We live in the era stultifying, bureaucratic complexity, imposed by government.  The serpentine federal tax code is beyond human comprehension and is almost universally hated. 

Then there’s federal election law.  The First Amendment to the US Constitution says, “Congress shall make no law…abridging the freedom of speech, or of the press.”  It’s simple and easily understood.  Yet, somehow  Congress has manifestly abridged both freedoms with a bewildering system of laws and regulations that control who may pay for campaigns, how much may be spent and who is permitted to advocate for or against candidates.

The Obama Administration’s IRS scandal is a collision at the intersection of impenetrable tax law and byzantine election law.

While businesses are taxed on their profits, not-for-profit activities and organizations are tax exempt. But in most cases one can’t simply engage in a tax exempt, not-for-profit activity unless one’s “tax-exempt status” has first been applied for and approved by the IRS bureaucracy.

The current scandal is over applications from conservative groups to the IRS seeking officially recognized tax exempt status as 501(c)(3) or 501(c)(4) organizations.  The numbers are chapter and verse of the tax code.

An understanding of the scandal requires a brief lesson in bureaucratic vocabulary:

Campaign Intervention is IRS speak for activities that support or oppose candidates for public office.  Tax exempt organizations may support causes but support of or opposition to candidates is either forbidden or limited, depending on the 501 category.   The rules are completely arbitrary and thus make no sense, but that much is is not the fault of the IRS, nor within it’s power to change.  Congress enacted and Presidents signed the nonsensical laws.  The job of the IRS is to interpret and enforce them, evenly, without prejudice, treating everyone the same.

The Determinations Unit of the IRS Exempt Organizations Office is charged with reviewing tax-exempt applications to ensure compliance with restrictions on “campaign intervention.”

The 25 to 40 pages of IRS application forms include scores of questions, demanding lots of meticulously detailed information on the organization’s leaders, employees, mission, operating plans and finances.  Many organizations find they must hire attorneys and/or accountants with specialized expertise just to complete the forms.

After several years of Complaints from Conservative groups and their representatives in Congress The Treasury Department Inspector General for Tax Administration launched an “audit” of the IRS Exempt Organizations Office to investigate allegations that the Determinations Unit, in the passionless prose of the Inspector General:

1) targeted specific groups applying for tax-exempt status, 2) delayed the processing of targeted groups’ applications for tax-exempt status, and 3) requested unnecessary information from targeted organizations.

The criteria the Determinations Unit applied to identify “specific groups” who were targeted was overtly biased against the administration’s ideological adversaries.  Applications that evidenced any of the following were flagged:

• Buzzwords such as “Tea Party,” or “Patriots” or “9-12 project:
• Opposition to government spending, deficits or tax increases
• Education of the public by advocacy/lobbying to “make America a better place to live”
• Criticism of how the country is being run
• References to the Constitution
• References to the Bill of Rights

Inside the Exempt Organizations Office the flagged applications were all called “tea party cases” until mid-2011 when someone apparently decided it might look less biased if they were called “advocacy cases.” 

The Inspector General notes that criteria for selecting applications for further investigation “should focus on the activities of the organizations and whether they fulfill the requirements of the law.  Using the names or policy positions of the organizations is not a appropriate basis for identifying applications for review…”  Yet, Every application with “Tea Party” or “Patriots” or “9/12″ in the organization’s name was flagged.

Rather than approve or disapprove the tea party applications The Determinations Unit would forward them to “a team of specialists” who would investigate the possibility that the group might, in the future, engage in forbidden acts of “campaign intervention.”  The team of specialists turned out to be a black hole.  the Inspector General found that many applicants had not received either approval or denial for more than two years.   In fact, the specialists simply stopped working on what they called “political cases” from October 2010 through November 2011!

After delays of a year or more the team of specialists would send letters to applicants demanding that additional information be provided within three weeks.  The IG report lists these examples:

• Identity of donors.  The tax code states that applications are confidential until tax exempt status is approved by the IRS.  After approval the applications are public information.  The tax code does not require public disclosure of the names of donors to approved 501(C)(3) and (C)(4) organizations.  But because the identities of donors would become part of the organization’s application they would eventually become public information.
• A list of all issues that are important to the applicant organization, and it’s position on those issues.
• List of any organization’s leaders who had ever or would ever in the future run for public office.
• Party affiliation of the organizations leaders, speakers, and candidates they supported.
• Information on the organization’s leaders employment and hours worked;
• Information on the activities of another organization not affiliated with the applicant.
• Roles of the organization’s leaders, members and non-members in activities;
• Types of conversations and discussions that took place among members and non-member participants in the organization’s activities.

Congressmen and Senators report that constituents were asked for even more offensive information than is in the above list, including paper copies of all Facebook articles and tweets they had ever posted.  One of Senator Grassley’s Iowa constituents complained that his pro-life organization was told it’s application would be approved only if leaders signed a letter under oath that they would never demonstrate in front of a Planned Parenthood abortion clinic.

When asked by a reporter President Obama reacted with a show of sanctimonious indignation and claimed, preposterously, that he knew nothing about IRS persecution of Conservative groups until media reports appeared on May 10.  In a just completed Senate Finance Committee hearing the last two IRS Commissioners testified that they knew almost nothing and could not say who had developed the criteria that flagged Conservative organizations for further investigation and delay, or who developed the invasive, intimidating questions.

Predictably, the White House and the President’s supporters in the media say “there is no evidence” that anyone in the Obama Administration directed, suggested or encouraged the IRS Exempt Organizations Office to undertake said targeting.  That would be true if one excludes from “evidence” the facts that:

• Obama’s agenda and reelection campaign benefited because opposition was muted;
• Obama’s political adversaries suffered delays, and unnecessary expense, while some were intimidated into withdrawing their applications;
• IRS staff, like all Americans, heard the speeches and media appearances wherein the President and his top appointees aggressively demonized tea party and patriot groups, portraying them as sinister agents of dark special interests;
• The IG report notes that after the buzzwords and other criteria listed above had been operational for about a year they were discovered by the Director of the Exempt Organizations office who ordered them to be changed to criteria that legitimately focused on activities rather than applicants’ beliefs or positions.  But after only six months someone yet to be identified changed them again, back to targeting beliefs and policy positions.

Some on the Left say the targeting was justified as legitimate extra scrutiny of nefarious “far right” groups.  President Obama may eventually wish he had chosen this defense rather than pleading ignorance, but since he has so vehemently denounced the targeting activities it’s now too late for him to “pivot.”

Some of the President’s supporters have adopted the incompetence defense: misdeeds were done by low level, apparently stupid, IRS employees with no direction from above.  Indeed Steven Miller, the acting IRS Commissioner said in both House and Senate hearings:

I think that what happened here is that foolish mistakes were made by people trying to be more efficient in their workload selection.  The [criteria] described in the report while intolerable was a mistake and not an act of partisanship.

The incompetence defense may seem to protect the President from being convicted in the public mind of what he appears to be, a ruthless, Chicago-way politician who would use the government’s most feared agency to punish and intimidate political adversaries. 

But dismissing the targeting as incompetence doesn’t serve Obama’s agenda of rapidly expanding government and concentrating power in Washington D.C.  One of the legitimate fears of Big Government is the effects on hapless individuals, businesses and organizations that get caught in the gears of indifferent, unresponsive bureaucracy charged with enforcing a regulatory behemoth so complicated and vast that it’s unmanageable, even by those who work within it every day.

ObamaCare, implementation has already produced some ten thousand pages of new regulations that no doctor or patient will ever be able to read and comprehend.  ObamaCare will be managed in part, by the IRS.  Pollsters tell us the Public is already skeptical and a majority supports repeal of of the health care leviathan.  Washington elites who dismiss outrageous offenses against freedoms of speech and the press as insignificant because they were acts of incompetence don’t help the effort to sell ObamaCare.

We don’t yet have all the answers but the Inspector General continues to investigate and more Congressional hearings are scheduled. 

The gradual decline in the unemployment rate over the past 4 years does not reflect rising prosperity.  It is a statistical deception, due entirely to a shrinking labor force.

The Labor Department’s Jobs report for the month of April once again called attention to the alarming drop in what statisticians call the “labor force participation rate.”

Labor force participation is the percentage of the working age population that is “in the labor force.” They are either employed or qualify to be counted as “unemployed.”  Not everyone who is out of work and wants a job is officially classified as unemployed. When people have been out of work for a long time they tend to become discouraged and don’t engage in job seeking activities often enough to meet government criteria and are thus no longer included in the labor force or counted as unemployed.

The recent, steep decline in the Labor Force Participation Rate has meant that fewer jobless people are being counted in computing the official unemployment rate which was 7.5% in April.  If the Labor force participation rate had been the same in April as it was at the end of 2008, the April unemployment rate would have been 11%.

For years President Obama’s supporters and most of the media simply ignored the falling participation rate and hailed each incremental drop in the unemployment rate as “proof” that his policies of maximum government borrowing, spending and regulation “worked.”  But in recent months they’ve been forced to acknowledge the elephant in the labor statistics room, and have responded with a contrived explanation.  Now they tell us it reflects not discouraged workers but retiring baby boomers.  Thus, they say, it is not the bad news it appears to be, it’s a predictable demographic trend.

But an examination of the available data debunks this explanation.  The emerging “millennial generation” is larger than the boomer generation.  So for every boomer who reaches retirement age there is one – actually a fraction more than one – young person reaching working age who should be seeking a job and thus, should be counted as “in the labor force.”

The monthly jobs statistics have contradicted the baby boomer retirement story for four years.As the chart above shows the only age group whose labor force participation has increased since the end of the recession in 2009 is the oldest group, those over 55, which includes about half of the baby boom generation.  The total populations of the younger groups have grown by several million.  Yet their labor force participation is the same or less than it was when the recession ended.

The statistical comparison of those over 65 with the prime working age population between 20 and 64 is even more dramatic:

The data in this chart show that reality is the opposite of what the President’s supporters tell us.  The overall labor force participation rate has fallen not because of senior baby boomer retirements, but because younger people in the prime working ages between 20 and 64 have quit looking for work and have been reclassified as out of the labor force. 

Meanwhile more and more people who have reached the traditional retirement age continue to work.  Since the recession, labor force participation among those over 65 has increased from 21.7% to 24%.  And an unprecedented 52% of those who reached the age of 65 since the end of 2011 are still working.

These data contradict assertions that retiring baby boomers are the reason for falling labor force participation.  It turns out that the oldest groups are the only ones bucking the trend with increasing participation rates.

Rarely has there been a better opportunity to judge the validity of economic ideas than the last four, miserable years.  We have experienced in real time an audacious experiment, testing the theory of economist and progressive hero John Maynard Keynes that the government can buy prosperity by spending enormous amounts of borrowed money and the resulting debt won’t matter.

The Commerce Department published its quarterly GDP report Friday, confirming again that history’s largest and most aggressive experiment has proven Keynesian economic theory to be a hoax.

GDP grew at an anemic 2.5% during the first quarter, an improvement over less than 1% in the previous quarter and a bit above average for the four years since the technical end of the recession in 2009.  The White House provided positive spin to be echoed by the President’s media fans:

Today’s report indicates that the economy posted its fifteenth straight quarter of positive growth, as real GDP (the total amount of goods and services produced in the country) grew at a 2.5 percent annual rate in the first quarter of this year…

Their hope is you will think fifteen quarters of growth is impressive.  The chart provides perspective, showing that compared to every previous post-recession recovery on record the past four years have been emphatically unimpressive.

President Obama’s early political successes were several legislative initiatives that would add up to a staggering increase in government spending and debt.  His economic team of academics confidently predicted that his nearly trillion dollar “stimulus” program would cut the recession short, and pump up GDP.  The enthusiastic media hailed brilliant economics that would “put America back to work.”  The President himself promised that his stimulus would, in his words, “immediately jumpstart job creation and long term growth.”

So far, the “jumpstart” has been limited to an unsustainable rate of increase in government debt, about $4.2 billion every day.

The supposed justification for spending like drunken sailors is the old Keynesian theory of “counter-cyclical” government intervention to “increase aggregate demand” during recessionary periods.  Keynesian economic theory is especially attractive to politicians of the liberal/progressive persuasion because it provides the illusion of scholarly research and scientific validation for what they always want to do anyway, spend more and expand government.

But it turns out that a massive spending increase is not a proven economic strategy that has been used successfully in the past.  The last time it was tried in the US was in the early 1930s and it utterly failed to shorten the Great Depression. 

Obama’s counter cyclical spending surge is the largest ever attempted.  But the promised economic growth, prosperity and jobs have not materialized.  Instead, as the chart above shows this halting, faltering recovery from recession has significantly underperformed every previous post-recession economy since the Commerce Department began publishing quarterly GDP reports in 1947.

The Bottom Line

The Keynesian fallacy is based in part on the assumption that economic activity that is visible and readily quantifiable, especially government spending, is the only activity that matters.  What are not visible and quantifiable are the losses to the economy when government uses its taxing and borrowing power to divert resources from investments that would have been chosen by entrepreneurs, small businesses and corporations to government projects chosen by the political elite.  There is no way to identify or quantify the business start-ups and expansions that would have occurred if the trillions Obama borrowed for extra government spending had instead been invested by the private sector.

The current recovery is hobbled by more invisible, non-quantifiable barriers than diversion of  resources  from the private to the public sector.  In anticipation of yet to be clarified ObamaCare costs and regulations small businesses (fewer than fifty employees) are reluctant to expand even if they have the capital.  No government agency tracks and counts private decisions to not invest or expand.  But that doesn’t mean those decisions aren’t being made.  In fact the chart above proves they have been made for four years.

Keynesians continue to preach their gospel of borrowing and spending.  Astoundingly, many on the left, including progressive hero Paul Krugman, hold that the economy is weak because Obama’s record-shattering escalation in borrowing and spending wasn’t enough!  They simply ignore the experience of previous recessions when, without massive government intervention, the private sector economy recovered, creating jobs and spreading prosperity.

The President has submitted his 2014 budget to Congress.  At a White House media event he spoke of  “deficit reduction” and claimed to have proposed  “smart cuts” in spending. 

President Obama roared into office vowing to “fundamentally transform America.”  The transformation has not been kind to middle class workers.

The Labor Department just published another new normal – miserable – jobs report.  The headline, that in March unemployment ticked down from 7.7%, to 7.6%, was, once again, an illusion that masked the real news.  In fact, the bad news, as shown in the chart below is now so stark that even the media are beginning to be skeptical of the declining unemployment rate. 

The labor force participation rate is the percentage of working age adults who are classified as in the labor force either because they have a job or because they qualify by government criteria to be counted as “unemployed.”  Jobless people who don’t meet the criteria by seeking work often are reclassified from “unemployed” to “out of the labor force,” so they no longer count in computing the unemployment rate.  In March there were 496,000 fewer people in the labor force than in February.  If they were still counted in the labor force the unemployment rate would gone up instead of down.

The difference between the labor force participation rate of 66% when the recession started in 2008, and the current 63.3% is 6.6 million jobless people who have become discouraged and don’t look for work often enough to be included in the labor force or counted in the official unemployment rate.

The next chart tracks the unemployment rate and the labor force participation rate over the 41 months since unemployment peaked at 10% in 2009.  As it shows the drop in the unemployment rate since then is due entirely to shrinking the labor force.

The parallel decline in both rates is unprecedented.  In every previous post-recession job market, the labor force participation rate was flat or increased as the unemployment rate declined.  The next chart tracks the first 41 months of job market recovery after the deep recession of the 1980s
In the 1980s President Reagan worked with Congress to reduce rather than increase tax rates on income, investment and capital gains.  He increased economic liberty by scaling back regulations.

So far President Obama’s “transformation” has included tax hikes on business owners and investors and an explosion in new regulations that serve as barriers to business innovation and expansion that leads to job creation.  His bureaucrats are now in the process of implementing ObamaCare, making job creation more risky and expensive. 

The route to prosperity is the same as it has always been, more liberty.  What can government do to help employers create more jobs?  Stop being a barrier!  Cut taxes, repeal ObamaCare, and reduce regulation.

During his first two years, with the support of commanding Democratic Party majorities in Congress, President Obama placed the biggest bet in US history on centralized government power.  The People lost.  We’re still losing.

The Commerce Department just published its final revision of the 4th quarter 2012 GDP growth rate.  From October through December the US economy grew at a rate of .4% – that’s 4 tenths of one percent.  The first chart compares the current post recession economy with the post recession economy of the 1980s.

Like President Obama, President Reagan inherited a deep recession when he took office in 1981.  But his strategy of expanding liberty by removing regulatory barriers and implementing across-the-board tax cuts to empower investors and entrepreneurs was a sparkling success.

Rather than repeat Reagan’s proven strategies President Obama went with the unproven Keynesian economic theory that a spike in government borrowing and spending could “stimulate” growth.  Instead of expanding liberty he expanded government.  His massive borrowing and spending, grants and loans to “green” energy schemes run by political cronies, ObamaCare, expanding federal regulations, and continuous threats of tax hikes on businesses and investors have yielded tragic results.

A major pillar of the progressive philosophy Obama represents is the belief that an interventionist government, advised by “experts” can achieve better economic results than we’ll experience if liberty and free enterprise are allowed to function, without supervision.  Obama thundered into office, vowing to use government power to “fundamentally transform” America.  He and his team of economic “experts” promised to “stimulate” the economy and bring forth prosperity for all.

Those experts now say their economic failure results not from too much government borrowing and spending but from too little!  The opinion columns regale us with pseud0-academic harangues that actually label Obama’s record shattering deficits “austerity” and insist that even more borrowing will fix what ails us. 

So is this a valid idea?  Were all the previous recoveries more prosperous because government borrowed more?  No. Obama’s spike in borrowing and spending is unprecedented.  Not since mobilization for World War II has government spending increased by so much in such a short time.

If your gut tells you we’ve already borrowed too much and gotten too little for it, history, as shown in the chart above agrees with you gut.  

The resurrection of Jesus is the most significant event in human history.

Jesus did not accept the cultural norm of his time on earth, that women were less than men and treated like the property of men.  It’s fitting then that the good news was first revealed to women.

The Following excerpt is from the Gospel of Matthew.  It’s Friday, the day before the Jewish Sabbath.  Jesus has been hung on the cross to die.

We begin quoting at Chapter 27, verse 45:

At noon, darkness fell across the whole land until three o’clock. ⁴⁶ At about three o’clock, Jesus called out with a loud voice, “Eli, Eli, lema sabachthani?” which means “My God, my God, why have you abandoned me?”

⁴⁷ Some of the bystanders misunderstood and thought he was calling for the prophet Elijah. ⁴⁸ One of them ran and filled a sponge with sour wine, holding it up to him on a reed stick so he could drink. ⁴⁹ But the rest said, “Wait! Let’s see whether Elijah comes to save him.” Read more »

The headline jobs statistics understate the depth of America’s misery and despair.

The White House and President Obama’s media groupies we’re popping Champagne corks when the Labor Department released its monthly jobs report showing that the unemployment rate had fallen to 7.7% in February, from 7.9% in January.  Employers created 236,000 jobs the fifth best month of the Obama years.

Now that we’re past the phony euphoria let’s get real.  The latest jobs report is “good” only within the grim, New Normal, that doesn’t put Americans in a partying mood.  Even those who have not experienced any interruption in employment don’t feel prosperous or secure.  They are likely to be earning less after adjusting for inflation, and virtually everyone has seen family or friends suffer long term unemployment, and/or forced to work below their skill level for less than they’re worth.

The public mood is anxious, not celebratory. The People do not understand how the government unemployment rate could have come down from its 2010 high of 10% when so many around them are still jobless.

The statistic that explains this gap between the official unemployment rate and reality on Main Street is the Labor Force Participation Rate, defined as the percentage of working age adults that is “in the labor force.” To be included in the labor force one must either have a job or qualify to be counted as “unemployed” by meeting certain criteria.  

Not everyone without a job is counted as “unemployed.”  Obviously we don’t want to make the situation look worse than it is by counting stay-at-home parents or college students or other adults who don’t want or need a job as “unemployed.”  So government statisticians include only those who are actively seeking a job in the official count of unemployed.

When people have been unemployed for a long time they tend to become discouraged and spend less time on job search activities and thus don’t qualify by government standards as “unemployed.”  Labor Department statisticians reclassify them out of the labor force, lowering the labor force participation rate.  The unemployment rate also goes down because these jobless people aren’t counted.  But they still need and want jobs, and their family and friends still consider them unemployed.

The chart to the left shows the recent, sharp drop in the labor force participation rate from old normal to the new normal.  We designated 66% as “old normal” not because it was the highest ever, but because it was the average, with very little variation for five years before, and the first year of, the 2008-09 recession.

We designated an unemployment rate of 4.8% as old normal because it has been the average rate between recession years since the 1950s.

The Obama Administration hopes we will all accept a lower unemployment rate as progress toward the goal.  But Americans will not believe that things are back to “normal” as long as almost everyone knows people who are still suffering, even if the government doesn’t count all the sufferers in the official, monthly, unemployment statistic. 

The first chart at the top shows just how far we have come and how long it will take to create enough jobs to bring both the unemployment rate and the labor force participation rate back to Old Normal.  If job creation were to continue at the February rate it would take almost eight more years!  If the average rate of job creation over the past six months were to continue it would take an astounding fourteen more years!

This situation is unprecedented since government began its current employment reporting system in 1947.  Before that, the great depression of the 1930s was the longest economic downturn in US history.  It lasted roughly ten years.  We’re starting year six of the current slump, and if government policies don’t change it will take another 12 to 14 years to get back to a normal job market.

But it doesn’t have to be this way. 

History gives us a clear road map to prosperity if only our political leaders would give up their dreams of a society and economy dominated by government and allow liberty and free enterprise flourish

Rand Paul’s dramatic Filibuster deserves both praise and criticism.

First the (muted) criticism: 

The hypothetical Senator Paul railed against, a President ordering up a drone fired missile to kill an American citizen, eating in a cafe or sleeping in his bed – in America – because he was “suspected” of terrorist associations, was too far fetched to take seriously.  Even if such an order came from a psychotic future President (we don’t like President Obama but we don’t think he’s a psycho) it would be an unlawful order and nobody in the military or the clandestine services would obey it.

Senator Paul may have discredited himself, the Republicans, and the Conservative/tea party movement in the minds of some voters who might otherwise have been persuadable if his issue had been more realistic.

BUT…

Now the enthusiastic praise:

The President’s representatives including his Attorney General had been asked about a hypothetical drone execution several times.  They had been unwilling to simply say that no, the Constitution doesn’t permit the President to deny a citizen his right to a trial and summarily execute him, on American soil, when he is not actively engaged in violence.

The attention drawn by the Filibuster forced Attorney General Holder to do something he, Obama, and those on The Left vigorously avoid, issue a concise, unambiguous answer to a Constitutional question.  The Left’s relentless expansion of federal power is possible only with ambiguous, long-winded interpretations of their version of the Constitution, a so-called “living” or “evolving,” or we would say, meaningless document.  Their ideas clearly violate the plain meaning of the text in the real Constitution.  Any time they have to demonstrate that ordinary people without law degrees can understand the Constitution and determine what violates it, they’ve lost a round.

Unfortunately, too many Republicans, including Mitt Romney, fail to do what should come naturally to the party of liberty and free enterprise, evoke the powerful language of the Constitution to develop compelling campaign themes.  But Paul used the Constitution to great effect during his 13 hours of Filibuster.  Consider this excerpt:

Your government was given [by the Constitution] a few defined powers, enumerated powers. There are 17-19, depending on what how you count them. They’re few and defined. But your liberties are many, basically unlimited and undefined. When you read the ninth and tenth amendment, it says that those rights not explicitly given to government are left to the states and the people. They’re yours, not to be disparaged. These are important debates we’re having.

This language could be the beginning of an argument against almost any big government plan to spend vast sums on politically motivated schemes that are not authorized by the Constitution.

Now consider excerpts from Mitt Romney’s standard, stump speech repeated countless times on the campaign trail. He usually began with stirring references to the Constitution and Declaration of Independence.  Here’s a sample:

Now is the time to reaffirm what it means to be Conservative.  The very heart of American Conservatism is the conviction that the principles embodied in the Constitution and the Declaration of Independence are uniquely powerful foundational and defining…

Good start.  While public education abandoned serious instruction in the Constitution and Declaration of Independence decades ago, millions of Americans have recently begun reading them and, inevitably, found themselves shocked by the gulf separating the limited government chartered by the Constitution and the government of nearly unlimited power wielded by Barack Obama.

Today we borrow 40 of every dollar we spend.  This is unconscionable, immoral, and it will end in my Presidency.  I will approach every spending decision, every budget item with these questions: Can we afford it and if not is it really worth borrowing money from China to pay for it.

Wait!  What about the Constitution?  It should provide the criteria for what is and is not worthy of government spending!  Romney hoped to appeal to our emotions with what seemed like decisive criteria. Unfortunately his criteria was meaningless.

Every dollar of spending is affordable and “worth borrowing from China” to whomever it benefits.

President Obama continuously insists that we can’t afford not to “invest” in all his myriad programs.  Indeed, we’ve just endured weeks of his hysterical warnings of calamities from merely shaving a couple of percentage points from the rate of spending growth!

As election statistics show millions of potential Conservative voters perceived too little difference between Obama and Romeny to bother turning out.  Obama won 3.5 million fewer votes than he won in 2008.  But Romney won only about 1 million, or 1.6% more votes than McCain won in 2008, even though he spent at least three times as much money as McCain.

The Romney campaign ignored the Constitution and became a sort of mirror image of the Obama strategy.  Obama, like all Leftist candidates, segments the electorate into ethnic, age, and gender identity groups and then feeds them customized, emotion-driven messages designed to assure each group that the candidate understands and will command government power to address its specific fears and concerns.

Romney’s offensive “47%” remarks were actually intended to inform high-end donors that he would not develop Constitutional themes to try to persuade anyone who happened to be, by accident of birth rather than choice, in one of Obama’s targeted groups.  Rather he would mirror Obama’s tactics but with different groups.

Rand Paul’s Filibuster was a stunning political and public relations success.  As the hours wore on the Twitter reaction measured in millions of enthusiastic and supportive tweets was dramatic evidence of broad acceptance.

Sadly, some in the Republican establishment still don’t get it.  While criticism of Paul from the left was weak and cautious, GOP Senators McCain and Graham proved they had no idea what he was doing when they angrily denounced him the next day, speaking from the Senate floor to ensure maximum TV coverage.

But McCain and Graham were outnumbered by scores of Republicans from the House and Senate who did get it, and will emphasize the Constitution in their campaign messages and governing agendas.

Barack Obama, Senior Lobbyist for special interest tax breaks

President Obama’s weekly address was about the sequester and was typical of his strident rhetoric. Acting as if he had no role in enacting the sequester law he repeated claims that tiny incremental reductions in the rate of government spending growth would “inflict pain on communities,” hurt the economy, rob the middle class and cost 750,000 jobs,  a claim that contradicts economic history.  He concluded with:

And let’s be clear. None of this is necessary. It’s happening because of a choice that Republicans in Congress have made. They’ve allowed these [spending] cuts to happen because they refuse to budge on closing a single wasteful [tax] loophole to help reduce the deficit.  They decided to protect special interest tax breaks for the well-off and well-connected…

An impartial observer would say the President is the one who refuses to budge.  He refused to consider any alternative to the sequester except additional tax hikes, even though the top bracket tax rate increases he demanded during the election campaign have already been enacted into law.

But the most stunning hypocrisy was Obama presuming to blame others for…

special interest tax breaks for the well-off and well-connected…

To the right is a list of taxpayers and financial activities that will benefit from special interest tax breaks included in the fiscal cliff bill that President Obama signed into law on January 2.

The fiscal cliff bill was hailed by Democrats and the media as a Presidential triumph.  House Republicans were maneuvered into a no-win, position, and were forced to accept a bill written by Senate Democrats, with advice from the White House, that increased top bracket tax rates, and enabled the President to renege on his “balanced approach” promise of spending cuts.

Also included in the fiscal cliff bill were some 26 tax breaks specifically demanded by the White House that easily qualify as, in Obama’s words, “special interest tax breaks for the well-off and well-connected.”

The only legitimate purpose of taxation is to fund government.  But politicians corrupt taxation by setting tax rates unreasonably high and then offering discounts to taxpayers who behave in politically approved ways.  Thus, they enhance their power, and they gain control over the deployment of more money than they collect in tax revenue.

Of course some, maybe most of the special tax provisions exist only to benefit “well-connected” businesses.  By paying politicians for tax breaks and/or tax punishment against competitors, “well-connected” companies harness the power of government to force better outcomes for themselves than they can earn legitimately, by competing in the free market.

Decades of these corrupt practices have built an incomprehensible federal tax code, a maze of special provisions that mete out carrots and sticks in ways that defy common sense.

What is “Tax Reform”?

The Conservative movement, recently represented by the populist Tea Party, has long advocated tax reform, or deleting special interest deductions and credits, coupled with a reduction in tax rates.  The result of such reform would be a more vibrant economy with more employment opportunity because businesses would pivot from lobbying Congress and the President for special favors to competing in the marketplace by offering better value to customers.

Reformers would set the new, lower tax rates at a level that would generate the same amount of tax revenue as the pre-reform combination of higher rates and myriad deductions and credits.  However, companies would eventually generate more total tax revenue at the lower rates because they would invest their resources in productive activities that would generate more taxable profits, rather than unproductive tax shelters.

But now President Obama has hijacked the term “reform” for his own purposes. Obama’s version of “reform” would not lower tax rates and thus would not spur economic growth or job creation.  He would delete only the tax breaks he calls “loopholes,” those that benefit taxpayers who are out of favor politically, like drug makers and oil drillers. 

He wouldn’t use the L word to describe the special interest tax breaks in the above list.  By insisting on their inclusion in the must-pass fiscal cliff bill he proved that the well-off taxpayers who benefit are indeed well-connected – to the White House and Senate Democrats!