Obama Budget Speech

A lot is being made of the speech the President Obama is going to give this afternoon at 1:30ET today on the budget.  I don’t understand all the hyperventilation.

First, Obama has been on television every day since his inauguration giving a speech on one thing or another.  I have never seen television channels interrupt normal coverage to flash to any President giving a speech as much as they have gone to Obama. 99% of his speeches are “bloviating”.  They are incoherent, boring with little substance.  All I can say is it’s a good thing he hasn’t adopted Ross Perot’s Powerpoint technique or the ACLU would have a good case for torture.  I think “Death by Powerpoint” might be worse than water boarding.

The Republicans have been all over television this morning talking about how they want to see “details and numbers”.  Given what happened last week, they have lost all their credibility with regard to details and numbers.  Obama had very little credibility to begin with, and what little he had was burned in the stimulus and health care debate.  Numbers are elusive in Washington.  Maybe they ought to require that lawyers take calculus and economics-then maybe they would insert some true business math into budget numbers and not accounting numbers.

Both parties are still being disingenuous with the American people.  Shame on them.  That’s not what we voted for in November.

The path of spending that we are on is unsustainable.  There are several places that we can truly cut budgets, but true cuts are politically unpalatable.  Both parties are scared of the aftermath if they really and truly went after all the things in the government that need to be hacked.  We don’t need a scalpel, we need a flamethrower.  If either party enacted real cuts-pension reform, entitlement reform, we would see people marching in the streets.  If you think I am off base on that remark you weren’t watching in Wisconsin.  Entitlement programs and government pensions are going to break us.  The net present value tables don’t lie.

Economic incentives are misaligned in virtually all of Washington DC policy.  It’s amazing that the US is as productive as it is.  How about trying something interesting, a swap?  End all government subsidies, duties and tariffs for farming and agriculture-including agricultural corporate welfare and tax breaks.  In return, end all restrictions on how farmers can use private land, and sell all the government land back to private holders.  Then, let’s see what happens to food prices, agriculture production and imports/exports.   I bet they go down, and the amount of raw commodity material increases.  I also bet that agriculture becomes even more efficient than it is already.

This is why a flat tax with no write offs makes a lot of economic sense.  The markets will organize itself and businesses will react accordingly.  GE won’t be able to lobby for this or that, and businesses will have to compete rather than take a bureaucrat or Congressperson to lunch.

Don’t look for a lot of details in Obama’s speech.  Look for a campaign speech.  There will be a lot of platitudes that various groups can hang their hat on and feel good about. If Obama was being honest and straight with the American people, he’d give a lot different speech.

In twitterspeak, I’d say we have #leadershipfail.

thanks for the link Huffington Post. For more in depth analysis on the speech go here

  • http://twitter.com/grocklein George Rocklein

    “…businesses will have to compete rather than take a bureaucrat or Congressperson to lunch.”

    Unfortunately, bureaucrats and member of Congress really like being treated to lunch, and other things.

  • http://twitter.com/4all5 Rickster

    Spot on. Would love to see a simplified tax code but it will never ever happen because a) govt will no longer be able to control business and consumer activity, and b) what would happen to the 120,000 IRS employees and accounting firms?

    • http://jerrykhachoyan.com Jerry Khachoyan

      A simplified tax code is not only wrong but it also doesnt make sense. 25% (for example) for someone making 2 million is not the same as 25% for someone making 25,000.
      Besides that, you obviously dont know how important the IRS is to the govt.
      Every $1 spent on the IRS returns $10. Thats a 10:1 risk:reward ratio. Cant get any better then that. IRS one of the most important agencies that are needed to bring in revenue.

      • http://www.pointsandfigures.com pointsnfigures

        Jerry, what you are saying makes no economic sense. Taxes are not revenue generators, they are incentives or disincentives.

        Also, no one is advocating for a 25% flat tax-more like 15%, 19%. And someone who makes 25k per year probably wouldn’t pay taxes at all. As a matter of fact, that’s barely above the taxable line (and they pay at a rate of 15% today)

        • http://jerrykhachoyan.com Jerry Khachoyan

          Taxes ARE revenues. The main purpose of Taxation is to generate revenue.
          If taxes are not ‘revenue generators’, then tell me where our revenues come from? Excises and tariffs make up ONLY 10% of our generated revenue (~90% is income and social security tax). So obviously it is not that.

          And yes, taxes are incentives and disincentives. But that doest mean taxes are not revenue. That has nothing to do with this.

          If you think America can run on anything lower then a 25% flat tax you must either believe that deficit spending and lower tax rates will somehow magically produce more revenue or plan on cutting ALOTTTTTTTTTTTTTTT of spending. That probably means cutting at least 1/3rds of spending. A flat tax lower then 25% would lose ALOT of revenue.

          • http://www.pointsandfigures.com pointsnfigures

            Jerry, you clearly need to take some courses in Economics from someone other than a Keynesian teacher. You are using accounting numbers to guide your thought process, and you are making normative, not positive statements over spending, budgets etc. For example, a cut in the capital gains rate from 20% to 15% generated more revenue for the government. Why? Because there was more economic activity. Taxes need to be figured at the margin. There is a percentage that maximizes economic activity which also maximizes government revenue-but its far lower than 25%. It might even be as low as 10%-but Hauser’s Law shows us that 18-19% is what most people pay regardless of the top rate.

            Taxes are disincentives to behavior. If you don’t want something, tax it. You will get less. Want more of something, don’t tax it.

            The debate between Obama, the socialist Dems (and they are socialists), and the Reps is what the role of American government should be. If you go to what the all founders said, it’s a pretty libertarian republic. It was only in the later 1800’s, early 1900’s that the Progressive movement changed the views on that.

          • http://jerrykhachoyan.com Jerry Khachoyan

            Funny, with Corporate and personal (income) tax rates at near alltime lows, where is the revenue? AT ALL time lows. The revenue:GDP ratio currently is at the lowest levels weve ever been? Why? Cuz taxes are at the lowest levels. Im not making this stuff up! Take a look at this chart:

            And the statement that lower taxes=more jobs is also incorrect. Take a look when clinto nwas in office, we created 30million jobs (21% expansion)! OMG! How did that happen with the tax rates “soooo high”. During Reagen’s years, the top tax rate was at 50%, and 16 million (17.6%) jobs were created! Every president since WW2 has created jobs. But the two LOWEST have been the 2 Bushs. What a suprise. What did both do? Create MASSIVE tax cuts. Bush 1 cut the rates by 10%. Even though Bush 2 only cut 3.6%, his cut was felt more b/c by the 2000s, the top 1-2% of america owned a greater % of the wealth then during bush 1. So the cuts during that time were as substantive as Bush 1’s.

            And one more thing. Im no Keynesian, im not making normative,positive statements. IM LAYING OUT FACTS. I like numbers. If you can show me numbers that prove your point, then we have a debate. Until now, all youve done is make opinionated statements, same as anybody else ive talked to that share your similar viewpoints…..

          • http://www.pointsandfigures.com pointsnfigures

            Revenue is at all time lows because economic activity is at all time lows. Clinton had the advantage of the internet (a once in a generation development like the printing press), and a balanced budget.

            The facts you cite are normative. I can cite just as many facts that disprove exactly what you are saying. Ask yourself this question, if we raise minimum wage does it increase or decrease employment?

          • http://jerrykhachoyan.com Jerry Khachoyan

            Ok then Cite them please (I am sure I can disprove them). I want to see the facts.
            At funny how that works right? When taxes are at decade lows so are revenues and so is economic activity. Hmmmmm.

            Look, im not saying lets raise the rates to a communistic level of 90%. All im saying is that they are too low right now. A small bump up (clinton levels) will do wonders IMO.

          • http://www.pointsandfigures.com pointsnfigures

            http://www.investopedia.com/terms/l/laffercurve.asp Freshwater

            Any Keynesian would dispute it. The problem with macroeconomics is there are a lot of moving parts. The best evidence we have is the increase in revenue from the cap gains cut from 20 to 15%.

            Keynesians believe the multiplier effect of government spending is greater than 0. Freshwater economics advocates believe it’s 0-or possibly even negative.

            I think instead, the best thing to do is look at human behavior. If a tax is put on something or increased in something what happens? http://www.sjsu.edu/faculty/watkins/taximpact.htm

            the problem with the assumptions of the Keynesians is that they assume fixed pies, and no variability in income. The reality is that income is extremely volatile with high variance.
            The big earner of today isn’t necessarily the big earner of tomorrow.

  • http://profiles.google.com/tradylady DA Strasser

    You make much too much sense! They will never give up the gravy train until forced to do so.

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