The Real Problem With Obama's Tax Plan

I just read the following article on The Washington Post.com. These gentlemen do a great job of articulating why Obama's tax plan will hurt more than it will help. At first glance, I have only one issue with their article: In the second paragraph, they talk about Obama making the Bush tax cuts permanent. But later on in the article, they point out the exceptions. It's a bit of an emotional roller coaster.

By Alan D. Viard, Alex Brill and Arthur C. Brooks
Wednesday, October 29, 2008; A17

We've heard a lot this month about how Sen. Barack Obama's tax plans would affect Joe the Plumber -- the Ohio man who recently asked the Democratic nominee whether Obama planned to raise his taxes. Opponents of Obama seized on the incident to argue that his middle-class tax cuts are a scam. Some have even claimed that he has proposed tax increases for people with incomes as low as $32,000. Obama's supporters responded that the tax cuts are real (and noted that Joe is not a licensed plumber). The entire episode has only added to the confusion over what Obama is proposing for middle-class taxes.

How should an honest fiscal conservative see the situation? For those making less than roughly $200,000 ($250,000 for couples), Obama would not only make President Bush's tax cuts permanent but would also offer an array of new tax credits. Nobody should deny this.

To be sure, these "tax cuts" contain some sleight of hand. More than $400 billion of the money over the next 10 years would take the form of refundable tax credits paid in cash to people who already pay no federal income tax. It would be more accurate to refer to these cash outlays as cuts in payroll tax or -- even more accurately -- as transfer payments. Regardless of what the credits are called, though, they would put more money in the pockets of some American families. That sounds great in these tough economic times. Who can be against a boost to spending power and consumption?

We can. While a few of Obama's proposals may be sensible, the overall package would be bad for the economy. Unlike rate cuts for high incomes or reductions in investment taxes, most of Obama's proposed tax cuts would do little to reduce the tax penalty on work and saving. For some households, the penalty on work and saving would even increase because the new tax credits would be phased out as income rises. These proposals wouldn't deliver the economic growth that incentive-based tax cuts would.

Furthermore, there is no free lunch. Obama's middle-class tax relief would have to be paid for, either now or later. Middle-class tax cuts might make sense if they were paid for by spending cuts, but that is not Obama's plan. Like his opponent, Obama points to vague savings from reducing waste, the kind of savings that never seem to materialize. He also hopes to reap savings by accelerating our redeployment from Iraq, a project with an uncertain fiscal impact. At the same time, he proposes a wave of new spending on health-care, education, energy and infrastructure programs and declares his opposition to reforms that would reduce the growth of Social Security and other entitlement benefits.

So where would the money come from for the tax cuts and new spending? Largely from raising other taxes: the ones that have the biggest impact on economic growth. Obama would let key parts of the Bush tax cuts expire, causing the top tax rate on ordinary income to go back to 39.6 percent, up from 35 percent today. The capital gains and dividend tax rates would rise to 20 percent from today's 15 percent. Obama might also impose Social Security tax at a rate of up to 4 percent on wages and self-employment income above $250,000, starting in 2019.

These tax increases are not as bad as some Obama statements during the Democratic primaries suggested they would be, and they fall well short of what some of his conservative critics claim. For example, Obama does not propose to tax dividends at 40 percent or to impose the full 12.4 percent Social Security tax on high earners.

His real proposals, however, would still be plenty damaging. If rewards for America's entrepreneurs and firms are reduced through higher marginal tax rates, their incentives to earn, invest and create jobs will be diminished. Americans will have less incentive to save, and firms will have less incentive to pay dividends. Tax avoidance will become more profitable. A smaller capital stock will mean a less productive economy and lower wages for middle-class and other workers. These disincentive effects also mean that the revenue gain is likely to be smaller than Obama envisions.

In sum, Obama may very well give Joe the Plumber a tax break, but only if Joe does not become too successful. Obama is offering real tax favors for the middle class, but not real benefits for the economy.

Alan D. Viard is a resident scholar and Alex Brill is a research fellow at the American Enterprise Institute. Arthur C. Brooks will become president of AEI on Jan. 1.

I own a Mac and I vote!

Have you seen those silly bumper stickers that say something like I smoke and I vote! They should add: Cough...gasp...wheeze...

Hmmm...I can only hazard a guess as to the message they're trying to send. I've seen other bumper stickers that say something like I own a gun and I vote!

Hmmm... okay. I think maybe I can guess the intent on that one. How 'bout the one I saw recently here in town: I'm low on estrogen and I carry a gun!

Now that's a pretty clear message.

Okay, my turn. If I had a similar bumper sticker it would say I own a Mac and I vote. In fact, it's October 27th and I already voted. Here are a few quick thoughts on both topics: My maverick Mac and the self-described maverick, Mc.

I bought my iBook G4 something like three or four years ago. I use the thing constantly, but I barely know how to use it. And that's why my next computer will be a Mac again--because you don't have to be an expert to use your computer. By contrast, if you're running a Windows-based machine, you are an expert. You have to be. To make an automotive analogy, I insouciantly drive around without any tools and without a spare tire. I don't change the oil or even buy gas. By contrast, the PC folks have to tow a trailer full of spare parts wherever they go because they're always breaking down!

There are numerous things I don't like about the Mac and its software; I'm not some kind of Mac disciple or anything. But the operating system just works. And unlike PC users, in the unlikely event that I ever do actually receive an error message, I'll read it and think about it. Actually, I'll probably get weak in the knees because I've never seen one. Ha! But by contrast, PC users have developed a Pavlovian response to ubiquitous, "meaningless" (you hope) error messages. They're like senseless pop-ups. You get the error message; there's disgust, annoyance, and a strong sense of deja vu. Then with trepidation in your soul but with little delay of your mouse, you click either 'OK' or 'CANCEL' with little comfort that you really know why the heck that meaningless message appeared in the first place. You just hope you haven't just nuked your PC.

Your PC: NOTE~ Your hard drive will now be erased by aliens from Mars.

OK or CANCEL?

You: Whatever...click.

Some day...poof. All that will be left is a puff of smoke and you'll have soot all over your face.

Just kidding. I hope.

So I chose the Mac for pragmatic reasons. I've saved approximately 72,000 hours that I would've otherwise spent troubleshooting a PC. Thank you, Mr. Jobs.

That's why I picked the Mac. Now let's talk about the other Mc, the "maverick" Mr. McCain. Chalk this upcoming loss to this headline: McCain snatches defeat from the jaws of victory!!!

Sorry, but I just couldn't bring myself to vote for him. I greatly admire what he did for us in Vietnam and I greatly appreciate his many years of service as an elected official, but he just doesn't strike me as stable enough for the job. And the way he has run his campaign...oy! If he had only stayed away from his incessant sophomoric negative attacks...if he had only kept to the high ground and stuck to telling us how he was going to save the world...if he only had kept his mouth shut instead of making up lyrics to that Beach Boys song...

Alas, he did not do those things and Sarah's just not ready to take over should the need arise.

What about B.O.? He'll likely win, but as much as I like Biden, I couldn't vote for Obama either. He hasn't done much good for anyone but himself so far. Ask his constituents about crime. Ask them about taxes. Ask them about anything else that matters to most of us and you'll not hear many glowing reports. He appears measured and thoughtful and presidential, though, so that's a good thing. Seriously; it really is. That will be a huge change from what we've seen from 'W'. Plus, he looks black (you can't honestly call him black anymore than you can call him white) and he will (hopefully) be a good hero image for thousands of young and impressionable black kids. And that truly is important. But I have many questions.

Does Obama really believe in distribution of wealth? Then why didn't he share his campaign money with McCain? What's he gonna do with those millions of dollars he has raised for the campaign? Will you or I see any of that dough? Can you really tax a country back to prosperity? Why do we park in driveways and drive on parkways?

Alas, I do not see him as having the answers to our dilemmas. A vote for B.O. is a vote for what you (desperately) hope he'll do for you in the future; but it's certainly not based on what he has already done for you or anyone else in the past.

Being pragmatic, I know my pick won't win, but I still had to vote for the one guy out of all the candidates who has actually done a tremendous amount of good in his career for a broad spectrum of Americans. I picked the guy who hasn't pandered to special interest groups. I picked the guy who truly is a maverick and who truly does know how to get things done. I picked the guy who understands the situation in the middle east better than the rest and who speaks the language fluently. I picked the guy with no chance of winning: Ralph Nader.

Please visit www.votenader.org.

And in case you're saying I've wasted my vote, I would say, "Bully." Honestly, I'm not sure I know what that means, but really I haven't wasted my vote. I voted for the candidate I believe in and that's what voting is all about.

So there you have it: I own a Mac and I vote!

Bear tracks?

It's late October as I post this image. We've had a couple of good snows here in Anchorage already, but the snow has mostly melted from my suburban yard. Our home is not far from Cook Inlet, so we're close to sea level and our snow levels reflect that elevation. Up on the mountains, at the higher elevations, there's plenty of snow already and it's here to stay.

The other day, when we still had melting snow in the yard, I noticed a bunch of animal tracks in my front yard. The moose tracks were plentiful, including what appeared to be two sets of moose tracks passing across the driveway. It was a bit hard to tell at a glance because our driveway is paved asphalt. That day the driveway was clear of snow except for where the animal(s) had passed. You could see the tracks in the yard leading to the driveway followed by tracks of snow across the otherwise clear driveway and then tracks in the snow on the other side of the driveway. You could drive down the street and see that the animal(s) had cruised through the neighboring yards in the same fashion--through the yard, across the driveway, on to the next yard and so on. It was easy to imagine a pair of moose just ambling along, nibbling at various trees and shrubs as they worked their way through the yards.

So then I happened to look out my front window and was a bit startled to see the track you see above. Does that look like a moose print to you? No? Me neither. The shot is terrible, but it's honest--no retouching or enhancing--and the size of the print is comparable to a man's outstretched hand.

In case you're curious, this is about what a moose track looks like:



So maybe it was a bear and maybe it wasn't. Maybe it was a bear following a moose or mooses. There's not a good plural for moose. My wife and I call them moosers in fun, as in "I saw some moosers on the way to the store."

Interestingly, on the far side of the driveway you could see the moose tracks departing and you could see other tracks near the moose tracks. They may have also been moose tracks, but they were about the size of a paper plate. I didn't examine them closely when I had a chance. Until I found the possible bear track, I just figured they were more moose tracks.

So who knows? Interesting life here in Alaskan suburbia.

I'll leave you with a sunrise shot I took from our house. Those are the Chugach Mountains in the background.

Take care,
-M

Please watch this video

Lord Vitamix Seizes Weight Gain Initiative

Bi-partisan support unprecedented



Friends, family, surfers, and web-bots...

As those of you close to me know, I spent a king's ransom earlier this summer at the Alaska State Fair on an uber-blender called the Vitamix. In the days and weeks since buying that thing, I don't think a single day has passed in which I have been home and have skipped the opportunity to use my beloved Vitamix. In fact, I usually use it twice a day. My wife has looked on in bemusement and has dubbed me Lord Vitamix or King Vitamix or any number of other monikers I cannot hear when the motor is spinning at 240 mph. I just smile back at her and give her a thumb's up.

Anyhow, although almost everything I make in the Vitamix is really good for you (fruit smoothies, veggie concoctions, soups, etc.), I discovered with euphoric delight that I can make something that tastes intoxicatingly yummy and yet still has the added benefit of being really bad for you!

Yes!

In contrast to all the other stuff I usually make that tastes good, is good for you, and can potentially cause one to lose weight, I made something this evening that turns all that goody two shoes stuff on its head.

I discovered that I can bake cinnamon rolls that are stunningly, incredibly, mind- alteringly delicious. If I hadn't created these heavy little globs of pure bliss myself, I would've bet money they included some kind of narcotic.

Frankly, I was surprised. Not about the narcotic stuff; I was surprised at how good they are. As a novice cook, my expectations of success are fairly low. But from the first bite, I knew this was a winner. But one bite led to another which led to another. I couldn't stop. I was like that mouse in the experiment that ignores all other life-supporting functions in order to get his drug. My drug was those rolls. I just kept pushing the button like some freaked out junky mouse. More, moRE, MORE!!! GIVE ME MORE ROLLS!!!

Okay, that's only a very slight exaggeration. But my, oh my. This is good stuff. Who would've thought that brown sugar, white flour, and ludicrous amounts of butter could be so intoxicating?

Ha ha!

I'm gonna have another roll.

To your sugary good health. ;-D

-M

A Quarter Century of Flight

The first really substantial milestone in a fledgling pilot's career is the moment he flies solo for the first time. It's almost shocking to me to realize that I flew my first solo more than twenty-five years ago.

Way back in 1983, the year of my first solo, Ronald Reagen was still president and in that year made a speech calling the USSR an "evil empire". Back in '83, Bjorn Borg retired from tennis while John Elway was the number one draft pick in the NFL. The 'A' Team with Mr. T was a big hit on TV, Michael Jackson thrilled us on MTV with "Thriller", and the cast of M.A.S.H. ended their long-running series.

If you were around then, you might remember Poland's Solidarity, the bombing of the U.S. embassy in Lebanon, and the shoot down of Korean Airlines passenger flight 007 just west of Sakhalin Island.

Arnold Schwarzenegger became a U.S. citizen that fall, the space shuttle Challenger was big news, and Yours Truly flew his first solo in the mighty T-41 Mescalero, a modified Cessna T-41.

Since then I have been an instructor and have "soloed" numerous other fledgling pilots and I can say with authority that it's a huge relief for the instructor pilot (IP) when his charge returns safely to earth. It's pretty darn close to the relief the student pilot feels when he shuts down his engine(s) after that first solo. It's one of those mixtures of pride and relief. You think: I did it! And at the same time: Thank God I didn't screw up.

In the years since then, I've been a pilot or flight engineer on the following:

T-37, T-38, B-707, E-3 AWACS, C-17, B-727, B-747, B-757, B-767, and the MD-11.

As I look back on a quarter century of flying airplanes, I feel a variety of emotions and when I stop to think about it, the memories come back in a flood. I can't help but think about the various friends or peers who lost their lives flying airplanes in training or who were shot at and nearly killed by the enemy in battle. I look back with fondness at a lot of really fun times flying the airplanes or hanging out with the other guys and gals who fly them. I can think back on times when we came a heartbeat away from disaster and other times when I've seen heart-stopping beauty; sunsets or northern lights or other scenes that you can only see from way up there.

I feel incredibly blessed to have done this as both avocation and vocation for all these years and hope and pray that I get to continue for many more years. For me, this is more than just a job. It's my art and craft. Every time I strap an airplane to my little pink behind, I try to fly it as well as I can fly it. Indeed, I want to fly it as well as it can be flown. Much as an artist must look back at a piece of art well-crafted, I look back on each flight as a piece of art as well.

There are probably thousands of great anecdotes to pass along to future pilots. I'm not good at recalling those and spouting them off, but I still remember one of the first things I heard when I was a brand new T-37 student pilot in USAF Undergraduate Pilot Training. One of the IP's had the following to tell us:

"You've all been issued two bags," he said, holding up two invisible bags. "One is an 'experience' bag," he said as he shook the bag, "and it's almost empty. The other is a 'luck' bag." This time he just regarded the invisible bag. "Nobody knows how much is in there. The more you fly, the more you'll fill your 'experience' bag. Our job is to make sure you don't have to rely on what's in the other bag."

The one saying I do remember that ties in well with that IP's little instructional tale is this: There are old pilots and there are bold pilots, but there are no old, bold pilots.

To my fellow aviators I wish you fair skies and following winds.

-M