Commonsense Economics

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It’s too easy to label President Obama’s State of the Union as more tax-the-rich and redistribution. We know that. Rather than name-calling, Republicans must draw a clear line in the sand between their worldview and Obama’s. I’d call that line commonsense economics.

First, you can’t create a new business or sustain an existing one without the seed corn and nourishment of capital investment.

Second, only businesses create jobs. You can’t have a job without a business.

Third, jobs create all incomes, including middle-class incomes.

Fourth, incomes create family and consumer spending.

OK? This is not complicated. It’s common economic sense.

University of Chicago economist Casey Mulligan states this in a simpler way: Growth starts with investment and ends with consumer spending.

Regrettably, Obama doesn’t get this. That’s why he’s proposing the third capital-gains tax hike of his tenure. He started at 15 percent, went to 20, with Obamacare took it to 23.8, and now wants 28 percent. This damages business, jobs, and middle-class incomes.

Ironically, history shows that lower capital-gains tax rates produce higher revenues. Think Bill Clinton and George W. Bush. But a higher capital-gains tax produces lower revenues. Think late-Reagan, Papa Bush and now Obama.

Obama also proposes to raise the tax burden on capital by increasing inheritance and estate taxes. And he’s making another attempt to tax banks — only this time he is adding in asset managers and insurance companies. Ironically, a huge part of Obama’s base — police officers, firefighters, teachers — might suffer a serious depreciation of pension-fund stockholdings.

So, taxing capital will hurt the very middle-class workers and incomes Obama claims he wants to help. His so-called middle-class economics doesn’t work.

A related point: Obama’s SOTU made no mention of cutting corporate tax rates. Instead the president trashed the top 1 percent and slammed companies for keeping profits abroad and using unfair loopholes and deductions.

He’s right about loopholes and deductions. Let’s close them. But while we’re at it, let’s slash the corporate tax rate and make America more competitive worldwide.

Obama kinda forgot the lower-tax-rate part, didn’t he?

Also, nearly all studies show that middle-income wage earners are the biggest beneficiaries of corporate tax cuts.

And regarding those evil 1 percenters, according to the Tax Policy Center, the top 1 percent of Americans paid 33.4 percent of their expanded cash income in federal taxes in 2014. Meanwhile, Americans in the middle 20 percent paid only 13.7 percent of their income in federal taxes, while the poorest paid 3.1 percent.

You’d think a good class warrior such as Obama would like these numbers. Apparently not.

Why? He wants more money for government spending. A partial list includes more spending on childcare, sick leave, equal pay, lower mortgage premiums, a higher minimum wage, student-debt forgiveness, tax credits, and free community college. Some say this could wind up costing $500 billion.

So there’s a lesson here for congressional Republicans and some of my fellow conservatives: Do not get sucked into this class-war politics. You will never outbid the Democrats on middle-class benefits. And take a cue from Ronald Reagan, who rejected class politics and argued that his policies would increase prosperity for all Americans.

For instance, Obama’s child tax credits would be available for couples up to $210,000, tripling the max tax credit for childcare by up to $3,000. And that’s very close to what some of my conservative friends want. But there’s a better way.

Get rid of the 10 percent bracket and collapse the 25 and 28 percent brackets down to 15 percent. So if you’re making $100,000 a year and paying $25,000 at the 25 percent bracket, your tax cost drops to $15,000 at the 15 percent bracket. That’s a $10,000 savings. If you have two kids, with a $3,500 tax credit per kid, that’s only a $7,000 savings.

From the lower marginal tax rates, the middle class gets a much bigger tax savings. And, with marginal rates coming down, the incentive effect kicks in as people keep more of what they earn. And all middle-class folks are included — married with kids, single women without kids, millennials without kids, etc. And there’s still a big savings for the kids we love and cherish. But it’s done without class divisions or the targeted tax credits that Democrats love. (My only exception would be an expanded earned-income tax credit, which would have a longer phase-out period so as not to penalize folks moving from welfare to work.)

Former CEA chair Glenn Hubbard argues that “free community college, an enhanced tax credit for child care and higher taxes on high-income earners and large financial institutions” will not generate “growth, work and opportunity.”

Good advice, Republicans.

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The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

The GOP Story The Media Is Missing

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The vast majority of political journalists — and I include some of my conservative colleagues — are missing a very big story.

The Republicans are going to recapture the Senate, picking up more seats than most any forecaster expects. And the House GOP is going to add to its majority. But then comes the big story: The beginning of a new conservative revolution.

The idea that nothing much will change if the GOP captures the whole Congress is just plain wrong. The politics and policies in Washington are about to change in a major way.

Obama may still be president. But he is going to be immediately confronted with a flood of new bills that will change the debate on tax reform, energy, health care, education, international trade, and regulations.

Obama will no longer be able to hide behind Harry Reid, who has stopped all voting on these matters. And Mitch McConnell, as Senate majority leader, will be able to move forward the reform ideas of his caucus and House policy leaders like Paul Ryan, Jeb Hensarling, Kevin Brady, and many others.

Obama’s head will spin with all the new paperwork on his desk. He may even have to cut back on his golf game.

Of course, because of his left-wing ideology, Obama may veto everything. But if he does, he’s setting up a new Republican agenda for the 2016 presidential race. Either Hillary Clinton completely jumps the Obama ship, or she’s pulled way left by the Democratic party’s Bill de Blasio/Elizabeth Warren/Sandinista wing. Either way she’s in trouble.

And maybe some Senate Democrats vote to override Obama’s vetoes, with some even converting to Republicanism. An Angus King or a Joe Manchin may cross the aisle after the likely midterm GOP landslide.

Unfortunately, the current GOP never put together a clear national-policy election agenda. Not even a downsized Contract with America. But I suggest two Big Think thoughts for the first 100 days of the new Congress.

First is optimism: We know what the problems are, we know what the solutions should be, and we can make these changes quickly. Second is a re-energized evangelism by the Republican party for pro-growth, market-oriented, consumer-driven, pro-family policies.

“We all see this coming,” House Budget Committee chairman Paul Ryan told me in a recent interview. “Energy and tax reform are going to be at the top of the list.” And House Financial Services chairman Jeb Hensarling told me, “It’s time to put up or shut up for tax reform. Fairer, flatter, simpler, so the American people will at last know what the GOP would do for economic growth to rescue the country from the worst recovery since World War II.”

Hensarling also emphasized the need to expand the energy revolution and to stop the massive overregulation that has stunted growth.

“The regulatory red-tape burden, which violates the Founding Fathers’ Federalist paper 47 by diminishing the rule of law and increasing bureaucratic power in the executive branch at the expense of the constitutionally mandated legislative branch, has got to be stopped.”

Let me weigh in on the first two bills that the GOP should put on Obama’s desk.

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The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

Here’s Why I Am Supporting Obama’s New ISIS Plan

Photo credit: spirit of america / Shutterstock.com
spirit of america / Shutterstock.com

I know he’s made a million mistakes. And I have opposed nearly all his domestic and international policies. But after watching Obama’s intense ISIS speech Wednesday night, and reading the text several times, I think the president basically — finally — got it right.

I support him. My best advice to Republicans and Democrats is to support the president’s new ISIS campaign.

Noteworthy, as of this writing, House Speaker John Boehner has announced his backing of Obama on this matter. Democratic Senate Majority Leader Harry Reid and Republican Sen. leader Mitch McConnell have also announced their support of the president’s ISIS plan. Only Nancy Pelosi is absent.

But I want to underscore the need for Republicans to get on board with this Obama plan. If not, they risk blowing what appears to be a landslide election. Opposing the president on this would look way too political, ignoring national security. It would be a huge mistake.

Here are the opening words from the president on Wednesday night. They rally support: “My fellow Americans, tonight I want to speak to you about what the United States will do with our friends and allies to degrade and ultimately destroy the terrorist group known as ISIL.”

Importantly, Obama now seems to be following the sound advice of experts such as former ambassador Ryan Crocker (who terms ISIS “al-Qaida Version 6.0″); General Jack Keane, the retired four-star general and former vice chief of staff of the U.S. Army; and U.S. Army general Martin Dempsey, chairman of the Joint Chiefs.

Perhaps the most important point in the president’s speech was his apparent decision to bomb ISIS in Syria as well as Iraq. The presumption is that this will be done simultaneously, which is the exact advice given to him by Crocker, Keane, and Dempsey.

That’s another signal to members of the GOP. Before you go home for the congressional election break, fund Obama’s new military request and pass a resolution endorsing the simultaneous bombing of ISIS in Syria and Iraq.

Additionally, while Obama said he doesn’t want GI combat troops on the ground, he specifically endorsed the use of special-ops forces to guide enhanced bombing missions and support Iraqi and Kurdish troops with training, intelligence, and equipment.

In his speech, the president announced the deployment of an additional 475 “service members,” which can be added to the several hundred already in Iraq. In all likelihood, thousands of Special Forces will be necessary to destroy the Islamic State. Along with the bombings, there will have to be a ground war to eventually eliminate ISIS. And that will require all manner of U.S. advisors, such as ground-to-air controllers for every allied battalion. This will be tough stuff.

The president also will increase military assistance to the free Syrian opposition to Assad, which is tricky business. But former ambassador Crocker argues that this can be done with moderate Sunni forces.

And Obama stated that “we will redouble our efforts to cut off (ISIS) funding; improve our intelligence; strengthen our defenses; counter its warped ideology; and stem the flow of foreign fighters into and out of the Middle East.” And he reiterated the need to provide more humanitarian assistance.

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The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

The Obama Bank Shakedown

Obama Authorizes Airstrikes

The $16.65 billion settlement by Bank of America over financial-crisis-era mortgage securities “highlights a pattern of the government extorting the banks,” Dick Kovacevich said on CNBC this week. Kovacevich is the former Wells Fargo chairman and CEO. I’ve known him for years. He ran a great bank. He kept Wells Fargo clean during the credit meltdown. And, unusual for a big-bank CEO, he strongly supports free-market principles.

Kovacevich went on to say, “It’s definitely politics. It has nothing to do with justice or restitution to the innocent victims. In fact, more of the money is going to the coffers of the states and various departments than the victims.” He then concluded, “Why are we charging the stockholders instead of going after the people who did wrong? Corporations don’t engage in criminal behavior. People do.”

Kovacevich is right on target. These huge bank settlements are election-year ATMs for the Obama administration. It was $12 billion for JP Morgan, another $7 billion for Citigroup, and on and on. It’s a real shakedown.

In fact, no one even remotely knows how these penalty-payment numbers are calculated. And the federal government’s disbursement of these funds is equally mysterious. As the Wall Street Journal editorial page has pointed out, a lot of money has gone to states run by Democratic governors. Yup.

And in the $7 billion Citibank settlement, there’s a section explaining how $2.5 billion goes to “community reinvestment and neighborhood stabilization.” What does that mean?

All this sounds suspiciously like the housing version of the ACORN electioneering operations. In other words, community organizers. In other words, left-wing groups that had absolutely nothing to do with the credit crisis.

But this shakedown isn’t isolated to banks. In spirit, it extends to all businesses. It’s the Team Obama way.

A few days before the BofA settlement, The Hill ran a story on how the White House’s midterm strategy is going to revolve around “economic populism and so-called economic patriotism.” That’s interesting. Democratic strategist Jamal Simmons said, “There is still a great amount of discomfort in the American electorate around the economy, and particularly anger with Wall Street and corporate chieftains.”

Out campaigning in Texas last month, Obama said, “Let’s rally around an economic patriotism, which says, instead of giving more tax breaks to millionaires, let’s give tax breaks to working families to help pay for child care or college.”

He went on to add, “Instead of protecting tax loopholes that let corporations keep their profits overseas, let’s put some of that money to work right here in the United States rebuilding America.”

Of course, Obama’s talking about big companies reincorporating into low-tax countries, a process called inversion. Obama calls it loopholes. Shareholders call it after-tax returns on investment. The U.S. has the highest corporate tax rate in the developed world. We are completely uncompetitive. And corporations are always looking for ways to save money.

Why should companies be double-taxed on money they earn in the U.S. and the money they earn overseas? No other country does that. It’s a huge penalty. These firms don’t even have to reincorporate. They can just keep their foreign sales revenues overseas to avoid the double-tax.

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The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

Where Is The GOP’s Better Deal?

Photo credit: House GOP (Flickr)

Businesses created more than 200,000 new jobs for the sixth straight month. Second-quarter gross domestic product rebounded by 4 percent from the winter-weather doldrums. And the Manufacturing ISM Report exceeded all expectations, with big gains in new orders and employment.

So on the surface, the economy is looking better. And as a result, the Federal Reserve is on the cusp of a new and less-stimulating policy cycle — which is a big reason why stocks sold off this week. A lot of investors are wondering what happens when the Fed takes its foot off the accelerator. Will burdensome tax and regulatory policies prevent any sort of economic breakout?

But let me throw in another uncertainty: politics. What is the Republican response to all this?

Yes, the GOP is favored to win the Senate. But I wouldn’t be so confident. Polling shows many key races are up for grabs. The numbers are close.

And here’s what I see as a big part of the problem: Instead of putting forth a clear growth message — like a new Contract with America — congressional Republicans this week voted for a lawsuit challenging President Barack Obama’s abuse of executive power.

Now, suing the president is different from impeaching the president. But is it so different in the public’s eye? And don’t most people think this lawsuit will go nowhere? And isn’t this just a big distraction from key issues, such as the economy, tax reform, regulatory rollbacks, immigration reform, and rewriting Obamacare?

In other words, is the GOP sending voters a clear message about what it will do if it captures the Senate and House?

Let’s circle back to the economy. I’m all for good news, but the current expansion has registered only 2.1 percent annual growth — the lowest in the post-World War II period — and is $1.6 trillion below the economy’s long-run potential to grow.

And at least 19 million Americans are underemployed. The so-called U-6 labor-impairment rate, followed closely by the head of the Federal Reserve, Janet Yellen, increased slightly to 12.2 percent in July. And measured against long-term trends, there are still about 6 million missing jobs. To get back to normal, businesses would have to create nearly 400,000 jobs a month by the end of the president’s second term.

Take-home pay is also lagging. Wages remain soft at only 2 percent year on year. After-tax income, adjusted for inflation, is rising only 2.3 percent annually.

So while the newest numbers look better, we are still living way below our potential. I say this not to be a pessimist but to point out that we can do better. But I also want to underscore my concern that the Republicans are not offering a better deal.

What’s the GOP plan to increase take-home pay? Or to cut business taxes for large and small companies that would not only increase growth and jobs but throw 70 percent of the benefits to wage earners? And what happened to monetary reform that would boost King Dollar?

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The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom