Category Archives: fiscal cliff

Republicans Must Take Immediate Control Of The Economy

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Early in his presidency, President Obama introduced and the Democrat controlled Congress adopted what they believed was an $850 billion Keynesian stimulus plan. However, it predictably failed to grow the US economy as he expected. There are multiple reasons for its failure. Not enough was directed to infrastructure construction spending. Taxpayers struggling with excess debt used the extended tax reductions to pay off credit card balances. Giving away many billions of dollars in the form of food stamps and other welfare payments and as loans (which later defaulted) to reward green energy companies rewarded his political base. Although almost all welfare payments are spent, they have an insignificant multiplier effect. They grow the National Debt because they stimulate the creation of mostly non-tax-paying jobs and do not generate significant tax revenues for the federal government or the states to offset the expenditures.

His stimulus program should have been designed exclusively for projects that would have generated hundreds of thousands of tax-paying jobs and income for the tax-paying entities receiving the contracts. One way to do so would have been to use a large percentage of the stimulus to subsidize shovel-ready state infrastructure projects to repair and improve our decaying highways, bridges, tunnels and airports.

Despite the failure of his stimulus plan, the Obama administration continues its unprecedented expansion of welfare benefits for the poor leading to the unending rise in the National Debt. His main effort after adopting the stimulus plan went into adopting Obamacare which is an abomination. It is not only destroying the healthcare industry, and causing the conversion of forty hour per week jobs to part-time jobs, but also creates new types of welfare subsidies for people with pre-existing conditions, the poor, and low-income workers that have to be paid for. Obamacare was passed and President Obama was reelected based on an elaborate series of lies which were intended to, and with the aid of a politicized press, succeeded in preventing the American voters from learning the truth about the required major changes in healthcare policies and the outrageous excessive Obamacare premiums and deductibles required to be paid by the young and healthy middle class and businesses to fund the cost of the Obamacare subsidies.

Fortunately, while the president’s economic policies were failing, the low-interest rates maintained by the Fed over many years promoted a rise in stock prices that promoted spending that grew the GDP and generated tax revenues that contributed to the reduction in the deficit. A major stimulus to our economy was also supplied by fracking. Although conducted only on private land and impeded by President Obama because of his generally unfounded environmental concerns, fracking generated enormous revenues and created millions of tax-paying jobs in the oil and gas, steel, pipe-line, auto and railroad industries. Fracking grew the GDP and limited the rise in the deficit because it produced a multiplier effect on our GDP that the president’s stimulus program failed to achieve.

We now face a serious danger that our economic growth will stagnate because the increases in oil and natural gas production from fracking in a stagnating world economy has caused a temporary glut of supply and a precipitous drop in oil and natural gas prices. The expected large economic benefit from increased consumer spending and reduced costs to business resulting from hundreds of billions of dollars of reduced energy costs may be more that offset by reduced capital expenditures for drilling new wells, employee layoffs and debt defaults in the oil and gas industry, reduced demand for steel pipe and pipeline and rail services and trucks.

Now, after his inept policies have added many trillions of dollars to and doubled the size of our federal debt, President Obama is proposing a true Keynesian stimulus by seeking funding for transportation infrastructure. He blames Republicans in Congress, whom he has refused to negotiate with on most issues and consistently mocked and abused throughout his presidency, for creating grid lock and being the cause the government shutdown that he encouraged and exacerbated for political reasons. Looking back, we see that President Obama has repeatedly violated the Constitution and acted like a “banana republic” dictator while dangerously steering our economy toward socialism and communism.

The Republican controlled Congress will have the opportunity to take control of and stimulate the economy by (i) funding the repair and upgrading of our decaying transportation infrastructure, (ii) strengthening our military, (iii) improving homeland security and (iv) eliminating the Obamacare mandates. Despite his veto threats, President Obama will find it difficult to prevent passage of spending to improve our economy and our safety. However, if Republicans listen to the inept economists who insist on austerity to reduce the budget deficit and the National Debt or if they politicize the spending as the Obama administration does, they will fail.

Even though the spending programs proposed above will provide a Keynesian stimulus to our economy, we will need enormous amounts of capital to pay for the needed transportation construction projects across the country. Instead of complaining repeatedly as President Obama does about growing wealth discrepancies we should be seeking ways to encourage privately held wealth to partner with government to finance infrastructure construction projects. Our safety, domestic production and quality of life will clearly benefit from the improved infrastructure.

I attempted to address the financing problem in my book published in March 2013 entitled “Perpetuating American Greatness After The Fiscal Cliff”. I proposed changing our tax laws to enable the creation of “Jump Start America Bonds” to encourage American corporations with trillions of dollars parked overseas to finance domestic transportation infrastructure construction projects. Perpetuating American greatness is at issue.

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A Proposed Tax Law Change To Encourage Our International Corporations To Bring Home Cash Held Overseas To Invest In Transporatation Infrastructure Projects

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Our transportation infrastructure is a national disgrace. We are the richest country in the world and yet we fail to upgrade, or even maintain, the vital paths of commerce. The main reason is that our states and cities, which are primarily responsible for infrastructure projects, are saddled with ever-growing welfare and employment obligations and excessive debt. We must find a way to supplement transportation infrastructure funding.

President Obama, as he has every time an important election nears, is attempting to promote a plan for HUD funding of infrastructure spending. Why should Congress approve the president’s request for funding? A large portion of previously approved infrastructure funding has not been used by the Obama administration for shovel ready projects, but to promote Democrat candidates and to reward friends. Republican Congressmen don’t trust or like President Obama who disregards Congress and abuses Republicans at every opportunity. They are unlikely to approve the funding he seeks.

This writer in his book entitled “Perpetuating American Greatness After The Fiscal Cliff”, published in March 2013, has proposed changes in the corporate income tax laws to encourage the creation of “Jump Start America Bonds”. Such bonds would be sold offshore by states and their transportation agencies to our international corporations to finance transportation infrastructure construction projects. Jump Start America Bonds would have properties to make them a win, win, win for the investing corporations, the states and the federal government. The corporations would receive a fair return and be protected against loss of principal resulting from default or interest rate risk. They would also be able to repatriate the funds over a term of years at favorable tax rates. The states would get transportation infrastructure construction funding on reasonable terms. The federal government would collect outstanding taxes on overseas profits at reduced rates and would benefit from dynamic economic growth leading to middle class job creation and increased income tax revenues. See my previous article on this blog entitled “Jump Start America Bonds Represent the Perfect Economic Stimulus”.

It’s Graduation Time And The Economic Recovery Gets a Failing Grade

As we reach the middle of 2013 our colleges are conducting graduation ceremonies and our in debt seniors are looking for jobs. Too many of our graduates are having a difficult time. The US economy is growing slowly, but this recovery is different from previous recoveries. Top line unemployment has fallen because of the substantial growth in low-income and part-time jobs. However, such low paying jobs are not the type of entry-level positions our college graduates seek and are qualified for.

Many of the new jobs have compensation so low that the employees become entitled to negative income taxes. Twenty-four million people are either unemployed, have given up looking for work or have accepted part-time employment. These are the unemployment ranks which our graduates are joining. The number of people collecting welfare is growing.

There is a serious risk that American capitalism is being converted under President Obama into a new form of socialism which is eerily similar to European socialism. Because of the failure to stimulate the economy and create tax-paying jobs, the National Debt is growing at a faster rate than the GDP. Non-income-tax-paying jobs, that offer negative income taxes, grow the GDP, but they also grow the National Debt.

Our transportation infrastructure is decaying because a large number of our cities and states are insolvent and Congress is not supplying adequate assistance. The author of this article in his book, “Perpetuating American Greatness After The Fiscal Cliff”, has proposed federal tax law changes to permit the sale of Jump Start America Bonds to enable and encourage our international corporations and wealthy individuals to invest in infrastructure spending.

Few members of the decimated middle class are participating in the recovery. Many of them have lost their jobs and their homes. Obamacare is encouraging part-time employment and many employees have or are going to lose their health care coverage. The IRS, which will have major responsibilities under Obamacare, has become politicized and too few Americans are outraged. The acknowledged wrong-doing has been permitted by the Obama administration to continue for years. Housing prices have seen a small increase because of purchases by investors, while young families remain in large part as renters. 

Austerity being fostered by the Sequester is the wrong remedy and is harming the economy. The Obama administration has lost control over its ability to stimulate the economy because it refuses to deal with our out-of-control entitlements which are becoming worse under Obamacare and because it has failed to deal with the scandals which have caused a decline in President Obama’s approval ratings.

Austerity Measures Take Many Forms

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Paul Krugman shouldn’t feel it is necessary for him to keep proving that austerity measures are harmfull to the economy. Only the fools, including many conservative Republicans, disagree.
Austerity measures take many forms. The following are all austerity measures:
* the Sequester
* the American Taxpayer Relief Act of 2012
* reduced military and NASA spending
* reduced government employment
* reduced state government spending
The Obama administration which blames the Republicans for everything wrong in the economy, is responsible for the first four and the failure of its stimulus programs is in large part responsible for the fifth.
President Obama proposed the Sequester as a political trick to get the Republicans to extend all of his tax and spending programs until after the presidential election. It backfired on him when the Republicans refused to repeal it after the election and despite his demagoguery and gamesmanship by closing the White House to students and impeding air transportation the public blames him equally for the problems sequestration is causing.
It is promoting congressional gridlock.
The American Taxpayer Relief Act of 2012 raised taxes on the upper middle class in most large cities and is reducing their spending. Its two percent increase in withholding taxes was necessary to preserve the integrity of Social Security. Withholding taxes were reduced two years earllier to grow the economy and promote the president’s re-election. He should have sought a different stimulus at that time. Adding reduced deductions to the tax bill only further increased middle class taxes and will reduce their spending.
Reduced military and NASA spending was planned by the Obama administration independently of the Sequester. It has been enhanced by the Sequester. It has taken many forms and has already cost tens of thousands of jobs and left many returning veterans unemployed.
Postal worker layoffs, failing to find jobs for returning veterans who joined the unemployment rolls and excessively reducing government employee workdays to cause maximum inconvenience to the public to try to get them to blame the Republicans are further austerity measures. The Obama administration could have dealt with the Sequester’s two percent spending reduction in a less disruptive way. He turned down Republican offers to give him flexibility.
Reduced state government spending is being caused by requirements that states balance their budgets. The failure of the Obama administration stimulus programs to promote good tax paying jobs has limited the recovery in state revenues.
Furthermore, Obamacare is causing a response similar to an austerity measure. Businessess are holding back capital spending and hiring and looking for ways to avoid paying increased medial care costs. Many individuals fear loss of their jobs or their medical insurance and are afraid to spend.

Perpetuating American Greatness After the Fiscal Cliff

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March 10, 2013

President Obama insists on a balanced approach to raise taxes and cut spending to reduce the federal deficit. Both raising taxes and reducing spending will hurt our economy. He doesn’t really want to cut spending. He says he is willing to address entitlement problems (which were made worse by Obamacare), but he offers only vague solutions which fail to address the real issues of excessive and growing Medicaid, Medicare and now Obamacare expenses.  Squeezing drug suppliers, doctors, hospitals and insurers to reduce medical care costs is going to reduce the quality and availability of care.

The Republicans were bludgeoned by the president’s misleading demagoguery into raising taxes which they didn’t want to do. They want to cut government spending to reduce the National Debt, but austerity measures are likely to cause a recession and increase, not decrease, the federal deficit. They are using the sequester to cut the rate of growth of government spending. The sequester has been politically successful for the Republicans by exposing President Obama’s demagoguery and scare tactics. However, it requires across the board cuts and, even if modified, will reduce defense spending and result in job losses (as all federal spending cuts do). President Obama will blame everything which may go wrong in our country during the next four years of his presidency on the Republicans even if he has throughout his presidency been weakening our defense and most of the job losses will result from the 2013 income tax increases and the adoption of Obamacare and Dodd-Frank.

Neither party has proposed a plan to promote job creation and economic growth which will come to the aid of the forgotten middle class, increase tax revenues and reduce the federal deficit. Our politicians do not seem to understand that the goal should be to grow the GDP at a faster rate than the the rate of growth of the national debt.

My book entitled Perpetuating Greatness After The Fiscal Cliff examines the economic events after the turn of the century leading to the fiscal cliff and the myriad of problems facing our economy resulting in large part from government failures. It suggests solutions to our economic problems including:

1. Proposed corporate income tax and estate tax law changes to encourage our cash rich corporations and individuals to step up and invest in state transportation infrastructure construction projects to create millions of jobs;

2. A federal mortgage law to eliminate underwater mortgages by enabling homeowners to obtain restructured mortgages and reduce the aggregate of their home mortgages to the fair market value of their home;

3. Ways to modify our entitlements to make them affordable and available to provide quality health care.

4. Modification of the federal income and estate tax laws (including the 2013 tax law changes) to make them fair and to close loopholes to raise revenues without harming economic growth;

5. Changing Dodd-Frank to strengthen bank regulation while eliminating certain provisions which are unnecessarily restricting economic growth;

6. Changing securities regulation to prevent current manipulative practices and the next stock market crash by restricting manipulative short selling practices;

7. limiting interest rates on consumer credit by the adoption of a national usury law;