by Nancy Morgan
RightBias.com
March 6, 2011

In the summer of 2008 as McCain and Obama were in the midst of their campaigns to capture the presidency, a series of events dramatically changed the focus of the campaign from Iraq to the economy. From that point on, Obama took the lead and eventually won the presidency. 

Now, a full two years later, the Pentagon has issued a reporton the series of events that led to the 2008 economic crash. Bill Gertz writes in the Washington Times:

Evidence outlined in a Pentagon contractor report suggests that financial subversion carried out by unknown parties, such as terrorists or hostile nations, contributed to the 2008 economic crash by covertly using vulnerabilities in the U.S. financial system

Consider: The economic house of cards started tumbling on June 26, 2008, when Senator Chuck Schumer leaked a memo questioning the solvency of IndyMac bank. This memo precipitated a run on IndyMac which led to its failure. Federal regulators pointedly cited U.S. Sen. Charles Schumer, D-N.Y., in explaining the bank’s failure. “The immediate cause of the closing was a deposit run that began and continued after the public release of a June 26 letter to the OTS and the FDIC from Senator Charles Schumer of New York.”

As I wrote in February of 2009, this event, coupled with the Lehman Brothers collapse in September, marked the beginning of the current economic meltdown and provided the environment that enabled Barack Obama to focus on the economy instead of his position on Iraq – and, not incidentally, resulted in his election as President.

July 12, 2008: The federal government takes control of the $32 billion IndyMac Bank. *

* Six months later, Jan 2, 2009, a seven-member group of investors agreed to buy the remnants of failed lender IndyMac for $13.9 billion. Other investors included a fund controlled by billionaire George Soros’ Fund Management. 

Sept. 6, 2008: Fannie Mae begins its downward spiral, which will end with a crash in November. This crash was avoidable, as the problems with Fannie Mae and Freddie Mac were identified in June of 2006, when 15 Republicans on the Senate Banking Committee introduced legislation to address the problem. Democrats, led by Barney Frank, killed the reform efforts.

Sept. 15, 2008: Obama and McCain are virtually tied in their race for the presidency. Out of no-where, in the space of less than 2 hours, the Federal Reserve noticed a tremendous drawdown of money market accounts in the U.S. to the tune of $550 billion. Rep. Paul Kanjorski of Pennsylvania said that if authorities had not closed the banks, $5.5 trillion would have been withdrawn from US banks, which would have caused the collapse of the US  within 24 hours.

The markets reacted to Obama’s proposal to bail-out mortgages and Senator Christopher Dodd’s talk of nationalizing banks by reaching 11-year lows.

Enter George Soros. The infamous one-worlder, billionaire George Soros adds his voice to the media doomsayers by opining that the world financial system has effectively disintegrated, adding that there is yet no prospect of near-term resolution to the crisis.* 

Suspects include financial enemies in Middle Eastern states, Islamic terrorists, hostile members of the Chinese military, or government and organized crime groups in Russia, Venezuela or Iran. Chinese military officials.

Nancy Morgan is a columnist and news editor for conservative news site RightBias.com

In the immortal words of Laurel and Hardy: “Here’s another fine mess you’ve got me into.”

And there’s probably no better way to describe the situation that California, this once prosperous state, which from the days of the gold rush has attracted millions to its Pacific shores has found itself in. Its golden image, once a magnet for the ambitious, talented or simply enchanted by the beauty of its land and people, is now tarnished by years of fiscal mismanagement and irresponsible government spending.

It is wondrous indeed to note how a state with such riches in natural resources and richness in the diversity of its people can find itself in such financial ruin. The state of California (which if it were a country would be the 8^th largest economy in world) has found itself unable to fund its current fiscal deficit exceeding $24 billion and service its debt of over $72 billion to its bond holders. By any standard definition of insolubility, the state of California is bankrupt. And while teetering on the brink of being in default of its obligations, interestingly the state’s constitution explicitly does not allow it to declare bankruptcy – a curious dilemma.

The reasons which have brought California to this sad financial state are well known and documented. Summarized, it could be captured in the simple premise of having made too many promises without the wherewithal to deliver on them. These include promises made to government employees, such as in cases of retirees ending up with multiple pensions, some in the six figures. They include overly generous social programs, extending across citizens and non-citizens alike; lax enforcement of state entitlements; increasingly hostile tax burden on businesses including a state sales tax approaching double digits. Also most would target the ineffective state constitution which mandates a 60% majority in the state senate to enact major financial reform. By all practical terms such majority has been virtually impossible to achieve, resulting in stalemate on any attempts to curb the state’s insatiable spending appetite.

Whereas the causes of the states virtual collapse can (and will be) studied by many social economist and political analysts, the practical matter of how to address the dilemma and provide a sustainable solution to the California crisis remains. Prior attempts by its governor Schwartzenegger to seek a federal bailout have fallen on deaf ears of President Obama, and rightfully so as the precedent set by such action would be dangerous and ridden with consequences beyond our ability to predict. Furthermore, no constitutional authority has either originally or through any amendments been granted to the federal government to provide for such a bailout.

So what options exist for California? The ones most commonly discussed include:

1. Providing government credit guarantees of California’s debt have been floated (CBS News Story) but generally discounted as too temporary and not addressing the core of the state’s fiscal crisis. Furthermore, guarantees of such an amount could negatively impact on the credit rating of the US government, which itself is struggling with mounting debt and looming inflation. As traditional with the democratic liberal wing, its chief democratic rep. Barney Frank of Massachusetts, chairman of the House Committee on Financial Services is in support of such measures.

2. Allowing the state to default on its obligations has also been floated, but appears to have the support of only the most extreme faction of constitutionalists. Opponents argue that this would undoubtedly create a dangerous ripple effect throughout the US economy, the cost of which would potentially exceed any bailout which would be offered to the state.

3. Aggressive tax increases (primarily in the form of sales taxes) to compensate for the precipitous fall in tax revenues have the support of many of the liberal democrats in the state senate. However, under the terms of the state’s Proposition 13, their enactment has become a virtual impossibility due to the 60% majority provision. Furthermore, California residents have over the last years become increasingly more vocal against that state’s excessive tax rates, further diminishing the possibility of any such actions.

What is discouraging is that no significant momentum exists behind a movement to address what is the root cause of the state’s troubles – state government inaction and excessive tax burdens. In order, first the state needs to procedurally address the ineffective provisions of its state constitution, including Proposition 13. Armed with new powers to reduce the tax burden on its citizens and enterprises, a well targeted reduction in state business taxes, and either personal income taxes or sales taxes would restore vibrancy to the California economy and begin to again attract new investments and spur an influx of productive sectors of the population back to the state.

While in 2005 the US Census was projecting California as one of the states with highest growth rates, in the recent years of financial turmoil the opposite has begun to occur, with residence relocating to less tax onerous states, among them Florida, Nevada or Texas, each with no state income tax.

Tax incentives (instead of tax penalties) have time and again shown that the empowered individual and the entrepreneurial nature which he harnesses are the most effective tools to bring about economic growth and financial health. California would do well by heeding to one of its greatest son’s prolific advice:

“I don’t believe in a government that protects us from ourselves.”
“The best minds are not in government. If any were, business would hire them away.”

 Ronald Reagan (1911 – 2004)

It would be wise for the California governor and state senators to read their state motto (“Eureka”) and in it recognize that the solution to their state’s woes has already been found, tried and proven. All they need to do is act on it.

* * * * *

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by Rick Sincere
RickSincereThoughts
July 16, 2009

As part of the gargantuan (1,000-page-plus) health care “reform” package introduced by members of the Democratic majority in Congress, the Obama administration proposes to raise taxes through a “surtax” on Americans who earn the most money.

The Washington Post explained this “soak the rich” policy in a front-page article on July 15:

The surtax would start at 1 percent and rise to 5.4 percent on income exceeding $1 million. Combined with the expiration next year of tax cuts enacted during the Bush administration, the surtax would drive the top federal tax rate to 45 percent, the highest level since lawmakers rewrote the tax code in 1986.

The Washington Times, for its part, points out that this raises U.S. marginal tax rates to their highest levels since the 1980s:

A new surtax of 5.4 percent in the health care bill, which would apply to married couples’ income above $1 million, would bring the top federal income tax rate to 45 percent.

After consideration of state and local income taxes and the Medicare payroll tax, which applies to all wage and salary income, taxpayers in 39 states would face a top marginal income tax rate of more than 50 percent, according to a study by the Tax Foundation, a nonprofit tax research group based in the District.

“That means government would be taking more than half of every additional dollar from high-income taxpayers,” said Tax Foundation President Scott Hodge. “The lowest tax rate would be 47 percent – and that’s in the nine states that don’t tax wages.”

Businesses say the surtax would hurt the economy.

“The intention of this plan is to tax high-income households, but the real victims would be America’s small-business owners,” said Thomas Donohue, president of the U.S. Chamber of Commerce. “Placing a big tax burden on the small-business community would rob them of the resources they need to create the jobs that will lead us out of the recession.”

President Obama would be wise to look to history to see what happened the last time a president made a surtax the centerpiece of his economic program. (Some might object that this is a “health care” program. That’s true, up to a point. The fact that the bill has been referred to the Finance Committee in the House suggests that this is really a revenue bill.)

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In Yanek Mieczkowski’s 2005 book, Gerald Ford and the Challenges of the 1970s, the Dowling College historian relates what happened when Ford proposed a 5 percent surtax on all incomes above $15,000 (more than it sounds like; remember, these were 1974 dollars) in his first major economic legislative package:

As what he termed “the acid test of our joint determination to whip inflation in America,” Ford pronounced the cornerstone of his new economic program, a one-year, 5 percent surcharge on corporate and personal incomes. The surtax was directed at individuals with yearly earnings of $15,000 or more for married taxpayers and $7,500 for the unmarried. (Taxpayers would have to figure out what they normally owed the government, then add the 5 percent surtax to it.) The advantages of the surtax were that it would be mildly progressive, since the rich would pay more, and temporary, lasting only the calendar year 1975. Nor was it onerous. For example, a single person earning $15,000 would pay a federal income tax of $2,549; the surcharge would add $78. (p. 121)

Despite its modest appearance, Ford’s proposal was met with strong opposition, especially from the Democrats who held a majority in Congress (a majority that would grow substantially after the midterm elections a few weeks after his proposal was announced). Republicans were not too fond of it, either.

Ford took a political risk by proposing a surtax less than a month before congressional elections. Unveiling a tax increase at such a time was like unleashing a skunk at a picnic; representatives and senators ran in the opposite direction, refusing to embrace or even come close to it. Officeholders facing difficult reelection battles, such as GOP senators Bob Dole of Kansas and Marlow Cook of Kentucky, deserted their president rather than support the proposal….

The program itself was a political bomb. The jumble of proposals gave the whole thing an eclectic feel, and the centerpiece — a tax increase — fell flat. One poll showed that Americans opposed the surtax, 58 to 34 percent. Members of Congress resisted it. Just two days after the speech, William Baroody warned Ford that it was “in serious trouble on the Hill and very unpopular politically” and that Congress was in no mood to reduce spending. Two weeks before the election [William] Seidman publicly acknowledged that the surtax faced an uphill struggle on Capitol Hill and called its prospects “uncertain.” The overwhelming Republican repudiation in the ensuing elections turned “uncertain” to “doomed.” Ford’s policy making was off to a rocky start. (p. 124; footnotes omitted)

In one of the more significant parenthetical partial paragraphs of any work of recent history, however, Mieczkowski writes:

(One economist’s skepticism about the surtax generated what later became a mainstay of Ronald Reagan’s “supply-side” economics. Arthur Laffer doubted that the 5 percent surtax would generate much revenue, and while dining at a restaurant with Ford administration members Don Rumsfeld and Dick Cheney, he drew a graph on a napkin to illustrate his belief that tax cuts — rather than increases — would raise more revenue because of increased business activity. His illustration became known as the “Laffer Curve.”) (p. 122)

Apparently other economists caught on, even if they hadn’t seen the napkin. Yanek Mieczkowski writes on page 130:

By November, many economists, realizing that Ford had miscalculated, urged him to drop the surtax proposal and switch his focus to fighting the recession. The president stuck by the surtax and still urged budget cuts.

In the end, the surtax proposal crashed and burned. Mieczkowski notes on page 131:

A political science axiom says that “the president proposes, Congress disposes.” Congress certainly disposed of Ford’s surtax, and quickly. Although he developed a fiscally balanced program incorporating many recommendations from the economic summit conferences, it was also like a multipronged barb that Congress could not swallow. And it soon became incongruous. The deteriorating economy, coupled with the inherent unpopularity of a tax increase, doomed Ford’s first major economic initiative. But that failure was fortunate; as events played out, a surtax would have aggravated the downturn. (emphasis added)

History teaches us, and not just in this example from the mid-1970s, that raising taxes during a recession is a bad idea.

Barack Obama and congressional Democrats have not absorbed this lesson of history and economics. Should they succeed in raising taxes to finance their ambitious program to socialize medicine, they — or, rather, we — will live to regret it.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rick Sincere is the editor of RickSincereThoughts

Article has been published with permission

At first it seems quite funny … until you realize the awful truth of it.

Be sure to read all the way to the end and share this with your friends using the above email button!

Tax his land,  Tax his bed,

Tax the table at which he’s fed.

Tax his tractor, tax his mule,

Teach him taxes are the rule.

Tax his work, tax his pay,

He works for peanuts Anyway!

Tax his cow, tax his goat,

Tax his pants, tax his coat.

Tax his ties, tax his shirt,

Tax his work, tax his dirt.

Tax his tobacco, tax his drink,

Tax him if he tries to think.

Tax his cigars, tax his beers,

If he cries tax his tears.

Tax his car, tax his gas,

Find other ways to tax his ass.

Tax all he has, then let him know

That you won’t be done ’till he has no dough.

When he screams and hollers, then tax him some more,

Tax him till he’s good and sore.

Then tax his coffin, tax his grave,

Tax the sod in which he’s laid.

Put these words upon his tomb,

‘Taxes drove me to my doom…’

When he’s gone, do not relax,

Its time to apply the inheritance tax.

AND TO PUT THINGS INTO FURTHER PERSPECTIVE, CONSIDER THE FOLLOWING PARTIAL LIST OF TAXES PAID BY MOST AMERICANS:

Accounts Receivable Tax, Building Permit Tax, CDL license Tax, Cigarette Tax, Corporate Income Tax, Dog License Tax, Excise Taxes, Federal Income Tax, Federal Unemployment Tax (FUTA), Fishing License Tax, Food License Tax, Fuel Permit Tax, Gasoline Tax (42 cents per gallon), Gross Receipts Tax, Hunting License Tax, Inheritance Tax, Inventory Tax, IRS Interest Charges IRS Penalties (tax on top of tax), Liquor Tax, Luxury Taxes, Marriage License Tax, Medicare Tax, Real Estate Tax, Property Tax, Personal Property Tax, Real Estate Tax, Service Charge Tax, Social Security Tax, Road UsageTax, Sales Tax, Recreational Vehicle Tax, School Tax, State Income Tax, State Unemployment Tax (SUTA), Telephone Federal Excise Tax, Telephone Federal Universal Service Fee Tax, Telephone Federal, State and Local Surcharge Taxes, Telephone Minimum Usage Surcharge Tax, Telephone Recurring and Non-recurring Charges Tax, Telephone State and Local Tax, Telephone Usage Charge Tax, Utility Taxes, Vehicle License Registration Tax, Vehicle Sales Tax, Watercraft Registration Tax, Well Permit Tax, Workers Compensation Tax.

STILL THINK THIS IS FUNNY?

Not one of these taxes existed 100 years ago (see our article on the effects of the 16th Amendment), and our nation was the most prosperous in the world. We had absolutely no national debt, had the largest middle class in the world, and Mom stayed home to raise the kids.

What happened? Can you spell ‘politicians’ ?

And I still have to ‘press 1′ for English!

. . . . . . . . . . . . . . . . . . .

The “Tax Poem” is widely circulated, but I have not been able to identify its original author to provide attribution. If your care about the consequences of high taxation (and you and everyone else should), forward this post to your friends using the email link at the top of this article.

Article may be freely distributed with or without attribution