Matrch 24, 2010
On the run up to President Obama’s presidency, Barack Hussein Obama ran his campaign on the slogan, “Change We Can Believe In.” His promise to the people was that of change, to make dreams come true. One of those dreams was healthcare for all. Now one year into his presidency, President Obama has delivered the first rainbow in that basket of American dreams. On Tuesday, March 23rd, Barack Obama signed into law the most behemoth legislation to come out of Congress in over 50 years. And for the past three days the marbled halls throughout Washington have been ringing with song and jubilation, “Ding dong the witch is dead! The wicked old witch, the witch is dead! Ding dong the wicked old witch is dead!”
|Did the White House fall out of the sky and kill the Wicked Witch of the West? That evil witch — accountability.|
Finally America has joined the likes of Canada and England in offering Free-dom to her citizens. Free-dom in the form of free healthcare for all… apparently even including 30 million illegal aliens. But there’s another song here in America that most of us have heard from time to time. A song sung by Janis Joplin. In that song Janis sings these words:
Freedom’s just another word for nothing left to lose,
Nothing don’t mean nothing honey if it ain’t free, now now.
And feeling good was easy, Lord, when he sang the blues,
You know feeling good was good enough for me,
Good enough for me and my Bobby McGee.
And that makes me wonder. Has our nation moved into a new era? A new time when “feeling good” is good enough? As long as everything is free? Are we now a nation that enacts legislation based on what makes us feel good? Is the idea of free this, and free that, and free everything else for every Tom, Dick, and Harry an idea that we should embrace? Have we become the American Idol generation that sings the feel-good songs of rock-n-roll without concern for who’s going to pay for the ride?
American heritage is filled with rock-n-roll’s feelin’ good and Hollywood’s images of Oz, but it’s the hard work of frontier men and women who faced the daily battle of accountability that made this country a great nation. A nation of accountability. I wonder if that’s gone now. When President Obama signed the healthcare bill yesterday, was our nation transformed into a wonderful fantasy land? Did the White House fall out of the sky and kill the Wicked Witch of the West? That evil witch– accountability. That evil idea that kept everything from being free, and happy. Is America now a land of munchkins who have been set free by Obama’s White House? Set free to come out and play? To sing and dance on the yellow brick road to prosperity for all?
I think that’s exactly what tens of millions of Americans believe. That President Obama and his White House Cabinet have killed the wicked witch that has kept us from being free all these years. And now our country is free. Free from accountability. And Obama’s change has brought us a new nation. Where everything is free for all. A nation of carefree, dancing munchkins. “Follow, follow, follow, follow, follow the yellow brick road…. weeeee!”
Is Obama the wizard who will give us the answers and show us the way? Or is he just an image on the screen? An image created for the public masses? An image created by the banking and insurance industries operating behind the curtain. These corporate interests will make endless billions from Obama’s healthcare legislation. Could it be these corporate raiders have an agenda to enslave the American munchkins?
This new healthcare bill will generate a massive increase in the affairs of the IRS and its intrusion into the daily lives of Americans. An intrusion that will be facilitated by a new army of 20,000 enforcement agents. That’s 20,000 more flying monkeys to serve their master. For the IRS has been chosen to become the enforcer over national healthcare, which equates to one fifth of the nation’s economy. It was the Wicked Witch of the West who barked her commands to a horde of flying monkeys, “Bring them to me.” But here in America it is the IRS that is the feared master who commands,“Bring them to me.” These 20,000 new enforcers will serve their master and extract from the American populace endless billions in taxation. And the IRS will deliver much of these funds to the Federal Reserve, a consortium of international private banks. The world’s money masters.
But the question remains. “Who’s going to pay for this ride of free healthcare?” And this is just the beginning. President Obama has three more years of change to implement. Who’s going to pay for that? According to BusinessInsider.com President Obama and his White House team have a plan for raising government revenues during the 2011-2020 decade. That plan includes a minimum of 16 new revenue streams. All total, producing a projected $1.9 trillion. And most of those funds are to come from that feared master, the IRS. The master of squeeze. The first squeeze on the list may be sitting in your garage. A used motorcycle for sale. Or that riding mower you just bought from your neighbor. Or that check you wrote your brother to fix the back fence. The first of Barack’s 16 revenue streams is to have the IRS tighten controls on all of your spending… both personal and business. Every transaction of $600 or more must be reported to the IRS for taxation. Yes, my little munchkin. You are going to pay for that “free” ride you like so much. But like Joplin said, “Nothing don’t mean nothing honey if it ain’t free.” And there ain’t nothin’ free.
Here is a synopsis of the initial 16 tax increases that you will be paying to generate Barack’s $1.9 trillion for change:
1.$9.154 Billion Acquired by tightening IRS rules for reporting all transactions over $600 for businesses and individuals.
2.$14.196 Billion Acquired by increasing the employers’ unemployment insurance tax by 0.2%.
3.$14.413 Billion Acquired by closing tax loopholes insurance companies use when selling life insurance policies.
4.$18.925 Billion Acquired by taxing hazardous chemicals for an environmental damage fund.
5.$23.729 Billion Acquired by closing loopholes in estate tax rules.
6.$23.977 Billion Acquired by converting employee investment fund profits into personal rather than business profit.
7.$23.987 Billion Acquired by eliminating industries not actually involved in bio-fuel production from participating in bio-fuel tax incentives.
8.$38.819 Billion Acquired by eliminating government subsidies on fossil fuels.
9.$59.085 Billion Acquired by eliminating LIFO accounting practices used for product inventories.
10.$90 Billion Acquired by assessing a new fee on banks that participated in TARP.
11.$105.364 Billion Acquired by increasing tax on capital gains and dividends to a max level of 20%.
12.$122.189 Billion Acquired by closing tax loopholes regarding offshore banking practices.
13.$155.322 Billion Acquired by reinstating limits on itemized deductions that were expanded in the Bush tax cuts.
14.$291.175 Billion Acquired by limiting some individuals’ itemized deductions to 28% of their total tax paid.
15.$327.368 Billion Acquired by increasing the income tax rate from 36% to 39.6% for high income earners whose rate was reduced under the Bush tax cuts.
16.$42.815 Billion Acquired by reinstating 36% tax rate for some earners, eliminating some rental property deductions, and regular income taxing on some commodities and futures profits.
Once again our question, “Who’s going to pay for all this new free-dom?” The answer as always is “the munchkins,” The American people. For it is always the munchkins who pay the money masters. And as this money is siphoned off of the economy in taxes there will be an ultimate effect produced. And that effect will be an increased stagnation of the economy. In an economy where there already exists a state of magnified taxation, the act of increasing taxes always produces a reduction in economic activity, which means less need for workers and fewer jobs. Fewer people working means fewer tax dollars flowing to the government. Obama’s new taxes are very likely not going to increase government revenues. It is far more likely they are going to reduce government revenues. Many people will ask how that can be. How can increased taxes produce less revenues? The answer lies in an understanding of the Laffer Curve.
The Laffer Curve, named after Arthur Laffer, an economics professor, is a bell curve drawn on a graph where the vertical axis represents tax revenues or money, and the horizontal axis represents the rate of taxation from 0% to 100%. Here is an example:
The blue curve in the graph shows us how tax revenues begin to rise as tax rates are initially instituted at just above 0% . You can see this in the bottom left corner of the graph. As tax rates are increased the blue line rises, indicating that tax revenues going into government coffers are rising. But after reaching the top of the curve we notice that the blue line begins to curve downward as tax rates continue to increase from left to right across the graph. If the government were to increase income taxes to 100%, the revenues that the government actually collects would quickly drop to zero. This is evidenced in the graph as we see the blue line on the right side of the graph drops off sharply to zero when the tax rate is increased to 100%.
Why does this happen? Well, quite simply because people quit working when they are over taxed. Consider yourself. If the government came in and confiscated your entire paycheck at the end of your first week working at a new job, would you go back to work the next week? Not likely. And when you don’t go to work there is nothing for the government to tax. So the government’s tax revenues would drop to zero. The reality is that most people would quit working long before the tax rate got to 100%. By the time the tax rate reaches 40% people are already becoming less motivated to work and will work fewer hours.
It’s all a matter of motivation based on reward. The greater the reward, the greater the motivation to perform a given action. Whether that action be work, or something else. Here’s an example. Many states now conduct lotteries where people can purchase tickets in an attempt to win a cash payout. In some cases lottery numbers are drawn day after day with no winning ticket. When this happens for several successive weeks the total payout fund increases dramatically because no one has collected the payout. In some cases the fund will increase to over one hundred million dollars. When this happens lottery ticket sales skyrocket. Many more people are motivated to purchase a lottery ticket because the winning ticket will generate a prize of over $100,000,000. In this case the reward has risen phenomenally. This higher reward produces a higher motivation to purchase a ticket.
- A d v e r t i s e m e n t
The psychological relationship of motivation-to-reward is directly involved in the workforce economy. When the government steps in and siphons off some of your paycheck, then the reward produced by your labor has been reduced. And since that reward has been reduced, as a psychological response your motivation to work will also be reduced. Reduced reward generates reduced motivation. When taxes are increased and one’s reward for labor is thereby decreased, the resultant effect on society will be a reduced motivation to work. Fewer people will be motivated to continue employment or to look for new jobs. Fewer people will be motivated to take on a second job. Fewer people will be motivated to start a small business. All as a consequence of reduced motivation. And fewer people motivated to work means fewer and smaller paychecks to tax. Which means less tax revenues for the government. Hence we see that when tax rates are already high, as indicated on the right side of our graph, increasing the overall tax rate further by adding more taxes will actually produce the effect of driving down tax revenues rather than increasing them.
The ultimate effect of Obama’s planned tax increases to produce $1.9 trillion dollars will be economic stagnation. These tax increases will reduce motivation in the workforce, resulting in a national reduction in household income and purchasing power. This reduction in purchasing power will result in declining product sales nationwide, thereby reducing manufacturing output, thereby reducing the need for labor. All of which translates into a rise in unemployment and a consequential reduction in tax revenues.
That wicked witch of accountability is not dead. If you raise your hand to your ear, you can hear her shrill voice as she points her crooked finger, “I’ll get you my pretty. And your little dog too.” Payday is coming because free-dom ain’t free. Obama’s White House in the sky will soon come crashing down on all of the happy munchkins foolishly celebrating their new free-dom.
There’s a big storm coming. And we’re not in Kansas anymore.