and children; indeed, it was an economic benefit. For their descendants doing minimum-wage service jobs about to be rendered obsolete by technology, functioning families are a tougher act, and children an economic burden. The gays looked at contemporary marriage and called the traditionalists’ bluff.

There is the rub. We did not appreciate how important traditional values were for a civil society, Black activists blame slavery for the collapse of the black family. In fact, the black family was in good shape until the Great Society devastated the role of the black father. It was often non-traditional, as illustrated in Clarence Thomas’s book My Grandfather’s Son, in which he describes how his old fashioned grand father raised him and his brother in spite of the hopelessly disorganized life of his mother.

The “learned behavior” types who think man is a “blank slate” at birth and all behavior is cultural are already striking back in the NY Times. In their view, differences in mating behavior between males and females is all learned from cultural “norms.” As one recent paper by a female professor states:

the gender differences in acceptance of casual-sex proposals evaporated nearly to zero.

Therefore women = men in all respects. The old theory that women are more likely to be monogamous because they invest more in children than men do, is old fashioned patriarchal nonsense. The argument heads right to the blank slate debate.

“a leading voice among hard-line Darwinians” You see, if you disagree with the Times, you are “hard line.”

“But the fact that some gender differences can be manipulated, if not eliminated, by controlling for cultural norms suggests that the explanatory power of evolution can’t sustain itself when applied to mating behavior.”

Therefore gay marriage has to be good because women = men.

Some years ago, I was on a trip with my middle daughter who has a degree in Anthropology from UCLA. I had been reading Stephen Pinker’s book, “The Blank Slate”. He makes a pretty good argument, from identical twin studies among other evidence, that behavior is genetic. She refused to read it and told me I needed to read the apostle of behavioral theory, Stephen Jay Gould, whose book, “The Mismeasure of Man is the bible of behaviorists. I told her that I owned the book and had already read it. She still refused to read Pinker’s book, one of about ten he has written on behavior and language. Gould, of course, is a favorite of the left. Among other points, he dismisses IQ testing of any kind. That is handy for the Humanities types who hate the STEM majors.

I was raised, along with my sister, by a black nursemaid who instilled in us the traditions of family life. Her own family in Georgia owned property and she had been raised to value traditional virtues. She was strict and once when I called her the hated “n word” she chased me under the dining room table with a broom. She had chosen a life of celibacy to raise other people’s children. We were not her first family but we were her last. She was 40 when she came to live with us when my sister was born in 1941. She lived a long life and even saw my youngest daughter, born in 1990. She was in a Catholic nursing home at the time but we brought Annie for her approval.

What is coming I fear but I am relieved that I shall not have to deal with it. I am too old and my health is not good. I do worry about my children but three of them voted for Obama and can take what comes as best they are able. They have the advantages I have been able to provide. They are educated and, while my behavior has not been exemplary in some ways, they have seen the world and they know I love them. When I started out, I had none of the advantages they have had. My father did not respect education, although he did send me to Catholic school. I began college on a scholarship but it was not the college of my choice. I did succeed in gaining admittance to medical school but would have preferred other sources of training. All in all though, I can’t really complain.

The future will be what it will be. I hope for the best but fear the worst. In the coming hurricane, gay marriage will seem, and be, a minor distraction.

The Lost Boys

Saturday, March 2nd, 2013

Belmont Club has an unusually good post for yesterday. I could say that more than once a week, if truth be known. This one is quite to the point on Sequester Day.

The NHS, which its creators boasted would be the ‘envy of the world’, has been found to have been responsible for up to 40,000 preventable deaths under the helm of Sir David Nicholson, a former member of the Communist Party of Britain. “He was no ordinary revolutionary. He was on the hardline, so-called ‘Tankie’ wing of the party which backed the Kremlin using military action to crush dissident uprisings” — before he acquired a taste for young wives, first class travel and honors.

The NHS is dealing with the shortage of funds by pruning its tree of life, so to speak. He also does not tolerate anyone telling the truth about it.

it emerged he spent 15 million pounds in taxpayer money to gag and prosecute whistleblowers — often doctors and administrators who could not stomach his policies.

The public money spent on stopping NHS staff from speaking out is almost equivalent to the salaries of around 750 nurses.

It has recently been noted that NHS staff no longer recommend their own hospital for family members. Also one quarter report being harassed or bullied at work.

The other half of the equation involves the youth.

The European Youth will remain outside the Death Pathways for some time yet. But they will spend the time waiting for their turn at affordable, caring and passionate medicine in poverty and hopelessness. With the exception of Germany youth unemployment in Europe is over 20%. “A full 62% of young Greeks are out of work, 55% of young Spaniards don’t have jobs, and 38.7% of young Italians aren’t employed.”

Unemployment exceeds even our own Obama economy for failure. (more…)

The Sequester

Friday, February 22nd, 2013

As we count down to March 1, we are hearing more and more about the dreaded sequester. The left is confused about its history.

How did this become Obama’s fault? It started with Mitt Romney, a once-influential Republican Party politician and its 2012 nominee for president. In the third debate with President Obama, Romney fretted that “a trillion dollars in cuts through sequestration and budget cuts to the military” would weaken America’s defenses. The president literally dismissed this with a wave of his hand. “The sequester is not something that I proposed,” he said. “It’s something that Congress has proposed. It will not happen.”

How did this get to be the story ?

The accidental Bible of Sequestration is The Price of Politics, Bob Woodward’s history of the debt-limit wars, and one of the least flattering portrayals of the president this side of Breitbart.com. In it, Woodward recounts a July 27, 2011, afternoon meeting between Senate Majority Leader Harry Reid and White House negotiators. Reid wanted a “trigger” as part of a debt deal, some way to force more cuts in the future without defaulting on the debt that summer. Chief of Staff Jack Lew and adviser Rob Nabors proposed sequestration, as a threat that could be averted if/when Congress passed a better deal.

OK. The White House staff suggested it. Why ? Because they assumed that Republicans would cave in rather than accept cuts in the defense budget.

Republicans have “twice passed legislation” to replace the sequestration cuts. Who told you that? It’s a common Republican talking point, but it’s misleading in two ways. The House passed two bills related to sequestration replacement, but the first one, in May 2012, didn’t offer specific cuts. It moved the total amount of defense cuts over into the non-defense budget, like a croupier moving chips into the winner’s pile. The actual replacement cuts were only spelled out in the Spending Reduction Act of 2012, passed by a razor-thin, Republicans-only vote on Dec. 20, 2012. The Congress that passed it expired on Jan. 3 of this year, so the bill is dead.

Oh, OK. The House bill passed with “Republican only” votes so it doesn’t matter ? The real story is the Obama and Democrats’ gamesmanship. What is their position?

The Senate plan would replace the $85 billion of cuts this year with $110 billion of cuts and taxes, reducing the defense cuts to $27.5 billion and raising (hopefully) $54 billion with the “Buffet rule,” the new millionaire income tax.

I thought we passed a “millionaire tax” last January 1 ? Well, that was only the first “millionaire tax” which affected those with incomes above $200,000. Now they want another one. Why ? Because that’s what Democrats do.

To reduce the deficit in a weak economy, new taxes on high-income Americans are a matter of necessity and fairness; they are also a necessary precondition to what in time will have to be tax increases on the middle class. Contrary to Mr. Boehner’s “spending problem” claim, much of the deficit in the next 10 years can be chalked up to chronic revenue shortfalls from the Bush-era tax cuts, which were only partly undone in the fiscal-cliff deal earlier this year. (Wars and a recession also contributed.) It stands to reason that a deficit caused partly by inadequate revenue must be corrected in part by new taxes. And the only way to raise taxes now without harming the recovery is to impose them on high-income filers, for whom a tax increase is unlikely to cut into spending.

Even the New York Times people have to know that tax increases on high income people adds to unemployment and causes the really rich to flee to other countries. Unless, of course, they have bought favors from Obama. As for “revenue” the government’s share of the GDP is the highest since World War II and well above historic norms, no matter what the tax rates were

As for entitlements, Republicans mainly want to cut those that mostly go to the middle class and the poor, while ignoring nearly $1.1 trillion in annual deductions, credits and other tax breaks that flow disproportionately to the highest income Americans and that cost more, each year, than Medicare and Medicaid combined. Clearly then, there is both ample room and justification to reduce the deficit by curbing tax breaks at the high end, as Mr. Obama has proposed and Republicans have rejected.

Those “tax breaks” are the home mortgage deduction and other deductions that are of long standing (like state and local taxes and tax exempt municipal bonds). What the Democrats want is to have no limits on spending. I don’t believe that the Times’ people are so stupid and ignorant that they do not realize we are asking for the situation of Japan, which used Keynesian spending twenty years ago to deal with a real estate bubble collapse. They are still mired in a stagflation economy after a generation.

I will be very disappointed but not particularly surprised if the GOP caves in once again to the old tax now and cut spending later routine that we have seen before. It might be enough to get a third party started if it happens again. The Whigs got too far from their base in 1854. It could happen again.

For an important and entertaining history of the Whigs, read this.

The three most important components of that political culture were the Whig commitment to “improvement” (including both self-transformation as well as national economic improvement), to morality and duty rather than equality and rights, and to national Page [End Page 74] unity rather than local diversity.[4] Their opposition to Andrew Jackson and Jacksonian Democracy did not follow the lines of Schlesinger, which pitted progressives who wanted to use an expansive government to help farmers and the victims of robber-baron capitalism against monied exploiters who wanted to keep government small and impotent against their greed. Instead, it was the Whigs who advocated an expansive federal government—but it was a government that would seek to promote a general liberal, middle-class national welfare, promoting norms of Protestant morality and underwriting the expansion of industrial capitalism by means of government-funded transportation projects (to connect people and markets), high protective tariffs for American manufacturing, and a national banking system to regulate and standardize the American economy. Howe’s Whigs were the embodiment of Horatio Alger, of upward striving, of the triumph of reason over passion, of the positive liberal state, [5] and the counterparts of Disraeli’s “one nation” conservatism.

Arthur Schlesinger libeled more than just Calvin Coolidge.

Where we are headed, I fear

Tuesday, February 5th, 2013

UPDATE: An an article at Belmont Club describes interest in alternative money creation as a way of anticipating inflation. It also goes further into a discussion of general competence.

The idea that Virginia should consider issuing its own money was dismissed as just another quixotic quest by one of the most conservative members of the state legislature when Marshall introduced it three years ago. But it has since gained traction not only in Virginia, but also in states across the country as Americans have grown increasingly suspicious of the institutions entrusted with safeguarding the economy.

What has changed is faith in the federal government, not just in Virginia but in a growing number of places. The lack of faith in the competence of government — and the soundness of the dollar — has been growing leading some states to create contingency plans in case the currency goes bust.

Once again, I apologize for my pessimism but this is what I see. First, there is this article, which quotes a well known financier.

There may be a natural evolution to our fractionally reserved credit system that characterizes modern global finance. Much like the universe, which began with a big bang nearly 14 billion years ago, but is expanding so rapidly that scientists predict it will all end in a “big freeze” trillions of years from now, our current monetary system seems to require perpetual expansion to maintain its existence. And too, the advancing entropy in the physical universe may in fact portend a similar decline of “energy” and “heat” within the credit markets. If so, then the legitimate response of creditors, debtors and investors inextricably intertwined within it, should logically be to ask about the economic and investment implications of its ongoing transition.

Certainly “growth” seems to be fundamental to our economic health. That, of course, presumes a growing population but it also would be affected by a stagnant population with a growing age disparity. The obvious example of the latter is Japan.

The creation of credit in our modern day fractional reserve banking system began with a deposit and the profitable expansion of that deposit via leverage. Banks and other lenders don’t always keep 100% of their deposits in the “vault” at any one time – in fact they keep very little – thus the term “fractional reserves.” That first deposit then, and the explosion outward of 10x and more of levered lending, is modern day finance’s equivalent of the big bang. When it began is actually harder to determine than the birth of the physical universe but it certainly accelerated with the invention of central banking – the U.S. in 1913 – and with it the increased confidence that these newly licensed lenders of last resort would provide support to financial and real economies. Banking and central banks were and remain essential elements of a productive global economy.

The effect of asset bubbles on such a system is worrisome as the history of Japan and the recent history of the US have shown. The Panic of 1907 was largely responsible for the creation of the Federal Reserve. That financial crisis is thought, by a recent book, to have been a consequence of the 1906 earthquake in San Francisco, which destroyed a large amount of real assets and the insurance costs that were associated. The immediate cause was financial speculation but the real losses had added to the fragility of the system.

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Do we really want amnesty ?

Wednesday, January 23rd, 2013

The question about illegal immigration seems to have settled on the issue of amnesty. Republicans seem to be wavering about the benefits or disadvantages of the prospect of millions of new voters trending left politically. The issue of the advantage of Republican support for amnesty is highly questionable, if not dubious.

Getting killed almost three-to-one among Latino voters understandably concentrates the mind, but it’s no reason to lose it. The post-election Republican reaction has been built on equal parts panic, wishful thinking and ethnic pandering.

It’s one thing to argue that amnesty is the right policy on the merits. It’s another to depict it as the magic key to unlocking the Latino vote. John McCain nearly immolated himself within the Republican party with his support for amnesty and did all of four points better among Latino voters in 2008 than Mitt Romney did in 2012, according to exit polls.

Mickey Kaus asks if the GOP is being led astray by Fox News.

Does Fox News now have an All-Amnesty lineup? Looks like it. Sean Hannity and Bill O’Reilly have now fallen in line behind World Citizen Rupert Murdoch’s support of ”sweeping, generous immigration reform,” including a “path to citizenship.” Karl Rove was always on board, of course.

The problem with unlimited immigration is the welfare state. Until 1965, the new immigrant was on his own and the negative consequences were chiefly those of competition for low wage jobs. With the appearance of generous welfare benefits in 1965, the new immigrant might improve his situation even without working.

I don’t know how this will turn out but I am sure that it will not produce any benefit for the Republican Party

The GOP in opposition

Saturday, January 19th, 2013

Bill Kristol has an excellent column today on where Republicans could go in the next four years. I have little confidence that the House GOP can bend Obama to their will on the deficit or spending. He is riding high with the aid of the mainstream press and TV. The public does not understand the spending issue, or at least not enough of us do. The Republicans represent the “Eat your vegetables or there will be no dessert” philosophy and that is not popular right now. What do we do ? Here is one suggestion.

He quotes UN Ambassador Pat Moynihan in 1975.

The United States goes into opposition. This is our circumstance. We are a minority. We are outvoted. This is neither an unprecedented nor an intolerable situation. The question is what do we make of it. So far we have made little—nothing—of what is in fact an opportunity. We go about dazed that the world has changed. We toy with the idea of stopping it and getting off. We rebound with the thought that if only we are more reasonable perhaps “they” will be. .??.??. But “they” do not grow reasonable. Instead, we grow unreasonable. A sterile enterprise which awaits total redefinition.

I feel much the same way. I would have much preferred the GOP to have voted “present” when the “fiscal cliff” matter was before the House. I would like to see them do the same when the debt ceiling issue is voted on. Let Obama have his way but show that we do not agree.

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