Tag: American debt crisis

The Sky is Falling: Let’s Eat the Rich!

According to NASA and the Federal Reserve, the sky actually is falling.  Apparently, UARS, a weather satellite that ran of gas in 2005, has slipped its leash and is about to come home — at about a million miles an hour.   NASA is pulling a Napolitano, though.  (“We don’t know where.  We don’t know when.  But something terrible is going to happen.”) They haven’t told anybody when this five tonne ET is going to come sailing in – or more importantly, where.  Actually, they don’t know.  It is kind of important, though; especially since NASA says around 500 kilos of it is going to make it to the crash site.  I, for one, would kinda like to know when to duck.  The betting boys in Vegas aren’t talking, but according to NASA itself, there’s only a 1 in 3,200 chance of me getting brained by extraterrestrial debris, so that’s somewhat reassuring.

One the other hand, the Federal Reserve isn’t even giving odds on my financial well being anymore.  Their boldest reassurance so far amounts to “significant downside risks.”  Let me translate: we’re screwed.

In the next few years, the odds of any of us not being touched by this world-wide economic debacle are zero.  Our best plan of action is to get our personal financial house in order and hope the stupid wears off our political leaders before it’s too late.  While I’ll grant you the enormity of our collective debt didn’t just show up last Wednesday, it’s the responsibility of those who govern us now to start killing alligators – we can drain the swamp another time.  The problem is the leaders of our time remain blind to the economic realities that face us.  Not only that, but their Win-Win-Everybody-Gets-A-Rainbow political philosophy is seriously getting in the road.   I’m not sure what Fantasy Island Merkel, Papandreou, Obama and the others have checked into, but they better start thinking about coming back to the real world while the planes are still flying.  Sunshine and lollipops aren’t going to do us much good when all the airlines are bankrupt.  I hate to keep harping on it, but the delusionary air circulating in the halls of power has convinced most of the politicos that this economic crisis is the same in kind as every other one we’ve faced since the Arabs turned off the gas in 1973.  Guess again!  It’s not!

To be perfectly blunt; this time we’re broke.  The United States, the UK and Europe haven’t got the price of a Big Mac among them; forget fries and a beverage.  We are so far in debt even the guy at Sham Wow wants cash.  Here are the numbers: the United States, 13.9 trillion dollars; the EU, 13.7 trillion; Britain, 8.9 trillion.  That’s how much we owe!  And everybody knows it.  There isn’t a money person on this planet right now — from Madame Lagarde at the IMF all the way down to Ron the teller at Rubberboot Savings and Loan — who doesn’t understand we are facing a financial Armageddon.  They’ve been yapping about it for a couple of years now.  Yet — and here’s the sharp stick to the eyeball — not one world leader is willing to publically admit it or, more importantly, do something about it.  The best we get out of our fearful leaders is some old same old, borrow, tax and spend stimulus package.  The latest incarnation is “Let’s eat the rich!”

Here’s some arithmetic (It’s not even math.)  According to Forbes, there are 10.5 million millionaires in America.  If Obama taxed (took) each one of them an extra one million dollars (which, by the way, would wipe a lot of them out) he’d get only 10.5 billion dollars.  Likewise, there are 412 billionaires kicking around.  If Obama extra-taxed them a billion dollars each and added that to the original scam, he’d still only have 422.5 billion dollars.  Everything being equal (and if the accumulating compound interest stopped this very second) it would still take America well over 30 years to pay off their current IOUs.   Meanwhile, over in the European forest, Merkel, Sarkozy and Cameron don’t have near as many millionaires to sic their tax men on.  So, it would take them even longer to get out of the poorhouse.  Plus, there’s no guarantee what these financial Einsteins are going to do with the money after they collect it.   It might never see the debt.  It might end up buying muffins at a Justice Department Conference – perhaps with coffee and a nice piece of fruit.  Quite frankly, the track record so far isn’t all that good.

There’s only one way to get out of this money pit we’ve dug for ourselves.  Quit spending so damn much!  We need to stop the dollar haemorrhage immediately.   It’s no secret that government – any government – wastes enough money to keep a small planet going.  It has to stop.  This means deep and drastic cuts to the vast majority of government programs.  There will be weeping and wailing and threats for the next election.  After all, it’s very difficult to convince people they can no longer have the things they think they’re entitled to.  But we have to do it.

Unfortunately, our leaders have been taking the easy way out on this for years, that’s how we got in this mess.  Now, instead of judicious trimming, we’re going to have to cut to the bone just to come out about even, and nobody’s going to like it.  However, for every day we delay, the cuts are just going to get deeper.  There’s no quick fix, folks; I don’t care what the politicos think they can get away with.

Like it or not, the financial sky is falling, and the chances of you getting hit are 100%.  Believe me: it’s better to go outside and get it over with than spend the next ten years being pelted to death by little pieces.

Obama vs History: Taxing the Rich

If, as Sam Johnson and Bob Dylan maintain, “patriotism is the last refuge to which a scoundrel clings,” then taxing the rich is the first option of a faltering politician.  It doesn’t take a lot of planning; it’s easy to sound byte, and it makes good copy.  Journalist love tax stories because, since nobody likes taxes, they don’t need to waste a lot of time explaining economics to the iGeneration.  It’s either “tax breaks for wealthy friends [cronies in Canada]” or “making the rich pay their fair share.”  All journalists have to do is point to who’s getting screwed and go back to their Blackberries.  They don’t even have to look up.

When a faltering politician pulls the tax-the-rich rabbit out of his hat, he knows his days are numbered and he needs a ballot box bounce at the next election.  So when President Obama cranked up the teleprompter today, he wasn`t offering a bold strategy for economic recovery; he was starting his 2012 election campaign.

Actually, taxing the rich has a long and noble history.  It goes back to the days when Robin Hood and Maid Marian were playing Bonnie and Clyde with King John`s tax money.  In actual fact, though, Robin and his boys were a minor annoyance to King John; it was the rich northern barons who were the real problem.  John had been “making the [Saxon] rich pay their fair share” for years to cover the costs of his stupid wars.  Eventually, they got fed up with it.  In 1215, they raised an army, marched on London and finally cornered the King at a place called Runnymede.  Faced with involuntary abdication, King John signed the Magna Carta, a document that strictly limited the power of the monarchy.  The Divine Right of Kings was dead, western democracy was born and everybody (except John) went home happy,.  The Robin Hood story came centuries later and never really clarified just which rich Robin had been robbing.  Apparently, historically, taxing the rich has its disadvantages.

In the late 18th century, another British King, George III, was busy “making the [American] rich pay their fair share” to cover the cost of his stupid wars — and along the way maybe pay for their own defence.  This did not sit well with the local moneyed class of The Thirteen Colonies.  They got together in Philadelphia and decided to limit the power of the British king and the British Parliament — by getting rid of them.  On July 4th, 1776, they signed the Declaration of Independence, everybody went home to get their muskets, and the United States of America was born.  Meanwhile, George was left wondering if it was better to have taxed and lost than never to have taxed at all.

The modern version of “making the rich pay their fair share” first showed up in Britain, in 1909, when two wily Liberal politicians looked over to the left and saw the new Labour Party capturing the hearts and minds of British voters.  David Lloyd George and Winston Churchill decided it was time to redistribute the wealth of the Empire — and perhaps take a few votes away from the burgeoning socialist movement.  They concocted a People’s Budget which proposed an escalating Income tax, an Inheritance tax and a Land tax.  After a couple of years of political bickering and compromise, the budget passed.  Lloyd George described it thusly:

“This is a war Budget. It is for raising money to wage implacable warfare against poverty and squalidness. I cannot help hoping and believing that before this generation has passed away, we shall have advanced a great step towards that good time, when poverty, and the wretchedness and human degradation which always follows in its camp, will be as remote to the people of this country as the wolves which once infested its forests.”

Unfortunately, their scheme didn’t work.  Despite Lloyd George’s optimistic oratory, taxing the rich didn’t lift the poor out of poverty within that generation or even the next one.  It would take two World Wars and a worldwide Depression to eradicate the worst poverty from the slums of Great Britain, and even then not completely.  The only real result of the Liberal Party’s People’s Budget was within a generation the Liberal Party itself was wiped off the political map and is now “…as remote to the people of [Britain] as the wolves which once infested its
forests.”

Today, President Obama is playing a losing game with history by introducing the Buffett Tax on millionaires.  He might get away with it for a while because most ordinary people truly believe that the rich aren’t really “paying their fair share.”  It’s a common myth that no amount of reasonable arguments have ever been able to dislodge.  Let me bore you with some numbers, though; these are figures from the American Treasury Department.  In 2005, the top 50% of American taxpayers paid approximately 94% of all taxes collected, while the bottom 50% paid the rest – a mere 6%.  Obama knows that politicking with these numbers is not very smart.  However, “making the rich pay their fair share” is a far more palatable catchphrase.  It’s probably the first sound byte of the 2012 presidential campaign.

Luckily, the minute Obama opened his mouth, this morning history was on our side.  Despite its tempting appearance, taxing the rich has never been the best political strategy for staying around the halls of power — especially not in the long term.

It’s starting to look like the White House might get a new tenant next year.