Retro 24 - A Nation Should Have A Tax System That Looks Like Someone Designed It On Purpose

Due to family visitors and events this week, we will be posting some of our most popular previous posts. We will start posting new posts later this week.


Wednesday, January 4, 2012



A Nation Should Have A Tax System That Looks Like Someone Designed It On Purpose

The title for today's post comes from William Simon who long ago served as the U.S. Treasury Secretary, from 1974 to 1977, under both Nixon and Ford. He was being sarcastic when he coined the phrase, realizing that even decades ago, the United States did not have a tax system that looked like an intelligent being designed it on purpose. Such a system would be easy to comply with, easy to understand, and not a burden on the economy.

Over time, the political class has continuously used the tax system to reward both constituents and reelection campaign donors and tried to manage social and political changes by manipulating the tax code to advantage those changes. As a result, we have ended up with a tax system that is anything but fair, easy to understand, efficient, and easy to comply with.

Consider the following factoids about our nation's tax system:

- I first started out trying to find out a basic fact: how many pages are in the Title 26 Federal Tax Code? The answers I found were never exactly the same but were pretty consistent, most around 70,000 pages. However, most of the estimates were prior to 2011, they probably did not take into account the additional Federal tax changes that Obama Care seeks to put into place so at least 70,000 pages seems like a solid number.

How long is 70,000 pages? If you were reading my three volume edition of J.R.R. Tolkien's "Lord Of The Rings" tome, which measure about 5 inches across, you would have to read it about 70 times. If you bought the King James version of the Bible that is currently available on Amazon, you would have to read it about 46 times. And both of these examples are probably much easier reads than 70,000 pages of tax code.

- An online article from U.S. News and World Report in April, 2010 also estimated 70,000 pages but provided some additional, fascinating, and depressing statistics:

•Americans spend about 7.6 billion hours a year just preparing their tax returns.

•This is the equivalent of placing 3.8 million Americans into full time jobs.

•Using this criteria, the tax preparation effort in this country is six times larger than the auto making industry in this country.

•The original Federal tax code published in 1913 was 400 pages long, making it about .6% the size of what we deal with today.

- According to a Business Week article from its Insider report for Spring, 2011, there is a $345 billion gap between what U.S. taxpayers are supposed to pay in Federal taxes and what they actually pay. This gap theoretically places an additional tax burden of about $3,000 on each U.S. household, all because the political class and the government it runs does not know how operate an efficient tax collection system. The size and complexity of our 70,000 page tax code probably has a lot do to with tax evaders being so proficient at hiding the taxes the owe.

- According to a short article in the December 12, 2011 issue of Business Week, 51 Federal tax breaks were expected to expire at the end of 2010. A sampling of these 51 tax breaks give a good indication of how convoluted and needlessly complex our tax system has become (remember these are the tax components that went away, there are probably thousands and thousands of other similar ones that did not go away and which take up the 70,000 pages):

1.Special expensing rules for certain film and television productions.

2.Mine rescue team training credit.

3.Temporary increase in limit on cover over of rum excise tax revenues to Puerto Rico and Virgin Islands.

4.Credit for electric-drive motorcycles, three-wheeled vehicles, and low speed vehicles.

5.Seven year recovery period for motor-sports entertainment complexes.

6.Look through treatment of payments between related controlled foreign corporations under the foreign personal holding company rules.

7.American Samoa economic development credit.


8.Tax credit for first time DC home buyers.

These were some of the 51 tax components that I understood. Many of the other ones are complicated and apparently narrowly focused. Few, if any of these 51, apply to the vast number of ordinary Americans. They were likely developed and inserted into the tax code at the behest of Washington politicians to support a narrow geographic, personal, or business interest.

Did any politicians personally make use of that tax credit to buy DC home and real estate? Did Hollywood interests kick in some political campaign donations for those special expensing rules? How many Americans qualify for the mine training credit? Special rules for special political people all of which add to the complexity of our tax code, favor special interests, and cost ordinary Americans more in their own tax bill.

- A March 21, 2011 article in Business Week magazine reported how American corporations are holding $1 TRILLION worth of profits and cash overseas since it is a better business, financial, and economic decision to do so than to bring that wealth back to the United States and have it heavily taxed.

$1 TRILLION is about 25% more than what the Obama administration spent on its economic stimulus program. Dumping $1 TRILLION back into the U.S. economy, would have to have a positive economic on our unemployment situation. Wouldn't it be nice if we had a tax code that encouraged American companies to bring money and wealth back into America for investment in America which would generate jobs for Americans?

- A recent Wall Street Journal article, that was summarized in the April 29, 2011 issue of The Week magazine, estimated that U.S. taxpayers expend about $431 billion a year to comply with the complexity of the U.S. tax code. This money could be so much better spent on productive expansion of the economy and employment rather than tax paperwork.

- Another Business Week article in the Spring, 2011 issue had some interesting facts regarding corporate tax realities. According to the article, although the top U.S. corporate tax rate is 35%, that rate is applied haphazardly and grossly unfairly against different companies and different industries:

•For the business quarter that ended on December 31, 2010, Proctor and Gamble had an effective tax rate of 17.9%.

•Other the past three years, Walmart has had an effective tax rate of 33.6%, about twice the tax rate of Proctor and Gamble.

•But wait! Over that same time frame, General Electric had an effective U.S. tax rate of 3.6% even though it had billions in revenue and profits, about one ninth the rate of poor Walmart.

Looks like Walmart needs to significantly improve its Washington lobbying effort, given how poorly the tax code treats it vs. how well the same tax code treats General Electric. You cannot say you have a fair and balanced tax code when different sections of the economy are treated radically different from each other.

- Let's stay with General Electric for a while to show how ridiculous our 70,000 page tax code is. According to November news reports, the latest General Federal tax filing, if it had been printed out rather than submitted electronically, would have been about 57,000 pages in length.

In other words, just one company's one year tax filing would have been about 80% the length of the entire tax code. To make it more tangible, these 57,000 pages, if stacked one on top of another, would be about 19 feet tall.

Think about how many GE resources went into compiling a 57,000 page, one year tax return. Think about how much more productively GE could have used those resources to create new products and expand the economy.

Think about how many government resources will have to be expended to go through one 57,000 page tax return. Think about how easy it is for GE to cheat on its 57,000 page tax return, which I am definitely not saying it did, since I doubt even the Federal government has the resources to thoroughly go through all 57,000 pages to determine if the filing was accurate.

Think about how much better those government resources could be used if we had a simpler tax system, possibly diverting those resources to go after the criminals and fraudsters that rip off Social Security, Medicare, and Medicaid of hundreds of billions of dollars every year.

Details of the GE 57,000 page, 19 feet tax filing can be found at:

 http://www.weeklystandard.com/blogs/ge-filed-57000-page-tax-return-paid-no-taxes-14-billion-profits_609137.html

The details of how unproductive a 70,000 page tax code be is now pretty obvious. It creates an incredibly complex process that makes tax cheating and tax evasion so easy. It allows politicians to use the tax code to reward their financial backers or to personally enrich themselves.

It wastes time, resources, and wealth, all of which could be used for far more productive purposes, either reducing government fraud and waste or allowing individuals and companies to focus on expanding their businesses and lives. Replacing non-productive tax activities with productive economic activities would certainly go a long way to reducing unemployment in this country.

How do we get to this new view that taxes should be simple, fair, compassionate and not a drain on the economy? Believe it or not, the first step has to be installing term limits (Step 39 from "Love My Country, Loathe My Government) into our political processes. Our current set of politicians, in both parties, are not interested in simplifying the tax code. If they did, they would lose a primary source of political and financial power. They need to be replaced and the only way to do that is via a Constitutional amendment that imposes a "one and done" term limit restriction on all Federal politicians.

In the mean time, we will propose a simplified tax code approach within the next week that is fair, easy, effective, and efficient. It is not hard to do if you use reason, logic, and a little math, three attributes that constantly appear to elude most of Washington's political class.

Until then, consider two paragraphs about GE that we reported on in our July 6, 2011 post:

"Let's look at General Electric for a business example. They recently announced they had 2010 profits of $5.1 billion on their U.S. operations. [Note: GE also had about $9 billion worth of overseas earnings] Very impressive. However, more impressive is that they paid no Federal income tax on those profits. Even more impressive, they were able to legally work the complexity of the tax code so that they actually received a $3.2 billion tax credit from the United States government."

This is really nice work if you can get it. Earn billions of dollars, pay no taxes on those billions, and the government will give you billions more."

If this is not the poster child for fair and efficient tax reform, I do not know what is. More on our plan next week.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/

Retro 23 - Why Is A Billion A Lot Except When Talking About U.S. Politics?

Given family visitors and event this week, we will be rerunning some of our more popular posts from the past for your reading. We will continue with new posts later this week.

Monday, March 5, 2012

Why Is A Billion A Lot Except When Talking About U.S. Politics?

In most contexts, a billion of anything is a lot. It's a thousand times bigger than a million, which has always been a benchmark for a wide variety of things including being the minimal threshold for the millionaire's club, having a gold record in the music industry, etc. Yes, a billion is almost always a lot of something.

Consider a billion seconds of time. If you do the math, a billion seconds is about 32 years:

•32 years ago, Jimmy Carter was still President.

•32 years ago, about 41% of the current U.S. population had not been born yet.

•32 years ago, very few people owned a personal computer, no one owned a cellular phone, the Internet did not exist, and TVs were neither flat or large.

•The cumulative national debt was only about $900 billion or about $11,300 per U.S. household.

Yes, a billion seconds was a pretty long time ago. However, a billion minutes is even longer. A billion minutes is about 1,903 years ago:

•1,903 years ago is within a hundred years or so when Jesus Christ walked the earth.

•1,903 years ago is within the reign of the Roman Empire.

•1,903 years ago is about 1,400 years before Columbus discovered the New World.

Yes, a billion minutes is a long time ago. But a billion hours is even longer. A billion hours is about 114,000 years ago:

•114,000 years ago is prior to the last Ice Age (according to the NOAA).

•1114,000 years ago, Neanderthals were still walking the earth.

Yes, a billion of anything, even things as small as seconds, minutes, and hours, is really a lot and lasts a very long time...unless your are talking about the U.S. Federal government and the political class who operates it.

Based on Obama's recently submitted 2013 budget, one dollar, if multiplied a billion times, would be spent, on average, by the U.S. government in about two hours and 19 minutes:

•Yes, in less than the time it takes to watch an NFL football game, the Federal government would have spent a billion dollars.

•In less than the time it takes to typically to go out and see a movie in a theater, the Federal government would have spent a billion dollars.

•In less than the time it takes many trained runners to run a marathon, the Federal government would have spent a billion dollars.

•If Obama's proposed 2013 budget is not changed, it will add about another $11,300 to the national debt burden of each American household on average. This is equivalent to the debt burden that all American President's combined from Washington through the Carter adminisration had added to the national debt burden of American households over two centuries.

Yes, a billion is a lot of anything and everything and last a long time unless you measure it against how out of control this administration and the current political class in Washington is when it comes to spending, and wasting, taxpayer wealth. A billion seconds, a billion minutes, a billion hours, all seemingly last forever. A billion dollars in the hands of a Washington politician, not so much.

And this anomaly of a billion is what will destroy this country, this democracy, and our freedom long before a billion seconds, a billion minutes and a billion hours transpire.

We invite all readers of this blog to visit our new website, "The United States Of Purple," at:

http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/

Retro 22 - Cold In Maine; Smug, Wasteful and Impotent iN Washington - Isn't It A Shame

Due to family events this week and the time involved with these events, we will be running some of our most popular posts from the past. New posting will resume later this week.

Friday, February 24, 2012

Cold In Maine; Smug, Wasteful, and Impotent In Washington - Isn't It A Shame

Fascinating and depressing article in the February 24, 2012 issue of The Week magazine called "When Cold Kills - The frigid Maine winter, says Dan Barry, can turn lethal when the fuel oil runs out." This article originally appeared in the New York Times earlier this year.

The article focuses on Robert and Wilma Hartford who had recently moved into a poorly insulated house outside of Dixfield, Maine. Robert was a former stone mason who had traveled the country applying his trade and skills. However, Robert (age 68) now has a bad shoulder and Wilma (age 71) needs a wheel chair. They survive on $1,200 a month and have received about $360 in heating assistance. Because of their financial situation, like others mentioned in the story, they are not financially able to switch to more efficient, less expensive forms of home heating, locking them into their current financial duress of increasingly expensive oil home heating.

Even though it has been a relatively mild winter across the country, it still gets pretty cold up in Maine. Unfortunately, with rising heating oil prices, a fixed income, and health issues, this has placed a severe financial hardship on the Hartfords. The story revolves about their struggle to heat their poorly insulated home and the compassionate heating oil supplier that wants to help them but has already extended over $700 worth of credit in previous oil deliveries with little hope of ever recovering that money.

The heating oil supplier wants to help, he is a decent and compassionate human being, but he also needs to run a profitable business if he wants to stay in business. The story describes how this supplier is so torn up by the problem that he is under a doctor's care for stress.

The story goes on to describe how some Maine residents are keeping warm. Some sit in their idling cars with the car heater at full blast to warm up and then rush into their bedrooms and get under the bed covers. They buy portable, and more dangerous kerosene heaters, and hope they can afford kerosene. They look to their family and churches for help.

The Hartfords now have to heat their home by turning on the electric stove and burners and hope to spread what little heat they can get from that source throughout the house with a small fan. They ran their clothes dryer hose back into the basement to utilize the heat coming out of the dryer to keep their basement pipes from freezing. This obviously begs the question that if they do not have the money today to pay for home heating oil, will they have the money next month to pay for what is likely to be a very high electric bill from running the stove and clothes dryer to generate heat.

And in the most heartbreaking part of the story, Rober Hartford shows up at the heating oil supplier's business and offers to trade the title to the family car for a delivery of heating oil.

Part of the problem, according to the article, is that the Obama administration and Congress have cut the government subsidy for its energy assistance program. They have made it harder to qualify for Federal energy help and they reduced the amount of help available, on average by about 40%, from $804 to $483. This 40% drop is more impactful when you consider that the average price of heating oil is up $.40 or about 12% over the past year.

Now, I have never been a fan of large government bureaucracies, mostly because they are wasteful, inefficient, and ineffective. They tend to be corrupted from day one and never deliver on their promise. However, that does not mean there is not a place for a program to help Americans in need of a little help. And certainly, keeping people warm is such a program.

It has always been our theory that if government and the political class stopped doing a lot of things very badly and focused on just a few major things, and did those few things well, we as Americans would be way ahead of where we are now. We are the wealthiest country in the world, we should be able to do a much better job of feeding the hungry and warming the cold. Isn't it a shame that we do not?

Isn't it a shame that the Obama administration spent well over a billion dollars on an unnecessary and un-Constitutional military excursion in Libya? Think about how many Americans like the Hartfords might be a little warmer today of Obama had obeyed the Constitutional and our laws and not inserted us into the Libyan conflict.

Isn't it as shame that politicians like Obama continue to host campaign fund raising dinners that cost anywhere from $35,000 to $70,000 per person to attend in these hard economic times? Think about how many Americans like the Hartfords might be a little warmer today if our priorities were changed so that we spent $35,000 on home heating assistance rather than on one lame dinner with one lame politician?

Isn't it a shame that Fannie Mae and Freddie Mac executives and employees received millions of dollars in government salary bonuses for operating two of the most dysfunctional enterprises in the history of America? Think about how many Americans like the Hartfords might be a little warmer today if those unnecessary bonus payouts were put back into the energy assistance program.

Isn't it a shame that the U.S. Navy spent over $300 million to build two ships, the USNS Benjamin Isherwood and the USNS Henry Eckford, that it never used, simply built them and than junked them? Think about how many Americans like the Hartfords might be a little warmer today if the military did not waste hundreds of millions, if not billions, of dollars on unnecessary armaments?

Isn't it a shame that the Obama administration and Washington political class allow anywhere between $60 and $90 billion a year of Medicare resources to be lost to waste and criminal fraud activities? Think about how many Americans like the Hartfords might be a little warmer today if the Federal government knew how to run an efficient, effective, and less expensive Medicare program.

Isn't it a shame that the Obama administration and the Washington political class allow anywhere between $30 and $40 billion a year of Medicaid resources to be lost to waste and criminal fraud activities? Think about how many Americans like the Hartfords might be a little warmer today if the Federal government knew how to run an efficient, effective, and less expensive Medicaid program.

Isn't it a shame that the Obama administration and the Washington class allow about $70 billion a year of Social Security resources to be lost to waste and criminal fraud activities? Think about how many Americans like the Hartfords might be a little warmer today if the Federal government knew how to run an efficient and effective Social Security program.

Isn't a shame that the Obama administration, the IRS, and the Washington political class fail to collect over $300 billion worth of taxes a year from tax evaders? Think about how many Americans like the Hartfordss might be a little warmer today if the IRS actually collected the taxes it is supposed to collect.

Isn't it a shame that the Obama administration and its cronyism pals has wasted at least hundreds of millions of dollars in failed alternative energy investments in companies such as Solyndra, Everygreen, Spectra, Beacon, Tesla, Fisker, and other companies who had strong ties to major Obama election campaign fund raisers? Think about how many Americans might be a little warmer today if the Federal government stopped wasting taxpayer money in markets it has no clue about.

Isn't it a shame that the Federal government wasted well over $400,000 in a NYC fly over three years ago to take a picture of the Statue Of Liberty, a picture that could have more easily and much more cheaply been created using Photoshop? Think about how many Americans might be a little warmer today if that $400,000 could be diverted to heating assistance.

Isn't it a shame that billions of taxpayer dollars will likely never be recovered because of the unnecessary financial bailout of General Motors and Chrysler? Think about how many Americans might be a little warmer today if that unnecessary bailout had not occurred and the auto companies went through the regular bankruptcy proceedings?

Isn't it a shame that Nevada Senator Harry Reid gets Federal funding for the annual Nevada Cowboy Poetry contest? Think about how many Americans might be a little warmer today if that funding went to helping out truly needy Americans rather than a poetry contest?

Isn't it a shame that audits of the Housing and Urban Development Federal organization show that it wastes or mishandles about $4.5 billion a year? Think about how many Americans might be a little warmer today if HUD actually knew how to operate efficiently.

Isn't it shame that Federal politicians divert about $16 billion a year to their campaign fund raisers and political campaign conributors under the guise of "earmarks," that serve no purpose except to help incumbent politicians remain in office? Think about how many Americans might be a little warmer today if those earmarks refreshed government energy assistance programs rather than refreshing another term in office for a politician.

Okay, you get the idea, we could go on and on about similiar situaiotns of waste. We have allowed our politicians to skew and distort our nation's priorities, feeding taxpayer wealth into this cesspool of waste, criminal fraud, personal political gain, and inefficiency while people like the Hartfords try to barter the family car for a little heating oil. Disgraceful.

Again, I have never been a fan of large, ineffective government programs. However, that does not mean I am so uncompassionate that I do not realize there is a need to help those less fortunate within our society. The premise for our book, "Love My Country, Loathe My Government" was that we needed government and politicians to focus on a much smaller but better set of higher priorities than what they do now: they currently focus on nothing but try to execute a much wider set of low priorities.

This approach to governing has gotten us into the mess we have today. And this is also why no American, rich or poor, should see any increase in their current level of taxation. The political class in this country does not deserve access to any more of our wealth, they already have too much access and waste far too much of it on behavior and programs like those listed above.

A famous line from the movie "Animal House" goes like this: "Fat, drunk, and stupid is no way to go through life, son." For the President and those sitting in Congress, I would revise the line to read: "Smug, wasteful and impotent is no way to run a country." Not when you waste hundreds of billions of dollars a year while some Americans cannot get warm.

Please investigate our campaign for the Presidency at the United States of Purple website listed below including a way to help us impose term limits on the smug, wasteful and impotent political class in Washington. I guarantee you that taxes will not be raised but people will be warmer under our plan for the rewiring of the nation's political mess.

“We cannot solve our problems with the same thinking we used when we created them.” Albert Einstein

We invite all readers of this blog to visit our new website, "The United States Of Purple," at:

http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/

A Graphical View Why Taxing The Rich More Without Reducing Spending Is Still Senseless

Without going into the details of what we have covered dozens of times in this blog, it is safe to say that the Federal government easily wastes away over $500 billion a year in taxpayer wealth due to inefficiencies and criminal fraud in just a half dozen government programs including Social Security, Medicare, Medicaid, tax evasion, unemployment benefits, and food stamps. If we were to detail out inefficiencies, waste, and government fraud in the rest of the Federal government every year, I am quite confident we could easily find hundreds of billions of dollars more waste.

That is why it has always been our position that no American, rich or poor, should have his or her taxes raised until the politicians in Washington learn how to manage the taxes they already receive in a more responsible manner. It is senseless to give these people more of our wealth when they have shown no ability to spend it responsibly. That is why no matter how "fair" or 'unfair" our tax process is today, nobody should pay more when hundreds of billions of dollars are wasted every year.

Which gets us to our post today. I would bet that if you asked 100 people on the street to estimate the number of millionaire owners in America every year, i.e. how many Americans earn a million dollars every year, I would bet that at least 95% of them grossly overestimate the reality of that question.

To illustrate, let's check out a few graphs of actual IRS summarized tax information from the official IRS website from the tax year for 2009. This appears to be the latest year of tax information available online to the public but I doubt if the graphs and the conclusions would change much once the 2010 and 2011 tax data becomes available.

The first graph contains a simple bar chart which shows the percentage of tax returns filed in 2009 by Adjusted Gross Income bands (double click on the picture for a larger view):

The second graph contains a simple bar chart which shows the percentage of the nation's taxes paid in 2009 by Adjusted Gross Income bands:

This third graph puts the data from the previous two charts on the same graph:

Let's look at the numbers behind the graphs:

• In the first graph there looks like there are no taxpayers in the country that earn over a million dollars a year. And that is almost correct. In 2009, of the more than 140 million personal tax returns filed, only about 237,000 of them had earners that were over a million dollars for the year, as measured by the Adjusted Gross Income line.
• This paltry number comes out to only .17% of all earners that year. That is why the graph looks so emply on the right, there are just not that many Americans who earn over a million dollars a year.
• If you consider those "rich people" earning over $200,000 a year, as the President considers them to be, then you will find that there were only about 3.9 million tax returns showing earnings over $200,000 in 2009, or only about 2.8% of all returns.
• If you look at the super high earners, those Americans whose tax returns showed they earned over $5 million in 2009, you find that there were only 22,600 or so out of over 140 million, accounting for .00017% of all taxpayers that year.
• This last point is another reason why the right side of that graph looks so flat, there just aren't that many Americans in the country that earn millions of dollars a year.
• The second graph is almost a mirror reflection of the first. It is the left side of this graph that is almost not even there since the number of tax dollars paid by the people in the lower AGI bands is almost non-existent vs. the percentage of overall taxes paid by the higher band AGIs.
• For example, while 66% of the people who filed tax returns in 2009 earned less than $50,000, this group only paid about 7% of all the taxes paid that year while those earning over $200,000 comprised only 2.8% of all filers but paid over 50% of all the taxes collected.
• The third graph puts the previous two together on the same chart where we see that the very few people earning over $200,000 a year pay a very high percentage of all of the taxes.
• Now, I am not judging what is the "fair" amount of taxes each person should pay. But consider this: if we made those Americans earning over $1 million a year to pay an income tax rate of 100%, i.e. the government would confiscate ALL of the earnings of every millionaire earner, and spread that confiscated money over the rest of the 140 million personal tax returns, each one of those other tax filers would receive a total of about $4,900. Not a bad haul.
• But that haul would only last for a year or so. If the governemnt actually did confiscate 100% of those millionaire dollar earners, you can be sure that those millionaire dollar earners would not be out the next year working hard to duplicate their earnings only to lose it all. Thus, while those other 140 million or so tax filers would get a one year windfall of $4,900 on this 100% confiscation scheme, that is really fool's gold. In subsequent years they would have to pay much more in taxes to cover the shortfall from the current million dollar earners giving up.
• Lets' be more realsitic and assume that the million dollar earners had just another 10% of their earnings confiscated by the Federal government and given out to the other tax filers.
• This 10% surtax would bring about $490 for each of the other tax filers. This $490 comes out to only $1.34 a day, hardly enough to make anyone rich.

Of course, these are best case scenarios. They assume that the confiscation numbers, either 100% or 10%, actually and miraculously got back to the other tax filers. You and I both know that the Washington political class would take those additional taxes and waste it somehow, somewhere, probably on a political crony or campaign donor or criminal fraud.

The bottom line of all these graphs and numbers is that there are just not enough "high earners" in this country to hit up for more taxes and solve all, or even some, of our financial problems. The problem is too much government spending and waste, not too little in taxation.

Consider this: if the government did indeed confiscate EVERY dollar of EVERY millionaire dollar tax filer in 2009, that confiscation would cover less than 49% of that year's Federal government's deficit spending. So taking EVERY dollar does not do the trick, taking less than that, say 10%, would do even less of a trick.

An old saying goes as follows: "Economies cannot tax themselves to prosperity." It has never been done in the history of man. Why this President thinks he can do it is beyond me. There are just not enough millionaire earners to go around, only .17% . However, there is enough wasteful spending to go around, all of which needs to be stopped.


We invite all readers of this blog to visit our new website, "The United States Of Purple," at:

http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at http://www.loathemygovernment.com/. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/

High Pay, Low Workload, No Performance Reviews - The Life Of A Washington Politician

Many times we have reviewed the major, unresolved issues Americans have struggled with and against over the past few decades including a lost war on drugs, failing public schools, crumbling infrastructure, escalating health care costs, leaky borders, the lack of a national energy strategy and program, skyrocketing national debt, a mismanaged economy, government corruption and cronyism, etc. These problems go unresolved even though the Washington political class confiscates over $2 TRILLION a year in taxpayer wealth. 

Many times we have also reviewed the large amount of waste, hundreds of billions of dollars a year, that large and small Federal government programs lose every year to waste, inefficiencies, and criminal fraud. Just three of them, Medicare, Medicaid, and Social Security waste over $200 billion a year.

In our November 7, 2011 post we reported that, according to CBS News, as reported in the November 11, 2011 issue of The Week magazine, members of the House of Representatives earn over $170,000 a year, more than three times the average household income of the typical American household. However, those Congressional members will be in Congressional session only 109 workdays in 2012 while in recess for 151 weekdays, primarily to be able to focus more on their re-election than the business of the country. In January, August, and October of 2012, they are scheduled to work six days, three days, and five days, respectively.

This lackadaisical attitude is not just in Congress. We currently have a President and Vice President who have attended well over 100 campaign fundraising events this year alone, have taken numerous vacations, have held numerous athletic team photo ops, and have played many, many rounds of golf while the nation suffers through a horrendous economic reality.

We have a Senate majority leader in Harry Reid who has not allowed the Senate to develop a detailed national budget for over three years, one of his primary responsibilities. However, Mr. Reid recently introduced legislation that will establish Federal government over the boxing industry and actually held a news conference to protest the fact that U.S. Olympic uniforms were made in China. But he still has not developed a Federal budget for over 1,100 days.

Many times we have reviewed how the political class has hijacked our political processes for their own good. How they gerrymander Congressional districts to ensure their reelection, how they accept all kinds of campaign donations from outside entities in exchange for doing the bidding of these outside entities, how they use taxpayer money in the thinly disguised ruse of earmarks to receive more reelection campaign cash.

Thus, is it any wonder why no issue ever gets resolved in this country? Is it any wonder why taxes are never well spent and never go down? Is it any wonder why we are heading for a national fiscal disaster and national economic collapse in this country?

As the old saying goes, "its good work if you can get it." High pay,outstanding benefits, low performance, and no performance reviews since they corrupt the current performance review process (i.e. control the election processes). There is no accountability for what does or does not get done, what does get spent and how.

The point of all this was driven home by a short article in the July 23, 2012 issue of Business Week magazine. The article, "The Doing A-Lot-of-Nothing Congress," listed out all of the 54 bills that this sitting of Congress has passed. The highlights, or lowlights, of the article include the following:

• First of all, the number 54 is pretty atrocious. I do not want Congress passing bad legislation or passing legislation for the sake of just passing something, but from a pure number perspective, according to the article, the low number of 54 is one of the least productive sessions of Congress in our history, especially in light of all the problems we face.
• Of the 54 bills passed, the article considers only five of them were big, important pieces of legislation.
• Three of the other bills were only temporary, stop gap bills that led to the final passage of one of the five important bills.
• Three of the bills were nothing more than a rubber stamp approval of existing laws that needed to be renewed.
• Nine of the bills were no more than bills to approve trivial real estate transactions including transferring land beneath offices in Alta, Utah to the town itself, giving Federal property to the city of Tracy, California and the city of Pascagoula, Mississippi, giving Federal property in western Alaska to a company owned by Alaskan natives, a law to promote the development of some waterfront in D.C. and a law to protect the Maine Lobster Memorial statue.
• There were sixteen bills passed that the authors of the article classified as miscellaneous and included such trivial undertakings as directing the U.S.Mint to print coins in honor of the 225th anniversary of the U.S. Marshall Service, granting more law enforcement power to prosecute smugglers who build or finance tunnels into the U.S., and clearing the way for a new bridge crossing the St.Croix river between Minnesota and Wisconsin.
• There were sixteen bills that renamed post office buildings.
• There were three laws that renamed other Federal buildings such as a courthouse, a wildlife refuge, and a border patrol station.
• And finally, to add insult to injury, there was one bill passed that fixed the address of a renamed post office building.

That is all this Congressional session accomplished. If you add up all of the red, bold faced numbers listed above you should come up with 54, with about a third of them involving nothing more than changing the name on a building. Pathetic and dysfunctional.

For this they earn more in salary than probably 95% of the rest of America's citizens. They get health care and other benefits that are probably better than every other Americans'. They get these full time benefits and full time pay for working part time hours. They get to indulge in insider IPOs to enhance their earnings and probably use their government positions to forge post political office jobs that pay even more. And when you really come down to it, they get all this for approving the names of post office buildings.

A couple of suggestions on how to remedy the situation:

1. Most Americans have to work about 40 hours a week, 52 weeks a year to earn their annual salary. This comes out to about 2080 hours a year. I propose that the annual salary of these Washington politicians be reduced on a percentage basis for every hour below 2080 hours that they do not work. For example, if Congress is only going to be in session for five days this October and October has 23 work days for most other Americans, than Congressional member pay would only be 5/23rds in October. Thus, rather than receiving about $14,200 in their October pay check ($170,000 annual pay evenly spread across 12 months), each member of Congress would only get paid about $3,100 for their only five days of work.
2. Step 39 from "Love My Country, Loathe My Government" would impose term limits on all Federal political offices. Maybe if a sitting politician knew that they only had a predefined, limited time to make a worthwhile contribution to the country and their legacy, they would take more initiative beyond renaming post office buildings.
3. Step 37 from "Love My Country, Loathe My Government" proposes a process where American citizens would get to grade all Washington politicians, President, Vice President, Cabinet Secretaries and members of Congress, on their performance and withhold payment of salary and benefits if those grades to not meet minimal thresholds. This might encourage members of the political class to cooperate more, to respect each other more, to compromise for the good of the country more since their paychecks would hang in the balance if they did not.

I am reminded of the words from the movie, "The American President," as presented by actor Michael Douglas: "America is not easy. You gotta want it badly because it's going to put up a fight." Based on the lazy behavior, extensive vacation time, golfing time, and campaigning time, and the bad priorities of the current Washington political class along with the many unresolved issues of our times, I am quite sure that our current set of politicians do not want it bad enough.


We invite all readers of this blog to visit our new website, "The United States Of Purple," at:

http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/

The Federal Government's Fraudulent Accounting and The Debt Pit It Has Thrown Us Into

Interesting analysis from USA Today, as reported in the May 24, 2012 issue of Newsmax. The newspaper makes the assertion that the Federal government severely underreports the amount of deficit spending that the political class reports on every year, masking the fact that the Federal government is running up future liabilities that are not being financed with today's taxes and spending.

These liabilities will result in future retirees probably never receiving the future financial and medical support that the current members of the political class are promising, i.e. today's political class is writing checks that the Federal government will not be able to cover in the future.


But first let's look at what the Federal government reports as our annual spending deficits (double click on the graph for a bigger picture):

Ever since Obama became President, our annual Federal government spending deficit has been easily over $1 TRILLION a year. 2012 is not on the graph but credible current estimates put this year's deficit well over a TRILLION dollars again. This traditional definition of deficit is quite simple: it is the difference between what the government collected in taxes and fees and what it spent in a single fiscal year. The difference is the annual deficit which is financed by selling Treasury bonds, future IOUs, to cover the difference between what is collected as wealth and what is spent.

Just looking at these annual results is not a good news story. If we assume that the average annual deficit of the Federal government over the past few years is about $1.2 TRILLION a year, then on average, if the Treasury did not sell bonds and IOUs, every American household would be on the hook for an additional $10,500 per household to cover the deficit shortfall EVERY YEAR of the Obama administration. Since the average income for an American household is about $50,000 a year, this means that we would all have to pay a whopping additional 20% of our gross annual household income just to cover the Federal government's annual deficit.

Of course, every American household really is on the hook for the deficit shortfall, they just do not pay that additional number NOW since the Treasury Department continues to mortgage our future by Treasury selling bonds. Those bonds will eventually have to be paid off by every American taxpayer.

A horrific financial situation. Outlandish and wasteful spending by the Washington political class, which wastes hundreds of billions of dollars every year in order to attain these TRILLION dollar plus deficits.

But these numbers and spending deficits are just for current government operating expenses and costs. The USA Today article presents a more realistic, and more horrific view, of the country's dire financials:

• The official government deficit for the 2011 was $1.3 TRILLION.
• However, according to the USA Today analysis, the more accurate estimate is an astronomical $5 trillion.
• The reason for this large discrepancy is that Congress exempts itself from reporting the cost of promised retirement benefits incurred in any one year when computing the annual deficit.
• This exemption, of course, does not apply to private sector companies which must include these future liabilities and commitments in their business financial statements in order to give a truer picture of their actual financial situation and to not break the law.
• The USA Today analysis found that the liabilities for Social Security, Medicare and other government retirement programs rose by $3.7 trillion in 2011, but the amount was not included on the government’s financial ledgers and reports even though they are committed future expenses.
• If these retirement and liabilities and commitments were included in the outlook for 2011, the actual, more definitive, deficit total would be equal to about $43,000 for every American household, about four times higher the horrific estimate we went through above.
• Since the median income of U.S. households is $49,445, according to the latest Census findings, the average American household would have shell nearly all of its annual income in taxes to balance the real government liabilities incurred in 2011 if standard accounting rules were used to compute the Federal government deficit.
• If these better and more accurate accounting rules were taken into account by the Federal government, and the Washington political class, the annual spending deficits from 2004 to 2011 would be six times larger the official total of $5.6 TRILLION.
• The USA Today  report also determined that all future Federal debt and retiree commitments equal $561,254 per household.
• Since the average American household also owes $116,057 for its own mortgages, car loans and other debts, the total debt burden as of today for every household is about $676,311.
• Thus, on average, every American household would have to work 14 straight years, without paying any other taxes, paying any medical bills, eating, taking vacations, fixing up their homes, going to the movies, or incur any other expense in order to dig the nation out of the debt pit the political class has thrown us into.

Mind boggling. Obviously, something is going to have to give, the above trajectory of disaster will eventually manifest itself somehow. The Federal government may choose to continually raise taxes to pay off the debt which eventually will collapse the economy from lack of disposable spending. Or those Social Security, Medicare, and Medicaid promises will have to be broken since their exponential rise in cost, without the concurrent collection of wealth to pay for these future liabilities, cannot not be met.

The USA Today article and analysis have provided a great service to the country, a service that most Americans are not aware of and most politicians, given their short term, myopic thinking, do not want you to be aware of. We are in far worst financial condition than most of us are aware of. To stave off the collapse of our financial affairs and save our democracy, the following steps from "Love my Country, Loath My Government" need to be taken immediately:

1. Step 1 - a coherent plan of reducing government spending 10% a year for five years must be undertaken to get Federal government spending under control. Unnecessary and redundant programs and organizations need to be terminated. The wasting of hundreds of billions of dollars every year due to inefficiencies and criminal fraud need to be stopped. Obama's deficit reduction commission, which he completely torpedoed and ignored, would be a good first step to putting this Step 1 into operation.
2. Steps 10, 11, and 12 - These steps would reform Social Security by reducing the Social Security tax rate but applying it to all forms of income without any cap, raising the retirement age to 70 years old with a hardship exemption, and excluding anyone worth more than $3 million from ever receiving a Social Security check.
3. Step 28 provides a process to finally attack the root causes of our escalating health care costs and put a plan into effect to attack those root causes, something that Obama Care will never do.
4. Step 39  would implement term limits so that we can finally remove those sitting politicians that have been around forever but who have gotten us into this financial debt pit. Since they were not part of the solution, they must be part of the problem and need to be removed forever from office.

I do not know if even these five steps are enough to get us out of our debt pit. I do know that the longer we wait for someone, anyone, in Washington to show a little guts, courage, leadership, and vision in this area, the tougher it will be to climb out of this debt pit. We can only hope that the hole does not collapse upon on us before we get out, taking our economy and our liberty with it.


We invite all readers of this blog to visit our new website, "The United States Of Purple," at:

http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at http://www.loathemygovernment.com/. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/

Abra Kadabra, Part 2 - The Right Hand Of The Federal Government Still Does Not Know What The Left Hand Is Doing

We combine two concepts today. First, regular readers of this blog know that we have a real hard time giving the Washington political class any more in taxes, given how out of control Federal government spending is today. Waste, inefficiencies, and outright and widespread criminal fraud wastes hundreds of billions of dollars a year, resulting in what is about to be a $16 TRILLION national debt.

The sad thing is that it does  not have to be this way. We have already shown, based on some excellent analyses by credible nonpartisan sources that we could reduce government spending $9 TRILLION over the next decade with little negative impact on most American citizens. Details of how to compassionately cut spending can be found at :

http://loathemygovernment.blogspot.com/2012/02/united-states-of-purple-presidency-plan.html

Second, last week we did the first edition of our "The Right Hand Of The Federal Government Does Not Know What The Left Hand Is Doing." Specifically, we discussed the fact that the Federal government annually gives the tobacco industry about $190 million of taxpayer wealth every year to grow tobacco and is also about to execute a $54 million advertising campaign to encourage people not to smoke tobacco. Insanity, right hand of government doing something that is direct conflict with what the left hand is doing.

Today, let's combine both of these concepts, reducing unnecessary government spending by letting the right hand of government cooperate with the left hand. The basis of our thoughts are from a recent 400+ page detailed report from the General Accounting Office (GAO).

It appears that the GAO went through just about every Federal organization and put together an analysis which "identifies government duplication, overlap, and fragmentation as well as other cost savings and revenue enhancement opportunities. Its findings involve a wide range of government missions and touch virtually all major Federal departments and agencies." The complete report, "2012 Annual Report: "Opportunities to Reduce Duplication, Overlap and Fragmentation, Achieve Savings, and Enhance Revenue" can be viewed at:

http://www.gao.gov/assets/590/588818.pdf

Recommendation highlights of this year's report, as summarized by the Bankrupting America website, and a random perusing of the actual report include the following information:

• The 2012 GAO report details 51 different areas where the government can reduce waste and increase efficiency.
• Specifically, let a tax credit for ethanol expire because it duplicates other identical tax credits in place which would save of $5.7 billion annually.
• Reduce top-heavy management and overlapping positions in the State Department.
• Consolidate some of the 209 different science, technology, engineering and math(STEM) education programs,173 of which overlap.
• Eliminate or consolidate some of the 15 major financial literacy programs, including 3 new programs created by the Dodd-Frank Reform legislation.
• There are at least ten different Federal entities that have some roles and responsibilities for food and agricultural defense.
• There are 29 different military programs underway relative to unmanned military drones across all branches of our military (Army, Navy, Air Force).
• Regarding  government support of entrepreneurs, there are 36 programs distributed across four government agencies provide technical assistance, including business training and counseling and research and development support, there are 33 programs distributed across four government agencies which support entrepreneurs through financial assistance in the form of grants and loans, and there are 7 programs that support entrepreneurs by helping them qualify for Federal procurement opportunities.
• Only four of the 81 agencies identified for expense and cost savings in the GAO's 2011 report have fully addressed the GAO's waste reduction recommendations.
• A new, separate, but related GAO report showed that in 2010 there were 45 Federal government programs across 9 different agencies that supported employment for Americans with disabilities, with the most programs run by the Department of Labor (14), the Department of Defense (10), and the Department of Education (9).
• These support programs for Americans with disabilities reported expenditures of approximately $4.1 billion for providing employment services and support to 1.5 million individuals with very few measurement programs in effect to track the effectiveness of these scattered programs.

Many of the savings that would occur by terminating and consolidating this replication was not captured in the $9 TRILLION analysis identified above.

But these results should not surprise us. The Federal government has gotten so big and unwieldy that duplicate efforts and spending is to be expected. The GAO report cited instances where they found Federal employees did not know that others elsewhere in the Federal bureaucracy were doing very similar work to themselves. Taxpayer wealth that is wasted in this maze of duplication has to be worth tens of billions of dollars a year.

Two steps are needed to bring the left and right hands of government together. The first step is Step 1 from "Love My Country, Loathe My Government" which would reduce Federal government spending by 10% a year for five years. By forcing the government bureaucracy to operate on a leaner and leaner budget, duplication should be squeezed out of the bureaucracy without sacrificing service levels.

The second step is to finally elect people who are willing to do the nitty gritty work of making government more efficient. We no longer need people in Washington who are more worried about their reelection or how many cable news appearances they can create for themselves. We need people that will actually read the GAO report and put forth some guts, courage, and leadership to compassionately reduce spending before our national debt gets beyond our ability to manage. That would be the best abra kadabra for the nation.

Please visit our new website, "The United States Of Purple," at:

http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at http://www.loathemygovernment.com/. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/

Why California Is Failing While Wisconsin Is Succeeding

Last week we compared the relative economic situations of three states: Florida, New Jersey, and California (http://www.loathemygovernment.blogspot.com/2012/07/state-level-economic-musings-california.html). Florida fared the best in our analysis, with unnecessary government costs being cut, funding for education being increased, no taxes being raised, but essential government functions still operating. This has resulted in Florida making some of the best improvements in its economy and unemployment rate in the country.

We concluded that New jersey Governor Chris Christie was making all of the right moves to get that state economy moving again but was facing a long tradition of the state overspending its tax stream and raising taxes to cover the shortfall. Its economy has been slow to recover but at least the governor is doing the right things.

The basket case of the three was California. Tax shortfalls, underperfoming schools, budget overruns, good sized cities declaring bankruptcy (San Bernadino and Stockton), an out migration of better off citizens and business, a general malaise throughout the state and its population. However, we did present a rather radical plan from famed economist Arthur Laffer to help pull the state's economy and state government out of the ditch. However, it is doubtful the state's political class is willing or able to accomplish such a feat.

If we had waited a few days, we could have included some other worthwhile advice on how to fix this broken state, courtesy of an article and analysis in the L.A. Times:

 (http://www.latimes.com/news/opinion/commentary/la-oe-malanga-wisconsin-california-bankruptcies-20120717,0,5879241.story).

It has been my experience that the L.A. Times is a left leaning, Democratic Party preferring publication. So when it sings high praise for the economic progress and approach of a REPUBLICAN governor from another state, I sit up and take notice since complimenting a Republican anything is rather rare in a main stream media publication like the Times.

The Republican being complimented is Governor Scott Walker of Wisconsin. As you may know, Walker just prevailed in a bitter recall election that was headed by state government unions in the state. The unions were against many of the changes that Walker had pushed through the state legislature that would have reduced the power of state government workers in the state.

The Times article, "California, Look To Wisconsin," made the following points:

• Walker argued that the biggest beneficiaries of his budget reform plans would be cities, towns and school districts, which would gain the ability to cut costs without having to negotiate every change in compensation or work rules with local unions.
• This legislation specifically eliminated collective bargaining by government workers for benefits and required greater contributions from them towards their pensions.
• Once his plan was enacted into law, Wisconsin citizens quickly found out that state employee unions had used its power to force local school districts to provide health care insurance coverage only through a nonprofit insurer affiliated with the union.
• Once the state allowed bargaining on health care contracts, school boards began competitively bidding out their health insurance, which hopefully would reduce costs.
• According to the Times' article, just two months after Walker's reforms took effect, 23 Wisconsin school districts had redone their insurance contracts, saving $16 million, or an average of $211 per student.
• The MacIver Institute in Wisconsin estimated that if all the state's districts were able to negotiate similar deals once their contracts with the union-affiliated insurer expired, schools, and Wisconsin taxpayers, could save $186 million.
• The Milwaukee Journal Sentinel reported that the city of Milwaukee would save as much as $36 million in its next budget by using the new bargaining leverage the Walker reforms provided.
• This flexibility allowed the city to avoid having to implement layoffs of city workers.
• However, the Milwaukee school system was not so lucky since it had agreed to a contract with its teachers' union just before the reforms took effect and thus, were locked into an existing contract. The school board asked for concessions from the union, the union refused, and the school board was forced to layoff 519 people which included 334 teachers. The Times article estimates that if the union had made the concessions, 200 teacher jobs could have been saved.

Great success story. Government employees still get a robust set of benefits, state and local governments and school districts get financial relief, teachers stay on the job, and the strain of ever increasing taxes on residents is eased. Walker has successfully bent the so-called "cost curve" downward with minimal pain and maximum benefits to a wide range of constituencies.

California, not so much. According to the Times' article:

• Average annual pay for a California local government employee rose 60% between 1999 and 2008, far higher than the inflation rate over that time.
• For a perspective, that rise is about 70% more than the increase in private sector pay levels in California over the same frame.
• The annual cost of funding pensions in California's 20 largest cities has gone from $1.3 billion in 1999 to $5.1 billion 2011, according to a study by Stanford University professor Joe Nathan, an annual growth rate of more than 11%.
• No city government's revenue stream is increasing anywhere near that much, meaning that at some point something in the current process has to snap.
• The article points out that cities like San Jose, California do not have the flexibility that Wisconsin local governments have. In San Jose, the average annual cost of employing a city worker, including benefits, has risen to an unbelievable cost of $142,000, resulting in San Jose laying off 2,000 employees and cutting back on parks, libraries and other services over the past three years.
• The city of Stockton, California has already declared bankruptcy, driven by the fact that for every wage dollar it spends, it now has to spend another dollar to cover city employee benefits. This has required the city to layoff 25% of its fire and police force over the past few years but even that was not enough to avoid going bankrupt.

The Times article concludes with this appraisal of California's budget problem: "Without pension reform in Sacramento, and with local contracts that make it impossible to cut costs without concessions from unions, cities and school districts in the Golden State are left with few good choices to balance their budgets." Not a good situation to be in because at some point, California local and city governments end up being little more than collection agencies for bad union contracts while schools, teachers, parks, and other important government functions get emasculated.


Florida figured it out, Wisconsin figured it out. Any human organization, whether it is a nonprofit, a small business, an international conglomerate, a family household, or a government entity, has to live within its budget and available resources. If it does not, the ever escalating cost curve and ever present economic reality and limits will eventually lead to the collapse of that human organization.


How soon will it take California, and more importantly Washington D.C., to understand that "economies cannot tax themselves to prosperity." At some point, and hopefully before it is too late, both California and Washington need to wake up to the fact that spending has to match up with revenue, that is simply a fact of life.




We invite all readers of this blog to visit our new website, "The United States Of Purple," at:


http://www.unitedstatesofpurple.com/


The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.


The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.


Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at http://www.loathemygovernment.com/. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/