Tag: America

MLLG

The MLLG Blog Returns for 2016 

George Noga
By: George Noga

      It’s baaacck! After taking 2015 off for reflection and discernment, the MLLG blog returns. To be sure, there are changes of which the principal ones are:

  • We have a new commercial email provider with greatly enhanced readability; with few exceptions (such as mobile devices and Roadrunner email), you will see exactly what was written in the format it was written;
  • Our website is being upgraded to contain past posts from June 2011 onward and new posts on a timely basis; there will be subject and chronological indexes as well as a section containing the best of MLLG writings. The new site should be 100% functional soon; when it is ready, we will let you know on these pages;
  • Posts are shorter – 500 words more or less – readable in 2-3 minutes;
  • Current events and opinion are emphasized; however, economic, political and human interest content continues – fact based and principled as always; and
  • Frequency is not on a set schedule but expect 3-6 posts per month.

There is no cost to receive posts via email or internet. We will not request financial support until 2017 at which time we may ask readers and supporters to make voluntary contributions. The costs of operating the blog are not onerous but are nonetheless very real. There are costs for using a commercial email service for tens of thousands of emails and for, inter alia, maintaining a domain name and website.

Why do we need another blog and what can MLLG offer that is not currently being provided elsewhere? If you stay with us for a while, you should agree that you are receiving perspectives not usually found elsewhere. The author’s background as a financial analyst, economist, CPA and high level political operative confers a special knack for combining fact, logic and insight – not to mention well over a half century as a keen observer of life in these United States and beyond.

We unabashedly approach matters from a more liberty – less government perspective but never – absolutely never – at the expense of facts or logic. We have many progressive readers who respect being presented with principled analyses, even ones contrary to their cherished beliefs. However, the MLLG blog is not intended to convert liberals – but to witness the blessings of liberty to a candid world.

      Enough explanation. The next MLLG post you will soon receive is a memoir of the days the author spent with Jeb Bush and Rand Paul. Not many bloggers have spent full days one-on-one with two 2016 presidential candidates. Other upcoming posts deal with the 2016 election, radical Islam, EPA carbon regulations, how bottled water gives the lie to socialism and a special multi-part series about guns in America. Stay tuned!
MLLG

Final Posting and Valediction

George Noga

By: George Noga – December 15, 2014

        This is my final posting for the More Liberty – Less Government Foundation. It comes after more than 7 years and 300 posts totaling 1,000 pages and 500,000 words. The name says it all; those four words “more liberty – less government” are my creed. Deconstructing the name, you will see that, above all, I love liberty; that’s why in the logo the “more liberty” part is bigger and bolder. It is impossible to overstate the importance of liberty.

To borrow from Clarence Darrow: “Liberty is the most jealous and exacting mistress that can beguile the brain and soul of man. She will have nothing from him who will not give her all. She knows that his pretended love serves but to betray. But when once the fierce heat of her quenchless, lustrous eyes has burned into the victim’s heart, he will know no other smile but hers. Liberty will have none but the great devoted souls, and by her glorious visions, her lavish promises, her boundless hopes, her infinitely witching charms, she lures her victims over hard and stony ways, by desolate and dangerous paths, through misery and obloquy.” I proudly am one of lady liberty’s devoted souls.

“Of all who ever have lived, less than 1% experienced liberty.”

The second part of the name “less government” is the corollary of the first. They are mutually exclusive; one cannot have both more liberty and more government; they always move in opposing directions, i.e. if we have more liberty we, ipso facto, have less government. And government is the eternal archenemy of liberty. Of the 110 billion humans who have walked on this earth, less than 1% lived their lives in liberty. Even in the 21st century only about 10% of the world’s 7+ billion souls live in relative liberty. I used the term “relative” advisedly as liberty in contemporary democracies is partial at best. Moreover, the clear trend today is toward more government and less liberty.

Through these pages I have labored mightily to present different and compelling ways to show the blessings of liberty and the evils of government – always in a fact-based and principled manner. I have not engaged in name-calling or besmirching those whose views differ; I attack their ideas while respecting them as people. Again, I used the term “evil” advisedly; I began by calling government “malevolent” but over the years of writing, I came to believe “evil” is more accurate; this is a view I do not shy away from and which has been well documented on these pages.

Reasons for Writing this Blog

        Authoring this blog for 7 years and 500,000 words was, first and foremost, a cri de coeur for America. However feebly and briefly, I ventured into the world of ideas. Using William Buckley’s construct, I stood athwart our beloved republic’s march toward oblivion and yelled “stop“! If I failed, at least I failed daring to try and was not among those timid souls outside the arena. However, I would like to believe I accomplished my mission, providing our children’s children that infinitesimally better chance for liberty. If that was accomplished, that would be a fitting enough valedictory.

“First and foremost, this blog was a cri de coeur for America.”

Although my primary reason for writing was to stop America’s march toward statism as a way station on her longer march to ultimate oblivion and to provide my progeny with a better chance for liberty, there was a second, much darker, motive. In the event it proves too late to prevent the self destruction of our civilization, I wanted to leave a historical record so my children’s children would know there once was such a wondrous thing as the fire of liberty and that some of us took great care to preserve embers of that flame until at some future day the embers could be resurrected and used to reignite the torch of liberty. Perhaps, my progeny might even be among those reigniting the torch.

My favorite author is Whitaker Chambers and my parting gift to you is to again suggest you read Chambers’ books, particularly his classic Witness. Even if you don’t read the entire book, you owe it to your family to read Chambers’ forward which is in the form of a letter to his children; it constitutes arguably the best 85 pages in American literature. Following is how Chambers in his book Cold Friday describes the wreck and possible resurrection of liberty.

“It is idle to talk about preventing the wreck of western civilization. It already is a wreck from within. That is why we can hope to do little more now than snatch a fingernail of a saint from the rack or a handful of ashes from the faggots, and bury them secretly against the day, ages hence, when a few men begin again to dare to believe there once was something else, that something else is thinkable, and need some evidence of what it was, and the fortifying knowledge there were those who, at the great nightfall, took loving thought to preserve the tokens of hope and faith.”

Valediction

        My blog succeeded beyond expectations – albeit in a different manner than originally contemplated. It began with 150 readers and USPS mail. During the past few years, readership has grown to over 100,000. In addition to the thousands who receive it directly via email, my postings have been routinely republished by some large blogs and electronic journals – one of which has 160,000 hits a week, another with 1.6 million hits per month and yet another with 10,000 hits per day. Countless readers forward some or all of the posts to their own extensive email networks and the recipients, in turn, forward it to yet more readers and on ond on. Some posts have received thousands of “likes“.

“The MLLG blog has gone from 150 to over 100,000 readers.”

Despite this success – or perhaps because of it – the time to move on has come. I have written about every topic I set out to write about 7 years ago – often more than once. As the curtain now closes on the More Liberty – Less Government blog, I look forward to moving beyond the cares and drudgeries of researching and writing a weekly post. I look forward to time to reflect and perhaps to devote to other challenges – both seen and unseen.

I look forward to kicking back and reminiscing about my great enthusiasms and devotions and to ponder my once and future deeds, but – at age 71 – I suspect mostly past deeds. I will summon up the living and the dead and replay old coups and scenes of tenderness. As time magically melts away, I am young again, alive with hope; grace smiles upon me and thoughts of mortality recede into the far distance – morphing into the remote horizon.

        Thanks to all of you for you kind support and may God bless the United States of America.

MLLG

Principles of American Politics

George Noga

By: George Noga – December 7, 2014

      Eons ago, I spent considerable time in politics at the local, state and national levels. I learned a great deal and have been an acute observer ever since. I always had believed Truman’s observation that voters could always spot a phoney. That was before Barack Obama. America can survive a Barack Obama who, after all, is merely a pathological narcissist; our beloved republic is less likely to survive an electorate that enabled him – not once, but twice. In the end, Truman was vindicated; most Americans now understand Obama is a phoney; it just took them far too long and only after great damage to the republic. Following are some of the other enduring lessons I learned from my time in politics.

Enduring Principles of American Politics

     So, what is the true state of American politics today? Nearly everything promulgated by the media is both pap and spurious to boot. Four principles I learned many decades ago and which remain valid today are:

  1. There are no permanent majorities: There never has been, is not now, and never will be a permanent majority in American politics. You can put that in the bank! The media like to claim and progressives like to dream that, given present demographics of race, gender and class, Democrats have built a permanent electoral majority. These are the same charlatans who in 1992 said the GOP had a permanent majority. Anyone believing in permanent majorities is ignorant of history and also of Madison’s genius in writing the Constitution. In Madison’s words:“Extend the sphere, and you take in a greater variety of parties and interests; you make it less probable that a majority of the whole will have common motive  . . . or if such motive exists, it will be more difficult to act in unison.” Issues, positions, alliances and demographics continually shift and minority parties skillfully adapt. In a nation as vast and diverse as 2014 America, any electoral coalition is inherently short term and unstable.
  2. The longer a party is in power, the more likely it is to lose:  This principle is straightforward and has held up throughout the 238 years of our republic. It remains true despite any and all issues and demographics. The longer a party is in power, the odds continue to get ever higher and higher that it will lose. Power corrupts.
  3. Economics trumps everything: Recall Bill Clinton’s mantra: “It’s the economy, stupid“. Far more so than any other issue, economics is paramount. Demagoguing the rich is absolutely of no benefit if the average voter perceives the economy as tepid. The US has experienced stagnant living standards for the vast majority of Americans and there is a downward trend in take home pay. Business is not investing and worker productivity suffers as a result. Wages increase when each worker uses more capital, as his marginal productivity rises. Democrats are okay with low growth as they continue to strangle business, oppose Keystone, thwart energy development, keep corporate taxes high and support unions. When Democrats try to soak the rich, they drown the middle class.

    “When Democrats soak the rich, they drown the middle class.”

  4. The roll of money is significant but overstated: Money is important and can be effective; however, its marginal utility decreases as spending increases; there is a point at which the marginal utility of money turns negative.

Political Campaigns Versus Governing

     A few things have changed since my heyday in politics many decades ago. By far the biggest is that political campaigns have become permanent and there no longer is any meaningful distinction between campaigning and governing. This is an uber serious problem and no solution is in sight; it affects both political parties. This overemphasizes short term politics and severely shortchanges the true interests of the country. There are clear and significant differences between public opinion in polling and focus groups and the long term best interests of the people.

“We must recreate a way to govern in the long term best interests of the nation.”

Something needs to change or the perpetual campaign mentality will result in more hostility between factions and confusing political formulations for objective reality. Our current system rewards those adept at campaigning at the Iowa state fair while devaluing their ability to govern. Madison anticipated something like this may happen; he wrote: “We will wait in vain for public-spiritedness to become a pervasive motive in our politics. Instead, we must create – and if necessary recreate – institutions that channel human  nature as it is toward promoting the permanent interests of the community.”Therefore,  it is up to us to recreate a way for America to govern in the long term best interests of the nation or we will live out our lives in a perpetual political campaign where everything is determined by polls and focus groups.

Political Calculus in America Today

      While bearing in mind the principle cited supra that there are no permanent majorities in American politics, let’s take a look at the political calculus following the November 2014 election. Following is my take on where things stand.

  • Most pundits relegate Republicans to permanent minority status because of their low share of the black, latino, Asian. millennial and women’s vote. Democrats should be far more worried about their very low support from white males – currently 35% and in free fall. It will be far easier for Republicans to increase their share of the Asian, latino, women. millennial and even black vote than for Democrats to reverse the trend among white males.
  • The media is right on about a political party being dragged down by extremists – however, it is the Democrats who have by far the greater problem is this regard. Their contretemps with radical socialists and environmentalists eclipses any issues the Republicans have with the tea party. The situation already is so bad that Democrats cannot truthfully campaign (or even govern) based on what they really want for America.

     “There is a political party dragged down by extremists, the Democrats .”

  • The Democrats cannot win with their present economic agenda; yet they are wedded to perpetual low economic  growth by virtue of their inflexible, socialist ideology. Attacking the rich and ramping up class warfare have lost whatever traction they once may have possessed. Their race, class and gender warfare is no longer effective.
  • Demography has been ballyhooed as the enemy of Republicans. Democrats have crowed that the future belonged to them as their lock on ascendant voter groups would overwhelm aging Republicans. This was dispelled by the 2014 election as Republicans made substantial gains among women, hispanics, Asians and millennials. The Democrats (or any other party) ignore James Madison and American political tradition at its own peril!

Readers should take away four main principles: (1) there are no permanent majorities in America; (2) the longer a party remains in power, the more likely it is to lose; (3) economics always trumps every other issue; and (4)  do not read too much into any one (or two) election result. Finally, we must heed Madison’s words and recreate a way to govern America in the long term best interests of all Americans – and not strictly with polls and focus groups.

MLLG

School Choice: The Civil Rights Issue of Our Time

George Noga
By: George Noga – December 1, 2014
        In seven years of authoring this blog, I  wrote about school choice only one other time – once in 300 posts. I have shied away from that subject despite (perhaps because of) having been deeply involved in the school choice movement for ten years from 1994 to 2003. I started the first school choice program in Florida, and only the fourth in the entire USA, in 1995. The program I began (now called Step up for Students) funded 68,000 scholarships this year with a budget of nearly $300 million. During much of that time I also served on the board of the leading national school choice organization, Children First America, which began school choice programs in 100 US cities. This subject is not a new one to me.
“Imagine many kids died because ambulances drove right past private hospitals and would take seriously injured kids only to a public hospital.”
        It is not hyperbole or overstatement to assert school choice is the civil rights issue of our time. Actually, it is far more than that. Although people of color suffer most from the current educational paradigm, everyone is victimized. Imagine there was a terrible accident involving a school bus full of kids and there was a private hospital nearby ready, willing and able to provide high quality care. Now imagine the ambulances would not take the severely injured children to the nearby private hospital – insisting they could only be taken to a more distant public hospital that provided inferior care. Imagine some kids died as a result and imagine the ensuing public uproar. That is precisely what is happening in our schools; poor and middle class kids are dying educationally (and some literally) – yet there is little or no public outcry.

       Never have I seen an issue so demagogued and so rife with downright lies and with those promulgating the lies knowing full well they are lies. In the following parts of this post, I address many of these canards.

  1. School choice takes money from public schools: Let’s stipulate there are one million students in a particular school district and spending is $12,000 per pupil; total spending therefore is $12 billion. If 20% are given vouchers for $6,000 (50%) and total spending remains the same, the per pupil spending on the remaining 800,000 kids in public school now is $13,500 – an increase of $1,500 per pupil. Yet educrats and teachers unions want you to believe public school funding has been cut when it actually increased $1,500 per student or 12.5%. If every student had a voucher we could slash spending on education by 30% to 40% and improve school quality to boot.
  2. Private schools are not accountable: This is the biggest lie of all. If a parent has a problem with a public school, it is nearly impossible to seek redress. Public schools are accountable only to stultified bureaucracies and unresponsive school boards and not to students or parents. Private schools are directly accountable to students and parents. A consumer armed with a free choice is the most potent force on earth – recall New Coke and Blackberry.
  3. We don’t spend enough on schools: Real (inflation-adjusted) spending has doubled or even tripled in recent decades while schools got much worse. The US spends more per pupil than nearly any other OECD country while test scores in math, science and reading are in the middle of the pack. Actual public school spending is much higher than reported because much of it is hidden, i.e. off the school budget in capital budgets, pension plans, health care, debt service and grants. Often, real spending is double that shown on the education budget. Washington D.C. in 2010 spent $30,000 per pupil and had the worst schools in America. Sidwell Friends, one of the most elite private schools in the USA and where the Obamas send their children, spends only slightly more. Moreover, there is no proven correlation between school spending and any measure of educational output.
  4. Teachers unions and educrats care about students: The educational blob is nothing more than a jobs program for adults. New York state (population 19 million) has more school administrators than all of Europe with a population of 700 million. The head of the teachers union once said he would begin to care about students once they started paying union dues. Out of over 100,000 teachers in California, an average of 2.2 are fired each year for poor performance. Union tenure and seniority rules are nothing but a union racket.
  5. Private schools skim the best students: Every study published shows this is false. Voucher students in private schools are indistinguishable from public school students in every demographic. There is absolutely no skimming of the best students. The popular movie, Waiting for Superman, depicts the cri de coeur  from ordinary, anguished parents facing long odds to save their kid’s life by securing a voucher in a lottery.
  6. Teachers are underpaid: If this ever was true in the past, it has not been true for a long time. When accounting for hours worked and all benefits, teachers are overpaid by more than 50% per a study by the American Enterprise Institute. A typical teacher with a $50,000 salary will receive another $52,000 per year in benefits compared to $20,000 in benefits for a worker in private industry. Teachers have great pay, outstanding benefits, light work loads and ironclad job security despite graduating in the bottom two quintiles of their class.
  7. Vouchers favor the rich, resegregation, scare tactics: With all the facts against them, the education blob (educrats, unions, politicians) resort to scare tactics. They play the class warfare card by asserting vouchers favor the rich. News flash: the rich already have school choice by controlling where they live and via private schools. The blob then says the “rich” could add to the vouchers and send their kids to even better schools. Their argument is they don’t want to help poor kids just because some rich kids might possibly do even better. Race baiters play the race card claiming private or charter schools are more segregated – an argument shot down by the Supreme Court.
         In addition to the above myths, many other significant facts favor school choice. Foremost among these is the matter of values. Public schools teach a vapid, secular, valueless orthodoxy. School choice permits parents to select schools that reinforce, rather than contradict, parental values. Another issue is child safety. Public schools require metal detectors and a perpetual police presence and for good reason. Public schools, particular those in inner cities, have become petri dishes for social dysfunction and breeding grounds for behavioral pathologies. The blob is holding the kids hostage.
“Inner city schools are petri dishes for social dysfunction and pathologies.”
         The favorite story from my time in the school choice movement concerns Tommy. When he attended a failing public school, he continually feigned illness and did everything possible to avoid going to school. In utter desperation, his parents applied for a voucher from our organization for Tommy to attend a private school. After a few months at his new school, Tommy awoke one morning with a fever and obviously was ill. Nonetheless, Tommy insisted on attending school that morning. When his astonished mother asked him why, Tommy replied, “Because my teachers are counting on me.”
        There are millions and millions more Tommies in America and we are killing them educationally just as surely as the ambulances that would not take dying kids to a private hospital. The ones we don’t kill, we doom to lives of dysfunction and desperation. Shame on educrats, teachers unions, politicians, NAACP and their enablers. And yes, shame on unionist public school teachers too, for they are part of the problem. All these people are standing in the schoolhouse door, just like Orval Faubus in 1957, blocking desperate children from leaving. School choice is the civil rights issue of our time!
MLLG

Letter to Liberals

George Noga

Defining Liberalism – Part 4

By George Noga – November 22, 2014

Dear Liberal Friends:

Although I find liberal ideas (to the extent such exist) jejune, vapid and repugnant, I always have accorded you personal respect and dignity, a courtesy few of you have reciprocated. This is akin to the Christian concept of condemning the sin while loving the sinner. Most of you have been quick to call me racist, evil and other vile epithets but I do not reciprocate, again defaulting to a Christian concept, turning the other cheek. Although I have many liberal readers, my blog is not aimed at those impervious to truth and logic. This post is an exception and is expressly for you, my liberal friends.

Our personal lives, dreams and hopes are not dissimilar; we all want a brighter future for our children and a healthier planet; we live within our means; we assist those in need; we consider ourselves moral and try to do the right thing. We live-and-let-live, which interestingly is a libertarian principle. We enjoy similar pursuits and generally get along very well together. When politics rears its head however, it seems we are from different planets – make that different galaxies.

“Your credo is sentio ergo sum – I feel therefore I am.”

I view your liberalism as an emotional state in which obvious contradictions, disdain for facts, utopian fantasies, obsessive desires to control and to take from others and antipathy for all who differ – in various degrees and patterns – come to dominate your thinking. It seems that you feel rather than think; hence your credo is Sentio ergo sum, i.e. I feel therefore I am. Notice I say liberalism is an emotional state; I do not, as do many others, term it a mental illness. Churchill described your liberalism poignantly as: “the philosophy of failure, the creed of ignorance and the gospel of envy.”

Perhaps your liberalism was caused or exacerbated by fluoridation, EMT, the ozone hole, acid rain, GMOs, Thimerosal, dioxin, PCBs, acrylamide, BPA, pink slime or any combination of these and the 50 other instances of junk science in which you once believed – and perhaps continue to believe – and all of which have been proven false or grossly exaggerated. Did I mention anthropogenic global warming and organic foods? You embrace unreason because your progressive dogma is antithetical to objective reality and you prefer the ersatz comfort of mythology to the real world.

“Your liberalism is a lie.”

You believe the darndest things – many of which are contradictory. It is okay for a very young girl to have an abortion without parental knowledge or consent but not for her to sell lemonade in her front yard. Gender specific abortion is fine because we must kill females in order to protect their rights. Fifty million abortions are good but 1,300 executions are evil. Choice is your gold standard but you believe a woman cannot choose where to school her children, to own a gun and whether or not to buy medical insurance or to join a labor union. You believe more money improves schools, raising the minimum wage helps the poor, voter ID laws suppress minority voting, there is a war on women, government creates jobs,ad infinitum. Such modern day witchcraft inevitably leads to the syllogistic conclusion that your liberalism is a lie.

Most of you live inside a plastic bubble with other bien-pensant libs, in intellectually isolated and segregated enclaves; you live your lives without ever conversing with an evangelical Christian, conservative, libertarian or anyone from fly-over land. You attended government schools with a liberal curriculum using liberal textbooks written by leftist professors and taught by progressive unionist teachers in a milieu of political correctness.You are taught there are no values except that there are no values. There are no winners or losers because no one keeps score and everyone is above average. The media, pop culture and even religion reinforce your liberal mythology. If you ever venture outside your plastic bubble and perchance encounter truth, your first instinct is to deny it; your second is ad hominem attacks.

Your last liberal refuge is compassion and good intentions about which you never tire of regaling me. However, recent scholarship exposes your ersatz compassion as pathological altruism in which your attempts to promote the welfare of others, instead results in harm. The entire point of your falsetto compassion is for you to feel better when another’s suffering provokes unease; but this does not assure the sufferer of relief. Your interest is in accruing compassion points that you and others will admire. If you’re trying to prove your heart is in the right place, it isn’t. You regard your compassion as the central virtue that makes you good as distinguished from mean-spirited folks like me. But to bolster your rush of pious, pompous reaction, you need more victims in exactly the same way an addict needs more drugs.

“If you’re trying to prove your heart is in the right place, it isn’t.”

If you are so anguished about others’ suffering, why are you so disinterested in wasteful, misdirected and ineffective government programs? It is because you care much less about actually helping than you care about caring. Hence, it is more important for you to say or to do something rather than to accomplish something. Once you have written, spoken or even held forth at a social gathering about some government program, your work is done and you can bask in your own pious reaction. You always want a bigger welfare state for self validation rather than for helping others. That’s precisely why your mantra always is to spend more – it is really for your benefit for you to feel better about yourself.

To conclude dear liberal friends, you are all about feeling rather than thinking. You bought uncritically into every bit of junk science in your lifetime. You routinely accept grotesque contradictions as dogma. You believe so much that simply isn’t true, the only possible conclusion is that liberalism is a lie. You live in a plastic bubble where your myths are constantly reinforced. If you ever experience a conflict, you first deny the truth and then default to vicious and ugly ad hominem attacks. Unsurprisingly, studies show liberals hate more than any other group, a fact to which I can attest.

Even your compassion is phony; your tears are crocodile tears. If you really cared about the poor more than pumping up your self image, you would be more interested in the effectiveness (results) of programs intended to assist them rather than forever mindlessly spending more and more of other peoples’ money. By the way, study after study shows you talk a good game but don’t deliver; folks like me donate far more to charity than folks like you. You take great pride in your compassion and pristine intentions which you wear on your sleeve for all to see. Everything you do is to show your heart is in the right place; but if you’re trying to prove your heart is in the right place, ipso facto, it isn’t!  Have a nice day.

Acknowledgment and credit are due for the ideas presented herein dealing with the nature of liberal compassion. The books Never Enough: America’s Limitless Welfare State and The Pity Party both by William Voegeli, as well as his summary in Imprimis, were sources for this posting.
MLLG

What You Should Know about Tax Inversions

George Noga
By: George Noga – October 24, 2014
      I had not planned a posting about corporate tax inversions but I am working this in because I believe you will read a perspective herein not to be found anywhere else and, as a CPA, I don’t need to invest a lot of time in research. To begin, a tax inversion is the relocation of a US corporation’s headquarters to a lower tax nation so that it “inverts“, i.e. becomes a foreign corporation for US tax purposes. The US, unique among developed nations, imposes taxes on income earned abroad by American corporations – but the tax is not payable until the income (cash) is repatriated, i.e. returned to the US from abroad. Although there often are crucial non-tax considerations involved in inversions, the main driver usually is avoidance of US tax on income earned abroad and the ability to repatriate such funds.
    Because US taxes are not due until the foreign-earned profits are repatriated, US corporations with foreign operations keep the money offshore. For perspective, 75% of US corporations’ cash is kept outside the US – about $2.1 trillion currently. For example, Microsoft has $70 billion but less than $10 billion is in the US. Money held outside the US can’t be used for investment in plant, equipment or training in the US or to hire Americans; instead, it stays abroad.
       The Obama administration rails against inversions because they assert it reduces the amount of corporate income tax collected. Bear in mind that most companies currently do not pay the tax anyway – that’s why they keep the $2.1 trillion overseas. Following an inversion however, profits (cash) can be brought back into the US without tax and be used to invest within the US to create new American jobs. The increased productivity from this added investment in capital goods, job training and hiring of new workers helps all Americans and increases their standard of living. Arguably, inversions are a net blessing to America in the long run even if corporate tax collections suffer in the short run.
       I return to tax inversions and repatriation infra, but inversions do not exist in a vacuum. They are but one part – and a rather small one at that – of the overall US tax scheme. To put inversions into a proper framework, we must step back, understand what is really going on and look at US tax policy from 30,000 feet.
Getting the Most Feathers from the Geese with the Least Amount of Hissing
       As described in the above aphorism from Louis XIV’s finance minister, Jean-Baptiste Colbert, politicians approach taxation as an art form in which they pluck the geese (taxpayers) to get the most feathers with the least hissing. The main alternatives (cutting spending or raising taxes directly) are anathema. Politicians always enact or raise taxes to make everything as opaque as possible to taxpayers. This, of course, is diametrically opposed to the best interests of taxpayers who should want all taxes to be as transparent and direct as possible. The best tax for taxpayers would be a tax on consumption or a flat tax on income with no deductions or exemptions whatsoever.
“Don’t tax me; don’t tax thee; tax the man behind the tree.” 
       Let’s postulate the US had a flat consumption tax of 19% with no other federal taxes, exemptions, or  deductions whatsoever and that 19% tax represented 100% of the revenue to the government. If politicians wanted to increase spending, the only alternative would be to raise the tax rate to 20% or higher. Such a tax increase would be 100% transparent to every American every time he/she purchased anything. Citizens would know the true cost of government and everyone would have an interest in keeping spending under control. The reason we have a corporate income tax (and are now discussing tax inversions) is because it is a tax that takes many feathers from the geese without the geese ever being aware they are missing feathers. This is an important concept and is explained below.
Corporations Never Pay Taxes – Only People Pay Taxes
        Wouldn’t it be nice if no homo sapiens ever again paid tax? Only artificial constructs like corporations, with no heartbeat or pulse, would be taxed. This is like the mythical Germanic kingdom where candy grew on trees, lemonade flowed in rivers and the fattest, ugliest and stupidest  man was king. Alas, non humans paying tax can’t happen even though politicians would like you to believe it. All taxes always are paid by real, living, breathing people; corporations never have, do not now and never will pay a penny of tax. If the government increases the tax on a company by “say” $1 gazillion, there are three, and only three, possibilities for bearing the burden of the tax.
       It is true that businesses may remit tax revenue to the government, but it is not their money; they are simply transmitting funds to the government they have collected from other people. If the business chooses to pay the tax by reducing its profits by $1 gazillion, the owners (stockholders) pay the tax via lower dividends and/or a lower stock price. Most stockholders are ordinary thinking, feeling Americans investing through mutual funds, IRAs or 401(k) plans. Second, the company can cut its costs $1 gazillion; this of course means firing employees –  again, very much alive ordinary Americans. Third, the company can increase its prices by $1 gazillion (and this is what happens 90% of the time) meaning consumers, again scient, feeling ordinary Americans, are paying the tax in the form of higher prices.
       In reality, unlike in the mythical German kingdom, corporations don’t pay income taxes; there are only real-life human beings paying taxes; but politicians want to beguile you into believing fat-cat corporations are somehow not paying their fair share. Politicians want you to buy into their class warfare canard and they are counting on keeping you ignorant. In reality, the issue of tax inversions is moot and is a contrived tempest-in-a-teapot. Moreover, as observed supra, inversions in the long run may be a net benefit to ordinary Americans as it enables more money to be repatriated which can be used in America for capital investment to increase productivity and to employ more Americans.
       Now that we all understand just how inconsequential inversions are, we still are faced with a political issue searching for a solution. The US corporate tax rate is the highest in the world at 35% federal and 6% state for a total of 41%. Everyone, including President Obama, agrees it should be lowered. Everyone also agrees the $2.1 trillion being kept abroad should be repatriated. A reasonable compromise would be to lower the US tax rate to 20% for a combined federal/state rate of 26% even though this still is higher than many countries that are between 12.5% and 20%. This should be combined with a tax holiday for companies to bring home the $2.1 trillion being held offshore by paying a nominal one-time tax. This was done in 2004 and 800 companies participated, repatriating over $300 billion in overseas profits.
       In any other time with any other president, a compromise would be easy. However, President Obama, is intransigent; he will only compromise to lower the tax rate and to repatriate the funds if new and highly punitive corporate tax measures are part of the deal. Consequently, nothing will happen while Obama remains president. Inversions will continue; trillions of dollars will remain offshore; and ordinary Americans will suffer the consequences. Obama is banking that these same ordinary Americans will succumb to his anti-business, class warfare narrative that corporations pay tax and that inversions are a manifestation of corporate greed. In short, he is demagoguing the issue to death.

Into the Eye of the Debt Hurricane

George Noga

Update on the Crisis of Spending, Debt and Deficits
By: George Noga – September 20, 2014

     By some metrics the debt storm has abated. Compared to earlier deficit projections published herein, the USA is slightly better off, with the difference due entirely to the massive Obama tax increases. The deficit this FY ending September 30 is $500 billion, equal to 3% of GDP; meanwhile GDP is increasing around 2%, meaning the deficit is growing only slightly faster than the economy, a marked improvement. However, great damage already has been done; moreover, we are merely in the eye of the debt hurricane – it may appear sunnier at the moment, but the deficit storm will soon resume with even more ferocity and we will all be blown away.

The Seen and the Unseen

     The US economy already has sustained massive body blows. The reason we don’t clearly see the damage is due to the difference between the seen and unseen – or, more to the point, the difference between the reported and unreported.

  • In past recoveries following major recessions, the US economy has grown by an average of 5% for the subsequent 5 years; this results in a compound growth rate of 27.6%. Instead, we have experienced 2% compound growth yielding only 10.4%. The difference of 17.2% is the growth deficit. Simply, the average American today is 17% worse off than he/she should be; but we don’t see what should be; we only see what is. Nevertheless, the reality is that every American has been impoverished by 17% just during the past 5 years.
  • We see the increase in federal tax revenue and the concomitant reduction in the deficit. Unseen are the massive tax hikes that produced the revenue. Individual tax brackets increased with the top rate going to 39.6 % – a 13% increase. Investment related taxes were savaged with capital gains rates going from 15% to 23.8% (59% increase) and dividends from 15% to 43.4% (289% increase). Medicare taxes increased 62% and the upper limit was removed. There was a new surtax on investments of 3.8% and the death tax went from zero to 40%. New individual and employer Obamacare taxes took effect along with scores of other Obama tax hikes. The 35% corporate tax rate (world’s highest) is responsible for shifting jobs and investment abroad and businesses keeping $2 trillion overseas. The unseen effects of these massive tax increases will hobble the economy until abnegated.
  • We can see the reduction in the official unemployment rate; what is unseen is the jobs disaster that is America today. There are 12 million out of work, 12 million on disability and nearly 50 million (one in 5 households) in breadlines – err, on food stamps. The labor force participation rate hit a 35 year low. All (net) jobs being created are part time; there are legions of 29ers and 49ers. The true rate of unemployment is 15%, not the 6.2% reported.
  • We see Social Security and Medicare meeting their current obligations but we do not see the demographic time bomb looming for both programs. There is nothing on earth as certain as demographics; 77 million more boomers will retire (10,000 every day) and begin Social Security and Medicare. Spending on both these programs will grow by 8% compounded – doubling every 9 years. Within 10 years we will spend our entire budget on entitlements and interest on the debt leaving nothing left over for defense or for the rest of the government.
  • We see interest rates on federal debt hovering around record lows costing only $225 billion currently. We blissfully do not see what the interest would cost given a return to average interest rates, i.e. interest cost would increase $500 billion per year to $725 billion, or triple today’s cost. And that’s the rosy scenario. This is a no-win situation: keep rates low and the economy is grotesquely distorted and savings and investment are savaged or raise rates where they should be and the budget deficit goes thermonuclear.
  • We see government regulation exploding, uncertainty rampant and the scepter of Obamacare hanging over all of us like the sword of Damocles. We do not see the stultifying effects of all these on job creation and the economy.

     Looking at the gestalt paints a funereal picture. Average Americans already are 17% poorer over the last 5 years than they would have been in a normal economic recovery – and they will continue to get relatively poorer and poorer each year without any end in sight. The tax and regulatory burden, particularly on investment, has skyrocketed, halting new investment and job creation. Behind the “official” 6.2% unemployment rate lays a dystopian jobs nightmare; we are turning into a country of part time workers. We are reaping a demographic whirlwind still in its early stage. We are living on the razor’s edge regarding interest rates; we have a Hobson’s choice: ballooning interest costs or maintaining negative real interest rates. Finally, all this exists within a milieu of hyper-regulation, vast uncertainty and, of course, Obamacare.

Current CBO Projections for Spending, Debt and the Deficit

     Recently (July) the CBO released its latest forecast. The CBO alternate baseline forecast (its most realistic) assumed the average middle class family’s tax burden doubles over the coming generation; it also assumed no more recessions, wars, terrorist attacks, natural disasters and that interest rates remain low perpetually. Despite these horrific (taxes doubling) and grossly unrealistic assumptions, the results are disastrous. The deficit increases by over $100 trillion and the CBO stops forecasting because it can’t conceive of a functioning economy under those circumstances. And all this, dear readers, is based on an uber-optimistic forecast; the reality is much, much worse!

     We have been grazing on the fiscal commons for a long time; the pasture is about to give out and the spring lambs are doomed to a life of quiet desperation. We can muddle through for a few – perhaps several – years with temporizing and half measures. Soon enough time will run out and the ineluctable tipping point (Minsky Moment) will be reached. It will get ugly for an extended period, i.e. a lost generation., Eventually, when we emerge from the rubble, we may get it right again – only because there are no other choices – and America will again enjoy more liberty and less government!