Huckabee's Biggest Problem: The FairTax

As long as the former Governor of Arkansas, Mike Huckabee, has been running for the Presidency -- both now and previously -- he has been pushing something called a FairTax.  More often than not, he calls it a consumption tax rather than its real name. Essentially, the FairTax would replace all federal taxes with a 30% national sales tax on most goods and services.   In the first year of implementation, it would start out at 23%, and then, incrementally go up to 30%.

Also, in order to placate those who would argue that the tax disadvantages the poor, who currently pay no taxes, but would be faced with higher prices, the FairTax proponents have come up with the concept of a Prebate.  The Prebate would be a monthly check to every head of a household so that their basic needs and the needs of their family would be taken care of.  How socialist is that?  For, example, every single person aged 18 or older, and not living at home, would get a monthly check for $226 to cover their basic needs; this based on 2015 calculations.  A family of 4 -- two adults and two children -- would receive a monthly stipend of $611.

Of course, one of the biggest arguments for the FairTax is that it would eliminate the  Internal Revenue Service and their 83,000 employees.

My problem with the FairTax is that it will fall well short of funding the government; stymie growth in the economy; hurt the poor and middle class; and highly advantage the rich.  All this starts with the concept of a Prebate.

According to the U.S. Department of Agriculture (USDA), in its latest report on food plans, the cheapest that an average family of four can feed themselves in 2015 is with  $564 a month; assuming their two children are under the age of 5 and the family practices "thrifty" food planning. If the children are older, the  cost would be $648 a month.  So, this begs the question, how is a family of four supposed to cover their basic monthly needs if they only get a check for $611?  What about the basic needs of home heating, electricity, clothing, water, toiletries, rent or mortgage; all of which will be another 30% higher.  Even higher in places like California where the state and local sales taxes combined can run as high as 10%.

So, think about this.  If you're in the lowest tax bracket (10%) and the Prebate won't even cover the cost of food and you are living paycheck to paycheck, how are you supposed to manage the cost of goods and services going up 30%?  It's ridiculous to claim that the FairTax doesn't disadvantage those with lower incomes.

Then, there's the rich. Does anyone think that they will suddenly pay their fair share? The rich are better positioned to avoid the FairTax by avoiding building a new house or mansion and, instead, buying an existing old money mansion.  They might relocate to the Bahamas or Canada.  Also, since the deductions for charitable giving will be gone, our nation's needy will suffer as the wealthy give less.

One group, those aged 40+ will be hit the hardest. This is because the FairTax, unlike most state sales taxes, will tax healthcare and prescription drugs.  So, every monthly premium, co-pay, or health care expense that has yet to meet the deductible, plus prescription drug costs will be hit with a 30% tax.  We already pay the highest cost for healthcare in the world and Huckabee thinks we should pay even more.

But, the biggest impact of a consumption tax will be on the economy.  A high, 30% tax will force people to think twice about purchasing anything new. Take autos, for example.  People will hold on to them longer, buy used, or lower their standards and choose to buy a cheaper model.  And, this will happen on all types of goods and services.  Also, the FairTax is sure to create a black market for all kinds of products, and robbery is sure to rise.   All of this will slow the economy and result in less tax being collected.  As a result, the government will counter by raising the 30% to God only knows what.

In my opinion, The Fair Tax is very simple minded.  It will not work and will only serve to change the country for the worse.  We don't needs a tax system that punishes consumers for buying products and services; which today, accounts for 70% of the economic growth  and creates jobs.  Instead, we need a tax system that stimulates consumer activity.

References:

FairTax:  https://en.wikipedia.org/wiki/FairTax

California sales tax: https://www.google.com/search?q=california+sales+tax&ie=utf-8&oe=utf-8

USDA Cost of Food: http://www.cnpp.usda.gov/sites/default/files/CostofFoodJun2015.pdf

Why Millions Of Poor Will Suffer at the Hands of Obama's Coal Regulation

In June of 2014, President Obama, by executive order, directed his Environmental Protection Agency (EPA) to issue regulations that would basically eliminate all of America's more than 600 coal-fired power plants by 2030, with a third of the largest being shuttered "by" 2020 ("by" actually meaning before 2020).  As a result, 39 states, that are affected by the rule, will have just one year, by June of 2016, to come up with their initial plan to eliminate the more than 200 coal plants.

The problems with this Obama edict is that it will disproportionately punish people living in some of the poorest states in the union.

West Virginia, for example, gets 95% of its power from coal, and almost every power plant will have to be shutdown by 2030.  It will cost billions of dollars to build new natural gas plants to replace the existing ones; millions or billions more to create an infrastructure of 20 to 30 inch diameter underground pipes to feed those new plants; and, again, millions more to connect them to the existing electrical grid.  All these costs will have to be picked by by West Virginians in the form of higher electricity prices that may more than double.

All too many in that state won't be able to afford those new rates and the impact on their economy will be substantial.  West Virginia is poor.  The state's per capita income is just under $23,000 a year.  That's 20% less than what the average American makes. Nearly, 18% of the state lives below the poverty line.  That's more than 330,000 of the 1.8 million residents who are already struggling to make ends meet.  Now, they will be facing substantially higher electric bills.

According to the West Virginia government agency that oversees their coal industry, 30,000 direct jobs are involved in mining and those jobs are sure to be eliminated by 2030.  In many cases entire towns are wholly dependent on coal miner's incomes.  Hundreds of stores, restaurants, and other businesses will cease to exist when they lose their jobs. Whole towns will disappear, and, finding new jobs for all these people will be a difficult task.  For most, coal mining is all they know.  In addition, the lack of education will be an impediment to getting a new job because West Virginia ranks number one as the least educated state in the country.  Already, their population has fallen by more than 3,000 from 2013 to 2014 as more and more people seek employment outside the state.  But, these are the residents who can afford to pickup and leave with all their belongings.  Those who remain will probably be the poorest and least educated; meaning that the state will only decline in its tax revenues and business stature.

But, West Virginia isn't alone.  Kentucky gets 90% of its electricity from coal, and they too are poor; making just about $450 more a year than the average West Virginian.  The poverty rate is almost 19% against a population that is more than double that of West Virginia.  This means that more than 800,000 poor Kentuckians won't be able to afford the new electricity rates and higher retail costs that will surely come.  They too are in the bottom 10 when it comes to education, and 18,000 miners in that state will also lose their jobs by 2030.

So, in just two states, more than a million poor will suffer greatly from President Obama's shutdown of coal.  But the list of those with heavy coal dependence is long: Wyoming (85%), Indiana (84%), Missouri (83%), North Dakota (77%), Utah (76%), and so many more.  The Washington Post article referenced below includes an interactive map which shows how much each state is dependent on coal power.  Basically, the President's mandate will hurt more than half of the nation's 45 million poor in a mad rush to eliminate all coal-fired electricity in just 14 years.

Lastly, Obama's plan won't hurt some states like California and New York where there is little dependence on coal.  Of course, those states also have some of the highest electricity rates in the nation at around 14 cents per kilowatt hour.   In comparison, West Virginia is at about 8 cents per kilowatt hour, but, because of the rapid and widespread required replacement of coal, West Virginia's kilowatt rate will most likely wind up being much higher than 14 cents.

References:

The states that will be hit hardest by the EPA’s coal regulations, in one map: http://www.washingtonpost.com/blogs/govbeat/wp/2014/06/02/the-states-that-will-be-hit-hardest-by-the-epas-coal-regulations-in-one-map/

Quick Facts West Virginia: http://quickfacts.census.gov/qfd/states/54000.html

Quick Facts Kentucky: http://quickfacts.census.gov/qfd/states/21000.html

West Virginia Coal Facts: http://www.wvminesafety.org/wvcoalfacts.htm

Kentucky Coal Facts: http://www.kftc.org/campaigns/appalachian-transition/coal-production-and-employment-trends

America's Most and Least Educated States: http://247wallst.com/special-report/2014/09/23/americas-most-and-least-educated-states/

Electricity Prices by State: http://www.eia.gov/electricity/state/

Think Twice About Any Real Trade With Cuba

Shortly after President Obama announced a normalization of trade relations with Cuba, U.S. businesses began salivating over the fact that they now have a new market for their products. However, this assumes that we will be able to trade with Cuba as if it were a normal partner.  Nothing could be further from the truth.

First and most importantly, Cubans are poor as a result of Communism.

Because Cuba is a communist country, the government sets the wages; and because of this, the per capita income is less than $7,000 a year.  After buying necessities, there's probably not a lot of room left to spend on expensive imported goods from the U.S.  I really can't see the average Cuban buying even the cheapest GM car, the Spark, which sells for almost twice what the average Cuban gets paid in two years.  Also, understand that China is a major trading partner with Cuba and, as such, the prices of U.S. products will have to be lower than theirs in order to compete. 

Additionally, the Cuban government decides what will be sold to its citizens, and access to any approved goods is rationed. If the government says you can only buy 2 pencils a year, that's all you get. The government also sets the prices of any goods sold there.

For these reasons, Cubans will probably see very few imports from the U.S.  At best, the airlines, with flights to and from the island, stand to benefit the most.

On the other side of the coin, Cuba will most likely benefit the most from this deal.  They could experience increased exporting of products such as rum and cigars.  Although, I'm guessing they already export as much product as they now produce to their existing trading partners like China, Russia, Venezuela and other central and south American countries.  For sure, Americans visiting the island should help the tourism business; assuming that the current ban on tourism is lifted and accepted by Raul Castro.  Whether or not those visitors will be able to buy anything but a handful of Cuban products while visiting there is questionable since, again, all products are rationed.

Lastly, I don't think American companies will be able to set up businesses in Cuba.  Again, because of communism, most business are government owned; with some cooperatives and some self-employment allowed.  Not hardly a business model that would be compatible with any form of U.S. business.


References:

U.S. Companies Consider the Possibilities of Cuban Trade: http://www.wsj.com/articles/u-s-companies-consider-the-possibilities-of-cuban-trade-1418856872

UN Data: Cuba: https://data.un.org/CountryProfile.aspx?crName=CUBA

Economy of Cuba: http://en.wikipedia.org/wiki/Economy_of_Cuba

Thomas Piketty: Another Socialist Solution To Income Inequality

For years, the rock star economist for the political left was Nobel Prize winner Paul Krugman.  His endorsement of taxing wealth and encouraging massive government spending -- as a means of driving the economy -- has been music to the ears of all those who love and worship big government.  Now, the left has found a new leader to follow.  He is a French economist by the name of Thomas Piketty.  The recently released English language version of his book -- Capital in the Twenty-First Century -- has every socialist-minded politician and media type going gaga over his proposed solution to income inequality.

Essentially, Piketty believes that capitalism -- and democracy -- is doomed to collapse because it creates an ever increasing disparity between the rich and the poor.   It does this because, over time, capitalism spawns a faster growth rate in the return on capital investment versus any real growth in wages. Thus, the rich, by using their wealth as investment, are able to grow their status much quicker than the majority of citizens.  So, Piketty's solution to this fatal flaw of capitalism is to force the rich out of existence by imposing an 80% tax on incomes above $500,000 and a 50-60% tax on those with incomes between $200,000 and $500,000. This way there will be no rich and our democracy will be saved.

But, then there's this:  What if society is actually able to eliminate all of that rich class? What then?

Well, first of all, all those people who had careers that support  the rich would lose their jobs.  Jobs such as the staff of upscale restauranteurs, landscapers, caterers, housekeepers, expensive fine artists and craftsmen, boat and private airplane builders, and so many others.  Then, too, high taxation of the so-called "rich" will only reduce overall spending. Since our economy is 70% driven by consumer spending, we would be sure to fall into a recession.  Additionally, the $200,000-and-above crowd are givers.  Not necessarily in direct charitable giving, but as the primary supporters of the arts and culture in America. They are a dominant source of non-Pell grant college scholarships and fellowships.  Most private colleges and hospital expansions would not happen if it weren't because of their generosity. Without outside donations, does anyone think that a religious college or university would receive a grant from the federal government? Not with the ALCU jumping in to cite the separation of Church and State.

More importantly, the rich provide an essential economic benefit to society by providing the seed money to promote the development of inventions, new products and new businesses; all of which create new jobs.  Under Piketty's flawed beliefs, the concept of wealth investment would simply cease to exist. And, don't think for one minute that the government, with all that new found money is going to pick up the torch and act as America's new Venture Capitalists.  All it would do is fuel more crony capitalism so that we wind up with endless failed ventures like Solyndra.

The problem I have will people like Piketty is that they never once have a solution that elevates people  out of poverty.  Their answer is to always attack the rich; as if they are somehow the wealth takers and not the wealth creators.  Economists aren't sociologists; but, they should be. Only then would they understand what the real reasons are for income inequality.  Totally missing in most left-wing proposals is the concept of income mobility where 80% of the of the rich, today, are first generation millionaires; and, in as little two generations, much of that wealth (60%) will be gone.  At the same time, nearly 85% of all Americans have wealth greater than their parents.  Studies have also shown that between 86% and 95% of all those who were once living in poverty would shed that condition in as little as 15 years.  The bottom line is that people, whether they be rich or poor, are likely to reverse that status, through their own initiative, in just a few years.  Because of capitalism, poverty is not necessarily a permanent condition.


If Mr. Piketty is so sure of his beliefs, he should implement them in his home country of France and then we'll see what that country looks like in, say, 5 or 10 years.  Lastly, Picketty's book is so hot that 80,000 copies were sold in just two months and it is now back-ordered.  Apparently, it is a must read among all socialist Democrats. At a list price of $39.95, it's pretty pricey.  So, I guess it's Mr. Piketty's goal to get rich before anyone can impose that 80% tax on his rich-guy income.

References:

Thomas Piketty Revives Marx for the 21st Century: http://online.wsj.com/news/articles/SB10001424052702303825604579515452952131592

Piketty's 'Capital': A Hit That Was, Wasn't, Then Was Again How the French tome has rocked the tiny Harvard University Press : http://www.newrepublic.com/article/117498/pikettys-capital-sold-out-harvard-press-scrambling

The Facts About Income Mobility: https://www.youtube.com/watch?feature=player_embedded&v=vDhcqua3_W8

29 Valuable Facts About Millionaires and Billionaires: http://facts.randomhistory.com/millionaires-facts.html

Record American Wealth?

Recently, the Federal Reserve reported that Household Worth hit a record $80.7 trillion dollars.  The Drudge Report headline said it all: "Boom: Household Net Worth Hits Record High..."

Now, if you read that headline and you are an average Joe or Jane in America, you are probably scratching your head because you just know, since this recession, that you are still hurting.  The report claims that the record wealth was due to improved home prices. Really? Home prices are nowhere near the record median price of 2005:

Then, too, there are more Americans in poverty than ever:

Add to that the fact that the median household income has fallen for 5 years in a row and you have to wonder what the Federal Reserve was smoking when they came up with that "record" wealth story. 

Well, the primary problem with the Fed's calculation is that it heavily weights stock market gains.  But, most of those gains primarily benefit the rich and rich stock market funds.  Even Obama had to admit that 95% of the income gains under his Administration went to the top 1%.

The bottom line is that the Fed's numbers are completely deceptive.  Americans are not better off now than they were before the housing bust and the recession. All that their Quantitative Easing initiatives (QE1, QE2, and QE3) did is benefit the wealthy individuals, hedge funds, and major corporations.  Meanwhile, all that spending never reached the little guys of our society. 

References:

Household Worth in U.S. Climbs by $2.95 Trillion to Record: http://www.bloomberg.com/news/2014-03-06/household-worth-in-u-s-rose-by-2-95-trillion-in-fourth-quarter.html

Median Income Falls For 5th Year, Inequality At Record High: http://www.huffingtonpost.com/2013/09/17/median-income-falls-inequality_n_3941514.html

Obama admits 95% of income gains gone to top 1%: http://money.cnn.com/2013/09/15/news/economy/income-inequality-obama/

Dispelling the Myth That George W. Bush Only Benefited The Rich

We've heard it all before.  According to Obama and the Democrats, the George W. Bush tax cuts only benefited  the rich.  Thus, apparently, the rich got richer and the poor got poorer during the Bush years.

However, thanks to a post by Jim Lindgren, in a Washington Post blog, we get this very enlightening chart:

As the chart shows, of the last four out-of-office Presidents, the incomes of the lowest 20% of our population under George W. Bush increased the highest at 18.4%.  At the same time, the top 20%, saw declines of  6% in their incomes.  Under Clinton, the poor only saw income increases of 13.3%; but, the richest 1% saw their income rise by a whopping 84.1%.  Reagan was the biggest benefactor of the rich with a 90.9% increase in their incomes in his 8 years.

That, then, brings us to Obama.  Under his stewardship we have a record number of people in poverty: 46.5 million and a 49-year high; as a percent of population. Further, Obama has had to admit that, since being in office, 95% of all the income gains have gone to the top 1%.

If this was a fairy tale, and Obama had a magic mirror, his "fairest of all" question would definitely result in George W's face reflecting back at him.   


References:

Jim Lindgren:  If we want more income equality, should we return to the economy of George W. Bush?: http://www.washingtonpost.com/news/volokh-conspiracy/wp/2014/01/28/if-we-want-more-income-equality-should-we-return-to-the-economy-of-george-w-bush/

That’s rich: Poverty level under Obama breaks 50-year record: http://www.washingtontimes.com/news/2014/jan/7/obamas-rhetoric-on-fighting-poverty-doesnt-match-h/?page=all


Obama admits 95% of income gains gone to top 1%: http://money.cnn.com/2013/09/15/news/economy/income-inequality-obama/

Failing Education: The True Cause Of Income Inequality

This year -- an election year -- Obama and the Democrats think they have a winning issue in proposing spending measures and legislation that would fight income inequality.  For any Democrat, the rallying cry to getting those measures passed and, subsequently, getting themselves elected (or reelected), will be that the rich are getting richer and the poor are getting poorer; and, that they are the ones watching out for the poor while the Republicans only want to protect the rich.  Thus, we will be going back to the 2008 campaign when Obama told "Joe the Plumber" that we need to "spread the wealth around."

However, the real reason that we have income inequality in this country has to do with something that the Democrats are completely complicit in: Sustaining a failing and highly unionized educational system for the sole purpose of garnering union votes.  It is actually the level of someone's education that determines whether or not a person will be able to share in the wealth of this country and not a bunch of Democrat-sponsored "band aids" such as raising the minimum wage, or extending unemployment benefits, or whatever.  There is no better proof of that than this chart:

Statistics are for workers 25 or older (click to zoom)

Now, it doesn't take a PhD to see the direct correlation between education and income levels and education and unemployment rates.  So, the real solution to income inequality is a better educated population. 

In a world where Americans must compete for the best jobs and, where those jobs are heavily dependent on math and science, we continue to fall behind.  In recent tests conducted by the  Organization for Economic Cooperation and Development (OECD), our high school teens ranked 27th in math against the 34 other most economically developed counties in the world.  We also dropped to 21st place in science after having been in 17th place in 2009; and, slipped from 14th place to 17th place in reading.  All, under Obama's watch.

Also, as a country, we are experiencing horrible college graduation rates.  Once again, according to studies done by the OECD, only 34% of Americans enrolled in college actually graduate after 4 years.  While some might fail to graduate for economic reasons, the vast majority fail to complete college because they came unprepared.  Proof of this comes from the results of the 2012 ACT college readiness tests.  Only 67% of those tested had enough English comprehension skills to compete in college.  Other scores were even more frightening with reading proficiency at 52%; math at 46%; and, science at a mere 31%. But, the most disturbing fact of all was that only 25% were proficient in all 4 categories.  Realize, too, that the students taking the ACT are those with aspirations of moving onto college.  God only knows how poorly those who didn't take the test would have done.

In December, there were 4 million job openings in this country. Yet, only 74,000 -- of 10.8 million looking for work -- actually found a job.  This is an awful statistic but it proves my point; and, the problem is only intensified when you add in the nearly 9 million workers who have completely given up looking for work.

It is becoming increasingly more difficult to match worker education levels to the kind of high paying jobs that are being created; or, could be created.  As a consequence, those jobs are either eventually filled with imported labor -- people here on work visas -- or just wind up being shipped overseas where they can be filled with a better educated workforce. Thus, every year, America's workforce is increasingly made up of "dumbed-down" workers.  That's also why -- since the employment recovery began in 2010 -- half of all the jobs that were so-called created were low income positions.

The recession clearly exposed the education problem when so many poorly educated Americans lost their higher paying jobs.  Jobs that paid well because those workers had achieved some level of seniority.  Today, those same workers are being forced to literally start over at the bottom rungs of the uneducated workforce ladder.  This is why we have record numbers -- 46.5 million -- in poverty. Numbers that haven't declined in over three years of a supposed employment recovery.

Over the last few decades, there have been dozens of proposals on how to improve education in America.  But, all have been rejected, completely out of hand, by Democrat politicians on behalf of "their" teachers' unions.  That's because those proposals would either jeopardize the size of existing union membership; or, would have changed how teachers are paid; or, would have disciplined or fired poor performing teachers; and, would have eliminated the stupid concept of tenure.  Never once was the best interest of the student taken into any consideration.

References:

Organization for Economic Cooperation and Development: US teens lag in global education rankings as Asian countries rise to the top: http://usnews.nbcnews.com/_news/2013/12/03/21733705-us-teens-lag-in-global-education-rankings-as-asian-countries-rise-to-the-top?lite

Organization for Economic Cooperation and Development: College Graduation Rates: http://rankingamerica.wordpress.com/2008/12/19/the-us-ranks-14th-in-college-graduation/

U.S. News And World Report: High School Student Not Prepared for College, Careers: http://www.usnews.com/education/blogs/high-school-notes/2012/08/22/high-school-students-not-prepared-for-college-career

2012 ACT results (see chart on page 7): http://media.act.org/documents/CCCR12-NationalReadinessRpt.pdf

BLS: Job Openings and Labor Turnover Survey: http://www.bls.gov/news.release/jolts.nr0.htm

BLS: December 2013 Employment Situation Report: http://www.bls.gov/news.release/empsit.nr0.htm

Half Of All Jobs Created In The Past 3 Years Were Low-Paying: Study: http://www.huffingtonpost.com/2013/05/13/low-paying-jobs_n_3266737.html

Poverty level under Obama breaks 50-year record: http://www.washingtontimes.com/news/2014/jan/7/obamas-rhetoric-on-fighting-poverty-doesnt-match-h/

The Disappearing Rich

With all of Obama's rhetoric about the rich and successful, you would think that we had a growing disparity between the rich and poor in our society.  But, in fact, studies have proven just the opposite.  During the recession years (2007-2009), the highest class of wage earners in America lost 34% of their income; according to a study conducted by the Congressional Budget Office.

                            


At the same time, those at poverty levels, actually saw their incomes increase by 3%; mostly because of increases in liberal social programs such as food stamps.  Then, too, there was a wealth study done by the Boston Consulting Group (BCG) that found that the number of American millionaires fell by 129,000 in just 2011, alone.

Now, liberals might think that this "wealth redistribution" is a good thing.  But, is it a good thing that all other classes, including the middle class, lose in the process?  Also, think about this: Those losses of income by the nation's wealthiest might just be the reason that our economy is doing so poorly and jobs aren't being created.  If so, it makes no sense to erase even more of the wealthiest incomes through those higher taxes being proposed by Obama; and, through those rich-targeted taxes that are set to occur under ObamaCare in January 2013.



Sources for this blog entry:

CNBC: The Falling Fortunes of the One Percent:  http://www.cnbc.com/id/48257611

CNN: Number of millionaires see a decline in wealth: http://money.cnn.com/2012/06/01/news/economy/american-millionaires/index.htm