Politicians like to designate three economic classes based on income levels of Americans as “poor,” “middle class,” and “wealthy.” These amorphous categories are made to order for those who want to select a class with whom to empathize in their campaigns to get themselves elected to public office. Such a strategy disturbs public harmony and cohesion and is, at its worst, divisive.
A more precise system of economic classification recognizes only two types of people. The first type is the individual who produces, or vitally facilitates production of a surplus of well-being for many people in addition to himself. The second type, however, absorbs more material wealth than he produces by drawing down on the surpluses of wealth producers. These two types are hereafter referred to as “wealth producers” and “wealth absorbers,” and within both categories are the poor, the middle class, and the wealthy.
Who are the wealth producers, and who are the wealth absorbers? The following exampled distinctions are strictly observational and do not imply aggrandizement for the producers or a rebuke for the absorbers. For example, the principal branches of our constitutional government are subsidized and organized to pass laws, administer justice and defend our country. Certain wealth absorbing services such as police, firefighters, and the military are socially esteemed and are deemed vital to satisfy the people’s need to feel secure. Teachers disseminate knowledge to help students prepare to achieve their goals.
Examples of wealth producers and their vital facilitators are those persons who are: Scientists, Engineers, Architects and designers, Contractors, Ranchers, Farmers, Manufacturers, Foresters, Food processors, Fishermen, Transporters, Inventors, Commercial distributors, Miners & drillers, Energy providers, Real estate developers, Maintainers of property and equipment, and those who provide investment capital to the above. Vital facilitators to wealth producers are: Communicators, Weather forecasters, Accountants, Corporate Lawyers, and Public health maintainers.
Examples of wealth absorbers are those persons who are: Under the age of 21, Medicare and Medicaid recipients, Unemployed, Government employees, Military personnel, Traders in wealth, Politicians, Clergy, Entitlement recipients, Trial Lawyers, Prisoners, Pensioners, Teachers and students, Elected officials, Welfare recipients, Entertainers, Money fund managers, Insurers, Stock brokers, Gamblers, Charity workers, Food stamp recipients, and Foreign recipients of American subsidies.
Although fuzzy edges exist within each stipulation, the examples on the lists are generally accurate. Simply stated, producers provide more wealth than they absorb, thereby enriching the economy. Absorbers consume more than they produce, thereby subtracting from the economy.
The loudly proclaimed goal of politicians is to get people back to work, to “create” jobs. This broad brush job creation mantra disregards the distinction between wealth producing and wealth absorbing jobs. Politicians, themselves absorbers, continue pouring tax money to the needlessly growing ranks of federal civilian government employees who produce little of material value and yet receive over two times the total average individual pay and benefits of wealth producing Americans. The federal executive branch had 1.875 million civilian full time equivalent employees when the financial crisis began in 2008, but that number has now risen to 2.7 million, a 44% increase. Federal, state and local government employee wealth absorbing jobs, for example, now number over twenty million, and the countless additional millions of wealth absorbers on the list are disastrously impoverishing American financial balances.
Statistics from the recent U.S. Census indicate the following. Of America’s total work force of approximately 140 million, 91 million (65%) produce or facilitate wealth production, but 49 million wage earners (35%) produce nothing. InAmerica’s population of 318 million the wealth of our 91 million producers is incapable of providing life support to the 227 million who absorb the wealth. The summation of these disturbing facts is that only 30% of American’s provide the money or national credit worthiness to support everyone.
When wealth producers fail to outrun the wealth drain by absorbers, our government steps in to borrow or print additional money to make up for the shortfall and provide the means to subsidize the overwhelming number of absorbers. Rather than cut back on this irresponsible squander lawmakers put drag anchors on wealth producers with regulations and taxes while extending massive subsidies to wealth absorbers in maneuvers officials call, “fair,” and “redistribution of wealth.”
While acting out on the socialist prejudices on which they are based, the wealth redistributors have established a colossal disregard for financial budget management and practical free market commerce. They evidence by a disposition, characteristic of their order, an adversity to wealth producers.
A successful and durable economic playbook calls for stimulus to producers among the poor, the wealthy, and the middle classes which will add to prosperity. Stimulus dispensed to absorbers subtracts from wealth by increasing their rate of absorption.
William S. Davis
Chairman of the Board
Last week Sweden’s Prime Minister Fredrik Reinfeldt announced that the government intends to cut their corporate tax rate, which he called “probably the most damaging tax of all,” down to 22 percent.
That’s welfare state, high tax, big spending Sweden. Cutting their corporate tax rate to 22 percent-13 percentage points lower than the U.S. rate of 35 percent, which is now the highest in the developed world.
And for Sweden, this follows a previous cut in their corporate rate from 28 percent down to 26.3 percent in 2009.
Sweden gets it. We don’t.
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Two hundred and twenty-five years ago on this day, September 17, the Constitutional Convention finished its work and adjourned, sending the document that became our Constitution through the Confederation Congress to the states for ratification.
At this distance in time, it is easy to forget that the Constitution was highly controversial in 1787-88. Two-thirds of the New York delegation walked out of the Convention in early July when they saw that the proposed government would be much more powerful than that of the Articles of Confederation. Soon after, when the Convention voted to give each state an equal vote in the Senate, delegates from the large states met and seriously discussed whether they should also take their leave. (The small states had likewise threatened to depart if not given an equal vote.)
On September 17, three of the delegates present refused to sign, and a fourth was persuaded to affix his name only at the last minute – without committing himself to actually support the Constitution. Other delegates had left early, heading back to their states to get a head start on opposition to ratification.
This opposition was a blessing in disguise. It forced a long and thorough debate which went far to clarify the meaning of many portions of the Constitution and the intention of its framers. No less than James Madison pointed to those arguments as the best place to gain an understanding of the Constitution.
The nearly-completed Documentary History of the Ratification of the U.S. Constitution, when finished, will include twenty-one volumes of that debate. At a time when some claim that it is impossible to know what the Constitution was supposed to mean, these debates are a precious resource against a flexible, “living” Constitution.
By Charles Orndorff, TCC’s Constitutional Scholar
With that in mind, here is something that may surprise you: Federal entitlement spending over the past 50 years has grown significantly more under Republican presidents than under Democratic presidents.
I’ll come back to that below. But, first things first. The reason we have big government is because of the growth of entitlements: Social Security, Medicare, Medicaid, disability insurance, etc. Entitlements are nothing more than taking from Peter and giving to Paul. They are consuming an ever increasing share of federal spending and they are the principal reason for one of two nightmares in our future: (1) ever-increasing deficits for as far as the eye can see or (2) an ever-increasing tax burden.
As Nicholas Eberstadt wrote in the Wall Street Journal the other day, entitlement spending in 2010 at all levels of government totaled $2.2 trillion in 2010. That equals $7,200 for every man, woman and child in the country. It approaches a staggering $29,000 for a family of four.
Get ready for things to get worse. The Census Bureau tells us that one out of every two households is now receiving benefits under at least one entitlement program. As the population ages the costs of these programs will grow much faster than our ability to pay for them (our national income).
The Congressional Budget Office has projected how bad things are likely to be. Without any new legislation, taxes will claim two-thirds of the income of middle income families by midcentury if we are to keep all the promises we have made. Taxes on higher income folks will claim more than 90 percent of all that they earn.
So who is to blame for this state of affairs? Lyndon Johnson, of course, gave us Medicare, Medicaid and the rest of the Great Society. But when Johnson left office, these programs were relatively small. The main expansion came under Republican presidents Richard Nixon and Gerald Ford. Not only that, the expansions were largely the result of executive orders! That is, they didn’t have to happen.
The growth of the entitlement state moderated somewhat under presidents Carter, Reagan, and George H.W. Bush. Because of welfare reform under Bill Clinton, there was actually the prospect of some contraction. But during the presidency of George W. Bush, Republicans pushed for a new drug benefit under Medicare with a huge unfunded liability — greater in fact than the unfunded liability under Social Security.
Eberstadt summarizes the past 50 years this way:
From a purely statistical standpoint, the growth of entitlement spending over the past half-century has been distinctly greater under Republican administrations than Democratic ones. Between 1960 and 2010, the growth of entitlement spending was exponential, but in any given year, it was on the whole roughly 8% higher if the president happened to be a Republican rather than a Democrat.
Of course, the past may not repeat itself. We may have entered a new era. Barack Obama is the first Democratic president since Lyndon Johnson to call for a larger entitlement state — especially with the enactment of ObamaCare. Further, Republican nominee Mitt Romney has pledged to repeal ObamaCare as soon as he is elected.
Still, it’s worth remembering past deeds in addition to words. If Republicans succeed in electing the Romney/Ryan ticket, let’s hope they don’t suffer buyer’s remorse.
By U.S. Congressman Kevin Brady, senior member of the House Ways & Means Committee and vice chair of the Joint Economic Committee.
The Death Tax is a failed tax. And it needs to go.
By every measure, the federal estate tax has failed to achieve even the misguided goals Congress initially set for it. For nearly a century, it has failed to generate sufficient revenue; failed to redistribute income or boost the economy, and failed to meet any basic standard of fairness.
This failure is why a majority of members of the U.S. House of Representatives have co-sponsored my legislation to end this terrible tax once and for all. Senator John Thune (R-SD) is leading the effort to end this tax in the other chamber.
HR 1259 abolishes the federal estate tax permanently, because this tax generates more harm than good for theU.S. economy and federal tax coffers.
In a recent study titled “Costs & Consequences of the Federal Estate Tax: An Update,” economists on the Republican staff of the Joint Economic Committee point out the Death Tax has robbed almost as much capital from the U.S. economy as this tax has generated in revenue in its 96 years of existence.
The total revenue produced by this failed tax in almost a century is only $1.2 trillion, which fails to cover even one year of President Obama’s annual deficits. Remarkably, the revenues this tax will generate for this year covers barely a day of Washington spending.
Rather than redistribute wealth in America as its supporters hope, the JEC analysis shows the opposite: the estate tax motivates wealth holders to reduce savings and increase spending now rather than pass it to the next generation. This actually increases the consumption gap between the wealthy and the poor in America.
The bottom line is that both our economy and federal tax revenues would grow faster if the Death Tax was simply abolished.
According to a study by Stephen J. Entin, former deputy assistant secretary for economic policy at the Treasury Department, repealing the estate tax would actually increase federal revenue $89 billion through 2021 over the current estate tax revenue. How? Through increased economic output which spurs more tax revenue through payroll, income, and capital gains taxes without higher rates.
Ohio, Indiana and Tennessee have recently repealed this tax at the state level. And many countries that achieved higher scores than the United States on the latest version of Heritage Foundation’s Economic Freedom Index abolished their inheritance taxes, including Canada, Australia, New Zealand, Hong Kong and Singapore.
As the number one reason that many family farms, ranches and small businesses in American aren’t passed down to future generations, the cost of the Death Tax far exceeds any benefits it produces. It also piles on to the fiscal cliff we are headed for at the end of this year while causing businesses to sell assets and decrease their productivity.
The Death Tax is scheduled to spring back fully to life next year. Along with so many other tax hikes on capital gains, income, and dividends, this will have family-owned business and farms scrambling to just stay afloat, regardless of how flush or bereft of assets that they may be. We can’t let that happen.
Our tax code is too big, too complex and punishes those who work hard to build a family business. The Death Tax only adds insult to injury without helping reduce our nation’s $16 trillion debt. It’s time to bury it once and for all so Uncle Sam is no longer the intrusive shadow in the room when families grieve the loss of a father or mother who worked a lifetime to build their nest egg.
THE FEDERAL DEBT HAS GROWN 50% SINCE THE BEGINNING OF 2009!
ISSUE-in-BRIEF: In just four years, President Obama has managed a $5 trillion increase in the national debt—a full trillion more than George W. Bush added in eight years. The American Recovery and Reinvestment Act (also known as “The Stimulus”) cost taxpayers $767.6 billion, according to Recovery.gov. The CBO explains that federal spending on health care if Obamacare remains will rise from 5.4% of the economy today to 10.4% over the next 25 years.
These two signature Obama programs have added roughly a trillion a piece to federal spending. The Heritage Foundation’s J.D. Foster writes: “Federal spending as a share of the economy will average over 24 percent during Obama’s term, and each and every year of that term will see a higher share than during any year since the Second World War. That apparently qualifies as ‘significant fiscal restraint’ Obama-style.”
Where is the Presidential Leadership???
As a candidate in 2008, Obama scolded President Bush for adding to the national debt, calling him unpatriotic. At that time, the debt stood at $9 trillion. What does that make the President? His 2010 budget called for $3.67 trillion, but he got a measly $3.46 trillion out of Congress. For 2011, his budget request ballooned to $3.80 trillion, of which Congress delivered $3.6 trillion. The Washington Post Fact Checker concludes: “So in every case, the president wanted to spend more money than he ended up getting.”
Congress received the official mark-up of President Obama’s proposed budget for FY2013 in March. His budget would add $6.4 trillion in deficits between 2013 and 2022, bringing publicly held debt to 76% percent of GDP by 2022—compared to 40.5% in 2008. His spending proposal was so outrageous that Democrats and Republicans rejected it in both houses of Congress: 99-0 in the Senate and 414-0 in the House.
The Democrat-controlled Senate hasn’t even proposed a budget in over three years. Bottom line: The national debt will soon top $16 trillion and neither President Obama, nor the liberal Democrat leadership in Congress, has any plan whatsoever to deal with it.
The debt is above all a non-partisan issue. It threatens not only the favorite policy priorities of Republicans and Democrats, but the ability of government as we know it to function. On the present trend, according to the CBO, the national debt will hit 90 percent of GDP by the end of the next decade. Economists consider a national debt of 90 to 100 percent of GDP the point of no return – the point at which we no longer have the luxury of ignoring our debt, as Obama and Congressional Democrats seem content to do.
As the CBO reports, rising debt may result in higher interest payments on the debt; thus increasing the probability of a sudden fiscal crisis. Given that the U.S. government will pay $323 billion in interest expenses for fiscal year 2012 alone, an uptick of just .5% in interest rates could quickly spell disaster. The magnitude of the debt would outpace the CBO’s ability to model and predict economic developments—to say nothing of the government’s ability to eventually reconcile that debt.
Some handy debt facts and talking points:
Debt per Citizen: $50,843
Debt per Taxpayer: $139,913
U.S. Debt Held by Foreign Countries: $5.4 trillion
For Additional Information on the Federal Debt, please visit the following links:
This letter was signed by Peter J. Thomas, Chairman of The Cosnervative Caucus and members of the Conservative Action Project:
Duane Parde, President, National Taxpayers Union
Colin Hanna, President, Let Freedom Ring
Chris Chocola, President, Club for Growth
Grover Norquist, President, Americans for Tax Reform
David Williams, Taxpayers Protection Alliance
Tony Perkins, President, Family Research Council
William Wilson, President, Americans for Limited Government
Brent Bozell, President, Media Research Center
Alfred Regnery, President, The Paul Revere Project
C. Preston Noell, President, Tradition, Family, Property
Elaine Donnelly, President, Center for Military Readiness
Lewis Uhler, President, National Taxpayers Limitation Committee
Andrea Lafferty, President, Traditional Values Coalition
Ron Robinson, President, Young America’s Foundation
Heather Higgins, President, Independent Women’s Voice
Dr. Herbert London, President Emeritus, Hudson Institute
Edwin Meese III, former Attorney General
James Miller III, former Reagan Budget Director
J. Kenneth Blackwell, Chairman, Coalition for a Conservative Majority
Peter Thomas, Chairman, The Conservative Caucus
Al Cardenas, Chairman, American Conservative Union
Richard Viguerie, Chairman, ConservativeHQ.com
Mathew D. Staver, Chairman, Liberty Counsel Action
Rev. Louis Sheldon, Chairman Traditional Values Coalition
James Martin, Chairman, 60 Plus Association
Susan Carleson, Chairman & CEO, American Civil Rights Union
Tom Winter, Editor-in-Chief Emeritus, Human Events
Penny Nance, CEO, Concerned Women for America
Michael Needham Chief Executive Officer, Heritage Action for America
Bob Reccord, Executive Director, Council for National Policy
Bill Pascoe, Senior Vice President, Citizens for the Republic