Thursday, June 30, 2011

Two Questions For FreedomWorks

FreedomWorks is a Tea Party group started by former Congressman Dick Armey (R-TX-26).  They’re supported by Glenn Beck, and generally they do some pretty good things.

These good folk have decided to make Senator Orrin Hatch (R-UT) their #1 target for 2012. I realize that Hatch isn’t always someone the right can count on during confirmation votes, and he’s a bit of a big government conservative. But he has a lifetime ACU rating of 89.47 and was one of 12 Senators with a perfect 100 for 2010.

Compare with the other Senators running for re-election in 2012:

Senator 2010 ACU Rating 2009 Lifetime
Dianne Feinstein (D-CA) 8.00 0.00 8.50
Tom Carper (D-DE) 0.00 4.00 11.61
Bill Nelson (D-FL) 8.00 4.00 34.15
Richard Lugar (R-IN) 71.00 68.00 77.08
Olympia Snowe (R-ME) 64.00 48.00 48.39
Ben Cardin (D-MD) 0.00 0.00 5.26
Scott Brown (R-MA) 74.00 N/A 74.00
Debbie Stabenow (D-MI) 0.00 0.00 8.40
Amy Klobuchar (D-MN) 4.00 12.00 9.00
Roger Wicker (R-MS) 96.00 88.00 91.13
Claire McCaskill (D-MO) 17.00 28.00 18.25
Jon Tester (D-MT) 20.00 16.00 17.00
Ben Nelson (D-NB) 48.00 44.00 47.01
Dean Heller (R-NV) N/A N/A N/A
Bob Menendez (D-NJ) 0.00 0.00 7.67
Kirsten Gillibrand (D-NY) 0.00 0.00 7.75
Sherrod Brown (D-OH) 0.00 0.00 7.77
Bob Casey Jr. (D-PA) 0.00 12.00 7.00
Sheldon Whitehouse (D-RI) 0.00 0.00 2.00
Bob Corker (R-TN) 92.00 84.00 85.50
Bernie Sanders (I-VT) 4.00 12.00 6.59
Maria Cantwell (D-WA) 12.00 8.00 10.30
Joe Manchin (D-WV) 33.00 N/A 33.00
John Barrasso (R-WY) 100.00 100.00 99.00

 

Orrin Hatch has the 3rd highest lifetime ACU rating of Senators up for re-election in 2012.

So, my two questions for FreedomWorks are:

  1. Why in the world is he your #1 target?
  2. Do you really think you’re going to replace him with someone better?

Peaceful Green Gay Hippies Attack ATM

 

Maybe these were displaced workers getting their revenge.

Tuesday, June 28, 2011

June 28, 1914

Archduke Franz Ferdinand of Austria is assassinated in Sarajevo. This sets off a sequence of events that will result in the beginning of World War I one month later.

Immoral Politics

Vice President Joe Biden (D-VISA USA) said this weekend that the GOP approach to the debt ceiling talks “borders on immoral”. Apparently, this is the new attack plan for the administration. When asked about it, White House Secretary Jay Carney said the President would agree.

Let me tell you a few things that I think are immoral.

Mr. President, don’t lecture me on morality until you understand what the word means.

June 28, 2001

On this day in 2001, CIA official Richard Blee told CIA Director George Tenet that bin Laden was planning a spectacular attack against US or Israel within weeks.

“Based on a review of all source reporting over the last five months, we believe that [Osama bin Laden] will launch a significant terrorist attack against US and/or Israeli interests in the coming weeks. The attack will be spectacular and designed to inflict mass casualties against US facilities or interests. Attack preparations have been made. Attack will occur with little or no warning.”

Tenet responds by warning National Security Advisor Condoleezza Rice that:

“It is highly likely that a significant al-Qaeda attack is in the near future, within several weeks”

June 28, 2000

Starting this day in 2000, and going on through December, hijacker Ziad Jarrah attended the Florida Flight Training Center in Venice, FL.

[School owner] Arne Kruithof says that although Jarrah eventually receives his private pilot license and instrument rating, he does not do so while at FFTC. Kruithof later claims that Jarrah becomes an “average” pilot, saying, “We had to do more to get him ready than others. His flight skills seemed to be a little bit out there.”

Monday, June 27, 2011

Debt-Once More Into The Breach

On the theory that a picture paints a trillion words, I’m going to present some U.S. debt info one more time, to show just where we’ve been, and where we’re heading. USDebtClock.org allows you to look at the debt on this day in the past, and into the future. The meat of this post is the pictures. I have very little to say.

On this day, 2000:

onthisday2000

Today:

today

On this day, 2015, at current rates:

onthisday2015

Ok, I do have a couple comments.

Repeat the following until it sinks in. “Unsustainable”, “Economic collapse” & “Failure of Keynesian economics”.

When those sink in you might try “Death of America”.

Greece Fire

When I was in college, I remember hearing often that American knowledge of world events was very poor. There were even several studies released about that time which asked random Americans simple questions about current events all over the world. The results were depressing, to say the least.

I admit that I’m not without fault here, myself. Particularly at the time, I remember that my geography skills were somewhat lacking, and that I wasn’t always aware of why we were involved in various political situations around the globe. I did score much higher than the average American when I took the tests used for those studies, and I suppose that I should be consoled by that. I wasn’t. I knew before I took the quizzes that my knowledge wasn’t good. It appeared that most of my peers were blissfully unaware of their ignorance.

But now we have the internet. News from everywhere is right in front of us all day long. Things should be much better, right?

Sadly, I don’t see any indication of that. If that was the case, America, and certainly our political class, would be paying much more attention to what’s going on in Greece. The fire has already been lit, and the politicians are just trying to decide what to throw on it. I see them reaching for the water now…

 

As I said just last week, America is at the tipping point. Want to see what will happen when we tip over? Watch Greece. But we’re obviously not watching Greece. We’re not learning from them, and we’re certainly not adopting any sort of defensive posture to prepare ourselves against the coming Greece fire. When (and it is almost certainly “when”, not “if”) Greece falls, the effects will be felt far and wide.

See this from Stacy McCain at the Greenroom at HotAir.

One U.S. analyst said that the “downside” risk, if European leaders can’t come up with a bailout deal, “is effectively a financial system meltdown.”

The political situation in Greece is not encouraging. The Greek parliament will vote this week on an austerity plan — which bankers are demanding in order to extend the country further credit — and it is by no means certain that the unpopular cost-cutting measures will pass: “If Greece refuses to accept more austerity measures, the consequences for Greece, the EU and indeed the global economy could be dire.”

I don’t know about you, but seeing the words “financial system meltdown” and “consequences for…the global economy could be dire” don’t exactly inspire me with confidence. Nor do words like this:

A European debt crisis is likely once again to make banks fearful of lending to one another bringing about the freezing of financial markets similar to the credit crisis in 2009.  And this time a huge stimulus package will not be in the offing.  Nor can Greece resort to the age-old beggar they [sic] neighbor approach of devaluing its currency since it is on the euro and not the drachma.

From that same article:

The broader implications for the U.S. are set forth in a Congressional Research Service Analysis in 2010.  The report concluded there were five major implications.

First, many expect that if investors lose confidence in the future of the Eurozone, and more current account adjustment is required for the Eurozone as a whole, the value of the euro will weaken.  A weaker euro would likely lower U.S. exports to the Eurozone and increase U.S. imports from the Eurozone, widening the U.S. trade deficit.

Second, the United States has a large financial stake in the EU.  The EU as a whole is the United States’s [sic] biggest trading partner and hundreds of billions of dollars flow between the EU and the United States each year.  Widespread financial instability in the EU could impact trade and growth in the region, which in turn could impact the U.S. economy.

Third, a Greek default could have implications for U.S. commercial interests.  Although most of Greece’s debt is held by Europeans (more than 80%), $14.1 billion of Greece’s debt obligations are owed to creditors within the United States.

Fourth, the global recession has worsened the government budget position of a large number of countries.

Fifth, debates over imbalances between current account deficit and current account surplus countries within the Eurozone are similar to the debates about imbalances between the United States and China.  These debates reiterate how the economic policies of one country can affect other countries and the need for international economic cooperation and coordination to achieve international financial stability.

People have been predicting this since late 2009, and it’s quite easy to see that America is following the same path. Yet we haven’t done anything at all. We may have to join in the European financial bailouts just to keep the entire system from collapsing. But who’s going to bail out us? We don’t have the money to do this. We decided to spend it on stimulus and health care instead. If I had confidence in our own government to solve the fiscal problems here, I might be less worried. I’d be hopeful that we could throw the weight of the U.S. dollar behind some assistance to Greece and to the euro. That kind of confidence would be criminally insane at this point, however.

Here’s why:

The … government must also contend with a political and social crisis. The main political parties remain poles apart and the prospects of reform by consensus appear close to zero. Opposition also comes from the powerful public-sector unions, an increasingly fearful public, and disparate political forces maintaining constant street protests.

[…]

Added to these conflicts is an institutional weakness that questions the ability of any government … to deliver serious reform. Many parts of the public bureaucracy verge on the dysfunctional. Their staffs are too big — the result of parties in power using public jobs as electoral favors — too unskilled, too rigid from confused and archaic legal procedures, too hierarchical, and lacking morale. Too often, the [person] in charge lacks efficient means, information and technical know-how from those he or she seeks to direct. Such problems are all the more grave when policies are highly controversial and uncertain to be sustained.

What country is being discussed in that section? Did you think of the United States? No, it’s Greece again. Eerily similar description though, wasn’t it? Was this on some right wing site like HotAir? No, it’s in today’s New York Times. Things could go south as early as this week in Greece. More likely, the politicos will find a way to stave off the crisis for another few months, perhaps a year. That’s if Greece government manages to survive that long. A military coup or civilian overthrow is not out of the question. What happens then? I don’t know. And no one else does either, no matter what they claim.

When I was growing up, I remember that it seemed like just about every day there was some government being toppled in Africa or the Middle East. It always seemed so remote. It was just something I saw on TV that didn’t really matter (to me, anyway…I’m sure it was vitally important to those living through it). Our Keynesian economics debt ruled world isn’t like that anymore. When Greece falls, it’s going to at the very least, worsen the “economic downturn” worldwide. And that’s an absolutely hopelessly optimistic best-case scenario. Worst case scenario? I’m the doom-n-gloom guy lately, and even I don’t even want to think about it. Wars have started over less. Much less.

But I’m sure President Barack Obama (D-USA) can handle this. After all, he’s been incredible at crisis management so far, hasn’t he?

June 27, 1967

The world’s first ATM is installed in Enfield Town, England. According to rumor, unemployment skyrocketed the next day.

The Wikipedia article has some inconsistencies. There’s this quote:

In simultaneous and independent efforts, engineers in Sweden and Britain developed their own cash machines during the early 1960s. The first of these that was put into use was by Barclays Bank in Enfield Town in North London, United Kingdom,[7] on 27 June 1967. This machine was the first in the UK and was used by English comedy actor Reg Varney, at the time so as to ensure maximum publicity for the machines that were to become mainstream in the UK. This instance of the invention has been credited to John Shepherd-Barron of printing firm De La Rue,[8] who was awarded an OBE in the 2005 New Year's Honours List.[9] His design used special cheques that were matched with a personal identification number, as plastic bank cards had not yet been invented.[10]

And this one, in the intro:

Invented by IBM, the first ATM was introduced in December 1972 at Lloyds Bank in the UK. On most modern ATMs, the customer is identified by inserting a plastic ATM card with a magnetic stripe or a plastic smart card with a chip, that contains a unique card number and some security information such as an expiration date or CVVC (CVV). Authentication is provided by the customer entering a personal identification number (PIN).

Anyway, despite the text in the introduction, 1967 is widely regarded as the introduction date of these mysterious devices that seem to be taking over our world.

Personally, I am part of the resistance. I gave up ATM use several months ago and I’ve never looked bad. Although I did notice a strange machine following me the other day…

Sunday, June 26, 2011

Operation Fast & Furious

I haven’t blogged about this, because most of my stuff is opinion blogging. I’m the editorial section. Not the front page. Right now the facts are coming out fast & furiously. Stay abreast. I’ll add links to this post as they become available.

You can start at Moe Lane, the Washington Examiner, & HotAir.

Oh. Since I do opinion blogging, I should give at least a quick opinion. This is bad. Really bad. Far worse than “Plamegate”. Worse than “Whitewatergate” and “Lewinskygate”. Worse than “Iran Contra”.  Maybe Watergate level bad. Possibly worse. Yes, I said that. It is very possibly a worse scandal than Watergate and may go up just as high. People have died over this. No one died in Watergate. One person is already being pressured to resign. Another person is being fired. They won’t be the last.

At some point, someone is going to ask the President, “What did you know about this, and when did you know it?” In case you haven’t figure it out already, that’s the question a politician fears most.

UPDATE: More on the investigation and need for a Special Prosecutor here.

More On Delta

As more information surfaces, it appears that I was right. The problem with Delta and Saudi Arabia is not a Delta problem. It’s a Saudi Arabian problem.

From The Corner:

UPDATE: And just like that, I get a new statement in my inbox from Trebor Banstetter of Delta Airlines:

Delta Air Lines does not discriminate nor do we condone discrimination against any of our customers in regards to age, race, nationality, religion, or gender.

Delta does not operate service to Saudi Arabia and does not codeshare with any airline that serves that country. Delta does not intend to codeshare or share reciprocal benefits, such as frequent flier benefits, with Saudi Arabian Airlines, which we have confirmed with SkyTeam, an Amsterdam-based 14-member global airline alliance.

Delta’s only agreement with Saudi Arabian Airlines is a standard industry interline agreement, which allows passengers to book tickets on multiple carriers, similar to the standard interline agreements American Airlines, US Airways and Alaska Airlines have with Saudi Arabian Airlines.

All of the three global airline alliances – Star, which includes United Airlines; oneworld, which includes American Airlines, and SkyTeam, which includes Delta – have members that fly to Saudi Arabia and are subject to that country’s rules governing entry.

As AllahPundit at HotAir puts it:

This isn’t a “Delta problem,” it’s a western-world problem shared by Delta insofar as we happily do business with the Saudis despite some truly nasty informal — and formal — discriminatory policies. (Try getting a church or synagogue built there.) As also noted yesterday, there was no groundswell of opposition to Delta doing business with the Kingdom based on the latter’s policies towards women, for instance; the outrage erupted only when people were faced with the loathsome, historically-charged prospect of Jews being identified for special burdens.

Also, there’s this from the Saudi Embassy in Washington, via CBN:

Some reports suggest the partnership would force Delta to adopt a "no Jews allowed" policy on flights heading to Saudi Arabia. The country bans any traveler with an Israeli stamp in his or her passport from entering the country.

The Saudi Embassy in Washington issued a statement denying the reports.

"Rumors being circulated via the Internet regarding passenger flight restrictions on Saudi Arabian Airlines are completely false," Saudi Embassy spokesman Nail Al-Jubeir said in statement sent to CBN News Friday.

"The Government of Saudi Arabia does not deny visas to U.S. citizens based on their religion," he said.

Take that for what it’s worth. I’m not sure I believe it, either.

Finally, USAToday (one of the original sources of all of this), has a new article worth reading, entitled “Criticism of Delta unfair, some travel industry experts say” (yeah, I hate the phrase “some…experts say” too).

"Delta has been unfairly singled out," says travel expert Henry Harteveldt, a Jewish American and a vice president of Forrester Research. "We may find a lot of Saudi Arabia's policies unpleasant and not agree with them, but any airline flying into any country is obliged to act by the rules of that country."

And finally:

Joe Brancatelli, a business travel columnist for Portfolio.com, says criticism of Delta's SkyTeam relationship with Saudi Arabian Airlines may have been blown out of proportion, and Delta may have been the victim of misinformation.

But he questions whether U.S. airlines should be more careful about the marketing alliances they form.

"Does Delta want to be in business with an airline whose government has policies we find repugnant?" he asks.

The last is a legitimate question, and should be asked of United, American, or any American business doing business there, and even our government.

Another Peaceful Green Hippie Goes After Trig Palin

Yes, I know. It’s been a while since I’ve looked in on the Peaceful Green Hippies. Will have to do a few more of those. This is from RightWingNews.

The Left is so obsessed with Sarah Palin that crazy libs are even sending me Sarah Palin-themed hate mail. From YouTube yesterday.

U will pay…..

and sarah palin will pay as well!!!

letting that lil’ retarded baby of hers live is a sin!!!

he can’t function in this world!!! someone needs to spare him the sad life he has!!

just drown him in the bathtub!!! it’s easy to fake!! or give him a gun to play with in bed! one shot to the head, and he’s sent to Heaven!!!

but no angel should have to do sarah’s job…. so her murder will let her in to Heaven to raise this cripple. then she can go to Satan and do his bidding….. — rorycalhoun27

As I’ve mentioned before, this IS the face of the liberal left. Pleasant people, aren’t they?

June 26, 2008

The Supreme Court of the United States rules that the Second Amendment still applies in federal enclaves in District of Columbia v. Heller.

District of Columbia v. Heller, 554 U.S. 570 (2008), was a landmark case in which the Supreme Court of the United States held that the Second Amendment to the United States Constitution protects an individual's right to possess a firearm for traditionally lawful purposes in federal enclaves, such as self-defense within the home. The decision did not address the question of whether the Second Amendment extends beyond federal enclaves to the states,[1] which was addressed later by McDonald v. Chicago (2010). It was the first Supreme Court case in United States history to decide whether the Second Amendment protects an individual right to keep and bear arms for self defense.[2]

On June 26, 2008, the Supreme Court affirmed the Court of Appeals for the D.C. Circuit in Parker v. District of Columbia.[3][4] The Court of Appeals had struck down provisions of the Firearms Control Regulations Act of 1975 as unconstitutional, determined that handguns are "arms" for the purposes of the Second Amendment, found that the District of Columbia's regulations act was an unconstitutional banning, and struck down the portion of the regulations act that requires all firearms including rifles and shotguns be kept "unloaded and disassembled or bound by a trigger lock." "Prior to this decision the Firearms Control Regulation Act of 1975 also restricted residents from owning handguns except for those registered prior to 1975."[5]

Saturday, June 25, 2011

June 25, 2006

Gilad Shalit, a corporal in the Israeli Defense Force Armor Corps is captured by the terrorist organization, Hamas. He is still being held by this group, and is one more reason why Benjamin Netanyahu will not negotiate with them. His capture and imprisonment has caused one of the rare incidences of near worldwide agreement in siding with Israel against Hamas.

June 25, 1950

The Korean War begins. This is one of the few areas of recent American history that I haven’t studied all that extensively. In fact, most of my knowledge comes from the TV show, M*A*S*H, which paints an extremely unflattering image of the U.S. Army, so I rarely watch it anymore. I really should work on learning more about this. My sense is that it’s impact on American history has been understated.

June 25, 1948

Bugs Bunny was born. The first cartoon was entitled Long-Haired Hair, one I’ve seen several times, including just a couple weeks ago. Never knew it was the first.

Happy birthday, Bugs!

June 25, 1947

The Diary of Anne Frank is published under the title The Diary of a Young Girl. Picked one up for my Kindle myself today.

She started writing it in June of 1942.

Friday, June 24, 2011

Political Chicken: The Game Republicans Must Win

This is a guest post from @AG_Conservative who normally posts at RedState. I’ll update this post with a link to his RedState post when it appears.

UPDATE: Link to RedState post.

Everyone knows about the classic game of chicken, usually in the form of two cars driving towards each other until one side turns and loses. That situation is a perfect analogy to the current debt limit negotiations in congress. Usually a game of chicken is for fun or reputation, but in this case the future of the country may be at stake. Our country is facing a financial catastrophe due in large part to the enormous debt we have accumulated. Just a few days ago the Congressional Budget Office released a report predicting a debt explosion whereby the national debt will exceed our whole economy by 2021. This debt will lead to more joblessness, devaluation of the dollar and higher poverty. That is the realistic path we are on and the path from which Democrats refuse to change course. Instead during negotiations to raise the debt ceiling, Democrats are suggesting more spending and more debt. In most other professions, someone that disconnected from reality would likely be sent to see a psychiatrist, but in politics this is just another day at the office. These politicians refuse to accept basic economic facts and obviously did not learn from the first failed stimulus that they forced on America.

Yesterday, news came out that the main Republican negotiators withdrew from talks because they refuse to compromise on the idea of raising taxes during a recession. This was clearly the right move. Even the head of the non-partisan CBO admitted that raising tax rates would slow economic growth, at a time of already lagging growth and high unemployment. The Democrat plan is increased debt, slower growth and more taxes. It is a plan that America and Americans cannot afford right now. For that reason, the Republicans are doing the right thing by not negotiating with false choices. The Democrats are hoping Republicans will get scared of being blamed for the issues that will arise with the debt ceiling not being raised and thus cave to their demands. Republicans must realize that turning of the road first might be the safer short term political play (though in the current climate that may not even be true), but it will ensure disaster for the country and constituents they serve. We can compromise about the size of cuts or exactly how to reform certain programs, but we cannot compromise on the fact that we need cuts and limited taxes. Furthermore, as the election of 2010 showed, the American people are on the Republican side of this issue as long as they are able to explain their position. In this game of chicken, Republicans are essentially driving a hummer and the Democrats are coming at them with a tiny hybrid (likely one of the ones we are forcing GM to make and no one wants to actually buy). There is no reason to fear them, instead Republicans should stay the course and get something done on behalf of the people they represent. Make Obama (who has been too pre-occupied with improving his handicap to directly participate in negotiations) and the Democrats decide whether they are going to turn or risk crashing into our hummer. The Democrats and President Obama have made it obvious that they have no intention of doing the right thing by themselves in the debt crisis, so the Republicans must force them into it. If Republicans hold firm and stay the course, they will not only win this game of chicken, but they will also save America in the process.

June 24, 1948

The Soviet Union initiated the Berlin Blockade, cutting off all of Berlin from the west. This blockade lasted almost a year, and the end result was the creation of two separate German states (they had just been “zones” before), and the official splitting of Berlin into East and West.

The west was able to counter the Berlin Blockade with the Berlin Airlift, which was used to carry food and supplies to the people in Berlin. The airlift’s success surprised the Soviets and strengthened the alliance of the western countries, which also lead to the forming of NATO.

Regarding Delta Airlines & Jews

I have some thoughts about this story that, at least for now, put me in direct opposition to many of my friends. First, a little background to make sure everyone’s on the same page.

Yesterday my twitter feed was buzzing with a story printed in both World Net Daily and USAToday regarding Delta Airlines partnering with Saudi Arabian Airlines. The USAToday story has since been removed, but the WND story can be found here. Basically, it says that Jews will not be allowed into flights into Saudi Arabia.

Delta, realizing they had a PR nightmare on their hands issued the following statement, included in its entirety.

We’ve gotten questions today from you, our concerned customers, following an article about Saudi Arabian Airlines joining SkyTeam (the global airline alliance that includes Delta as a member). After listening to many of your thoughts today, we’d like to take this opportunity to share some information and help to clarify some of the questions we know you have.

First and foremost, I think one of the most important things to mention here is that Delta does not discriminate nor do we condone discrimination against anyone in regards to age, race, nationality, religion, or gender.

That said, some have raised questions about whether Saudi Arabian Airlines’ membership in SkyTeam means Delta is adopting any type of policies that could present barriers to travel for some passengers, including Jewish customers. For this particular concern, it’s important to realize that visa requirements to enter any country are dictated by that nation’s government, not the airlines, and they apply to anyone entering the country regardless of whether it’s by plane, bus or train.

We, like all international airlines, are required to comply with all applicable laws governing entry into every country we serve. You as passengers are responsible for obtaining the necessary travel documents, such as visas and certification of required vaccinations, and we’re responsible for making sure that you have the proper documentation before you board.

On a personal note, I want to share with you all that I’m proud to work at a global airline that serves a diverse customer base with an extremely diverse workforce, and I hope this blog has helped answer your questions on this important topic.

Trebor Banstetter

Delta Media Team

I read that, and tweeted that, in my mind, this exonerates them to some degree. They claim that they’re merely complying with Saudi Arabia’s travel restrictions and that you’d face the same travel restrictions no matter how you entered Saudi Arabia.

To borrow from our esteemed President. Let me be clear. If Delta’s statement is true (and I have no reason to believe that it isn’t), and that the Saudis do not allow Jews to travel in their country, then that is reprehensible. Before the statement from Delta, many people in my timeline were saying that Delta’s decision was reprehensible as well. Afterwards, the outcry diminished a little, but not much, pointing out that Delta doesn’t have to fly there, so their behavior is still reprehensible. That’s probably true.

Often stories go viral on the internet and stir up quite a bit of anger and frustration. This is certainly one of those times. Nearly as often though, there’s little accompanying research with the story. This also appears to be one of those times. My concern isn’t that Delta is being accused of deplorable behavior, but that they are being singled out.

I did a tiny bit of research. Not much. More needs to be done. What I did was to go to travelocity.com and look for flights from my local airport (IND) to Riyadh, Saudi Arabia (RUH). I searched for a round trip from July 20-July 27. I found flights from the following airlines into Riyadh: Lufthansa, Etihad, and Qatar. In addition, the following airlines link with Saudi Arabian Airlines, Emeriates, or EgyptAir for flights into Riyadh: Delta, American Airlines, Air France, and US Airways.

From this I conclude one of four things is true:

  1. There are no travel restrictions for Jews into Saudi Arabia, and this whole this is nothing but hot air.
  2. There are travel restrictions and Delta is lying about who is to blame.
  3. There are travel restrictions and other airlines are ignoring them.
  4. There are travel restrictions and other airlines are complying as well and Delta is being unfairly singled out.

The last one seems by far the most likely to me. I’m not saying that it’s wrong to attack Delta over this. If you feel that this is wrong, attack them. Just make sure that you’re not caught up in the heat of the moment and are armed with facts, and are not singling out Delta for behavior that may not be unique.

However, if my interpretation is incorrect, and Delta does deserve to be singled out, then I will gladly post an update and jump on the bandwagon with you. Until then, I prefer to wait and see how this all plays out.

Thursday, June 23, 2011

The Same Failed Policies Of The Past

How many times have you heard a Democrat say that with respect to Republican economic plans? Well a search for “same failed policies of the past” (in quotes) on Bing yields 76,600,000 results. The number one hit is a page entitled “Vote Democrat”. So, I’m guessing they’ve mentioned it once or twice.

What are these same failed policies? Well, they tend to bring up that comment whenever a Republican says something about “tax cuts” and “growing the economy”. Liberals seem to think that tax cuts do not grow the economy. In fact, using Bing once again, this time searching for “tax cuts do not” yields another 44,200,000 results. A quick scan shows that phrase typically followed by “pay for themselves”, “create jobs”, and “increase revenue”. So, I think I’m on the right track.

They point to the relatively weak growth from 2003 to 2007 as the basis for their argument, completely ignoring the economic growth after taxes were cut in the 90s and the economic growth after taxes were cut in the 80s. It is important to note that while the growth during the mid 2000s was weak, that it was sustained. We had 52 consecutive months of job growth. And yes, that is a record. In fact, while tax cuts have not always lit the economy on fire (more on why that might be in a later post), it’s difficult to find a time when the economy did not improve after tax cuts. This has been proven at both the state level and the federal level.

But there are some policies that have been tried multiple times and are nearly unique in their complete record of abject failure. These are raising taxes, increasing debt past 90% of GDP, and government funded “stimulus”. I’ve covered the last of these three in a previous post, so I’ll just talk about the other two today.

The first should be obvious, but I’ll elaborate a tiny bit (this will also be covered in more detail in that same later post). Taxes increase the cost of doing business. Anything that increases the cost of doing business reduces the amount of funds available for business growth. Simple logic dictates that limiting funds available for growth would then limit growth itself. No, I’m not going to provide any links or studies that prove this. I’m not even sure there are any. If you’re incapable of grasping this simple point, then you are incapable of even the most basic understanding of capitalism.

That leaves us with the second one, high debt to GDP ratio. Look at the pic below:

The picture paints a couple trillion words, and is from this McClatchy write up of a National Bureau of Economic Research report entitled “Growth in a Time of Debt”. The report looks at 200 years of economic data from 44 different countries. The whole thing is worth a read, but I’ll include a couple key excerpts.

Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced and emerging economies. Second, emerging markets face lower thresholds for external debt (public and private)—which is usually denominated in a foreign currency. When external debt reaches 60 percent of GDP, annual growth declines by about two percent; for higher levels, growth rates are roughly cut in half. Third, there is no apparent contemporaneous link between inflation and public debt levels for the advanced countries as a group (some countries, such as the United States, have experienced higher inflation when debt/GDP is high.) The story is entirely different for emerging markets, where inflation rises sharply as debt increases.

[…]

The simplest connection between public debt and growth is suggested by Robert Barro (1979). Assuming taxes ultimately need to be raised to achieve debt sustainability, the distortionary impact imply is likely to lower potential output. As for inflation, an obvious connection stems from the fact that unanticipated high inflation can reduce the real cost of servicing the debt. Of course, the efficacy of the inflation channel is quite sensitive to the maturity structure of the debt. Whereas long-term nominal government debt is extremely vulnerable to inflation, short term debt is far less so. Any government that attempts to inflate away the real value of short term debt will soon find itself paying much higher interest rates when it comes time to refinance.

[…]

Over the past two centuries, debt in excess of 90 percent has typically been associated with mean growth of 1.7 percent versus 3.7 percent when debt is low (under 30 percent of GDP), and compared with growth rates of over 3 percent for the two middle categories (debt between 30 and 90 percent of GDP).

So, what is the current U.S. debt to GDP ratio? According to USDebtClock.org, it’s about 97.9% as I type this.

usdebt

All of this information is easily obtainable. One can assume that most member of Congress or at least their staff have this sort of thing and more at their fingertips.

97.9% puts us squarely in the danger zone. A logical person is probably thinking at this point that we need to work at getting out of the danger zone in order to grow the economy. But politicians are not known for being logical…

So, what do the Dems propose? The same things that were tried in the 1930s that didn’t work. The same things they’ve been trying for the last two years. The same things that have been tried and failed all over Europe.

  1. Government stimulus
  2. Higher taxes
  3. Higher debt

Or, as I prefer to call it, the same failed policies of the past.

June 23, 2005

The Kelo v. City of New London case was decided by the U.S. Supreme Court. In a stunning 5-4 decision, the Court ruled that eminent domain could be used by private interests to further economic development.

Kelo v. City of New London, 545 U.S. 469 (2005)[1] was a case decided by the Supreme Court of the United States involving the use of eminent domain to transfer land from one private owner to another to further economic development. The case arose from the condemnation by New London, Connecticut, of privately owned real property so that it could be used as part of a comprehensive redevelopment plan which promised 3,169 new jobs and $1.2 million a year in tax revenues. The Court held in a 5–4 decision that the general benefits a community enjoyed from economic growth qualified such redevelopment plans as a permissible "public use" under the Takings Clause of the Fifth Amendment.

Justice Sandra Day O’Connor wrote the dissenting opinion which was joined by Chief Justice William Rehnquist, Justice Antonin Scalia and Justice Clarence Thomas:

The dissenting opinion suggested that the use of this taking power in a reverse Robin Hood fashion— take from the poor, give to the rich— would become the norm, not the exception:

Any property may now be taken for the benefit of another private party, but the fallout from this decision will not be random. The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms.

She argued that the decision eliminates "any distinction between private and public use of property — and thereby effectively delete[s] the words 'for public use' from the Takings Clause of the Fifth Amendment." 125 S.Ct. 2655, 2671

Clarence Thomas also penned a separate originalist dissent, in which he argued that the precedents the court's decision relied upon were flawed and that "something has gone seriously awry with this Court's interpretation of the Constitution." He accuses the majority of replacing the Fifth Amendment's "Public Use" clause with a very different "public purpose" test:

This deferential shift in phraseology enables the Court to hold, against all common sense, that a costly urban-renewal project whose stated purpose is a vague promise of new jobs and increased tax revenue, but which is also suspiciously agreeable to the Pfizer Corporation, is for a 'public use.'

Thomas also made use of the argument presented in the NAACP/AARP/SCLC/SJLS amicus brief on behalf of three low-income residents' groups fighting redevelopment in New Jersey, noting:

Allowing the government to take property solely for public purposes is bad enough, but extending the concept of public purpose to encompass any economically beneficial goal guarantees that these losses will fall disproportionately on poor communities. Those communities are not only systematically less likely to put their lands to the highest and best social use, but are also the least politically powerful.[11]

Tuesday, June 21, 2011

The Obligatory ‘Huntsman Is In’ Post

So, former Governor Jon Huntsman (R-UT) officially announced his candidacy for the Presidency of the United States today. The MSM likes to pump him up, but I suspect that the reaction of most voters in Iowa and New Hampshire will be the same as mine was when I first heard he was considering a run.

“Who?”

Yeah. Anyway, here’s the vid.

Ok, MSM, I Give Up

You’re right. We can’t allow someone this stupid in the White House.

Mr. Pinko presents: The Ultimate SARAH PALIN is a MORON video.

 

 

(yes, I know…you’ve already seen it elsewhere…still, this deserves to be here).

Hey, Who Needs A Budget?

I have a friend whose tagline on his IM account is “Liberalism is a mental disease”. I believe he’s right. Certainly you’d have to have your wires crossed somewhere to honestly believe this.

 

I’m speechless. I don’t even know how to respond. Ok, Bill, here’s just ONE of the hundreds of responses that are flying through my head right now. Investors hate uncertainty. Businesses hate uncertainty. It keeps investors on the fence, and keeps businesses from hiring. If you’re actually worried about the economy, one simple thing Democrats could do right away would be to propose an actual budget!!!!!!

Monday, June 20, 2011

I’m Not Worried About The Debt Ceiling Anymore

Ok, that might be an exaggeration. But it’s definitely dropped farther down my worry list. Much farther.

Why? Because it’s too late to worry about it. Speaker Boehner could agree to a debt ceiling increase to $30 trillion tomorrow (the current limit is about $14.3 trillion) and it wouldn’t matter all that much. The debt crisis isn’t coming. It’s here.

As I’m sure you know, recently several credit organizations have threatened to lower the United States’ credit rating from AAA, including Moody’s and Standard & Poor. S&P even went a little farther than just threatening and lowered the outlook from ‘stable’ to ‘negative’.  The Moody’s statement does say a bit about the debt ceiling, but it’s what else they say that’s important (emphasis mine).

Moody's Investors Service said today that if there is no progress on increasing the statutory debt limit in coming weeks, it expects to place the US government's rating under review for possible downgrade, due to the very small but rising risk of a short-lived default. If the debt limit is raised and default avoided, the Aaa rating will be maintained. However, the rating outlook will depend on the outcome of negotiations on deficit reduction. A credible agreement on substantial deficit reduction would support a continued stable outlook; lack of such an agreement could prompt Moody's to change its outlook to negative on the Aaa rating.

The bold area mirrors what S&P said exactly. The credit agencies aren’t just worried about the current debt limit, but about the future ability of the United States to pay it’s debt. And they’re right to be so. Unless we both a) grow the economy, and b) make serious progress in reigning in government spending, we won’t be able to pay our debt. A point I’ve made before.

UPDATE: @drewwill points out that I should say that the credit agencies are also and possibly primarily worried about the risk of the no political deal occurring, thus forcing the U.S. to default. I was a little sloppy here and left that out, as I really don’t think that is going to happen. There are still things Bernanke can do to buy us more time, and in the end, Congress will raise the debt limit. Boehner may try to get as much out of it as he can, but he knows that in the end, the limit will be raised. Still, this is a risk that Moody’s and S&P examine, and it’s in the quote above “very small but rising risk of a short-lived default”.

So, what happens when credit agencies get skittish about the ability of a debtor to pay off it’s debts? The investors get skittish as well. Which finally brings me to my point. As I predicted back at the beginning of May:

It won’t matter how high we raise our debt ceiling, if we can’t get anyone to buy our debt.

As Ed Morrissey says:

We are rapidly approaching a moment of truth.  While we debate the finer points of raising debt limits and calculating just how many hundreds of billions of dollars in annual deficits we’ll tolerate, the truth is that the money to fund any deficit spending may soon run out.  Fiscal sanity may wind up being imposed on us if we don’t choose that path willingly.

We’re there. Right now. Today. China isn’t buying anymore of our debt, and is trying to dump what it already has. Japan isn’t buying any. And now Russia plans to lower its U.S. debt holdings according to the Wall Street Journal.

Everyone thinks the problem will be when the credit agencies lower our credit rating. They keep talking about what will happen then, interest rate increases, economic woes, etc. I’m sorry to be the one to say this, but that’s the optimistic outlook. We don’t hit the crisis when our credit rating is lowered, but when investors pull out over that fear. In other words, now. We are at the tipping point. The debt ceiling is no longer the crisis. Our ability to pay off our debt is.

In just a few days, QE2 will end. More and more people are expecting a QE3.  Unless we get the economy moving, and take steps to reduce our future debt, the investors aren’t coming back.  Frankly, I put the likelihood of either of these occurring before January, 2013 at very close to 0. And, until the investors come back, then we are facing either forced austerity or a succession of QE’s, each less successful than the last. Or possibly some combination. None of these scenarios will be at all pleasant to live through. You may to start hearing the words “Great Depression” and/or “Weimar Republic” often. Or possibly, “Greece”.

Europe is a doom-monger's paradise at the moment. Riots in Greece; summary Cabinet reshuffles; meetings between Merkel and Sarkozy to save the single currency — and there's still the potential for things to get worse, much worse. If the Greek government defaults on its debts, then there's no knowing where the contagion will spread, only that it it will spread wide: from Spain and Portugal to markets across the world. Share indices have already been trembling at the prospect, although many of them rallied slightly today.

One consolation, however scant, is that all this crystallises just what can happen to governments who operate beyond their means. Indeed, this seems to be the point that Jean-Claude Trichet, the President of the European Central Bank, makes in an interview with the Times (£) today. As he puts it, "We were not at ease with the idea that, in the heat of the crisis, all countries were called to spend as much as possible, embark on deficits as much as possible." And he concludes the argument with a sober warning: "I believe that the tensions we are observing in Europe today are part of a much more global phenomenon."

And we can look to the riots in Greece as an example of what will happen here when forced austerity happens. People tend not to like it all that much when their free handouts disappear. Greece and several countries in the EU, as well as the United States have arrived at Margaret Thatcher’s predicted socialistic crisis.

Socialist governments traditionally do make a financial mess. They always run out of other people's money. It's quite a characteristic of them.

I suppose we can take some solace in the fact that as we go down, we’ll take down most of the rest of the world with us. The whole world depends on American dollars. Misery loves company, after all. The unspoken corollary to that statement, however, is “company does not reciprocate”.

Of course, there’s always the possibility that I’m just being overly pessimistic today. President Barack Obama (D-USA) and the Democrats in Congress (and even a lot of the Republicans) seem to think so, and surely they’re smarter than me, right?

Right?

June 20, 1975

You’re gonna need a bigger boat.

The motion picture “Jaws” was released in the United States on this day.

Jaws created the “summer blockbuster” and forever changed how movies were marketed and released.

Jaws was the first film to successfully use "wide release" as a distribution pattern. As such, it is an important film in the history of film distribution and marketing.[38] Until the release of Jaws, films typically opened slowly, usually in a few theaters in major cities, which allowed for a series of "premieres." As the success of a film increased, and word of mouth grew, distributors would forward the prints to additional cities across the country. Some films eventually achieved a wide release, such as The Godfather, but even that blockbuster had originally debuted in just five theaters.[39]

Jaws was the first film to successfully open nationwide on hundreds of screens simultaneously, coupled with a national marketing campaign—a then-unheard of practice. (A month earlier, Columbia had done the same with a Charles Bronson thriller, Breakout, but the box office was middling at best.) The film became the first to use extensive television advertising.[40] The media blitz "included approximately twenty-five thirty-second advertisements per night on prime-time network TV" between 18–20 June 1975.[38] Universal executive Sidney Sheinberg's rationale was that nationwide marketing costs would be amortized at a more favorable rate per print than if a slow, scaled release were carried out. Sheinberg's gamble paid off, with Jaws becoming a box office smash hit and the father of the summer blockbuster.[41][42

Sunday, June 19, 2011

June 19, 1862 & 1964

The U.S. Congress passed the Law Enacting Emancipation in the Federal Territories, forever making slavery illegal in the United States and its territories.

CHAP. CXI.–An Act to secure Freedom to all Persons within the Territories of the United States.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That from and after the passage of this act there shall be neither slavery nor involuntary servitude in any of the Territories of the United States now existing, or which may at any time hereafter be formed or acquired by the United States, otherwise than in punishment of crimes whereof the party shall have been duly convicted.

APPROVED, June 19, 1862.

Exactly 102 years later, to the day, the Civil Rights Act of 1964 was passed in the Senate, overcoming an 83 day filibuster led by Senator Robert Byrd (D-WV). It will be signed by President Lyndon Johnson (D-USA) on July 2.

June 19, 1910

Father’s Day is celebrated in the United States for the first time in Spokane, Washington.

Modern Father's Day was invented by Sonora Smart Dodd, born in Arkansas, who was also the driving force behind its establishment. Her father, the Civil War veteran William Jackson Smart, was a single parent who reared his six children in Spokane, Washington.[5] She was inspired by Anna Jarvis's efforts to establish Mother's Day. Although she initially suggested June 5, her father's birthday, she did not provide the organizers with enough time to make arrangements, and the celebration was deferred to the third Sunday of June.

Happy Father’s Day to all the dad’s out there, mine most of all. Hope your day is great, Dad. Sorry I can’t be there today. But will call.

Saturday, June 18, 2011

Obama’s Israel Ultimatum

This was a news story that didn’t seem to gain much traction last week, which I think is wrong. In my mind it shows just about the same amount of cluelessness as President Barack Obama’s (D-USA) remark about ATMs did.

What am I talking about? This.

Israel Radio Reported Sunday that The United States gave Netanyahu an ultimatum on renewing negotiations with the Palestinians.

According to the ultimatum, Netanyahu has to decide within a month whether he agrees to accept US President Obama’s proposal and resume talks based on 1967 lines.

Washington is pressuring Prime Minister Benjamin Netanyahu to accede to its proposal to resume Israeli-Palestinian peace talks on the basis of U.S. President Barack Obama’s May 19 speech.

This is just mind bogglingly stupid. Let me translate the sequence of events for you into non-politician speak.

Obama: We want to resolve the Palestinian/Isreali situation, and we think we should start the negotiations with the 1967 borders, and give and take from there.

Netanyahu: You can forget that idea. It’s never going to happen. We will never negotiate with Hamas (governing party of the Palestinians), and the 1967 borders are off the table in any event. Starting there amounts to a suicide pact for Israel.

Obama: Ok, so I’m gonna need a decision on this whole 1967 borders and negotiation with the Palestinians thing within 30 days.

How in the world is Israel supposed to respond to this? Every time I think about it I get the picture of this in my head.

Seriously, it’s as if the Obama administration is trying to pretend that Netanyahu never came to the United States last month, or that he never made any public statements while he was here.

Benjamin Netanyahu is not known for patience with fools. I imagine that either Israel will either give no response at all or will send a very tersely worded one, something along the lines of “Israel has already made its position on this issue quite clear.”

Liberalism And Robin Hood

A lot of people don’t understand Robin Hood. I think that statement applies almost equally to the left and the right. Perhaps it’s tilted more to the left though. I’m not sure.

Anyway, the left likes to portray Robin Hood as their hero, and the right lets them get away with it. We’ve all heard “Robin Hood robbed from the rich and gave to the poor”, as if such a thing would somehow be heroic. At least the right seems to get that such a thing is not heroic at all, but liberals don’t. It’s their core philosophy. That’s what their fantasy of income redistribution is all about. They want to rob from the rich and give to the poor. They want to keep doing it until no one is rich and everyone is poor. I’m not sure who they’ll rob after that, but I imagine they’ll find someone.

However, anyone who has ever really paid attention to the Robin Hood story knows that, in fact, that’s not what it’s about at all. Robin Hood fought an oppressive, corrupt, and over taxing government, in order to give the money back to the people who had been crushed by this oppression and taxation. This storyline appears in just about every version of the Robin Hood tale.

So, here’s a question for you. If you fight against an oppressive and corrupt government that is taxing the citizens into the poorhouse, in order that these citizens might be able to keep their own money and live fruitful lives, are you a hero of the left, or the right?

Or, put another way, who is more like Robin Hood, Senator Jim DeMint (R-SC), or President Barack Obama (D-USA)? And which one is more like the Sherriff of Nottingham, or Prince John?

If you’ve been paying attention, you know the answers to these questions and don’t need me to point them out. The sad thing is that Obama probably thinks he’s like Robin Hood, and DeMint probably doesn’t. Not that DeMint doesn’t understand the Robin Hood tale. He may very well. But I don’t think he thinks of himself as a hero of the people. He’s just doing his job. Note: that’s not a sad thing.

So, the moral of this story is, as it often is when dealing with the left, don’t let the left control the narrative. Robin Hood is no more about “robbing from the rich to give to the poor” than it is about war against aliens in outer space. It is about fighting against a tyrannical government, intent on destroying the freedoms of the people.

UPDATED: Had promoted Prince John to King John (it is that way in some of the older versions of the tale). Fixed.

June 18, 1940

Winston Churchill gives his “Their Finest Hour” speech. It concludes with this amazing summation (God, he was a fantastic orator):

What General Weygand called the Battle of France is over. I expect that the Battle of Britain is about to begin. Upon this battle depends the survival of Christian civilization. Upon it depends our own British life, and the long continuity of our institutions and our Empire. The whole fury and might of the enemy must very soon be turned on us.

Hitler knows that he will have to break us in this Island or lose the war. If we can stand up to him, all Europe may be free and the life of the world may move forward into broad, sunlit uplands. But if we fail, then the whole world, including the United States, including all that we have known and cared for, will sink into the abyss of a new Dark Age made more sinister, and perhaps more protracted, by the lights of perverted science.

Let us therefore brace ourselves to our duties, and so bear ourselves that if the British Empire and its Commonwealth last for a thousand years, men will still say, 'This was their finest hour.'

I can see former President George W. Bush (R-USA) saying that. I can’t picture President Barack Obama (D-USA) saying that.

Friday, June 17, 2011

June 17, 1972

Five men were arrested for breaking and entering into the Democratic National Committee headquarters at the Watergate hotel. The resulting investigation and cover up would lead to the resignation of President Richard Nixon (R-USA) just over one year later. Bob Woodward and Carl Bernstein, reporters for the Washington Post became household names during the investigation. They eventually wrote a great book called “All the President's Men” on the subject, and were portrayed in a mediocre film of the same name by Dustin Hoffman and Robert Redford.

Thursday, June 16, 2011

June 16, 1858

On this day in 1858, then private citizen Abraham Lincoln gave one of his more famous addresses, the House Divided Speech, in his campaign for IL state Senate against Stephen Douglas. This speech became a rallying point for Republicans in the north, who used it to declare that either the United States must accept slavery everywhere, or nowhere (their choice, and Lincoln’s, and mine, for what it’s worth).

The argument turned out not to be a successful one, at least immediately. Douglas believed the opposite, and it was his view that was accepted later that year when Douglas was elected to the Senate.

The best known passage:

A house divided against itself cannot stand. I believe this government cannot endure, permanently, half slave and half free. I do not expect the Union to be dissolved — I do not expect the house to fall — but I do expect it will cease to be divided. It will become all one thing or all the other. Either the opponents of slavery will arrest the further spread of it, and place it where the public mind shall rest in the belief that it is in the course of ultimate extinction; or its advocates will push it forward, till it shall become alike lawful in all the States, old as well as new — North as well as South.

Your Lemonade Stand & The Government

Hopefully Janie Johnson won’t be offended by me taking her lemonade stand example. This is a follow-up to yesterday’s post on corporate taxation inspired by a Twitter conversation. It offers a specific, simple, and yes, somewhat silly example of what I was discussing yesterday.

Here’s the scenario:

You create a lemonade stand business. You figure it will cost you $4 to get started, and another $1 to operate for a day, so you get the $5 in an interest free loan from Mom. You sell 12 glasses of lemonade at $1 each. Woohoo! Capitalism at its finest. You pay back the $5 to Mom, and your business is still left with $7. Since you worked so hard on the lemonade stand, you pay yourself a $2 salary.

Now your business has $5 left and you have dreams of expansion. You figure you can double your capacity for an additional $5 ($4 startup, $1 operating), and you still need $1 to operate your existing business.  That totals $6. That’s more than you have left, but you’re willing to take $1 of your salary and invest it into your business to get this expansion off the ground. So, you’re off and running.

Then Dad comes by. Dad mentions that he’s been protecting you and providing you with free housing, meals and healthcare. So, to fund his governing, he demands 25% of your profits. You hire your sister for $1 to handle the necessary paperwork and make sure that you’re in compliance with all of Dad’s regulations. You now have $4 left, and Dad gets $1 of that.

So, how much did the taxation cost your business? If you said $2 ($1 tax + $1 for your sister’s accounting), then you understand that the corporate income tax costs your business money. Congratulations. If you don’t understand that the corporate income tax costs your business money, then stop now. There’s no point in reading any further until you do.

Your business now has $3 of profit to reinvest in itself, but that’s not enough to cover the cost of expansion, and your dreams of growing your business are over, at least for now. So, this taxation has definitely hurt your business.

But Dad’s not done yet. He also takes 25% of you and your sister’s income for a total of $1.75.  This leaves you with $1.50, so even if you wanted to put your entire salary back into the business, you still don’t have enough to expand, and Mom has already said “no” to the idea of another loan. You’ll probably be able to afford to expand after tomorrow, but this corporate tax is definitely hurting your growth potential.

Now let’s look at a slightly different example. This time around, Mom doesn’t just give you an interest free loan. She invests in your business and wants a share of the profits. Also, every kid in the neighborhood has seen your success, and now there’s a lemonade stand in every driveway. You’re not going to be able to charge $1 per glass anymore.

So, here’s how your first day of business goes.

In order to deal with competition, you lower your prices, and you get a bigger pitcher. So, this time you sell 14 glasses of lemonade at $.50 each. You didn’t sell out because you spent so much time managing your business. There’s at least 4 glasses left over, but they’ll go bad by tomorrow, so you throw them out. Your business still made $7, which wouldn’t be so great if you had to give $5 back to Mom, but you don’t have to do that. You just have to pay her a dividend. You plan on a $2 dividend. But first, you pay yourself your $2 salary, and then there’s Dad with his hand out again. So, once again, you pay your sister $1, and pay your Dad $1 in taxes. Like last time, Dad takes an additional $.75 from you and your sister in personal income tax. Including your sister’s salary, your corporate taxes still cost your business $2.

Now, this time, rather than expanding your business, you just want to hire an additional employee. That will enable you to have more time to seek out new investors, figure out new ways to expand and increase profits, and possibly come up with new product lines like pink lemonade. You figure that a new employee will cost you $1. But if you pay Mom her $2 dividend, that only leaves you $1, which is what you need to cover the next day’s operating costs. So, either you’ll have to pay Mom a lower dividend, or you’ll have to cut back on your hiring plans. Note that either of these will negatively impact how much tax revenue Dad can collect.

We’ll say that you forgo the hiring of an additional employee and pay the $2 dividend to Mom. Dad gets $.50 of that, bringing his revenue up to $2.25. Yay, tax revenues are up! At the expense of crushing your business’s growth potential. Eventually, if you want to keep growing the business, you’re going to have to pay less in salaries or dividends.

Remember what I said were the three ways corporate taxes were passed on to others?

They pass the tax burden on to their customers in terms of higher prices, their employees in terms of lower wages and benefits, and their stockholders in terms of lower dividends.

Well, we’ve just seen two of them. Not hiring is the same thing as passing it on to employees. Your presumed new employee would have made $1. Since you won’t hire him, he’ll make $0. Or, to hire him, you’ll have to cut your own salary. Or Mom’s dividend.

Now, if you had raised your prices to $.75 a glass at the beginning, you’d have enough to pay your shareholder, Mom, her dividend, and hire a new employee. Assuming that your higher price didn’t cut into sales, that is. Probably an unrealistic assumption in this neighborhood, but we’ll go with it. And now you’ve done the third method of passing your tax burden on to others.

However, lemonade is used up pretty quickly. That’s the cornerstone of your business idea. You want to be able to sell new lemonade to your customers each and every day. The problems is that even if your higher prices don’t have an immediate impact, they definitely have a long term one. Your customers only have a certain amount of discretionary income available to pay for summer beverages. You’re going to make them run out of money sooner, and they will be forced to stop buying your product.

Since she’s an investor now, not just a banker, Mom might be willing to help you out more. Suppose she invests half her dividend, after taxes, back into the company. Now you’ll be able to hire that additional employee! Err...no. She only has $1.50 after taxes, so she only reinvests $.75. Unfortunately, that still isn’t enough for you to hire. This corporate tax thing is really screwing your business (bonus points if you noticed that a capital gains tax screwed your business too, but that’s beside the point right now).

Guess what? Dad has created some new financial regulations that might help you out! Rather than starting this lemonade stand business as a traditional corporation, you can form this thing called a scorp. Scorps allow you to avoid the corporate income tax. How? By passing it on to your shareholders. But wait, we already said that’s one of the ways corporate taxes are paid, so how does this change things? It doesn’t, all that much. And it doesn’t change the initial premise at all, which is that corporations don’t pay taxes. In fact, it reinforces it.

Using the previous example again, when Mom invested the $5 in your business, you sold her a 50% share of the company. You kept 50% for yourself, since the business idea was yours. You still sold 14 glasses of lemonade at $.50 each.

But, this time you had to pay your sister an additional $1 up front to file all the scorp paperwork. So, you need another $1 from Mom. Her investment is now up to $6. And you still had to pay your sister another $1 to handle the accounting showing that you stayed within scorp regulations and don’t owe any corporate income tax. You paid your own salary of $2. That leaves $4. You split the money with Mom, paying her $2, and bringing your total income to $4.

So, Dad gets $.50 from Mom for her $2 (yes, I know that it’s sometimes possible to offset capital gains with capital losses, but I’m trying to keep this simple), $.50 from your sister, and a whopping $1 from you for a total of $2. Your business has no capital, so you reinvest your $2, leaving you with $1. Mom only reinvests half of her post tax dividend, which is again $.75. You can finally afford to hire somebody, but at what cost? Well, it cost an additional $1 from Mom initially, and you only have $1 left of your $2 salary. Your sister is happy because she made an additional $.75 after taxes, but Mom is not. She invested an additional $1 and got nothing to show for it. You have less money in your pocket, too. This is hardly a win-win scenario. And it still cost your business $2 just to avoid paying anything in corporate taxes. In other words, the corporate taxes cost you $2, even though you didn’t pay any.

Now, what if there was no corporate tax? You sell your 14 glasses of lemonade for $.50. Mom gets her $2 dividend. You get your $2 salary. You get to keep your prices low enough to ensure a constant revenue stream. There’s $3 left over, so you pay yourself a $1 bonus for being such a good businessman, and you can still afford to hire someone.

And Dad? Dad gets $.75 from you and $.50 from Mom for a total of $1.25. Tax revenue is down initially, but starting tomorrow he’ll get an additional $.25 each day from your new employee. Your sister is mad because she didn’t get the $1 for accounting, but you hire her as your new employee. This is a good thing because she’s now part of production and sales, and not just overhead like she was before. Because of that, starting tomorrow, you’ll be able to sell all 18 glasses of your lemonade each day, bringing you an additional $2 in revenue, which you can use for dividends, higher salaries, or expansion. Dad will like the increased tax revenue from that.

And, since you have this extra employee, you have all this extra time and money to figure out how to make your business grow. You’ll soon be able to double capacity, hire another employee (fortunately, you have lots of siblings), perhaps even expand over to the next street. All these people you’re hiring have to pay personal income taxes, so pretty soon Dad’s not missing his corporate tax income at all (if he is, he can always raise the personal tax rate a bit to compensate, but since everyone’s making more money, that won’t hurt them nearly as badly). And GDP growth for your neighborhood is through the roof. Everybody wins.

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