There will be blood

Recently I wrote a piece noting that Obama's economic policies are less about fixing the economy and more about retributive justice -- a pernicious form of wealth redistribution designed to achieve a liberal social agenda. This agenda is at the heart of Obama's philosophical orientation -- that same "spreading the wealth around" view that he inadvertently let slip to "Joe the Plumber" on the campaign trail. Many didn't pay attention to this off-hand comment -- but we know now just how revealing it was. Daniel Henninger reinforces the retributive justice argument in an op-ed in the Wall Street Journal today and highlights the underlying theory that alights the Obama redistribution plan. He cites a graph created by Thomas Piketty and Emmanuel Saez, French economists who "are rock stars of the intellectual left."  Their specialty is "earnings inequality" and "wealth concentration" -- code words for socialist theory designed to validate confiscatory economic policies. It turns out that Piketty and Saez are for Obama what Arthur Laffer was to Ronald Reagan. Perhaps it tells you all you need to know about Barack Obama that his economic philosophy comes from French economists -- that nation of stagnant growth, high taxes and huge public sector unionization. That in itself should be troubling enough.

Piketty and Saez have provided the Obama Administration with their rationale for "soaking the rich". See the following graph:

"As described in Mr. Obama's budget, these two economists have shown that by the end of 2004, the top 1% of taxpayers "took home" more than 22% of total national income. This trend, Fig. 9 notes, began during the Reagan presidency, skyrocketed through the Clinton years, dipped after George Bush beat Al Gore, then marched upward. Widening its own definition of money-grubbers, the budget says the top 10% of households "held" 70% of total wealth."

This kind of income inequality is anathema to those who see an equality of outcomes in society. Never mind, of course, that the top 1% of earners pay almost 40% of all Federal income taxes to begin with, and that from these earners come a huge percentage of the jobs that fuel the economy. Socialists like Piketty and Saez would prefer that everyone dumb down to a common denominator where so-called "winners" and "losers" were much closer together. They would prefer that everyone be mediocre rather than have a few big winners who raise the tide for everyone. And it is exactly the economic philosophy that Obama has now embraced. Massive wealth transfer as social policy.

And it matters not that it is bad economic policy, because fixing the economy is a poor second to the need to dumb America down. In Obama's own words:

"While middle-class families have been playing by the rules, living up to their responsibilities as neighbors and citizens, those at the commanding heights of our economy have not.

Prudent investments in education, clean energy, health care and infrastructure were sacrificed for huge tax cuts for the wealthy and well-connected.

There's nothing wrong with making money, but there is something wrong when we allow the playing field to be tilted so far in the favor of so few. . . . It's a legacy of irresponsibility, and it is our duty to change it."

So if you made a lot of money you somehow cheated -- not living up to your responsibilities, even though you paid your fair share of taxes in what is already a highly progressive tax code.

What a tremendously offensive statement.

This is class warfare pure and simple. Or, as Henninger says, "the primary goal is a massive re-flowing of "wealth" from the top toward the bottom, to stop the moral failure they see in the budget's "Top One Percent of Earners" chart.

And for those top earners -- the engine of our economy -- there will be blood.

Motorists shafted by Dems' tax trick

Beginning July 1, Colorado drivers will pay higher taxes--we're told to call them "fees"--on every vehicle every year when we renew our license plates. The increase of $29 to $51 per vehicle is projected to generate $250 million annually to repair unsafe roads and bridges, Gov. Bill Ritter said when he signed the "fee" hike into law.

All this occurs under the guise of economic stimulus as Colorado Democrats learn from their Washington counterparts to strike quickly while the economy is on the ropes and the public is too worried about their own finances to pay attention to statehouse shenanigans.

To be fair, transportation funding from Colorado's fuel tax has been stagnant in recent years because it's calculated on a per-gallon, rather than a per-cent, basis. Higher fuel prices and better fuel efficiency keep total fuel consumption relatively flat. For the last 10 years, the state's share of fuel tax receipts never fell below $379 million but never grew above $430 million.

When the economy is booming, roads and bridges receive a tremendous bonus from the general fund ‹ income and sales taxes ‹ which nearly matched the fuel tax, adding $1.3 billion to the transportation budget from 2005 to 2007.

However, just hours after Gov. Ritter signed the vehicle fee hike into law, every Democrat in the state senate voted to sever this general fund lifeline to transportation.

If it sounds like Democrats are talking out of both sides of their mouths, it's because they are - at least, so far. One day, they say our roads and bridges are unsafe and demand more money from Colorado drivers. The next day, they take a hatchet to transportation funding.

Any sane person can be excused for wondering what they're drinking or smoking at the state capitol.

Sadly this is nothing new. Dating back to former Gov. Roy Romer, Democrats' favorite tactic has been to grow social welfare spending and leave transportation with scraps. Romer's approach was to tell voters that if they wanted more money for transportation, they should vote for higher taxes.

In 1997, Romer and Republicans reached a compromise that guaranteed the aforementioned bonus source of highway funding and limited general fund spending increases to no more than six percent per year.

Republican Gov. Bill Owens staunchly defended that compromise and worked out a similar agreement with Democrats in 2002.

Now that Democrats hold a monopoly at the state capitol, they seem intent upon smashing those agreements in order to boost social welfare spending.

Senate Bill 228 would eviscerate the limit on general fund spending, end a vital source of transportation funding, and allow rapid expansion of entitlements. Even Gov. Romer didn't suggest repealing this limit without the required public vote, but today's Democrats are above consulting lowly taxpayers.

The bill's sponsor, Sen. John Morse, nearly stepped in it recently when, reacting to opposition from Denver chamber of commerce, he declared, "Let's let the people's elected representatives decide that - not the chamber."

Better yet, Sen. Morse, let's let the people decide for themselves, as the constitution ­ which you pledged to uphold ­ requires.

Ironically, proponents suggest that eliminating a spending limit to facilitate more spending on social welfare will help Colorado "get out of a recession."

That's an argument with rife with economic illiteracy. If all spending limits disappeared tomorrow, state government still couldn't spend an extra dime. In a recession, it's the economy that limits spending. Moreover, Colorado's government doesn't fund the economy; the economy funds government.

If Democrats want to expand social welfare spending, they should be honest about it. If they believe transportation needs more money, they should first protect every existing resource. And if they want to repeal state spending limits, they should follow the constitution by asking the voters.

Mark Hillman served as senate majority leader and state treasurer. To readmore or comment, go to www.MarkHillman.com

Spenders aim to bust the 6%

Emboldened that the state supreme court still hasn't ruled on Gov. Bill Ritter's plainly unconstitutional property tax hike, tax-and-spenders at the State Capitol are drawing up their game plan for another end-run around voters. If they can get away with hiking property taxes by claiming it's not a tax increase, then Democrats are increasingly confident they can again bypass voters and the state constitution by claiming that a spending limit is something else.

The Taxpayers Bill of Rights (TABOR) in the state constitution famously mandates that taxes cannot be increased without voter approval. However, voters also get the final word on weakening any limits on "revenue, spending and debt."

In 2005, Referendum C suspended much of TABOR for five years and modified other portions indefinitely. However, Ref C left intact a provision that limits annual increases in general fund spending to six percent and devotes anything over that amount to roads and bridges.

Now Democrats - and one Republican - want to eviscerate that limit, too, although their justification and methods are dubious.

Even Gov. Ritter's budget office - known for its dreamily-optimistic projections - doesn't expect general fund growth to bump against the limit in the next four years.

Why then are liberals chafing at a limit that won't actually impede them anytime soon? For the same reason their counterparts in Washington turned an "economic stimulus" bill into a big-government spending binge.

"You never want a crisis to go to waste," reminds Rahm Emanuel, chief of staff to President Obama.

Taxpayers striving to keep their own financial boat afloat don't have time to worry about the minutiae of government formulas, so Democrats shamelessly use today's economic distress to dismantle anything that might slow state spending when the economy rebounds.

Spendaholics are all atwitter. "We've got to do something!" more often conceals an agenda of opportunism than of necessity.

"We don't have a spending problem, we have a revenue problem," complain activists at the liberal Colorado Center on Law and Policy. Translation: "Government can't spend enough because taxes aren't high enough."

No wonder they don't trust the voters.

Next, Jean Dubofsky, a former supreme court justice with a crafty legal mind and a penchant for legislating from the bench, proffered a clever legal strategy.

Dubofsky is no neutral observer. She's a board member of the Colorado ACLU and two liberal think tanks that despise TABOR. Her opinion suggests that the six percent limit really isn't a limit and can, therefore, be changed without voter approval.

Two Democrat legislators are dutifully parroting that message.

Denver Rep. Mark Ferrandino claims the six percent limit "doesn't actually limit the amount of money we're spending." Colorado Springs Sen. John Morse calls the six percent limit "an allocation strategy. TABOR is silent on allocation strategies."

Past legislatures and former governors from both parties have taken TABOR at its word when it plainly says: "Other limits on . . . revenue, spending and debt may be weakened only by future voter approval." Further, the constitution requires that TABOR's "preferred interpretation shall reasonably restrain most the growth of government.."

Although a spending limit of six percent is indeed arbitrary, it is hardly draconian. Yes, it could cause major difficulty in an age of hyper-inflation, but for eight of the past 10 years, six percent was more than the combined growth of inflation and population. Why then do liberals find it so oppressive?

Because expanding entitlement spending is the holy grail of the Left. More people who depend on government means more votes for the party that promises bigger government. Expanding social welfare is difficult when anything over six percent must go to roads and bridges.

It's ironic that liberals who liken government spending to "investment" now prefer to shift money away from lasting infrastructure and into social programs where more spending always begets demand for more spending.

If Gov. Ritter and Democrat legislators aren't willing to trust voters with these decisions, as the constitution requires, why then should voters trust them with their taxes?

Sausage process belied BHO promises

Many Americans are skeptical of the economic stimulus bill as passed by Congress, and with good reason. We may debate the merits of the Keynesian principles of government stimulated economy versus supply side economics. Both the House and Senate versions of the stimulus package, however, did not embody the true intent of either theory. They are, rather, a dreadful example of social engineering and special interest spending that most Americans denounce. Despite calls to implement the best ideas from all to stimulate the economy and reach a true bipartisan compromise, this bill has been rammed through the legislative process without taking stock of legitimate concerns and proven stimulus techniques or the implications of massive debt on future generations.

Keynesian theory is an economic policy that believes you can stimulate the private sector through tax policies and funding of public projects. As the government spends money on infrastructure it creates jobs and makes America more competitive on the world market through the infrastructure improvements. Even though the stimulus package was presented as primarily Keynesian, both versions stimulus bill of 2009 spend more money on special interest projects and the type of wasteful, uncontrolled spending that is often blamed for our current economic troubles.

Supply side economists believe that the best way to get Americans back to work is to create tax structures that encourage businesses and people to invest capital and create jobs. The United States has the highest corporate tax rate of industrialized nations. I favor a reduction of corporate tax rates from 35 percent to 25 percent, which would directly inject capital into an economy that is sputtering. I also believe there are legitimate infrastructure, scientific and transportation projects that are practical only on a governmental scale that would also make us more efficient and effective.

President Barack Obama made three main promises about taxes, the economy and spending during his campaign. First, he promised that 95 percent of Americans would receive a tax cut. Second, businesses that created or transferred jobs from overseas would receive a $3,000 tax credit, per job. Third, he pledged to go line-by-line through the budget and remove wasteful spending and eliminate special interest pork. It is disappointing that two of three promises have not represented in the economic stimulus package. Although there are some tax cuts, they are nowhere near the extent to which he promised and unlikely to stimulate investment in businesses or create jobs. The Congressional Budget Office's (CBO's) assessment of the current stimulus bills states that the spending will probably result in an economic drag on the economy due to increased debt and insufficient stimulating activities. Further, the CBO analysis concludes there is not enough spending in 2009 to give the economy a jump start and, overall, most expenditures are not stimulating in nature.

I realize that through the art of legislation and politics, many campaign promises are often too difficult or impractical to implement. I believe that the President should have shown true leadership by putting a stop to the wasteful spending and taking the time for serious thought and negotiation. President Obama should have led this process, rather than leave the crafting of this critical legislation to the sausage mill process and divisive House and Senate leaders.

True bipartisanship in Washington would combine the best of both of Keynesian and supply side economic principles while being as fiscally responsible as possible. This is the type of change that Americans want and need. Americans' real hope was for our politicians to resist the temptation to load special interest spending in the stimulus and avoid taking out a second mortgage on our children's future.

Scott Starin works in industry, ran for Congress in 2008, and chairs the Boulder County Republicans. This is from his Sunday column in the Boulder Camera.

Four objections - and a better way

America is at a crossroads. Congress, pressed by President Obama to act quickly to prevent “catastrophe,” is on the verge of spending more than $800 billion on a “fiscal stimulus package” intended to jumpstart the economy, with roughly $300 billion in tax rebate checks and $500 billion in infrastructure spending. Hundreds of economists, however, have expressed their deep concerns about the government’s plan for dealing with the recession, and a review of the effectiveness of such policies as those proposed reveals the folly of tax rebates and government spending as fiscal stimulus.

1. Tax rebates do not boost consumer spending. According to economist Martin Feldstein, CEO of the National Bureau of Economic Research, when tax rebates went out as economic stimulus last spring, only around 16% of the checks were actually spent, with nearly five times that amount going into savings. Most of the rebates were used to pay off loans, not to buy new products and services, and the stimulus package utterly failed to preclude the recession.

In 2001, tax rates were reduced and tax rebates went out to make up the difference. While the economy improved after the tax changes, evidence suggests that the rate reductions, not the rebates, did the trick. A late-2001 study conducted by economists Matthew Shapiro and Joel Slemrod of the University of Michigan and NBER found that only 22% of those households receiving stimulus checks spent the money.

Furthermore, by the time the checks would be in the mail, the economy may be improving, as happened, according to Steven Weisman and Edmund Andrews of The New York Times, in the 1970s. If implemented now, the benefits of a tax rebate stimulus—a small burst in increased consumer demand—are minimal at best and will not outweigh the substantial costs.

2. Faulty policy is not worth the debt risk. While the value of the dollar has lately gained in strength, it still has the potential to continue its recent decline. As its value goes down and creditors like China see their own GDPs shrink, creditor concerns over their holdings of U.S. bonds will rise, resulting in the likely increase in interest as they rethink their holdings. By spending $800 billion on a stimulus package that will likely have minimal effect, the U.S. government is essentially assuming even more debt, which is already at $10.7 trillion, at greater national risk.

3. Infrastructure projects will not work. Obama intends to spend around $500 billion on infrastructure projects and public works programs, including transportation projects, intended to create jobs and boost consumer confidence. Yet when Herbert Hoover and FDR tried such programs in the 1930s to tackle the Great Depression, unemployment remained in the double digits up to World War Two, averaging at 17.2%.

According to the Heritage Foundation, federal spending rose from “3.4% of GDP in 1930 to 6.9% in 1932 and reached 9.8% by 1940. That same year—10 years into the Great Depression—America's unemployment rate stood at 14.6%.” In sum, massive increases in government spending did not result in noticeable economic improvements.

Even if infrastructure spending were to have positive effects, an early analysis of the Congressional Budget Office found that just 7% would be spent by next fall, with only 64% reaching the economy by 2011—likely after the country has entered into recovery.

4. Japan’s “lost decade.” Japan’s “lost decade” of economic growth of the 1990’s presents an excellent case study for the suggested package. Over a period of seven years, the government implemented eight different, large stimulus packages much like Obama has proposed.

According to The Wall Street Journal, during the 1990’s, the Japanese government, faced with many of the problems we are confronted with today, tried giving out loans to businesses, boosting infrastructure spending, buying bad assets off of banks and distributing tax rebates, among other Obama-esque policies.

These policies resulted in an increase in Japan’s debt-to-GDP ratio from 68.6% in 1992 to 128.3% in 1999. In essence, government spending in Japan skyrocketed in ways very similar to Obama’s proposals, yet the economy did not experience noticeable improvements until the current decade.

5. An alternative proposal. The government must instead institute wide-ranging, permanent, pro-growth tax rate cuts, starting with making the Bush tax cuts permanent and expanding them. Beginning in 2010, the Bush rate reductions on income, capital gains (investments) and the estate tax will start to dissipate. With the dire need for capital injections into the market, allowing the 15% capital gains rate to return to the 20% rate would discourage investment in the economy. Instead, the capital gains tax should at least be cut in half to 7.5%, if not temporarily expunged for all investments begun this year and kept for no less than two years, so as to incentivize greater investment.

Former House Speaker Newt Gingrich has proposed that the 25% income tax rate be reduced to 15%, thereby “establish[ing] a flat-rate tax of 15% for close to 90% of workers.” Such targeted tax cuts would give the economy the boost it needs to create jobs and increase consumer demand and investment. We must then slice the corporate tax rate from 35%, the second-highest in the world, to 25%, the average in Europe. This would expand incentives for businesses to create jobs in America and lessen the enticement to outsource.

If the Bush tax cuts expire, taxpayers will reduce spending in anticipation of the expirations, stunting the benefits of the rebates further. Alternatively, the knowledge that tax rates will be cut and individuals will be permitted to keep more of their income will give a sense of comfort to the beneficiaries.

By cutting marginal tax rates now, the short-term effect will be a rise in consumer confidence, resulting in a boost in consumer spending. The long-term relief that came in the form of broad-based tax cuts in 2003 resulted in the largest single-quarter GDP growth in 20 years, 7.2%, and the creation of 8 million new jobs through 2007.

The president has disappointingly labeled such contentions against his plan “old,” “phony,” “worn out” and “tired.” Yet history has shown that the net benefit of such stimulus packages is minimal, and he who does not learn from history is doomed to repeat it.

A fiscal stimulus of tax rate cuts, not tax rebates or infrastructure spending, would stimulate an economic recovery by putting more money in people’s pockets long-term and increasing demand in the short-term. That is the kind of economic policy that would do America the most good.

Jimmy Sengenberger is a political science student at Regis University in Denver, a 2008 honors graduate of nearby Grandview High School, a national organizer for the Liberty Day movement, online radio host, and a columnist for the Villager suburban weekly. He is also College Liaison for BackboneAmerica.net, working through the Backbone Americans group on Facebook.