Saturday, September 25, 2010

It's The Spending, Stupid

This morning, I was watching Judge Napolitano's "Freedom Watch" on the Fox Business Network while I was putting on my MAMIL outfit to go for a bike ride.

A discussion that will be carried out many times this weekend and in the coming days, is that of ending the Bush tax cuts, and the Judge was doing his part.  The DNC talking point is that they need to end the cuts for the top income bracket because "we need to cut the deficit".  You will hear them say it turns out to be "700 Billion Dollars". 


As always, they assume you're not capable of doing math and aren't really paying attention.  They think you'll hear that number and think they mean $700 billion every year.  The Judge had a professor, Dr. Caroline Heldman, who spouted the line that we need to increase taxes on the rich to pay for the deficit.  

You see, the 700 billion dollars is a roll-up for 10 years.  If you think that's an accurate number, go look up what the estimates were for today's economy from 10 years ago: a 10 year prediction is nothing but a wild guess.  Secretary of the Treasury Timothy Geithner said,
Geithner said extending the tax cuts for the top 2 percent of taxpayers would cost $700 billion over a decade and $30 billion for a single year.
Since 700 divided by 10 is not 30, you know they're counting on healthy economic growth to get that 700 billion number.  Now remember this year's deficit is 1.4 Trillion dollars, and anyone can see that 30 billion is 2.1 % of it.  If you take it down to the daily level, just the deficit is 3.8 billion dollars a day.  The daily tax revenue they'll get is 82 Million.  When I ask myself who will benefit more from that, the taxpayers or the feds, it's pretty clear it's not the leviathan. 

The fact is, this is a spending problem.  If you confiscated every single penny from every billionaire in America, you couldn't fix the deficit.  According to this link, if you confiscated every single penny of income from the top 1% of taxpayers, you couldn't pay off this year's deficit.  In fact, the top brackets pay a higher percentage of the tax burden than ever before:
Never forget that while it's not a fundamental characteristic of the universe and is not a physical law, Hauser's Law always seems to be true.  If that bothers you, the laws of thermodynamics aren't fundamental physical laws, either.  Hauser's Law and the First Law of Thermodynamics enjoy essentially the same status.

Hauser's Law states that no matter what your tax rates, you never get more than about 20% of GDP collected in taxes.

No, this isn't a tax problem.  It's a "stop the insane spending" problem.

Edit 10/16/10 - Turns out I blew it big time.  I originally had the source of needing the 700 billion to pay the deficit as "Dr. Elizabeth something-or-other-I-think."  I watched the Judge again this morning, and the professor was Dr. Caroline Heldman.   All references to her are corrected here.  And to be charitable, here's a link to her web page at the college where she is professor of politics. 


  1. Most people don´t know or care that ¨the wealthy pay 42% on Capitol Gains until they sell the Home that they have raised their families in and want to use that money to buy their retirement home and use the rest for their retirement fund. That´s when they say oh shoot(usually an other word)this ain´t fair.


  2. Exactly.

    I find the "death tax" insulting. Anything in your estate, except tax-sheltered things, has been taxed at least once before. Now you get another special tax just to prevent you from giving this already-taxed money to your kids. Why, exactly, is it wrong for me to try and help my kids by leaving money I worked hard for? To prevent inherited wealth dynasties in this country. Worked real well with Paris Hilton, didnit?