Why the Uncertainty in ObamaCare is Bad for our Economy

This week marks the anniversary of the passing of ObamaCare, and next week the Supreme Court will begin hearing arguments about it and might decide to repeal the bill. As a small business owner I can explain how the bill is hurting the economy.

Let's look at the big picture. Profits are up throughout the economy, however employment and the GDP are lagging, to say the least. US corporations are sitting on record amounts of cash, but they're not expanding and they're not hiring. Wondering why? It's because of the uncertainty. Nobody knows what new regulations and mandates are coming in the next years, or even months. Businesses are looking at 2-3 years forecasts before making any significant decision, and uncertainty about Government intervention is incredibly high. If a businesses decides to grow, of course it needs to hire more people, but does anyone know what new workplace regulations are to be expected? What new taxes or mandates are coming?

And the biggest unknown of all is ObamaCare, which will massively affect everyone once it starts being implemented in 2014. Speaker Nancy Pelosi told us we have to pass the bill so we know what's in it. Two years have passed and we still don't know what's in it. The language is so twisted that noone can figure it out. One example in recent weeks is the debate over contraception. The media diverted the attention and made it all about abortion rights, religion and the new meme, "women's health". The issue has nothing to do with any of these. It's not about "access to health care", since there's currently no restriction on buying birth control pills, and you can even get them for free from Planned Parenthood. It's all about the Government mandating businesses and taxpayers to pay for someone's birth control pills. New regulations just found in ObamaCare say that contraception pills should be provided for free. But nothing is actually free. If you have insurance from your employer, the employer pays for it (or more precisely, the employees who don't need it pay, since health insurance costs are built into the total compensation package). If you get insured through some Government program or subsidy, the taxpayers are forced to pay for it. (And by "taxpayers" I mean the 50.5% of the population that, according to IRS, pays federal taxes; I assume that if you really can't afford $20/month for birth control pills, then you fall into the other 49.5%).

So we saw what a scandal this minor problem created. If birth control is considered an essential women's health issue (by the way, when was pregnancy classified as a disease?), then a Government agency deciding that food is very important for your health is not that far fetched. Can anyone be sure that, through ObamaCare, companies won't be mandated to pay for their employees' nutrition? Or to offer an allowance for heating costs, since I'm sure it's easy to conclude that extreme cold and freezing is a serious health issue?

It's easy to see why businesses are reluctant to hire people, even though they have the resources. And for small businesses, which make up an overwhelming percentage of our economy, it's even riskier. Big businesses can afford layoffs, but for a small business, the increase in unemployment insurance costs after new crippling mandates force a few layoffs can be devastating. For most business owners like myself, it's much safer to just hang on and try to survive. And hope for a smart and Constitutional decision from the Supreme Court in the following weeks.

Markets Celebrate the GOP Wins

Today, the Dow closed at 11,434 and the S&P 500 at 1,221, which are the highest closings since the summer 2008. That is, since before Lehman failed, since before TARP and all the stimuli. It tops a trend that started in September, when it became clear that the GOP will recapture the House and the only question remaining was by how much.

The reason is not only because of the huge Republican win, but because there is a legislative gridlock now. What has hampered the recovery the most, and prolonged this recession for longer than normal, is the huge uncertainty about the future. For 18 months, we didn't know what was gonna happen, what new anti-business bills we were gonna get. It was the healthcare bill, about which we discover more and more which every week passing. It was the question or whether we'll have a cap&trade bill, another financial regulations bill, card check, and on and on. Since Obama took office, any smart business didn't plan any new operations, growth, or hiring, because they weren't sure what's gonna hit them next. There's is no credit crunch, as only 9% of businesses recently polled said that getting credit is their main problem. American companies are sitting on a record $2 trillions in cash, which for now sits much better in protected securities than risk being taken over by new Government mandates, regulations or taxes.

But the takeover of the House, while the Democrats remain in control of the Senate and the White House, means we'll have two years of legislative gridlock. That means that no major bill has any chance of passing! It's exactly what we need, what the markets need, what businesses need: for the Government to stay of our lives. We've had many recessions in the past, and the shortest ones where the ones where the Government didn't do anything, and just let the economic cycle turn everything around. When the Government got involved the most, we got FDR's Great Depression, and Carter's double recession and inflation. We probably had the fastest recovery after the 1988 market crash when Reagan, to everybody's despair, did the right thing: nothing.

So now, we'll have legislative gridlock, and no more bills to squeeze our economy and businesses. It's time to finally start recovery, and the markets showed they're ready.

The Road to Hell

by Thomas Stokes


The road to hell, it is said, is paved with good intentions.

The current economic crisis, resulting from the sub prime mortgage meltdown, is certainly a perfect example of this.

Politicians had the major role in creating the current problems, starting with the admirable intention of having low-income families own their own homes.

The Community Reinvestment Act, passed by a Democrat Congress in 1977 to reduce alleged discriminatory credit practices in low income areas actually encouraged lending to uncreditworthy borrowers. Amendments to the CRA in the mid-1990s, raised the amount of mortgages issued to otherwise unqualified low-income borrowers, and allowed the securitization of CRA-regulated mortgages, even though many were subprime.

Those who opposed this faced charges of racism from the more liberal politicians and activist groups like SEIU and ACORN (both of these organizations are international and no information is provided as to foreign funding of their political activities in the US).

In 1982, a Democrat Congress passed the Alternative Mortgage Transactions Parity Act (AMTPA), which allowed creditors to write adjustable-rate mortgages, including option adjustable-rate, balloon-payment and interest-only mortgages.

Approximately 80% of subprime mortgages were adjustable-rate mortgages.

By 2008, the Fannie Mae and Freddie Mac owned, either directly or through mortgage pools they sponsored, $5.1 trillion in residential mortgages, about half the total U.S. mortgage market.

When concerns arose in September 2008 regarding the ability of Fannie and Freddie to make good on their guarantees, Washington placed the companies into a conservatorship, effectively nationalizing them at the taxpayers' expense.

What has been the result of this?

The worst economic crisis since the Great Depression of the 1930's. In 2009, almost 3 million homeowners faced foreclosure. Huge drops in home values for those who manged to keep their homes with many now "under water" (values below the mortgage owed). Double digit unemployment, poverty levels higher than when President Johnson waged a "War on Poverty". This attempt to help people has not only hurt those same low-income families. but has also hurt each and every one of us.

In New Jersey, politicians have created the Council on Affordable Housing (COAH) which imposes mandates on communities, like Middletown, to provide low-income, high density housing at taxpayer expense. This has a major impact on services, especially schools, and the property taxes we pay.

Professional politicians, of both parties, always searching for more votes, ignore the unintended (but not unforseen) consequences of their actions. Yes, the road to hell is paved with good intentions.

Is a Severe Recession Obama's Plan for 2012?

If you thought we barely passed through a bad recession, then wait for 2011. The huge tax increases that will occur when the tax cuts of 2002-2004 expire will deal a severe blow to our economy, which could send us into a much severe recession that the one we didn't even recover from.

Despite all the lies that come out of Obama's mouth (and I'm shocked at how he can keep a straight face while telling them), small businesses will suffer a deadly hit after January 1st. As you can read in today's Wall Street Journal, 48% of small business income will see a tax rate increase from 35% to 40.8%. That's a 5.8 tax rate increase, or more precisely, a 16% increase in the tax liability. At the end of 2011, as a small business owner, you should be happy to still be in business.

Now consider the fact that the GOP will take over the House (according to a study published by the Huffington Post, there's a 79% chance of that happening). Also, the GOP is very close to also getting the Senate. According to the RCP averages, Republicans will win 8 seats. That leaves them to win 2 of the other 3 competitive races (Wisconsin, California and Nevada), which is very probable.

So what's gonna happen? Republicans will control the full Congress, Obama will prevent them from passing any relief measures, and will blame the recession that he engineered on an inept GOP Congress. Then he will run on this in 2012. It seems like the only thing that could still save him, given the total support from the media.

My Thoughts on the State of the Union

By now I bet you've probably read everything you wanted to hear about the State of the Union speech, but if you want my take on it, here it goes. Personally, I was a bit confused, because the TOTUS (Teleprompter Of The United States) kept switching between being an ignorant idiot, and an outright liar. So here's my play-by-play of just the SOTU's highlights:

I hear about them in the letters that I read each night. The toughest to read are those written by children, asking why they have to move from their home, asking when their mom or dad will be able to go back to work.
You can just answer that it's your Administration's economic policies that discourage businesses from hiring their parents.

They don't understand why it seems like bad behavior on Wall Street is rewarded, but hard work on Main Street isn't.
It's because the Administration was more interested in bailing out Wall Street than in giving tax cuts for Main Street.

It's time the American people get a government that matches their decency, that embodies their strength.
Yes, we'll start doing this in November 2010, and finish in 2012.

And if there's one thing that has unified Democrats and Republicans -- and everybody in between -- it's that we all hated the bank bailout. I hated it.
But you voted for it.

And if we had allowed the meltdown of the financial system, unemployment might be double what it is today.
No, mister President, you said that if you don't bail them out, unemployment would go over 8%. Well, you had your way, and unemployment is still at 10.2%. So much for your labor market forecasts...

Now, I know Wall Street isn't keen on this idea, but if these firms can afford to hand out big bonuses again, they can afford a modest fee to pay back the taxpayers who rescued them in their time of need.
They already paid back, with confiscatory interests rates and fines, which almost bankrupted some smaller banks.

...and passed 25 different tax cuts. Now, let me repeat: We cut taxes. We cut taxes for 95 percent of working families. We cut taxes for small businesses.
WHAT???? Are you mocking us, Mr. President? Is the teleprompter playing a prank on you??

Now, because of the steps we took, there are about 2 million Americans working right now who would otherwise be unemployed.
Really? Which ones? Last time I checked, there were about 2 million more American out of work since you took office.

And we're on track to add another 1.5 million jobs to this total by the end of the year.
And probably 1.5 million others will lose your jobs because of your policies.

But government can create the conditions necessary for businesses to expand and hire more workers.
Hint: The only thing Government can do to help businesses expand and hire more people is by reducing regulations and cutting taxes.

... and give rebates to Americans who make their homes more energy efficient
You mean, if my neighbor wants an energy efficient appliance, I should pay for it??

And to encourage these and other businesses to stay within our borders, it is time to finally slash the tax breaks for companies that ship our jobs overseas
What?? Is there a tax break if I outsource a job off-shore? How do I get it? Can you give me some specifics?

We can't afford another so-called economic "expansion" like the one from last decade, what some call the "lost decade," where jobs grew more slowly than during any prior expansion, where the income of the average American household declined.
First of all, in the last decade we had the longest period of jobs growth in our entire history. Second, stop using "household"-related statistics, because household sizes is decreasing. Why don't you use simple reference points like "per capita"? Oh, because that income is growing and it doesn't help your populist tirade?

You see, Washington has been telling us to wait for decades, even as the problems have grown worse. Meanwhile, China's not waiting to revamp its economy; Germany's not waiting; India's not waiting.
Yes, you're right, they're lowering business and corporate taxes. China is drilling for oil 90 miles from Florida, while you don't let us do it.

You can see the results of last year's investments in clean energy in the [...] California business that will put 1,000 people to work making solar panels.
...Which no one is buying, because if there would be a demand for that, you'll have a lot of businesses building them without any help from the Government.

But to create more of these clean-energy jobs, we need more production, more efficiency, more incentives, and that means building a new generation of safe, clean nuclear power plants in this country. It means making tough decisions about opening new offshore areas for oil and gas development.
Now he's joking again, right? Democrats have been opposing nuclear and oil refineries for DECADES. Do you have any idea when the last nuclear plant or oil refinery was built in the United States??

And, yes, it means passing a comprehensive energy and climate bill with incentives that will finally make clean energy the profitable kind of energy in America.
Now back to the previous affirmation, will you be fair and provide the exact same incentives to clean energy AND to nuclear and oil drilling businesses?

I know that there are those who disagree with the overwhelming scientific evidence on climate change.
Yes, for example yourself, Mr. President, seem to disagree with the overwhelming evidence that global warming is a hoax.

So tonight, we set a new goal: We will double our exports over the next five years, an increase that will support 2 million jobs in America.
Oh man, did I just hear that? It reminds me of communist Romania, when the Great Leader would decide that we'll double production over 5 years, and then tell us it happened after only 4 years, although there was no factual support for that?

And let's tell another 1 million students that, when they graduate, they will be required to pay only 10 percent of their income on student loans, and all of their debt will be forgiven after 20 years, and forgiven after 10 years if they choose a career in public service, because in the United States of America, no one should go broke because they chose to go to college.
Did the Obamination really say that? So taxpayers are supposed to subsidize people who want to work for the Government? As if we don't support a bureaucracy that's already way too big and expensive? Listen Obozo. People shouldn't go bankrupt because they went to college. They should go to college because they expect better opportunities (which doesn't include a dead-end do-nothing Government job). And if they think it's not worth it, then nobody's forcing them to go to college, if not going to college will make you better off financially.

And by the way, I want to acknowledge our first lady, Michelle Obama, who this year is creating a national movement to tackle the epidemic of childhood obesity and make kids healthier. Thank you, honey. She gets embarrassed.
Obesity is not a disease, therefore it's not an epidemic, and taxpayers shouldn't be on the hook for other people's bad choices. And by the way, is it me, or did Michelle have the same look on her face that Hillary used to have when Bill was cheating on her?

And according to the Congressional Budget Office, the independent organization that both parties have cited as the official scorekeeper for Congress, our approach would bring down the deficit by as much as $1 trillion over the next two decades.
So this will cost us $1 trillion per year, but will save us $50 billions every year? Is that what you're saying?

Still, this is a complex issue. And the longer it was debated, the more skeptical people became. I take my share of the blame for not explaining it more clearly to the American people.
Now he's telling us we're stupid.

As temperatures cool, I want everyone to take another look at the plan we've proposed. What??? Did global warming just stop??

But if anyone from either party has a better approach that will bring down premiums, bring down the deficit, cover the uninsured, strengthen Medicare for seniors, and stop insurance company abuses, let me know.
OK, there you go:
- bring down premiums: allow competition across state lines
- bring down the deficit: the deficit is a Government thing, so just jeep the Government out of this altogether
- cover the uninsured: which ones? Poor people: they're covered by Medicaid; Illegals: send them home; People who choose not to get insurance: well, I thought you're pro-choice
- stop insurance company abuses: Reduce regulations so companies don't need to find ways to go around them

So let me start the discussion of government spending by setting the record straight. At the beginning of the last decade, the year 2000, America had a budget surplus of over $200 billion.
Oh my... Here it goes again. THERE WAS NO BUDGET SURPLUS. THAT WAS AN ACCOUNTING GIMMICK. THE DEBT STILL WENT UP DURING THOSE YEARS.

By -- by the time I took office, we had a one-year deficit of over $1 trillion and projected deficits of $8 trillion over the next decade. Most of this was the result of not paying for two wars, two tax cuts, and an expensive prescription drug program.
So why $8 trillions over 10 years? Meaning $800 billions per year? With two wars, two tax cuts and the expensive prescription drug program, Bush kept the deficit around $3-400 billions. I understand you'll stop the wars, increase taxes and kill the elderly, so why is your deficit doubling or even tripling?

Starting in 2011, we are prepared to freeze government spending for three years. Spending related to our national security, Medicare, Medicaid and Social Security will not be affected, but all other discretionary government programs will. We will continue to go through the budget line by line, page by page, to eliminate programs that we can't afford and don't work. We've already identified $20 billion in savings for next year.
Now he's mocking us again. So he'll keep spending trillion after trillion on his pet projects but thank God he's saving us $20 billions! Can you believe him?? It's like ordering 2 supersize double cheeseburgers with large fries - and a diet coke.

That's what I came to Washington to do. That's why, for the first time in history, my administration posts our White House visitors online.
Yes, I've seen those two visitors online - on YouTube mocking your White House security.

That's why we've excluded lobbyists from policy-making jobs or seats on federal boards and commissions.
Are you lying in our face? Your Administration is filled with lobbyists! From the Attorney General to almost everybody in the Treasury Department, the Secretary of Agriculture, and tons of czars and other jobs!

Tonight, I'm calling on Congress to publish all earmark requests on a single Web site before there's a vote so that the American people can see how their money is being spent.
Would it be the same website which showed thousands of jobs created in districts that don't exist?

But what frustrates the American people is a Washington where every day is Election Day.
You're dam' right! So please stop acting like you're still campaigning! Mr. President, you gave 400 speeches in your first year, don't you think it's a tad too much??

The confirmation of well-qualified public servants shouldn't be held hostage to the pet projects or grudges of a few individual senators.
Are you referring to months of filibustering of Judge Sam Alito? Or to the dozen federal judgeships that were open for 8 years because they couldn't get to an up-or-down vote in the Senate?

I'd like to begin monthly meetings with both Democratic and Republican leadership. I know you can't wait.
Ah! Now you have to do it! For one year you never had at least ONE meeting with the Republican leadership, because you didn't think it necessary, with a large majority in the House and supermajority in the Senate. But now that Scott Brown won, you'll have to do it!

I know that all of us love this country.
No kidding. "Us"? YOU really love this country? Then why do you keep apologizing for it everywhere you go. It's like saying you love your wife, but everytime you'd meet a stranger you'd say sorry that she's fat, sorry that she speaks too much, sorry that she doesn't clean the house. That's not love, Mr. President!

As a candidate, I promised that I would end this war, and that is what I am doing as president.
What exactly do you mean by "end this war"? In my view, you "win" a war, or "lose" a war, that's how it ends. So, can you clarify? Because sorry, but I don't understand this concept of "ending a war".

I've embraced the vision of John F. Kennedy and Ronald Reagan [...]
Hahahahahahahahahohohohohohohohihihihihihi

And at April's Nuclear Security Summit, we will bring 44 nations together here in Washington, D.C., behind a clear goal: securing all vulnerable nuclear materials around the world in four years so that they never fall into the hands of terrorists.
So let's hear, what's the plan on getting Iran ad North Korea on this deal?

And as Iran's leaders continue to ignore their obligations, there should be no doubt: They, too, will face growing consequences. That is a promise.
Yo yo yo. What did you say? Is that a threat? Whatchu gonna do, huh? Will you post something on their Facebook? Will you throw Michelle's purse at Ahmadinejad next time you see him at the UN?

Every day, Americans meet their responsibilities to their families and their employers. Time and again, they lend a hand to their neighbors and give back to their country.
Harry Reid is yawning. Janet Napolitano is dozing off.

I campaigned on the promise of change, change we can believe in, the slogan went.
I was playing Modern Warfare 2 the other day and I was imagining a secret operation with a commando unit that would infiltrate the White House basement and neutralize the teleprompter' power generator. Can you imagine that? I can see the President remaining limp like a zombie... or like those drones from Attack of the Clones.

Unfortunately, too many of our citizens have lost faith that our biggest institutions -- our corporations, our media
Oh, that's how you explain the tanking ratings of CNN, or the fact that MSNBC has fewer viewers than the fishing shows on Versus?

We don't quit. I don't quit.
No worries. We'll vote you out.

3 Reasons to Keep Bernanke in his Position

I disagree with the GOP trying to block Ben Bernanke's reappointment as Fed chief for 3 reasons:

1) He did a pretty good job keeping the dollar stable despite the administration's disastruos policies. The dollar didn't crash and the money supply is in check despite irresponsible spending.
2) A good Fed Chairman is an unpopular one. You don't want a populist in that position.
3) You don't want Obama to appoint yet another ignorant crook (like his czars) to head the Federal Reserve

Stop Worrying about a Double-Dip Recession

We simply never had a double-dip recession. Ever. People who threaten us with the specter of a double-dip recession (mostly the ignorants in the media) are refusing to look at any historical facts. Never in our economic history have we had such a thing. In every case they're invoking, there were actually two separate recessions:
- In the 30's, we had a recession a few years after the Great Depression, which was caused by the prior heavy government intervention into the way business worked. It was separate from the Depression.
- Early 80's: The 1980 recession was followed by a new one in 1981, which was caused by a combination of skyrocketing fuel prices and the government's efforts to control inflation

So as you can see, it's was either Government, or external factors, that caused a close, new recession. But by the way the economic cycle is working, there is absolutely no reason to fear a double-dip recession.

Taxpayer Money Earmarked for SC End Up in CA

Because there still are a few idiots who think that Government can efficiently manage $2.5 trillion dollars... Earmark meant for the library in Jamestown, SC, ends up in Jamestown, CA. Which doesn't even have a library. Government efficiency at its best.

Read here the full story.

Obama Encouraging More Irresponsible Behaviour

In a meeting with bankers today, Obama implored top bankers to increase lending.

So after a recession caused by a credit crisis created by easy money, foreclosures and other loan defaults, how can this ignorant idiot keep a straight face while telling banks: "You gotta lower your lending standards even more, guys".

About Raising the Debt Ceiling

The Congress Democrats are planning to raise the debt ceiling by a staggering $1.8 trillions as soon as possible, so they don't have to do it before the 2010 elections. I previously heard the argument that they'd have to do it no matter what, and there's no way they can't do it.

Really? Can't they? So what if the debt ceiling is not raised? I mean, there are people who were foreclosed, and had their credit card accounts cancelled... What do they do, the first thing? They stop spending. Wouldn't that be an interesting exercise? To see what the Government would do when they reach the legal debt limit (think of it as the credit card limit) and they can't go over it?

Stimulus is Working in NJ

The Obama administration set up a website, Recovery.gov, to track stimulus spending throughout the country, and its results, especially the numbers of jobs saved. It's an extensive operation, financed with about $84 millions, and it's almost a real-time aggregation of various data, sortable by zip codes, congressional districts, industries, etc.

I looked at the New Jersey page, and the data is very encouraging. 384 jobs were saved in the 40th congressional district! 3 millions spent in the 17th district! That's great news!! There's only one problem. New Jersey only has 13 congressional districts. So what's going on here? Is it a programming error, or a way to hide spending?? Obama's website shows that $5,637,012 has been spent in the 15th district, and $7,095,859 more in the 0th district. Wouldn't that be called "money laundering"??

Despite this data being publicized in recent days (it applies to almost every state), there was no official explanation from the White House, and no attempts to fix it.

Proof that the Fed is Monetizing the Debt

I hear a lot of people who're saying that nooo, the Fed is not monetizing the debt, because there are many buyers interested in our debt. For those who don't know what monetizing is, it means that when the Treasury doesn't have investors to finance our national debt, the Fed prints the money and buys the debt. Printing the money just creates fictitious money which only results in inflation.

And here's an easy proof of what's going on. First check out this Treasury debt sale:
http://www.treasurydirect.gov/instit/annceresult/press/preanre/2009/R_20090730_1.pdf

It's on July 30th, note the instrument's ID: 912828LD0.

Then go to the New York Fed's search page (that's the office which runs open market operations for the Fed):
http://www.ny.frb.org/markets/pomo/display/index.cfm?fuseaction=showSearchForm

As date range, enter 8/6/2009 - 8/6/2009. It's one week after the Treasury debt auction mentioned above. And look in the results. 3rd row from the top, surprise! The same 912828LD0 debt instrument that was sold barely a week before to interested investors!

If that's not obvious that we're heavily monetizing debt, then I don't know what is. Instead of the Fed buying the debt outright and admitting monetization, it's using a 3rd party to hold the debt for a week before buying it back. I wonder who that 3rd party is, and if this wouldn't qualify as conspiracy.

Remember folks, this happened when they had trouble selling $300 billions of debt. Few people were interested to buy it. What will happen with the other 9 trillions that Obama is planning to spend??

Credit for this story go to Glenn Beck and Chris Martenson.

Cash-for-Clunkers Savings and the Government's Genius Business Plan

A vehicle at 15 mpg and 12,000 miles per year uses 800 gallons a year of gasoline.

A vehicle at 25 mpg and 12,000 miles per year uses 480 gallons a year.

So, the average cash-for-clunker transaction will reduce US gasoline consumption by 320 gallons per year.

Government bought 700,000 vehicles so that's 224 million gallons / year.

That equates to a bit over 5 million barrels of oil.

5 million barrels of oil is about ¼ of one day's US consumption.

And, 5 million barrels of oil costs about $350 million dollars at $75/bbl.

So, we all contributed to spending $3 billion to save $350 million.

How great a deal was that ???

They'll probably do a great job with health care though.

(Thank you Joe Schilp for the information and numbers)

Arthur Laffer: Tax the Rich and They'll Leave

Good piece in the Wall Street Journal today by Arthur Laffer and Stephen Moore: Soak the Rick, Lose the Rich. It's a simple explanation of why taxing the rich in one state will only make them relocate to another state. And since the rich are also the business owners, when they leave they take their jobs with them. Here are a few excerpts from this article:

Here's the problem for states that want to pry more money out of the wallets of rich people. It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states.

Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.

Did the greater prosperity in low-tax states happen by chance? Is it coincidence that the two highest tax-rate states in the nation, California and New York, have the biggest fiscal holes to repair? No. Dozens of academic studies -- old and new -- have found clear and irrefutable statistical evidence that high state and local taxes repel jobs and businesses.

We believe there are three unintended consequences from states raising tax rates on the rich. First, some rich residents sell their homes and leave the state; second, those who stay in the state report less taxable income on their tax returns; and third, some rich people choose not to locate in a high-tax state. Since many rich people also tend to be successful business owners, jobs leave with them or they never arrive in the first place. This is why high income-tax states have such a tough time creating net new jobs for low-income residents and college graduates.

Or consider the fiasco of New Jersey. In the early 1960s, the state had no state income tax and no state sales tax. It was a rapidly growing state attracting people from everywhere and running budget surpluses. Today its income and sales taxes are among the highest in the nation yet it suffers from perpetual deficits and its schools rank among the worst in the nation -- much worse than those in New Hampshire. Most of the massive infusion of tax dollars over the past 40 years has simply enriched the public-employee unions in the Garden State. People are fleeing the state in droves.

To illustrate, on Friday Rochester businessman and Sabres owner Thomas Golisano announced he's leaving the State of New York, to move to Florida. This followed a more than 2% hike in taxes for people making over $500,000. Instead of making 2% in confiscatory taxes from this succesful businessman, David Paterson's state will lose all his paid taxes, together with several hundred jobs, with all their income taxes, payroll taxes, gasoline taxes due to commuting, sales taxes on what Galisano and his employees would buy, and so on.

Government's Business Strategy: Nobody's Buying Our Products, so Let's Raise the Prices!

You gotta love the Fed's business thinking. Just take the latest example. Post Office raised stamps prices because apparently they're losing business as people use postal services less and less. Which took those masterminds in Washington to this brilliant solution:

NO ONE IS BUYING OUR PRODUCTS, SO LET'S RAISE THE PRICES!

This is genius!! An always-winning business model. Wonder why there aren't more business following it! Just wait until they get to other industries, like the cars, or healthcare...

My View on The Tax System

Recently, I had a few arguments with conservative friends, spurred by the tax debate between Chris Christie and Steve Lonegan. I want get into that debate, I just want to express my opinions on the flat tax.

I think we live in a very socialist society, as exemplified by the highly redistributive progressive tax system. The idea of the progressive tax is that the more you earn, the more you pay in tax from every dollar you make. So let's take the federal tax. Let's say I make $200k/year, and a cashier at Walmart makes $20k/year. I will pay 28c for every dollar I make, while the cashier pays 15c. So according to this scheme, the dollars I earn are worth less than the dollar the cashier makes. I'm severely punished because I got a better job.

The flat (proportional) tax tries to replace this situation with a uniform tax rate, let's say 20% that everyone will pay. Of course, liberals will cry that this is unfair, but actually the flat tax is still an unfair redistribution of wealth. Even with the flat tax, I pay $40k/year in taxes, while the cashier pays only $4k. You'd say that this is normal, since I make more money, but again, why should I be punished because I got to a better job?? Just to explain, we the people pay taxes to the Government so it can fulfill its Constitutional duties, and provide services in return. So if we all receive the same kind of Government services, we should all pay the same tax, right? Otherwise, if I pay 10 times more than the cashier, I should get better roads in front of my house, better schools in my neighborhood and much better police protection. Anything less than this makes the tax plan unequitable and redistributive.

Of course, the alternative which is a lump-sum tax, is not feasible. And this is mainly due to the increased social programs that our rooted in our Government. But the most equitable way of taxation is when everybody pays the same amount of money to the Government. Under the 2008 budget, that would amount to about $16k/taxpayer (or $32k/married couple). And this is more than MOST of the population pays. It just shows how much people should be thankful to the rich that are paying for their Government services. After all, the 5% richest Americans pay more than half the tax bill (55.2%). The 20% top earners pay 83% of all the taxes. 60% of the Americans, the a solid majority, contribute only 3.2% to the federal budget.

The flat tax is the best we can do now, although it's still a socialist system that redistributes wealth. The problem with switching to a flat tax is that for some people the taxes will be lower, and for some they will be higher. And the real political problem is that they will slightly increase for a lot more people (voters), so no one will agree to it. No matter what political affiliation they have, no one will give up this Marxist progressive redistribution.

From an economic standpoint, the flat tax should be calculated by dividing current total tax receipts to the number of taxpayers. This is just a starting point, and the calculation is empyrical. The fact is that a flat tax would probably boost tax revenues, as a result of increased GDP. The decrease in taxes for the high earners acts as a supply-side stimulus, which has a pretty high multiplying effect (even according to previous papers by Christina Romer, currently Obama's economic adviser). The increase in taxes for low earners has a more Keynesian effect (in reverse), which has a lower multiplier. So overall, switching to a flat tax would boost tax revenues and the economy, making it possible to further reduce the tax rate.

As I said, this looks politically unfeasible. The only way it would work would be if the taxes would be lowered for more people than will see the tax increase. And this will result in significantly lower tax revenues, which probably can't be covered even by drastic spending reduction. So far, I didn't offer any solutions, I was just critiqueing the current tax systems... But I'm a blogger, not a political adviser. But if I were to suggest a way to cut spending, I'd advocate for zero-based budgeting for one year. This means that instead of adjusting budgets from year-to-year, by deciding which programs to cut (not many) and what to add (a lot), to start from scratch. Start with the so-called mandatory spending, and add only strictly necessary programs.

Regarding mandatory spending, in 2008 that was $1.8 trillions, 62% of the $2.9 trillion federal budget, and is made of Social Security, Medicare, Medicaid, unemployment, welfare and interest on the national debt. As you can see, most of this (amounting to 52% of the total budget) are social programs. The fact that we call them mandatory shows how hard would be to remove any kind of new entitlement (including national healthcare). Once you start an entitlement program, there's no going back. It was never the Constitutional duty of our Government to take from the rich and give to the poor. This is the result of mainly two movement, FDR's New Deal and LBJ's Great Society. They created most of this spending, and we're paying more and more for them. And it's interesting to see how these socialist programs shadowed major worldwide socialist events, by about 20 years: the creation of the Marxist state in USSR, and the spread of communism through the world, post-WW2. 20 years is what the establishment intelligentsia needed to digest the new policies, and feed them to the uninformed public.

But back to zero-based budgeting. We can't get rid of "mandatory spending", maybe just trim it, although it wouldn't be by much. Apart from this, you have to provide for National Defense, since this is a Constitutional duty of the Government to its citizens, and then everything starts from scratch. Social programs and defense amounted for $2.3 trillions in 2008, and everything that's on top of that (600 billions) would be cut, under zero-based budgeting. Every program that needs to be funded by the Federal government will be studied, and decided if it's worth spending the taxpayer dollars. I'm sure you could get away with spending just $100-200 billions more above the mandatory spending. This would've meant for 2008 about $2.5 trillions, with a budget surplus of about $160 billions.

Now back to the tax system. A flat tax punishes people who got a better job. The current progressive taxes punishes them even harder, to the point where, when looking at the tax share of various percentiles, it becomes confiscatory. Switching to a flat tax would be a very hard political move. But it's been done in many Eastern European counties, and it's considered the reason why those ailing economies are finally starting to move and try to catch up with Western Europe. For a politician, it would be dangerous to advocate for a flat tax, but they don't want to sound economically illiterate, they shouldn't strongly advocate against it. They have to admit that the proportional tax is better, they jsut can't do it.

Obama and his Clear Path to Fascism

It's becoming more and more obvious that the Obaministration is leading America down the path to classic fascism. Here's a brief definition of FASCISM:

As an economic system, fascism is socialism with a capitalist veneer. The word derives from fasces, the Roman symbol of collectivism and power: a tied bundle of rods with a protruding ax. In its day (the 1920s and 1930s), fascism was seen as the happy medium between boom-and-bust-prone liberal capitalism, with its alleged class conflict, wasteful competition, and profit-oriented egoism, and revolutionary Marxism

Where socialism sought totalitarian control of a society’s economic processes through direct state operation of the means of production, fascism sought that control indirectly, through domination of nominally private owners. Where socialism nationalized property explicitly, fascism did so implicitly, by requiring owners to use their property in the “national interest”

Where socialism abolished money and prices, fascism controlled the monetary system and set all prices and wages politically.

Under fascism, the state, through official cartels, controlled all aspects of manufacturing, commerce, finance, and agriculture.

To maintain high employment and minimize popular discontent, fascist governments also undertook massive public-works projects financed by steep taxes, borrowing, and fiat money creation.

This is to show that Obama's not heading towards pure socialism, but fascism. I think it's scary to find the similarities between the definition of fascism, and the new Government policies. Even more scarier is to follow the evolution of fascist economy in Italy, under Mussolini:

Trying to handle the crisis, the Fascist government nationalized the holdings of large banks which had accrued significant industrial securities. The government also issued new securities to provide a source of credit for the banks and began enlisting the help of various cartels.

This economic model based on a partnership between government and business was soon extended to the political sphere, in what came to be known as corporatism. Various banking and industrial companies were financially supported by the state.

The national leader] also adopted a Keynesian policy of government spending on public works to stimulate the economy. Public works spending tripled to overtake defense spending as the largest item of government expenditure.

American Spectator's Quin Hillyer argued this case by finding many similarities between Il Duce's road to fascism in Italy, and Obama's plans for the next 10 years.

Some Good News About the Real Estate Market

Here are two statistics that went largely ignored by the media:

1. Real Estate Loans hit a record high in February.


2. Home price index hit a record 1.7% increase in January.

New Jersey Is the 4th Worst State for Business

No wonder, New Jersey drops one spot to 48th. Now it's the 4th worst state for doing business.

According to Steve Lonegan, here are the 5 worst business laws in New Jersey (apart from the tax laws):

Paid Family Leave, Project Labor Agreements, Binding Arbitration, Card Check and the $500 S-Corporation Tax.

“Paid Family Leave is a new government program financed by an income tax on working people to pay other people not to work,” Lonegan said. “It is typical of the silly ‘feel-good’ legislation liberals pass because they have no comprehension of what it is like to run a business and make ends meet.”

Lonegan called Project Labor Agreements, where union wages must be paid on all government projects and Binding Arbitration for municipal labor negotiations “two of the reasons property taxes have skyrocketed in recent years and that affects businesses bottom line.”

New Jersey’s “Card Check” law -- a model for legislation being pushed by the Obama Administration today -- would end secret ballots in union elections and replace them with a system where union organizers can intimidate workers into supporting a union merely by signing a membership card.

“This so-called ‘reform’ takes Union elections from an American-style process to the type seen in Cuba where thugs and goons insure people vote ‘correctly’.”

Lonegan said the worst of all the anti-business laws was the McGreevey $500 S-Corporation tax. “This penalizes the job creator who is starting their business because you pay this tax even if your company loses money,” Lonegan said. “That’s not only wrong, it single-handedly tells an untold number of our residents not to bother starting your own business and that’s the wrong approach to take.”

Obama's Ignorance on History

The latest from our stupid president: "There has never been a Secretary of the Treasury, except maybe Alexander Hamilton, right after the Revolutionary War, who's had to deal with the multiplicity of issues that Secretary Geithner is having to deal with"

I recommend Obama to get a history book and learn that the Revolutionary War ended in 1783, and Hamilton became Treasury Secretary in 1789. That's 6 years, not "right after".