http://joshdowlut.com/

The only thing worse than rich people saying tax cuts for the rich will help everyone else is for everyone else to believe it. Tax cuts on the rich compared with no tax cuts at all will help everyone else. But compare tax cuts on the rich with tax cuts for everyone else, and it is obvious which scenario helps everyone else more. If you and I are in a closed economy and someone gives me $100 it certainly helps you, but not as much as had that someone given the $100 to you instead.

Before I detail exactly what makes Ryan’s plan smoke and mirrors I must assert myself as a champion of lower taxes, smaller government, and reduced regulation. These are the core concepts of my detailed plan to balance the budget and create jobs. If wanting to focus those tax cuts on the masses instead of the few, the powerful and the elite makes me not a true conservative, then so be it. A conservative blogger who moderated Monday night’s debate (audio here) has already said that my ideas “won’t make me any fans among….the conservative grassroots.” That’s fine. I’m running to get out specific ideas and solutions and speak the truth, not cater to a dogma.

Ryan’s plan aims to turn this country into a society much like pre-revolutionary France where the top 3% paid no taxes, and everyone else carried the burden. It would greatly favor those whose money works for them at the expense of those who work for their money. Specifically, it would end all taxes on investments: interest, capital gains, dividends, and estate tax. Of course regular people have income from these sources, but it is a small portion for all but the richest of our country. It would also end the corporate income tax. All of these taxes would be replaced with a European style VAT, which is just another way of saying consumption tax or national sales tax. Consumption or sales taxes are regressive-that is they are disproportionately burdensome on lower incomes. Poor people consume a higher percentage of their income than rich people do.

Smoke and mirrors trick #1:

1. End every tax that taxes the majority of rich people’s income and replace it with a regressive tax that taxes a higher percent of lower incomes.

Ryan’s plan also offers a choice between either the traditional income tax structure, with its various brackets and deductions, or a simplified plan that taxes 10% of the first 50k of income and 25% of all income beyond that, but with no deductions. The Tax Policy Center has estimated that the simplified alternative would most benefit those making between 100k and 500k. It would also lead to $6-$7 trillion dollars less tax revenue over the next decade if everyone chose their best tax saving plan, something $50 software can figure out.

Smoke and mirrors trick #2:

2. Blow a huge hole in the deficit giving tax cuts to those making 100k-500k/year.

Ryan’s plan brags of ending the AMT. The AMT taxes your first 47k at 0%, and then everything up to 175k at 26%. The Ryan alternative taxes your first 50k at 10% after allotting for a standard deduction of roughly 10k, then everything beyond that at 25%.

Smoke and mirrors trick #3:

3. Replace the AMT with a plan that will have most incomes pay at least $4000 more, and try to pass it off as an improvement

In short, the tax side of his plan shifts the tax burden downward onto those who can least afford it. It produces the real possibility for the ruling class to pay a much smaller percent of their income than everyone else does. Thomas Jefferson believed in the estate tax for he feared precisely what is happening today. Jefferson feared that one day a ruling class would rise up that was so powerful it could challenge and control our nation’s government. Many would agree that the bank bailouts announced the arrival of that day. Ryan wants to make sure the sun never sets on these new Masters of the Universe.

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Greg Mankiw, professor of economics at Harvard University, prefers a payroll tax cut over any other type of tax cut to get the economy growing again. Excerpts:

“Regular readers of this blog have a pretty good sense of my policy preferences. But for those occasional readers who might be stopping by, let me reiterate what I would do right now if I were the fiscal king.

I would institute an immediate and permanent reduction in the payroll tax.

Some traditional Keynesians would object on the grounds that government spending has a larger multiplier than tax cuts. Even though that is the prediction of standard Keynesian models, the evidence is not completely consistent with that conclusion.”

I have long championed a payroll tax cut over any other type of tax cut as part of my detailed action plan to close the deficit and create jobs.  The most direct way to expand payrolls is to cut the payroll tax.

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Peter Morici, an economist and professor at UMD who testifies before Congress frequently has endorsed the exact tactics I am using: getting specific with a credible action plan to close the deficit and create jobs.

Excerpts of Morici’s article:

“Voters want a clear plan to balance the budget and create decent jobs, and to win their confidence one or the other party must come clean about what that takes.

Americans may be dissatisfied with the economy but don’t look for Republicans to sweep control of the House and Senate.

Voters have good reason to not be enamored with both parties.

Democrats have pushed through President Obama’s agenda — more than $800 billion in stimulus spending, health care reform and new financial regulations — yet the economy remains sluggish and Treasury Secretary Timothy Geithner tells us unemployment will linger near 10% for many months.

The Republican chant of less regulation and lower taxes is just not credible after the Wall Street meltdown of 2008, and with a $1.5 trillion budget deficit.

Neither party really deserves to lead.”

Morici’s original article.

Action Plan

Josh Dowlut
www.joshdowlut.com
joshdowlut@gmail.com

Problems

• ~10% unemployment as far as the eye can see
• Deficits 10% of GDP and 40% of spending
• Stagnant real wages for the last 40 years
• You could flat out eliminate every program outside of defense and entitlements and you’d still have huge deficits

Growth Solutions

• The best way to expand payrolls is to cut the payroll tax.
• Exempt the first 100 employees from the payroll tax. 95% of all business and 40% of the work force would be exempted from an oppressive, regressive regulatory and tax burden. Revenue loss: $320B/year
• Close the $106k earnings loop hole and revenue neutral adjust everyone’s payroll tax from 7.65% down to 3.5%.
• Encourage states to deregulate small businesses. Aside from the payroll tax, most small business regulation happens at the state level. Regulation is an anti-competitive government aid for big business.
• Replace our centrally planned predatory banking system with a free market honest banking system. End the Fed, return to a gold standard.

Spending Cut Solutions

• Raise full eligibility for Social Security and Medicare to 71. It’s the only solution in keeping with the original intent of Social Security. Savings: $452B/year
• Cut defense spending to inflation adjusted Cold War levels. Savings $260/year
• Close the federal government pay gap over the private sector. Savings $50B/year
• Cut contractor spending 10%. Savings $54B/year
• Zero based budgeting-especially on entitlements. No automatic increases, every department must justify every dollar. Savings undetermined.
• Privatize/end welfare. Replace it with a dollar for dollar tax credit to private charities capped at 10% less than current welfare. Savings: $57B/year
• Cap future spending growth at half of GDP growth
• The result, a realistic plan to balance the budget.
• Keep it balanced through a balanced budget amendment.

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There will be a debate tonight (Monday the 30th) from 7-830pm at the main Towson library on York RD. I intend to focus as much as possible on arguing that if your main goal is to expand payrolls, then cutting the payroll tax is the best, most direct tax to cut. It is not to cut the top corporate rate, top marginal rate, estate tax, capital gains tax, or dividends tax. You cut the later if your goal is to create a society modeled after pre-revolutionary France where the top 3% paid no taxes, and everyone else paid it all.

For years proponents of trickle down economics have tried to trick the masses that a tax cut for someone else is better for them than a tax cut for themselves. Of tax cuts for the rich will help the masses compared with no tax cuts at all. But to compare tax cuts for the rich with tax cuts for the masses and then ask which scenario is better off for the masses, the answer is obvious. It’s like if you and I are in a closed economy and someone else comes along and gives $100 to me. Of course that’s going to be better for you relative to the $100 never coming along, but it’s certainly not better than had the $100 been handed to you. If trickle down proponents want to argue based on fairness, based on the fact that the top 5% pays 36% of all the income taxes, fine. But don’t try to argue that it’s in my best interests to pass a tax cut onto you.

Speaking of fairness, the top 1% pays the same total tax rate as the bottom 50% when accounting for the payroll tax, about 28%. If you make over $402k/year, you’re in the top 1% and you pay an average federal income tax rate of 21.8%. In addition you pay Medicare tax of 2.9% and Social Security tax of 3.3% (because only the first $106,500 of your income was taxed) bringing the total to 28%. If you make less than $30,588/year, you’re in the bottom 50% and pay an average federal income tax rate of 12.8%. But you also pay Medicare tax of 2.9% and Social Security tax of 12.4% bringing your total to 28.1%.

My plan would exempt the first 100 employees from complying with the payroll tax at all. 95% of all businesses in this country would be completely exempted from the biggest regulatory burden most face, and have their payroll costs reduced by 7.65%. With this savings they could hire, reinvest/grow, or pay their employees more who would then in turn circulate it through the economy. In any case, payrolls and the economy expand. 40% of the US labor force would get a 7.65% raise in their take home pay. This would also increase the amount of money circulating through the private sector, real economy. Additionally, I would close the $106k Social Security earnings cap thereby subjecting all income to the SS tax, just like Medicare is. This would bring in enough extra revenue to lower the rate for everyone from 7.65% to about 3.65%. If you think the math through, you’ll see that this would result in a tax cut for every individual earning under about $188k/year.

One of the many causes of the Great Depression was the fact that the average worker couldn’t afford to purchase his own production. The economic collapse we have faced the last few years was also caused by this, only unsustainable credit bridged the gap for awhile. We must abandon dogmas, and apply common sense and facts if we are to find the path to prosperity.

http://joshdowlut.com/

Monday the 30th (tomorrow) 7PM-8:30PM at the main Towson library on York RD there will be a debate among all 5 Republican primary candidates vying to take on Dutch Ruppersberger. The purpose: to shift the discussion off of a platform of platitudes and onto policy specifics.

Some questions that need answering:

Q. Everyone running believes in smaller government, what specifically would you cut beyond the cop out answer of “Cutting government waste?”
A. Unless your definition of government waste is grandma’s Social Security check, there just isn’t enough to cut to close the deficit. We could flat out eliminate every program aside entitlements and defense spending and we’d still have a huge deficit. The following is what I would cut:
• Raise the full eligibility age for both Social Security and Medicare to 71. Nobody likes this but it’s better than the alternatives of tax increases, benefits cuts, or insolvency, and it’s the option that is most in-keeping with the original intent of the Social Security Act of 1935.  Life expectancy at age 65 has increased 6 years since 1935 but the full retirement age has only increased 2 years.  71 brings it back in line.
• Bring all the troops home/cut defense spending. We spend as much as the entire rest of the world combined, 8 times as much as the #2 nation, and twice as much as we did at the end of the cold war even adjusting for inflation. Bringing it back in-line with cold war levels would save $300B/year.
• Close the pay gap between federal and private employees. Even controlling for the same job, federal employees make 54% more than their private sector counterparts. We’d save $50B/year closing this gap.
• Clampdown on government contractors AKA beltway bandits. Their fraud, abuse and waste makes government employees look like a bargain. Cut contractor spending 10%/year and re-evaluate each year.  We spent 545B on contracts last year, 31% of that was non-compete. Savings: 54B/year.
• Zero based budgeting/no automatic budget increases applied to everything-even entitlements. Currently departmental managers justify only increases to the budget, many of which are automatic. By contrast, in zero-based budgeting, all expenditures must be justified, there are no automatic increases, and there is the constant possibility of year over year cuts.

Q. Everyone wants lower taxes, but not all taxes are equal. Given budget constraint realities, which taxes would you cut?
A. We must cut taxes on the middle class and small business, not the rich and huge corporations. That means cutting and exempting the payroll tax. Specifically:
• Exempt the first 100 employees from having to comply with the payroll tax. This would be a huge tax and regulatory relief for 95% of the businesses in the country, cutting their payrolls by 7.5%, and give 40% of the nation’s labor force at least a 7.5% raise.
• Close the Social Security earnings cap with a revenue neutral cut for everyone. Right now after you make 106k your SS tax rate falls to ZERO. If we closed that loophole we could drop every employee’s rate to about 3.5% from the current 7.5%. It would be a revenue neutral 3.5% tax increase for those making over 106k, and a 4% tax decrease for everyone making under 106k aside from the 40% of the labor force that works for a business with fewer than 100 employees who would see a 7.5% tax decrease.

http://joshdowlut.com/

For immediate clarification, I am NOT one of these Repubs, but I was confronted by one at last night’s candidate forum.

Given a room full of primarily other candidates, I addressed the fact that not only does this country have a major economic problem, but the R party has a major PR problem. Broadly framed, the D solution to fix our broken economy is to spend money we don’t have. The R solution is to cut taxes on big corporations and the rich and hope that we’ll Laffer Curve our way to a balanced budget. I offered a solution: cut taxes on small business and the middle class, specifically the payroll tax, and acknowledge that we must cut the sacred cows of entitlements and defense spending because we could eliminate everything else and we’d still have a huge deficit.

This idea didn’t go over too well with the room.  The most Republican of responses: “Don’t you think the middle class have already gotten enough tax relief?” And “Since big companies like AIG employ way more people than a small business does, shouldn’t we be cutting taxes on them?”

My answers to both were “No.”  On the topic of AIG, I pointed out that he couldn’t have picked a worse corporate example. This is a company that would be in the gutter were it not for bailouts thus its very existence today was the result of central planning, not free enterprise. I may have called him a central planner corporatist.  Additionally, dollar for dollar, we get more bang for the buck and job growth out of cutting taxes on small businesses than we do cutting them on big businesses.

The best response I got to the idea of cutting the payroll tax was “you can’t do that, it’s impossible.” The reason: payroll tax funds Social Security/Medicare and both of these problems (almost said programs but this Freudian slip stands) are already on a runaway freight train to insolvency. This is true, but it’s also true that the government has been combining and commingling funds for years and spending SS/Medicare tax on the general fund.  In other words, a tax is a tax. The government can label it whatever they want to try and trick us into thinking it is some sort of savings plan, as FDR originally tried to pass it off, but don’t fall for it.  If we can cut the capital gains tax, or the top corporate tax rate, we can cut the payroll tax.

One of the causes of the Great Depression was that people couldn’t afford to buy what they made.  The prices of consumer goods ran up to unsustainable, unaffordable levels relative to the wages of the average worker.  We have that problem today. Look at all the consumer spending of recent years that was unaffordable based on income, so we used loose credit to pay for it. WE MUST RAISE THE WAGES OF THE AVERAGE WORKER and there are 3 ways to do it. One is cutting the payroll tax. Two is reducing small business regulations to improve the labor market.  Three is replacing predatory central planner banking with free market honest banking.

http://joshdowlut.com/

I will be at a candidate forum tonight (Thursday the 26th) from 6PM onwards at Ropewalk Tavern in Fed Hill on Charles St. It looks like a bunch of other primary candidates for state, federal and local office will be there to speak and answer questions.

Then this coming Monday the 30th at 7PM at the Towson Library on York RD, there will be a 2nd district debate among all 5 Republican candidates running to take out Dutch Ruppersberger.

http://joshdowlut.com/

The CBO just released a report quantifying huge successes for the Obama stimulus plan. Judging by the lack of media coverage, others besides me may be concluding this report is sheer nonsense. The report claims that the stimulus act:

• Raised the level of real (inflation-adjusted) gross domestic product (GDP) by between 1.7 and 4.5 percent
• Lowered the unemployment rate by between 0.7  and 1.8 percent
• Increased the number of people employed by between 1.4 million and 3.3 million

The simplest argument against their faulty logic: you can’t pull yourself up by your bootstraps, but you sure can waste time and effort trying. The CBO report uses mathematical modeling which is akin to that impossibility.

Specifically, the CBO’s model started by automatically assuming that government spending increases GDP by pre-set multipliers, such as:
 Every $1 of government spending that directly purchases goods and services ultimately raises the GDP by $1.75
 Every $1 of government spending sent to state and local governments for infrastructure ultimately raises GDP by $1.75
 Every $1 of government spending sent to state and local governments for non-infrastructure spending ultimately raises GDP by $1.25
 Every $1 of government spending sent to an individual as a transfer payment ultimately raises GDP by $1.45

This directly conflicts with research by Harvard’s Robert Barro that has shown real world multipliers closer to 0.6-0.8. A multiplier of anything less than 1.0 indicates loss which is logically consistent with government waste. Applying Barro’s multipliers more than cuts the CBO numbers in half, but that’s not the end of it. The CBO model doesn’t account for the future tradeoff cost of pulling forward consumption. The Keynesian IS-LM model would like you to believe that monetary policy can increase both consumption and savings, but it’s really just using central planning to force the tradeoff to favor consumption now over savings and investment for later. A separate, earlier CBO projection did take that into account and actually projected the stimulus would shrink the economy as far out as 2019.

These central planner Keynesian accounting tricks by the government’s own admission only work in the short term and only at the expense of the long-term, yet this theory is the underpinning of long-term policy making. You can’t dig yourself out of a hole. You can’t borrow yourself out of debt. There is no free lunch. We need honest middle class and small business tax relief through a payroll tax cut. We need to restore long-term solvency by cutting the sacred cows of defense and entitlements. We need an honest, free market banking system, not a predatory central planner banking system.

Ron Paul to Sunshine Patriots: Stop Your Demagogy About The NYC Mosque!

Congressman Ron Paul today released the following statement on the controversy concerning the construction of an Islamic Center and Mosque in New York City:

Is the controversy over building a mosque near ground zero a grand distraction or a grand opportunity? Or is it, once again, grandiose demagoguery?

It has been said, “Nero fiddled while Rome burned.” Are we not overly preoccupied with this controversy, now being used in various ways by grandstanding politicians? It looks to me like the politicians are “fiddling while the economy burns.”

The debate should have provided the conservative defenders of property rights with a perfect example of how the right to own property also protects the 1st Amendment rights of assembly and religion by supporting the building of the mosque.

Instead, we hear lip service given to the property rights position while demanding that the need to be “sensitive” requires an all-out assault on the building of a mosque, several blocks from “ground zero.”

Just think of what might (not) have happened if the whole issue had been ignored and the national debate stuck with war, peace, and prosperity. There certainly would have been a lot less emotionalism on both sides. The fact that so much attention has been given the mosque debate, raises the question of just why and driven by whom?

In my opinion it has come from the neo-conservatives who demand continual war in the Middle East and Central Asia and are compelled to constantly justify it.

They never miss a chance to use hatred toward Muslims to rally support for the ill conceived preventative wars. A select quote from soldiers from in Afghanistan and Iraq expressing concern over the mosque is pure propaganda and an affront to their bravery and sacrifice.

The claim is that we are in the Middle East to protect our liberties is misleading. To continue this charade, millions of Muslims are indicted and we are obligated to rescue them from their religious and political leaders. And, we’re supposed to believe that abusing our liberties here at home and pursuing unconstitutional wars overseas will solve our problems.

The nineteen suicide bombers didn’t come from Iraq, Afghanistan, Pakistan or Iran. Fifteen came from our ally Saudi Arabia, a country that harbors strong American resentment, yet we invade and occupy Iraq where no al Qaeda existed prior to 9/11.

Many fellow conservatives say they understand the property rights and 1st Amendment issues and don’t want a legal ban on building the mosque. They just want everybody to be “sensitive” and force, through public pressure, cancellation of the mosque construction.

This sentiment seems to confirm that Islam itself is to be made the issue, and radical religious Islamic views were the only reasons for 9/11. If it became known that 9/11 resulted in part from a desire to retaliate against what many Muslims saw as American aggression and occupation, the need to demonize Islam would be difficult if not impossible.

There is no doubt that a small portion of radical, angry Islamists do want to kill us but the question remains, what exactly motivates this hatred?

If Islam is further discredited by making the building of the mosque the issue, then the false justification for our wars in the Middle East will continue to be acceptable.

The justification to ban the mosque is no more rational than banning a soccer field in the same place because all the suicide bombers loved to play soccer.

Conservatives are once again, unfortunately, failing to defend private property rights, a policy we claim to cherish. In addition conservatives missed a chance to challenge the hypocrisy of the left which now claims they defend property rights of Muslims, yet rarely if ever, the property rights of American private businesses.

Defending the controversial use of property should be no more difficult than defending the 1st Amendment principle of defending controversial speech. But many conservatives and liberals do not want to diminish the hatred for Islam–the driving emotion that keeps us in the wars in the Middle East and Central Asia.

It is repeatedly said that 64% of the people, after listening to the political demagogues, don’t want the mosque to be built. What would we do if 75% of the people insist that no more Catholic churches be built in New York City? The point being is that majorities can become oppressors of minority rights as well as individual dictators. Statistics of support is irrelevant when it comes to the purpose of government in a free society—protecting liberty.

The outcry over the building of the mosque, near ground zero, implies that Islam alone was responsible for the 9/11 attacks. According to those who are condemning the building of the mosque, the nineteen suicide terrorists on 9/11 spoke for all Muslims. This is like blaming all Christians for the wars of aggression and occupation because some Christians supported the neo-conservatives’ aggressive wars.

The House Speaker is now treading on a slippery slope by demanding a Congressional investigation to find out just who is funding the mosque—a bold rejection of property rights, 1st Amendment rights, and the Rule of Law—in order to look tough against Islam.

This is all about hate and Islamaphobia.

We now have an epidemic of “sunshine patriots” on both the right and the left who are all for freedom, as long as there’s no controversy and nobody is offended.

Political demagoguery rules when truth and liberty are ignored.