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Americans Deserve the IRS

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Photo Credit: Townhall

Individually, Americans do not deserve to be subservient to such a fear-mongering, intimidating and powerful agency as the Internal Revenue Service; but collectively, we do. Let’s look at it.

Since the 1791 ratification of our Constitution, until well into the 1920s, federal spending as a percentage of gross domestic product never exceeded 5 percent, except during war. Today federal spending is 25 percent of our GDP. State and local government spending is about 15 percent of the GDP. That means government spends more than 40 cents of each dollar we earn. If we add government’s regulatory burden, which is simply a disguised form of taxation, the government take is more than 50 percent of what we produce.

In order to squeeze out of us half of what we produce, a government tax collection agency must be ruthless and able to put the fear of God into its citizens. The IRS has mastered that task. Congress has given it powers that would be deemed criminal if used by others. For example, the Constitution’s Fifth Amendment protects Americans against self-incrimination and being forced to bear witness against oneself. That’s precisely what one does when he is compelled to sign his income tax form. However, a Fifth Amendment argument can’t be used as a defense in a court of law. The IRS will counter that you voluntarily provided the information on your tax return.

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Manipulating Growth: Data Shift to Lift US Economy 3%

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The US economy will officially become 3 per cent bigger in July as part of a shake-up that will see government statistics take into account 21st century components such as film royalties and spending on research and development.

Billions of dollars of intangible assets will enter the gross domestic product of the world’s largest economy in a revision aimed at capturing the changing nature of US output.

Brent Moulton, who manages the national accounts at the Bureau of Economic Analysis, told the Financial Times that the update was the biggest since computer software was added to the accounts in 1999.

“We are carrying these major changes all the way back in time – which for us means to 1929 – so we are essentially rewriting economic history,” said Mr Moulton.

The changes will affect everything from the measured GDP of different US states to the stability of the inflation measure targeted by the Federal Reserve. They will force economists to revisit policy debates about everything from corporate profits to the causes of economic growth.

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The Spending Sequester Will Grow the Private Economy — Don’t Back Off

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Photo Credit: Tax CreditsYesterday’s report of a 0.1 percent GDP decline for the fourth quarter came as a surprise to most forecasters. But it actually masks considerable strength in the private economy. Namely, housing investment in the fourth quarter jumped 15.3 percent annually, business equipment and software spiked 12.4 percent, and real private final sales rose 2.6 percent. All in, the domestic private sector of the economy increased 3.4 percent annually — a very respectable gain.

And here’s one for the record books: Working ahead of year-end tax hikes, individuals shifted so much money to the fourth quarter at the 35 percent top rate that personal income grew by 7.9 percent annually — a huge number. And there’s more: In order to beat the taxman, dividend income rose 85.2 percent annually. You think tax incentives don’t matter? Guess again.

Now, all this private-sector strength occurred despite the fact that government spending — namely military spending — dropped 6.6 percent. Inventories also lost ground and the trade deficit widened.

But here’s a key point: Military spending has now fallen virtually to its lower sequester-spending-cut baseline. It did so in one quarter by about $40 billion. So the brunt of the impact over the coming years has already been felt. (Normally, as of recent years, military spending has been virtually flat.)

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US Debt Headed Toward 200 Percent of GDP Even After ‘Fiscal Cliff’ Deal

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The nation’s long-term fiscal outlook hasn’t significantly improved following the recent agreement between Congress and the White House over tax and spending issues, according to a new analysis.

The “fiscal cliff” deal, combined with the debt-limit agreement of August 2011, only slightly delays the United States reaching debt-to-gross domestic product levels that would damage the economy and risk another fiscal crisis, according to a report from the Peter G. Peterson Foundation released on Tuesday.

The agreement “may have prevented the immediate threats that the fiscal cliff posed to our fragile economic recovery, but we haven’t remotely fixed the nation’s debt problem,” said Michael A. Peterson, president and COO of the Peterson Foundation.

“The primary goal of any sustainable fiscal policy is to stabilize the debt as a share of the economy and put it on a downward path, and yet our nation is still heading toward debt levels of 200 percent of GDP and beyond,” he said.

The report concludes that the recent round of deficit-reduction measures won’t make major improvements because they fail to address most of the major contributors to the debt and deficit, including rapidly rising healthcare costs.

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Celebrating Labor Day: A ‘Jobless Recovery’ On Earth, And The Future Of Workers On Mars

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Photo credit: Robert Couse-Baker

Happy Labor Day! And what better time than this annual celebration of America’s working stiffs to draw attention to our national economic recovery?

As those attached to the Dow Jones Average can attest, the economy is now perking along quite nicely, with the Dow up 57 percent since the dark days of 2009, presently soaring above 13,000. Also, the nation’s pile of wealth has grown impressively, executive paychecks have zoomed back up to Zip-a-Dee-Doo-Dah levels, and sales at stores like Neiman Marcus and Saks Fifth Avenue are absolutely crackerjack!

The only little cloud over this otherwise sunshiny recovery is … well, you. You people for whom Labor Day is named, that is.

Not only did Wall Street’s crash knock jobs, wages, benefits, homeownership and middle-class opportunities into the ditch, but they’re still stuck there — and even sinking lower. Yet the financial elites, political establishment and media powers remain rapturously focused on the Dow, uncaring about the precipitous decline in the Doug Jones Average.

If Doug and Donna aren’t prospering, neither is America, no matter how much wealth the privileged few are lavishing on luxury goods or socking away in offshore tax havens.

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Fed’s Driving Youth Unemployment to Record Levels while GDP Stagnates

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Photo credit: clementine gallot

Last week, the U.S. Department of Labor released its Employment and Unemployment Among Youth—Summer 2012 report. While many youths (ages 16-24) found a summer job this year, many did not even try. Fully 39.5 percent of the youth population neither worked nor looked for work this summer. This number has trended upward over time—it is almost double the rate (22.5 percent) from July 1989.

Of those who looked for work, many could not find it. The youth unemployment rate in July 2012 was 17.1 percent. By comparison, it was only 12.4 percent in July 2000 and 10.8 percent in July 2007. For men, blacks, and Hispanics, the youth unemployment rates in July 2012 were worse—at 17.9 percent, 28.6 percent, and 18.5 percent respectively.

Why are fewer youth participating in the labor force, and even fewer working? In part, because a bad economy always hits younger workers harder. The central problem with the labor market right now is a dramatic slowdown in job creation. While job losses rose at the start of the recession, they have since returned to pre-recession levels.

Hiring, meanwhile, has not recovered. Unemployment remains high because employers are creating fewer new jobs. This makes it much harder for those without jobs—like the youth—to find them. It also allows employers to become more selective in the people they do hire. That often means hiring older and more experienced workers.

Government policies have made this difficult labor market even worse for younger Americans. In 2007, Congress voted to raise the federal minimum wage to $7.25 an hour. Half of minimum wage earners are between the ages of 16 and 24. Raising the minimum wage, in addition to employer paid Social Security, workers compensation, and unemployment insurance prices many young workers out of the job market. An inexperienced high school student may not produce enough to be paid $7.25 per hour plus Social Security, workers comp, and unemployment insurance. As a result, since an employer is not allowed to pay her less by law, she is not hired and misses out on the job experience she needs to get a higher paying job: two-thirds of minimum wage workers earn a raise within a year.

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Click HERE for article regarding GDP’s 1.7% growth.

It’s Not Getting Better: GDP Slows to Sluggish 1.7 Percent Rate

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This morning’s update from the Department of Commerce on economic activity in the second quarter shows that the economy grew at an anemic 1.7 percent annual rate. This follows a nearly equally weak first quarter growth rate of 2.0 percent.

How weak is this? In terms of economic output, the current recovery is the weakest of any since 1945: Total output is only 6.8 percent higher than when the recession ended in 2009, which was about 12 quarters ago. Compare that to the other really big post-war recession: 1981. After 12 quarters, economic output stood 18.5 percent higher than the end of that recession. Even the really slow recovery from the 2001 recession outdoes the current one: By 12 quarters following the end of the 2001 recession, economic output was 8.9 percent higher.

The weak spots in the current recovery stand out in today’s economic growth report. The Bureau of Economic Analysis traces the sluggish growth rate to slowdowns in the spending of households and businesses and shrinking inventories.

While the media will highlight the weak household spending numbers, the real focus of concern should be on business investment. When businesses hold back on improving and growing their productive capacity, that inaction directly affects hiring decisions and, thus, household incomes. And that’s what businesses appear to be doing this year: They are sitting this economy out.

Very few economic actions testify more strongly to the failure of current economic policy—especially the threats of tax increases next year—than what businesses are doing. Well before voters head to the polling booth in November, American business has apparently voted against the near-term prospects of the economy. Imagine the economy today if better economic policy had been the norm over the past several years.

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US on the Brink of the Greatest Depression Ever via Fox News

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Photo credit: Mike Licht

Everywhere from FoxNews.com to CNBC.com, I suddenly see commentators warning of pending doom, economic collapse, and a new Great Depression. Welcome to my club. Perhaps America’s politicians and economists should have paid attention to an entrepreneur and small businessman that has been warning of economic collapse and a new Great Depression publicly for over two years.

More importantly, none of the current commentaries mention the “why’s” of this slow motion economic collapse…beyond the obvious — mountains of deficit and debt. None of them mention the dysfunctional structure of the current U.S. economy and the massive changes in the work ethic and mindset of the average American.

I am a successful small businessman and a patriot who loves America and always sees its greatness. I am also an optimistic, positive thinker who always sees the glass half full. But not this time.

This time we are in such deep trouble, the only solution is a radical restructuring of the politicians, the economy, and the way we view personal responsibility versus government handouts. If those changes don’t come then we are facing a long decline and the eventual end of America.

This time the results are going to be dramatically worse than 1929. This time we are facing The Greatest Depression ever.

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Video: The question is not “if,” it’s “when” our nation collapses from insolvency

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This new “Government Gone Wild” video explains in simple terms that both parties are selling this country out. Collapse is inevitable absent fundamental change.

Heritage: Another Recession Is Imminent

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Photo credit: Ed Yourdon

Yesterday, the Congressional Budget Office (CBO) reported that without a doubt, America will have a fresh recession next year unless Congress and the President prevent it.

We are facing the largest tax increase in history—Taxmageddon, scheduled to take effect January 1—and what experts are calling a “fiscal cliff” of sharp and unforgiving budget changes that will send the country spiraling downward. Congress and the President have the power to prevent this, and when the August congressional recess is over, that is exactly what they should do.

In its new report, the CBO said that if Congress does not act, it’s not economic growth we should be worried about, because the economy will actually shrink next year. It will shrink by 0.5 percent, and the unemployment rate will spike to 9.1 percent. As Heritage’s J.D. Foster explains: “Forget percentages—what does this mean in actual jobs lost if President Obama and Congress fail to act? It means roughly 1.6 million more Americans will be out of work—on top of the 12.8 million who already want to work but can’t find jobs.”

Preventing Taxmageddon and the fiscal cliff are necessary just to keep the economy from taking a nosedive. The status quo isn’t attractive, but Congress certainly shouldn’t make things worse. If Congress moves to prevent the nosedive, the CBO projects that the economy will grow only slightly next year, at an anemic 1.7 percent, and the unemployment rate will remain stuck around 8 percent.

Why? The CBO report makes it clear: Our spending problem continues, and it’s driven mainly by the three major entitlements: Medicare, Medicaid, and Social Security. Spending on these programs will outpace tax revenue over the next decade.

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