Saturday, October 29, 2011

How Taxes Work

This was forwarded to me in an e-mail. It explains our tax system very well:

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100…

If they paid their bill the way we pay our taxes, it would go something like this…

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that’s what they decided to do..

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball.

“Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20″. Drinks for the ten men would now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men? How could they divide the $20 windfall so that everyone would get his fair share?

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man’s bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.

And so the fifth man, like the first four, now paid nothing (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).
Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.

“I only got a dollar out of the $20 saving,” declared the sixth man. He pointed to the tenth man,”but he got $10!”

“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar too. It’s unfair that he got ten times more benefit than me!”

“That’s true!” shouted the seventh man. “Why should he get $10 back, when I got only $2? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. This new tax system exploits the poor!”

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore.

In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.

Friday, October 28, 2011

The Final Five: October 28, 2011

The Final Five: Bedtime Stories for Conservatives
October 28, 2011

Tonight's Crazy Story
An Ohio dentist has offered to buy back Halloween candy from kids.

Tonight's Final Five:

David Freedman explains why economic models are always wrong: they require calibration data that cannot be accurately predicted. However, problems come when analysts continually try to recalibrate data instead of fixing the model.

Ronald Brownstein explains the two races taking place in the Republican primary: the race to determine the "conservative" candidate and then the race of that candidate against Mitt Romney.

Taking a laugh a little
"President Obama just announced a new student loan plan that will forgive debt after 20 years. Yeah, Obama said that forgiving debt is the most honorable thing someone can do. And then he repeated that in Chinese."
-Jimmy Fallon, 10/27/11

Now Back to The Final Five

Keynesian policies have given us high unemployment and a stifled recovery. Allan Meltzer gives four reasons why the Keynesian model keeps failing.

Peter Suderman argues that Mitt Romney's plans to control federal spending will fail.

A Wall Street Journal editorial presents the distinction between Paul Ryan and Barack Obama: Obama divides the country while Ryan is trying to think through our problems.

Tomorrow in History: October 29
October 29, 1886 - A parade celebrating the dedication of the Statue of Liberty becomes the first "ticker-tape" parade when office workers throw ticker tape in the streets.

Food For Thought - A Bedtime Snack
"As the cool and deliberate sense of the community ought in all governments, and actually will in all free governments ultimately prevail over the views of its rulers; so there are particular moments in public affairs, when the people stimulated by some irregular passion, or some illicit advantage, or misled by the artful misrepresentations of interested men, may call for measures which they themselves will afterwards be the most ready to lament and condemn. In these critical moments, how salutary will be the interference of some temperate and respectable body of citizens, in order to check the misguided career, and to suspend the blow mediated by the people against themselves, until reason, justice and truth, can regain their authority over the public mind?"
-James Madison

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America Needs Hope and Change

“Hope” and “Change.” Two words that captivated the attention of America three years ago, and ultimately, it was these words that fueled the selection of our current President. While Republicans have taken to mocking these two words (“How's that hopey changey feeling working out for you?”), perhaps they should look a little more closely at these two words and see what they can learn about Americans.

Contrary to what many of my fellow conservatives would like to admit, Obama's message was exactly what the country wanted and needed in 2008. Americans had spent the last eight years under a president who campaigned as a conservative but governed as liberal—if not more liberal—than the man who preceded him. (For example: Clinton signed welfare reform; Bush signed the Medicare prescription drug package.) At the same time, we were engaged in two wars that we won quite handily, only to find our military incapable of ending civilian rebellions that followed. Meanwhile, many Americans were losing their houses, and those who could afford to stay in their homes were finding they owed more than the homes were now worth. Toss in rising unemployment and the largest deficits in American history (at the time), and it was not a pretty picture for America. If there was one thing that Americans wanted in a president, it was someone who could provide hope and change: hope that America would regain its economic strength and solutions for change to make that happen.

Americans responded positively to Obama's 2008 message: the Democratic base turned out in unprecedented numbers. However, in the almost three years since that election, Americans have come to realize that they were fooled. Good marketing sold a message of hope and change, but the product failed to meet expectations. America failed to ask Obama what his ideas of “hope and change” really meant. Under Obama, Americans have seen more “business as usual” instead of “change we can believe in.” Unemployment and debt continue to rise, many houses are still underwater, and we are still in Afghanistan and only now talking about getting out of Iraq. Given all these scenarios, it is no wonder that Obama's approval ratings continue to fall. Americans were promised change, but little has changed, and the changes that Obama has implemented have not been what Americans hoped for.

We have now begun the time for Republicans to determine who will contest Obama in the 2012 election. However, Republican candidates need to take a lesson from the president's 2008 campaign. Instead of spending their time attacking each other or attacking Obama, the candidates need to begin laying out their own message, centered around the ideas of “hope” and “change.” America needs someone willing to stand up and lay out a real plan to change America for the better. America needs a president who will change an over-regulating executive branch that is stifling job creation. America needs a president who will change course in the Middle East and allow us to put out the insurgencies in Iraq and Afghanistan. America needs a President who will change our financial priorities and reduce the debt instead of piling on more debt. America needs a president who will provide hope to the jobless by laying out a plan that business leaders—not academic economists who have never created a single job—say will increase hiring.

The problem with the Obama presidency was not the message of hope and change, but the lack of action that followed the message. Defeating Obama in 2012 is certainly possible, but it will require a strong leader with a strong message. That message, however, can be as simple as using the ideas behind the two words Obama rode to the presidency three years ago. However, unlike 2008, Americans will not be fooled by mere words, and will expect a plan of action from whoever is the nominee. A message and a plan that provides hope and promises change could be exactly what America still needs.

WordBites: October 28, 2011

WordBites - October 28, 2011
"Soundbites, except with words!"

Starting with some domestic news, a new FOX News poll is showing that 76 percent of Americans are dissatisfied with the direction of the country. This is up from 53 percent at Obama's 100 day mark, and it rivals the 79 percent level of displeasure when he took office.

Moving to Washington, the Washington DC Office of Human Rights has confirmed it has received a complaint against Catholic University over the presence of crosses and other religious symbols. The complaint alleges that the university has prevented Muslim students from forming a Muslim student group and will not give them a room without Christian symbols for their daily prayers.

In tech news, Google released an updated transparency report listing the number of user data requests it receives. Over the first half of 2011, Google received an average of 31 requests for user data each day, and 93 percent of those requests were approved.

Moving to New York, it appears that the Occupy Wall Street protesters have a real problem. They have to figure out how to spend the $500,000 in donations they have received since the start of the protests. The number of spending requests have led the group to consider establishing a board of directors in order to allow it to file as a tax-exempt organization.

Thursday, October 27, 2011

The Final Five: October 27, 2011

The Final Five: Bedtime Stories for Conservatives
October 27, 2011

Tonight's Crazy Story
What happens when a man tries to get himself inside a baby swing for $100? A meeting with firefighters and a hospital visit ensue.

Tonight's Final Five:

James Pethokoukis gives seven reason why Obama's income inequality argument is wrong, despite starting with a commonly-cited graph claiming the opposite.

Despite his claims to "cool" global warming with a cap and trade system, Obama could not get any plan passed, even when Democrats held both houses of Congress. Victor Davis Hanson analyzes why global warming has taken a back seat in this administration.

Taking a laugh a little
"We had President Obama on the show last night. I think the president enjoys visiting NBC because we're the only place that has lower numbers than he does."
-Jay Leno, 10/26/11

Now Back to The Final Five

John Hinderaker explains why giving more money for education is not the right solution for America's education problems. While spending has doubled, test scores have remained flat.

The unemployment rate has been hovering steady at just over nine percent, but not every state is being affected equally. Debora Dragseth explains why North Dakota has the lowest unemployment rate in nation.

Paulette Miniter explains why Perry's state-sponsored capitalism in Texas is different than Obama's support of companies like Solyndra.

Tomorrow in History: October 28
October 28, 1636 - The Great and General Court of the Massachusetts Bay Colony votes to establish the first college in the New World, known today as Harvard University.

Food For Thought - A Bedtime Snack
"Arbitrary power is most easily established on the ruins of liberty abused to licentiousness."
-George Washington

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Wednesday, October 26, 2011

The Final Five: October 26, 2011

The Final Five: Bedtime Stories for Conservatives
October 26, 2011

Tonight's Crazy Story
Another Huffington Post video shows us what happens when a cat decides to climb a traffic light and sit in the red light.

Tonight's Final Five:

Juan Williams provides insight into the lessons he has learned in the year since he was fired from NPR. While I do not agree with his political positions (including some of the ones mentioned in the article), he provides great insight into the assault on free speech.

David M. Smick analyzes the role of public debt in the economic situation in Europe, and he provides a warning that America may not be far behind.

Taking a laugh a little
"I just read that a bear broke into a candy store in Tennessee and started eating all the candy. That’s right, a live bear filled with candy. Or as Sarah Palin calls that, 'the best piƱata ever.'"
-Jimmy Fallon, 10/24/11

Now Back to The Final Five

Avik Roy explains the fundamentals and potential effects of Rick Perry's economic plan, centered around an analysis of the flat tax proposal.

Matt Mackowiak explains the divide in America: those who make money and those who take money. He explains why the divide will continue to exist until every American is personally invested in the costs of government.

Through one 1984 Supreme Court decision, the United States has expanded the ability of the government to take private property. Richard Epstein argues that in a time when even communist China is affirming the right of property, the United States seems to be destroying that right.

Tomorrow in History: October 27
October 26, 1964 - Ronald Reagan gives a speech supporting Republican presidential candidate Barry Goldwater. His "A Time for Choosing" speech did not help Goldwater win the election, but it did launch his political career which culminated with him moving to the White House 16 years later.

Food For Thought - A Bedtime Snack
"If men through fear, fraud or mistake, should in terms renounce and give up any essential natural right, the eternal law of reason and the great end of society, would absolutely vacate such renunciation; the right to freedom being the gift of God Almighty, it is not in the power of Man to alienate this gift, and voluntarily become a slave."
-John Adams

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Funding Bankruptcy

If you are an American taxpayer, another company in which you invested money went bankrupt last week. Yes, I am talking about the TR Auto Truck Plaza in Tennessee, which filed for bankruptcy despite receiving a $424,000 EPA-backed loan only months earlier. The loan went to install electric outlets so that truckers would not burn diesel fuel while resting. Unfortunately, due to the bankruptcy, the outlets and the truck stop are closed, but trucks are still able to sit in the parking lot (while burning diesel fuel).

Some would argue that failure is necessary in business investment, and they would be absolutely correct. However, this is not about business investment: it is about government investment. Solyndra and the TR Truck Plaza are the latest examples of poor investment decisions made by the government. In the Solyndra case, Bush administration officials had previously rejected the loan application, saying that the records showed the company would go bankrupt in September 2011 despite the loan. (Obviously, the Bush administration showed its ineptness in that decision. The company received the loan from the Obama administration and went bankrupt in August 2011!) In the TR Truck Stop case, the owner had already once filed for bankruptcy, and he also had 31 convictions of theft and is under indictment for check fraud. That certainly does not sound like a reasonable business investment.

It is not the government's job to make or insure loans for companies (or for that matter, individuals). When a person is investing his or her own money into a company, that person will research the company and compare the likelihood of reward with the risk being taken. However, the government has taken to insuring loans for companies that would otherwise be unable to secure financing. While I am sure that many of these companies were able to take the loan and create successful businesses, there have been others like Solyndra or the TR Truck Plaza that have taken the money and lost it. This is not the way that taxpayer money should be spent.

When a person decides to invest in a company, it is to earn either a share of the profits or a return on his or her investment. The person knows that the company could go broke but decides that the risk is worth the possibility of return. Even a fund manager has a personal stake in making successful investments: the manager's salary increases as the fund makes money and a successful fund will attract more investors. However, when the government invests in a company, the decision is not made by a man with a personal financial stake in the company. Rather, the decision is made by a bureaucrat who has little interest in whether or not the company will ultimately be successful. If the investment goes well, that man and the government both receive little reward. If the investment goes broke, the man usually still has a job and millions of taxpayers lose their money.

If Solyndra was a great investment, it would be able to receive money regardless of governmental involvement. If the TR Truck Plaza was a great investment, it would also have been able to receive funding without the need for governmental intervention. However, in both cases, the government had to get involved in order for the company to receive a loan it was eventually unable to repay. Government is a horrible banker, and an even worse investor. These investments should serve as a wake-up call to Americans that it is time for the government to stop involving itself in investment.

WordBites: October 26, 2011

Welcome to the very first edition of WordBites. WordBites will be a daily look at the important news stories from the previous day.

WordBites - October 26, 2011
"Soundbites, except with words!"

Starting with some economic news, Merrill Lynch is reporting that another US debt downgrade appears likely before the end of the year. "'The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan' to cut the deficit, Merrill's North American economist, Ethan Harris, wrote in the report. 'Hence, we expect at least one credit downgrade in late November or early December when the super committee crashes,' he added." However, do not worry. President Obama will still believe that America is a "Triple A" country.

Moving to Washington, charges were dropped against three people who were arrested for selling lemonade at the US Capitol building. I must admit that I had no idea that was against the law, but I also had no plans to sell anything at the Capitol anytime soon.

In Tennessee, a Nashville hotel is refusing to allow an anti-Sharia group to hold its conference in its facilities. The Tennessee Freedom Coalition had made its plans to meet at the Nashville hotel in early November, but the hotel's management returned the deposit after receiving discouraging phone calls and e-mails regarding two speakers at the conference. Conference organizers are claiming the hotel is violating their right to free speech.

In auto news, Ford has fallen ten spots in the latest Consumer Reports survey, now placing 20th out of 28 major automakers. Brands by Toyota, Honda, and Mazda took the top nine spots, with Jeep in thirteenth as the top American brand. Ironic considering that Ford employees were recently threatening to strike.

On the west coast, supporters of San Francisco mayor Ed Lee have been accused of illegally filling out absentee ballots to support their candidate. Given that the latest poll showed Lee with a 22% lead over the next candidate, it seems unnecessary to use fraud to win.

Tuesday, October 25, 2011

The Final Five: October 25, 2011

The Final Five: Bedtime Stories for Conservatives
October 25, 2011

Tonight's Crazy Story
What happens when you give a lion a soccer ball? The Huffington Post has the video.

Tonight's Final Five:

Elizabeth Warren claimed to have created the foundation for Occupy Wall Street, and she also said that she supports them. Does she realize exactly what she is supporting? Jeff Emanuel uses the news to show exactly what Elizabeth Warren claims to support.

Lee Smith explains why Libya is only the beginning of post-Bush involvement in the Middle East. Eventually, someone will have to deal with Iran.

Taking a laugh a little
There seems to be some confusion on why the President will appear on "The Tonight Show" tonight. First, one report says he's starting his next bus tour:

"I'm very excited that President Obama is coming tomorrow night and as you know he's on his nationwide 'I Whacked Another Terrorist' tour."
-Jay Leno, 10/24/11

However, another report says the President is highlighting one of his administration's successes:

"President Obama was back in Los Angeles today, where he will appear on the 'Tonight Show' with Jay Leno, to highlight the one job that was saved during his administration."
-Conan O'Brien, 10/24/11

Now Back to The Final Five

Since two jobs proposals have failed in the Democratic-controlled Senate, President Obama has decided to move forward with plans. Chris Stirewalt asks the question, "Can Obama do stimulus by decree?"

Alana Goodman analyzes the paradox of college and jobs. A college degree has become easier to obtain, but that means there are more graduates competing for available jobs.

Russ Roberts argues that the Occupy Wall Street protesters have it wrong. Instead of protesting TARP, they should protest the other bailouts that made bankers more willing to take extreme risk.

Tomorrow in History: October 26
October 26, 1958 - Pan American Airways completes the first flight of the Boeing 707, flying it from New York City to Paris.

Food For Thought - A Bedtime Snack
"A dependence on the people is, no doubt, the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions."
-James Madison

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Congressional Update: October 25, 2011

This update is taken from the e-mail newsletter of Congressman Geoff Davis (R-KY). If you would like to receive his e-mail updates, you may sign up here.

Last Week on the House Floor
Last week, the House was in recess for a Constituent Work Week.

Anticipated Action on the House Floor This Week
This week, the House will be in session Monday through Thursday. The House is expected to vote on the following bills:
  • H.R. 441, Kantishna Hills Renewable Energy Act of 2011
  • H.R. 1160, McKinney Lake National Fish Hatchery Conveyance Act
  • H.R. 320, Distinguished Flying Cross National Memorial Act
  • H.R. 461, South Utah Valley Electric Conveyance Act
  • H.R. 2594, European Union Emissions Trading Scheme Prohibition Act of 2011
  • H.R. 2447, To grant the congressional gold medal to the Montford Point Marines
  • H.R. 2527, National Baseball Hall of Fame Commemorative Coin Act
  • H.R. 2042, Asia-Pacific Economic Cooperation Business Travel Cards Act of 2011
  • H.R. 1904, Southeast Arizona Land Exchange and Conservation Act of 2011
  • H.R. 2576, To amend the Internal Revenue Code of 1986 to modify the calculation of modified adjusted gross income for purposes of determining eligibility for certain healthcare-related programs
  • H.R. 674, To amend the Internal Revenue Code of 1986 to repeal the imposition of 3 percent withholding on certain payments made to vendors by government entities

You can read bills, summaries by the nonpartisan Congressional Research Service and keep up-to-date on their progress as they move through the legislative process by visiting and typing in the bill number.

Gaddafi's Death: Good or Bad for Libya?

On Thursday, we were greeted with the news of the death of Libyan dictator Muammar Gaddafi. This news was celebrated by everyone from Libyan rebels to American leaders. There is no doubt that Gaddafi was an evil man responsible for many murders, and the world is definitely better off with him dead. However, current circumstances leave one to wonder whether Gaddafi's loss of power and ultimate death will be good or bad for the people in Libya.

The answer to that question depends largely on who eventually takes control in Libya. As we saw in Egypt earlier this year, transitions of power are not as easy as they might seem. In Egypt, the military took control and promised elections for September of this year. However, that schedule has not been kept, and the elections have been delayed for at least one more year.

Furthermore, the leading political organization in Egypt is now the Muslim Brotherhood. This group's goal is to establish Shari'ah law in government and society and to create the caliphate, a union of Arab states with Shari'ah as its legal basis. This stands in contrast to the claims of the Director of National [Lack of] Intelligence James Clapper, who told Congress that the group was “largely secular.” (It has the name of a religion in its title and its goal is to establish law based on that religion's holy book. Can it become any more secular than that?)

The Muslim Brotherhood has been banned from Egypt on three separate occasions, with each instance coming after assassination attempts and violence. The group now claims to have abandoned the violence promoted by earlier generations and says it wants to use peaceful means to accomplish its goals. While it remains to be seen whether or not their current statements can be trusted, one thing is likely now: freedom of religion will be about as prevalent in a Muslim Brotherhood-controlled Egypt as it currently is in Iran, and once one freedom is lost, it is not long before others began to disappear with it. Protests are already beginning to break out in Egypt once again, as the people have begun to realize that at the present time, they have only replaced a dictator with military rule.

Moving back to Libya, the important issue is who will take control of the country following the transitional council's rule. The Libyan people completed a rebellion for freedom from a dictator, but now those people must set up a new government. Only time will tell who will take control in Libya, and what kind of ruler that nation will have. While I hope that things turn out well in both Libya and Egypt, the truth is that very few revolutions have ultimately advanced the cause of freedom. In both cases, unfortunately, it seems more likely that the freedoms won through protest and revolution will be lost to whoever takes control next.

Monday, October 24, 2011

The Final Five: October 24, 2011

The Final Five: Bedtime Stories for Conservatives
October 24, 2011

Tonight's Crazy Story
If you're climbing Mt. Everest, you might soon be able to ask, "Where's the nearest bathroom?" See the reason why Nepal is considering installing toilets on a mountain at FOX News.

Tonight's Final Five:

A Washington Times editorial describes the latest attempt by government at getting involved in mortgage lending. Will government ever be able to kick the habit?

The Occupy Wall Street protests were built on the idea that no one was in charge. However, there are classes of people starting to form at the protests. New York Magazine analyzes what may happen next.

Taking a break...
To laugh a little
"President Obama is going to be a guest on "The Tonight Show" with Jay Leno. I'm surprised, because his popularity is at an all-time low. And there are people in the streets marching against him. So it's nice of President Obama to help him out."
-Craig Ferguson, 10/21/11

Now Back to The Final Five

Mary Williams Walsh explains the plight of the state of Rhode Island and what it means for the rest of America.

Martin Feldstein explains why solving the financial crisis is as simple as looking back to what Ronald Reagan did 25 years ago.

Merrill Matthews explains why Americans should prepare to live in a red state: not only are state legislatures and governors becoming more red, but the policies being implemented in these states are actually working.

Tomorrow in History: October 25
October 25, 1995 - One of the worst train accidents in history took place in Fox River Grove, Illinois, when a train collided with a school bus, killing seven students.

Food For Thought - A Bedtime Snack
"But where says some is the King of America? I'll tell you Friend, he reigns above, and doth not make havoc of mankind like the Royal Brute of Britain...let it be brought forth placed on the divine law, the word of God; let a crown be placed thereon, by which the world may know, that so far as we approve of monarchy, that in America THE LAW IS KING."
-Thomas Paine

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