Two Ways to Increase Revenue

by Bryan Baumgart

December 3, 2012

I’ve always hated the phrase, “increasing revenue”. From a business perspective, increasing revenue is a good thing. From a governmental perspective, “increasing revenue” usually means “increasing taxe rates”, which to the American taxpayers is NEVER a good thing. I will always call it what it is…”increased taxes”.

There is another way to “increase revenue”; however, without increasing tax rates. It involves creating wealth in the private sector which increases the pool of taxpayers. THIS is the type of increased revenue we should be pursuing.

Spending cuts (and tax rate increases) won’t begin to solve the problem. Spending cuts only involve cuts in the amount of increase in spending planned, not actual spending cuts. And asking more from the wealthy is only a drop in the bucket, it get’s us nowhere.

As Warren Buffett admitted, the plan to ask more from the wealthy is nothing more than a morale boost to the poor (aka: a big screw you to the wealthy). This meaningless class warfare gets us nowhere. If we don’t pursue policies of increasing revenue through wealth creation (including slashing corporate and income tax rates) and deregulation…we will never get out from behind the eight-ball.

If the only bill that will be on the table in these "fiscal cliff" talks, is a bill that involves “increased revenue” through increased taxes rates, then I don’t think the Republicans should have any part of it. We currently have guaranteed cuts in spending (through sequestration) coming already. Let the democrats own the tax rate increases just as they own obamacare (which is equating to large middle-class tax increases, premium increases, job loss, price inflation, along with the diminishing of the quality of healthcare in this country).

If Republicans cave and become complicit in these tax increases, the dems will surely (and I hope they do) use those votes against the Republicans when they run for re-election. I will too!!!

We got ourselves into a huge mess here, and just as I would be forced to make some painful sacrifices to get out from under huge credit card debt I wa responsible for running up…Americans will have to make some painful sacrifices to get out of this debt we ran up. We lived beyond our means and now it is time to pay the price. Everyone is pointing to everyone else to make those sacrifices.

“Ask more from the wealthy”

“I don’t want to lose my entitlements”

Bottom line…we are all in this together (both Republicans and Democrats ran up the debt this past decade) and it will take sacrifice from ALL of us to get out!!! EVERYTHING has to be on the table. Defense, entitlements, and even Obamacare (a massive espense). And we need to increase revenue by seeking wealth creation in our private sector.

Give a Man a Fish…

By: Bryan Baumgart  

11/2/2012

With the release of the latest jobs report we learn that for every ONE job created under the Obama administration, 75 more people have been added to food stamp rolls. 

In total since January of 2009, a net of 194,000 new jobs have been created while 14.7 million people have joined the food stamp rolls. As The Weekly Standard points out today, “During that time, our nation’s debt has risen $5.63 trillion. Total spending on food stamps is now more than $80 billion annually. Total welfare spending is now approximately $1 trillion, or enough to send every household beneath the federal poverty line an annual check for $60,000.”

Some may not be surprised by this trend; we are after all in the grips of a pretty stagnant economy. The problem however, isn’t the ever increasing number of Americans added to the rolls of food stamps. The problem is that the current administration has put in a much greater effort to increase food stamp rolls than to increase job creation. They have promoted dependence rather than empowerment.

President Obama claims, “We do not pressure any eligible person to accept benefits, nor is our goal to simply increase the number of program participants.” You can imagine how surprised I was then, when I was approached by a friend recently who mentioned that they were currently receiving SNAP themselves. They stated that while applying for college at Education Quest, counselors approached them and suggested they apply for SNAP.  The process was easy enough. They applied, had an interview, and began receiving food stamps immediately. Counselors even coached them on how to be accepted into the program stating, “It helps if you are a full time student working at least 20 hours a week.”

Despite the president’s claims, the focus of the Obama administration remains on increasing enrollment in SNAP. The administration has partnered with Mexico, meeting with Mexican officials over 30 times in an effort to boost participation among immigrants.

The USDA boasts a range of strategies and programs designed to bring more people to SNAP, including taking on “pride.” Awards are provided to local assistance offices for “counteracting” pride and pushing more people to sign up for benefits. A “Common SNAP Myths” sheet details the importance of reaching people who do not think they qualify or have beliefs that conflict with accepting food stamps. A pamphlet currently posted at the USDA website encourages local SNAP offices to throw parties as one way to get potentially eligible seniors to enroll in the program. Despite the high rate of food stamp participation, the USDA has numerous blueprints posted on their website aimed at getting more people to enroll. The USDA even goes so far as to argue that the program is “the most direct stimulus you can get.”

Only 194,000 net jobs have been created under the Obama administration. This pace doesn’t even keep up with the population increase. So few jobs have been created that the employment rate actually decreased due to an increasing number of working age adults have given up even looking for jobs. The real unemployment number (U-6) currently hovers around 14.6 percent.

While on the campaign trail, the president’s slogan has been to, “ask a little more from the wealthy”.  He doesn’t plan to ask though, he plans to take. Allowing the Bush era tax cuts to expire equates to a tax increase on job creators. In the words of Senator Marco Rubio, “I have never met a business owner waiting for the next big tax increase before he will create some jobs.”  Under the president’s current proposals, job creation in the private sector isn’t likely to pick up anytime soon. If these trends continue, we won’t have enough employed Americans to fund SNAP for the needy. If the trends aren’t reversed, America will soon go the way of our European neighbors.

A Lesson from Greece

by: Bryan Baumgart

November 7, 2012 

In late 2009, Greece had found itself removed from a long period of unprecedented economic prosperity and cast into the throes of a severe economic collapse. The Greek Ministry of Finance, in a 2010 report “Stability and Growth Program” highlighted FIVE main causes of the economic collapse.

1.   GDP plunged due to lack of competition in the private sector.

(Gross Domestic Product is the total value of all goods and services produced over a specific time period, usually calculated by adding the total income or the total amount spent by a nation).

2.   Budget Deficits skyrocketed when spending over a six year period (from 2004 to 2009) dramatically outpaced income, mostly to finance public sector jobs, pensions, and other social benefits.

3.   Government Debt Levels reached unsustainable sizes. Debt levels rose so dramatically that in April 2010, rating agencies downgraded the Greek economy to “junk status”, which caused the private capital market to freeze and bailout loans (from IMF) were required to avoid default.

4.   Budget Compliance was nonexistent.

5.   Statistical Credibility was compromised. To keep within monetary guidelines, the government misreported official economic statistics, even paying Goldman Sachs and other banks for helping them hide the actual level of borrowing. Flawed statistics made it impossible to predict accurate GDP growth, budget deficits, and public debt which turned out to be far worse than anticipated. Trust among financial investors was lost.

In May of 2010, Greece avoided default when the IMF (International Monetary Fund) agreed to a bailout of $163 billion dollars (110 billion euros). The conditions of the bailout required Greece to comply with:

1.      Implementing austerity measures (cutting spending on benefits and public services/welfare).

2.      Privatizing government assets worth $68 billion dollars (50 billion euros) by 2015.

3.      Implementing outlined structural reforms aimed at improving market competitiveness and growth (moving the public sector back to the private sector).

Greece failed to comply quickly enough and another bailout of $171 billion dollars (130 billion euros) was required and offered in February of 2012, with a requirement of even further austerity measures (more cuts to benefits and public services/welfare), a rise in taxes, and even more privatization reform.

The tax increases resulted in record numbers of Greek businesses going bankrupt. In 2011, Greece lost a total of 111,000 businesses (up 27% from 2010). The unemployment rate jumped from 7.5% in 2008 to over 25% in July of 2012. During that same period, the youth unemployment rate skyrocketed from 22% to 55%.

As Jon Henley stated in a March 2012 issue of The Guardian:

“In an economy without a welfare regime to speak of, the impact of five consecutive years of recession has taken its toll. Charitable foundations that used to fund educational programs have taken a big hit themselves and have now shifted to paying for soup kitchens. Neighborhoods are marked by buildings that owners are desperate to sell or rent and a major increase in the homeless sleeping rough. Almost half of Greece's young people are unemployed, as are one in five of their older peers. Despondency is everywhere, despite the "rescue". If future Greek governments keep to the terms of the bailout, by 2020 public debt will be back to what is was when the crisis erupted in 2009.”

But the leftist government of Greece refuses to face reality.  They have promised to hire at least 100,000 more people in the public sector, to restore all the budget cuts made over the past two years, and to offer free health care and social services to all illegal immigrants. To date, no real reforms have occurred in Greece. Not a single privatization has taken place. There have been no important changes in the labor market and no simplification of the tax system. Instead, the government has put nearly all of its energy into squeezing more taxes out of the overregulated private sector. The economy is in its fifth year of contraction, half of all young people are unemployed, the suicide rate is going up by double digits every year, and hundreds of thousands of people working in the private sector have not been paid for months.

Greece snubbed a policy of wealth creation for a policy of borrowing and subsidies. They have now reached such high levels of debt and government dependency that a realistic solution to their economic crisis is impossible.  Riots and violence rage every time necessary spending cuts are made, because the citizens of Greece are now completely dependent on social assistance. The UN warned that Greece may be charged with human rights violations if necessary cuts are made as citizens could be left without food, water or shelter. The only solution is temporary; borrow while you can because it’s only a matter of time before it all comes crashing down! Then human rights go out the window and chaos ensues!

 

How does the United States compare to our European neighbors? Much like Greece, we found ourselves plunging from prosperity into an economic crisis in 2008, brought on by manipulation of economic statistics by the government backed mortgage giants Fannie Mae and Freddie Mac and the removal of market competition allowing Fannie and Freddie to issue high risk loans without fear of failure.

Since our plunge into recession we have acted much in the same manner as Greece, repeatedly bailing out private companies branded “too big to fail” with tax dollars, and removing competition by nationalizing private industries from banking and mortgage to school loans and healthcare.  

Over the past four years the United States has dramatically increased government dependency, setting records for disability and food stamp rolls. Under the Obama administration, just short of 15 million people have been added to food stamp rolls while total welfare spending has already exceeded $1 trillion dollars annually.

The country’s debt has increased by $5.63 trillion dollars leaving us over $16 trillion dollars in debt.  For every $1 dollar added to the economy, this administration has added $3 dollars in debt. We have carried an annual deficit over $1 trillion dollars each of the four years Obama has been in office. Like Greece, much of the deficit has stemmed from entitlements and outrageous pensions and benefits packages cut over crony deals between elected officials and union leadership. Our debt has become such a liability that in September the United States joined Greece in having its credit rating downgraded.

Much like Greece, we have not complied with a budget. In fact, this administration has not even passed a budget since President Obama took office. Our country’s sluggish GDP figures (well below the 3.5% annual growth indicating an improving economy) indicate the poor jobs situation won’t improve anytime soon. So many people have given up hope looking for jobs the BLO actually dropped the unemployment rate down to 7.9%. The actual number of Americans whom now are without jobs totals almost 27 million for a REAL unemployment rate of 14.6%. The actual youth unemployment rate pushes 17%. Yet, for every ONE job created, 75 Americans have been placed on food stamp rolls.

The President’s signature achievement, Obamacare, hasn’t even kicked in yet and employers have begun involuntarily dropping employees down to part time to avoid the fines they would face under the law; potentially leaving up to 5.9 million Americans without benefits. Not that medical coverage would do Americans any good, as Bloomberg points out, the United States is looking at a doctor shortage exceeding 15, 230 primary care physicians alone under the new healthcare law.

Much like in Greece, austerity efforts to curb spending in the United States were met with strikes and resistance. Inflation is up, food and gas prices are way up, tuition and insurance preimiums continue to skyrocket, and household income continues to plunge.

Yesterday, voters turned down Governor Romney’s policies to create wealth in favor of continuing President Obama’s policies of increases in taxation, entitlement spending, and borrowing. As we approach the fiscal cliff early next year, our government faces the same predicament Greece did. Experts widely agree, if the tax hikes and cuts to public spending are allowed to kick in, the country will likely fall in to a much deeper recession.  Like Greece, the United States has reached the point of no return, and there is no indication that we will choose a different strategy.

*Where does Greece stand today?

Headlines from USA Today (November 6, 2012): “Strike Hits Greece in Bid to Derail Austerity Plan”

Rand Paul's Budget Plan to Balance Budget in FIVE Years!

Forget Paul Ryan's Budget! Rand Paul has introduced a very detailed plan to balance the budget and fix the economy within FIVE years, all without raising taxes! In fact...he proposes a 17% flat tax! Now THAT is fairness!  EVERYONE pays the SAME percentage of every dollar they make regardless of age, race, sex, religion, income, etc.  And perhaps the best part, despite Paul's reputation...he has not cut the national defense budget!  And for Medicaid for seniors...it gives all seniors the same health care plan as Members of Congress.

By Julie Borowski on March 21, 2012

Rep. Paul Ryan, the Republican Chairman of the House Budget Committee, has released his new budget plan called The Path to Prosperity: A Blueprint for American Renewal. His plan does contain some praiseworthy proposals such as cutting the corporate tax rate, repealing ObamaCare and ending forms of corporate welfare. However, it does not cut a single federal department and doesn’t balance the budget until 2040. Paul Ryan’s plan has received tons of media attention but it’s difficult for me to get very enthusiastic about a plan that would take nearly three decades to balance the federal budget.

While the Ryan plan is certainly preferable to President Obama’s budget, it is not as bold as the budget plan introduced by Rand Paul, Mike Lee and Jim DeMint in the Senate. Rand Paul’s plan known as a Platform to Revitalize America would slash four federal departments and balance the budget within five years without raising taxes. Now, we’re talking. The Department of Education, Energy, Commerce and Housing and Urban Development would be axed under the plan. Unfortunately, the media has largely ignored this true fiscally conservative budget.

According to the CATO Institute...Paul’s plan would achieve balance by halting and reversing the historic rise in federal spending. Taxes would not be increased, but revenues would steadily increase as the economy recovers.

The following charts compare Paul’s plan versus President Obama’s recent budget submission for fiscal 2012:

While Obama intends to continue spending at a historically high level, Paul would reduce spending as a share of the economy. Paul takes the scalpel to all areas of federal spending, including discretionary, defense, and mandatory. However, it is not a radical plan. In fact, it’s a practical, common sense budget that recognizes that the federal government’s growth has become unsustainable, and thus a threat to our economic well-being and future living standards.

read more details here