Thursday, July 7, 2011


Submitted by: Donald Hank

The Bogus Math Of Both Left And Right

Can we cut with the tax cuts for private jets bullcrap?
We heard it again yesterday in Obama’s “twitterfest news event”, and it’s getting both old and ismanifestly dishonest.
The same holds true for the so-called “racehorse exemption.”
Both claims come from the fact that business expenses are deductible.  So if you’re running a company and have a private jet, and the jet is used in some manner that furthers the business interest, you can deduct the cost of owning and operating it from gross revenues.  The same with the racehorse – if you raise horses to race with the intent of making money by doing so - that is, as a business – you can deduct the cost of raising the horses from your gross revenues (winnings.)
Are there reasonable debates to be had on where the line is between “business” and “pleasure”?  Sure.  The business jet issue is one that resonates well with middle-class America and its propensity for class warfare: “Those evil fat cats are flying around and not paying a damn dime in taxes on that ridiculously expensive jet!

But if as an executive the jet costs $20,000 for the day’s operation, and as a consequence of flying in it I can do a business deal for $1 million that I would not otherwise complete since I would otherwise be spending my time being assaulted by the TSA and sitting in an airport lounge, then the argument is truly specious since the $1 million deal generates a taxable profit in the company and in turn the amount of tax revenue paid grossly exceeds that which would be collected were the $20 large to be taxed instead.
Of course the mantra from the other side is that “but we’ll get taxes from both the business deal and the plane if we cut out the loophole!“  My riposte to that is “Welcome to fantasy island“; this is the same claim that was run when the luxury tax on yachts was passed, and what actually happened was the destruction of the sport-fishing yacht industry in the United States putting hundreds of people out of work while almost zero tax was in fact collected.
At the root of these games and lies that are being run by both sides of the aisle is that the math is simple and quite-compelling: There is no way to get rid of the monstrous budget deficits without doing two things – (1) dealing with entitlements and (2) dealing with the fundamental problems with taxation, trade and demanded services.
#1 has been political suicide.  While everyone talks about Social Security the real nightmare is found in Medicare and Medicaid.  These two programs are mathematically impossible to fix without either massive tax increases in the hundreds of percent or fundamental reform of the medical system in this country.  Neither is being seriously discussed, yet the fact of the matter is that we spend twice what the rest of the developed world does on health care.  This is not fraud, waste and abuse, it is structural and intentional financial rape perpetrated on the people by the medical industry with the glad-handed and intentional assistance of Congress.
The second part of the issue is worse.  The government has basically doubled in size in the last decade.  This has outstripped the growth in the economy by essentially a double.  Government largesse and bloat is never willingly surrendered – these “jobs” are the worst sort of “McJob” in that they generate no real wealth improvement for the common man but are tremendously good for the government employee and they extend the tentacles of the government further into your life.
Witness, for example, the “War on Drugs.”  This has turned into a tens of billions of dollarsindustry in the United States employing literal tens of thousands of people, from DEA agents to local cops to prosecutors, attorneys and prison guards.  Yet these laws are, at their core, about punishing consensual adult behavior and as a consequence in order to do so it is necessary to intrude into people’s private homes and lives, effectively destroying the 4th Amendment. 
What “public good” and “benefit to GDP” has come from these policies?  None.  The person busted for doing drugs may well have an addiction, but giving them a permanent felony record isn’t good for GDP at all!  The temporary “lift” you get from employing the people to arrest, prosecute and jail him is offset with the permanent destruction in that individual’s earnings capacity within the marketplace which persists even if he quits using the drugs!
Or look at the TSA.  Beyond the civil liberties issue there’s the simple economic problem: The airlines have been relieved of financial responsibility for monitoring and protecting against terrorist acts.  The TSA is bloated, it has a documented history of employing people who commit crimes including both robbery and sexual assault and has become a self-justifying federal agency that has simply siphoned off tens of billions of dollars that would otherwise be spent in the private sector.  Never mind the daily commission of acts that, were you or I to perform a similar act, would land us on the wrong end of a (justified) felony indictment.  Are we safer?  I argue no: There are damn few people willing to die to commit an act of terrorism – those who argue otherwise need to explain away the fact that anyone with such murderous intent could get in a common Suburban and kill dozens by simply driving it down a busy sidewalk, or commit mass-murder with a common gasoline can intended for their lawnmower.  Where are all these murderous bastards?
There’s also the other possibility, of course: The TSA has had nothing to do with air safety at all.  That is, the “use by” date of turning planes into flying bombs actually expired on 9/11 itself at 9:57 that morning when the passengers on Flight 93 revolted.  Since it is a fact that no “prohibited items” were ever brought on board airliners on 9/11, we are left with the uncomfortable conclusion that the TSA is nothing other than a liability shield for the airlines and a monstrous “make work” program sapping both the rights of Americans and our economic treasure.
Let’s face reality: By and large elementary logic makes clear that the alleged grand threat that the TSA uses to self-justify its existence, both as a matter of spending and intrusion into our lives, simply doesn’t exist.
The reality of our fiscal situation is found in these two charts:


That is, government deficits exist due to (1) overspending and (2) workforce deterioration.
#1 we’ve talked about.  But fixing #2 means making it unprofitable for corporations to offshore their labor.  When most of the “attraction” of offshoring production comes from the ability to pay and treat people like slaves (e.g. Foxconn) while at the same time exploiting the ability to dump environmental poisons into the air and water (which is not permissible in the United States) it is clear that absent constraints imposed by law a profit-seeking corporation will do exactly that.
Yet nobody – absolutely nobody – will talk about these fundamental realities.  Instead we hear about “free trade” while all that “free trade” has done is trash our trade balance, making clear that there’s nothing “free” about it.   This is not an accident – China routinely requires local sourcing, labor, and even transfer or joint ownership of intellectual property in exchange for access to their markets.  We, in turn, never require the same conditions on access to ourmarkets.
The idiocy of the left and right in these “negotiations” is predictable and yet augers poorly for actual fixes.  We must address the structural factors – there’s no other way.  Producing products where the funds used in production do not circulate back into the national economy is suicidal; we’ve tried to bridge that gap with more and more debt and in fact have done so for 30 years but the end of that rope has been reached and we’re still 200′ above the floor of the cavern.
Our choices are simple: Climb back up, despite the required effort and short-term pain that must be accepted in order to do so, or rappel right off the end of the rope and die.
Choose wisely America.

No comments:

Post a Comment