To support the Obama campaign scores of politicians and assorted gasbags, all across the media echo chamber are chanting the same ignorant slogan:  “Mitt Romney’s priority at Bain Capital was not to create jobs, it was to maximize profits.”

The first post in this series explained what private equity really is and debunked charges from the Obama campaign that Mitt Romney, as leader of Bain Capital became a wealthy man by plundering and destroying healthy businesses.

At a recent press conference, a reporter asked President Obama for his “sense of what private equity’s role is in stemming job losses as they seek a return of investment [sic] for their investors.”

The President’s long, halting, semi-coherent response included:

Now, I think my view of private equity is that it is set up to maximize profit.  There are times where [sic] they identify the capacity for the economy to bring new jobs or new industries.  But understand that their priority is to maximize profits.  And that’s not always good for communities or businesses or workers.

Keep in mind that in Obama’s circles, where those who call themselves “progressives” are the self-appointed moral authorities, accusing someone of seeking to “maximize profits” is a harsh indictment, tantamount to accusing a preacher of skimming the donations he collected for widows and orphans.  The progressive mind dwells in a fictional realm where profit is a four letter word and wealth possession is evidence of having denied the masses their due wages.  Progressives either don’t understand or ignore the real world where honest people provide products and services to voluntary customers and are compensated in the form of profits.

Jobs are created when profits are reinvested in the same or a new enterprise with the expectation of further profits.  Without the pursuit of profits there would be no private sector jobs.  Without profits and the wages earned by those who fill private sector jobs there would be no tax revenue to fund the “green jobs” and “public service jobs” and “stimulus jobs” the President and his party claim to create.  Without profits there would be no donations to charities or social causes.

More from the President’s response:

And when you’re President, as opposed to the head of a private equity firm, and your job is not simply to maximize profits. Your job is to figure out how everybody in the country has a fair shot.

This is the standard, Obama rhetorical formula.  Knock down a straw man of his own creation and follow up with a meaningless slogan presented as serious policy  The straw man is an idea that no candidate has ever articulated, that the job of a President is “simply to maximize profits.”  The meaningless slogan is “fair shot.”  It cannot be defined and thus becomes whatever each individual listener imagines it is.

Your job is to think about those workers who get laid off and how do we pay for their retraining? Your job is to think about how those communities can start creating new clusters so they can start attracting new businesses.

A President’s legitimate job is to manage the federal government.  He should “think about” all  the ways the government contributes to the loss of profits that leads to layoffs and hinders job creation.  He should be thinking about how to remove regulations and taxes that are barriers to the normal investment of economic resources that creates jobs naturally, with no subsidies or loans or threats from government.  He should be thinking not as Obama apparently does every day, of more and more government intervention with more and more regulations and taxes.

Obama’s “new clusters” stumped several commentators.  Apparently he was referring to  “business clusters” or “technology clusters,” regional concentrations of interdependent companies.  But he doesn’t seem to acknowledge that profit-seeking is the motivational force that unites entrepreneurs with investment capital to create the new businesses that would populate his “clusters.”  Obama wants the political benefits of new businesses, the job growth that would impress voters and the tax revenue to fund his Utopian vision.  But he sneers at the seeds from which those new businesses grow: profits.

This is not a distraction. This is what this campaign is going to be about – what is a strategy for us to move this country forward in a way where everybody can succeed. And that means I’ve got to think about those workers in that [anti-Bain Capital] video just as much as I’m thinking about folks who’ve been much more successful.

For once, we enthusiastically agree with Barack Obama. By all means, let’s have a direct campaign debate about the two, opposite visions that have competed for the hearts and minds of Americans for a century:

A society and dynamic economy based on liberty, where those who earn profits are allowed to keep and invest them as they see fit, with reasonable taxation and minimum government intervention, creating new products, new businesses and new jobs naturally, to serve the needs and desires of voluntary customers;

VS

An authoritarian society and economy where profit seeking is treated as unsavory and not “fair,” and subject to more and more rules and restrictions, where more and more resources are allocated by politicians through tax credits, insider loans and Solyndra style subsidies, to accomplish politically determined goals.

President Obama’s campaign is designed to target the ignorant who do not understand that where there is liberty there will be entrepreneurial endeavors, funded by profits, that necessarily, inevitably create employment opportunities.  He hopes to lead voters to the irrational and false conclusion that seeking profits is a distraction from, rather than the only real path to jobs and prosperity.

Excerpts from a 1962 speech by General Douglas Macarthur

Duty, Honor, Country. Those three hallowed words reverently dictate what you ought to be, what you can be, what you will be…The code which those words perpetuate embraces the highest moral laws and will stand the test of any ethics or philosophies ever promulgated for the uplift of mankind. Its requirements are for the things that are right, and its restraints are from the things that are wrong.

The soldier, above all other men, is required to practice the greatest act of religious training — sacrifice. In battle and in the face of danger and death, he discloses those divine attributes which his Maker gave when he created man in his own image. No physical courage and no brute instinct can take the place of the Divine help which alone can sustain him.

However horrible the incidents of war may be, the soldier who is called upon to offer and to give his life for his country, is the noblest development of mankind.

Others will debate the controversial issues, national and international, which divide men’s minds; but serene, calm, aloof, you stand as the nation’s war-guardian, as its lifeguard from the raging tides of international conflict, as its gladiator in the arena of battle.

This is the Normandy American Cemetery, on the French coast, final resting place of 9,386 American heroes.

.

The Obama campaign is based on the liberal/progressive vision of – using the President’s own word – a “transformed,” government centered, society and economy.  Their central campaign tactic is to discredit the traditional American vision of individual autonomy and economic freedom by demonizing entrepreneurs, investors and successful business leaders.

The latest Obama stink bomb is a super pac ad seeking to smear Mitt Romney through yet another attack on free market business.  It’s a two minute video about a steel mill that was owned by Bain Capital, the private equity firm led by Mitt Romney back in the 1990s.  Bitter former employees who lost their jobs when the mill went bankrupt and closed say Mitt Romney and his investors bought the mill in order to somehow profit by shutting it down. 

The media herd piled on.  The usual TV commentators who know a lot about politics and emotionally charged language but little or nothing about business, ignorantly slandered private equity as morally equivalent to the mob, “extracting huge profits” by destroying companies and abusing forlorn employees.

It’s up to us at Liberty Works to do what the TV gasbags are unable or unwilling to do, objectively describe private equity.

• Private equity firms pool their own resources, actually the personal funds of the firm’s owners, with investor funds and bank loans to purchase businesses they believe are under performing and can be made more profitable and more valuable with some combination of new capital and management expertise.
• While some of the investors are individuals most invested dollars – 80% or more – come from pension funds and endowments.  Through their pensions millions of “regular folks,” including police officers, teachers, and employees of states, cities, hospitals and universities are private equity investors.  Endowments include those that have been set up to support universities, medical research and other good works.  When private equity deals succeed the lion’s share of the rewards go to these institutions, not to “fat cat wall street players.”
  
• Private Equity firms have a fiduciary obligation to manage the funds under their stewardship for the benefit of investors.
• Pension funds and endowments invest most of their funds in low risk, low return assets like Treasury and corporate bonds.   In an effort to increase their overall return they may allocate a small portion, usually 4% – 15% of their portfolios to higher risk investments that have the potential to generate higher returns. Enter private equity, through which they buy a portfolio of companies to hold for a limited period, usually no more than ten years and then sell for a higher price.

Now, consider the media fueled charges that Romney’s Bain Capital bought healthy companies “loaded them down with debt” and somehow profited by shutting them down.  In reality a private equity deal has three, sophisticated, hard-nosed, clear eyed overseers, each risking assets he/she owns or manages and his/her reputation as a prudent investor and steward of assets held in trust:

1. The private equity firm’s owners who are putting their own assets at risk;
2. Pension and endowment fund managers who are risking assets they are obligated to manage prudently;
3. Bankers who do not make loans without prior due diligence.

None of these overseers would have any interest in a strategy of buying a healthy, profitable company with the hope of somehow increasing the value of their investment by bankrupting it and shutting it down.  In the real world, the no-nonsense world of real investors and real business managers such a scheme would be laughed out of the room. 

What private equity deals do acquire are businesses that the investors and bankers believe can be made more valuable through growth.  In today’s investment environment growth is the most important consideration.  Growth makes a business more valuable, and thus a success for the investors in private equity.  Growth usually requires additional employees.  Thus the private equity management team serves the interests of investors by creating new jobs.

Sometimes consolidation is necessary to clear the way for new growth.  Consolidation usually means shedding unprofitable, or obsolete product lines and/or facilities and may include layoffs.  But the subsequent growth phase virtually always requires hiring additional employees.

Some of the businesses private equity deals acquire are profitable but under “tired” management and are thus at risk of decline.  Some have already declined and are at risk of bankruptcy.  Such was the state of the GST steel mill when it was purchased by a private equity fund led by Mitt Romney’s Bain Capital. 

GST had already laid off several thousand employees over a decade of decline and there were approximately 750 left.  The mill made only two, nearly obsolete products, grinding balls and wire for wire rope.  Both of these were low value added products sold to end markets like mining and dredging, that were having difficulties of their own at the time.  Bain invested in new machinery and technology to enable the mill to produce more modern sheet steel products.  As a result, what had been a doomed company lived on for a few more years.

Ultimately, imports and union intransigence caused the demise of the plant, similar to dozens of other facilities making low value added products in the 80s and 90s.

Obama’s attack ad doesn’t mention another Bain Capital investment in the steel business, Steel Dynamics Inc. or SDI.  It was a new start-up mill when Bain got involved.  With technology provided by Bain and its investors SDI became the fifth largest producer of steel carbon products in the US, growing from 1,000 to over 6,000 employees.

Over the years Bain Capital’s success rate is 84%.  That is 84% of the business they purchased increased in value, while 16% decreased and/or went out of business.  The 16% are companies that would have failed anyway, that Bain tried to save.

The Obama Administration intervened with strong-arm, extra-legal means to drive the brutal bankruptcy reorganization of General Motors and Chrysler.  The primary goal was political, to bail out and strengthen the United Auto Workers Union at any cost.  Bond holders, including pension funds, that under the law were supposed to be repaid first in a bankruptcy proceeding were elbowed to the back of the line and stiffed.   The reorganization of GM ended production of the Saturn, Pontiac and Saab product lines, closed plants, closed hundreds of dealerships and killed tens of thousands of jobs.  Yet the same establishment media that denounces Romney and private equity applauds Obama for “saving the auto industry.”

Suppose a man in his fifties loses his job and, after months of actively searching for new employment gives up looking for a while even though he still wants a job.  Is he “unemployed” or “retired?”

As the chart shows, the labor force participation rate – the percentage of the working age population that is classified as “in the labor force” either by holding a job or actively seeking a job – has declined in tandem with the unemployment rate for 31 months, because millions of men and women have been reclassified from “unemployed” to “out of the labor force.”  If they were still counted as “unemployed” the unemployment rate would now be over 10% instead of 8.1%.

Obama supporters in the establishment media are seeking to change our perception of this statistic from the national tragedy it is to a happy indicator of early baby boomer retirements.  Typical is a piece by Ezra Klein, a twenty-something whom the Washington Post presents as a senior economic sage:

The explanation is a little-watched measure known as the labor force participation rate…Between March and April, it dropped by 342,000. But because the official unemployment rate counts only those workers who are actively seeking work, that actually made the unemployment rate go down. Critics of the Obama administration have been quick to seize on this as the real reason for the falling unemployment rate…Economists say the story is considerably more complicated.

Beware of establishment commentators who start their analysis with “economists say” or “experts say.”  It usually signals that what follows is little more than their own, uninformed speculation.  Klein continues:

For one thing, the trend predates President Obama…The percentage of Americans in the labor force has been declining for more than a decade.  In January 2000, 67.3 percent of Americans had a job or were actively seeking work. By [December] 2007, just before the recession, that had fallen to 66 percent.

This chart provides perspective that somewhat contradicts Klein’s implication that the decline in participation is a long term trend rather than the immediate result of the current, weak economy.  The participation statistic always fluctuates from month to month. So to bolster his theory Klein picked January 2000 the month of the highest rate ever reported as his starting point.  As the chart shows the participation rate declined during and after the recession of 2001-2002 but began rising again during 2006 and the first part of 2007.  Then, due to the mortgage crisis and another recession it began declining again.  The rate of decline increased dramatically beginning in 2009.

Within the Labor Department’s monthly jobs report is a lot of additional data that contradicts the theory that carefree baby boomers who retire early account for the drop in the labor force participation rate.

The Labor Force Participation number we see published in the media is the percentage of all people over the age of sixteen who are either working or seeking a job.  In April it was 63.6%.  Deeper in the monthly report are statistics that break the rate down by age group.  This chart breaks the population into two groups, under and over 65.  It shows that while the participation rate of younger people has gone down over the past four years the participation rate of people over age 65 has actually gone up, indicating that more of the oldest baby boomers who reached 65 last year are continuing to work or seek work rather than retire.

The last chart shows the number of Americans in each of the age group who had jobs in December 2008, and in April 2012.  It turns out that the only groups with an increase were 55-64 and over 65, the oldest two thirds of the baby boom generation.

As the Presidential campaign continues we’ll be hearing more and more about the Labor Force Participation Rate and, more of the myth of  happy, prosperous baby boomers who have retired early.  But the statistics show the harsh reality that the baby boomers as a group continue to work or seek work later than the previous generation. 

Most baby boomers aren’t old enough to retire, especially after the financial crisis of 2008 decimated their retirement accounts.  Just this year the oldest boomers, those born in 1946 who are only 3.5% of the total, are turning 66, the age at which they qualify for full Social Security benefits. Sixty six percent of baby boomers are still under the age of 60.

The Obama economy is not a happy place to be if you’re in your sixties and wondering how much longer you’ll be able to work and what you’ll live on when you can’t.

In a rational world a President would honor these people as economic heroes who do far more than their “fair share.”

This week the Obama campaign transitions from gay marriage to placing blame for the looming government debt crisis on the only people who are doing anything to alleviate it.  He continues to insist that the problem is everyone is not “doing their fair share.”   He never discloses the details of his notion of “fair,” except to emphasize that high income tax payers, those earning over $200,000, should pay more.

The Treasury Department just released it’s monthly statement and it shows what you’ll not hear from any of the political-media establishment: without the increase in tax rates the President demands, income tax revenue for 2012 is on track to set a new record.

Even though the economic recovery is very weak with both GDP and job growth at lower rates than any previous recovery since the 1930s, a few Americans have begun to produce more income than they did in the depths of the recession.  As always the government will share in their success.  The income tax is steeply progressive, with fewer than 2.8% of taxpayers, those who earn over $200,000, providing half of all the tax revenue the government receives.  Of those over-$200,000 folks two-thirds are small business owners. 

There are approximately 310 million people in America.  This tiny minority, these 2.6 million taxpayers, are the economic engine that drives the American economy, providing the goods and services, most of the jobs and most of the income tax revenue.  Their personal assets are at risk every day.  They never get a bailout and they struggle to comply with ever more complex regulations.   Yet these are the people Barack Obama insists are “not doing their fair share.”

In a rational world these folks would be honored as economic heroes, not targeted for punitive tax increases.  Mitt Romney should ask: “Mr. President, how much more would be fair?”

Guess who said the following from the Presidential campaign trail:

He [opposing candidate] is spending an awful lot of time talking about me. You notice that? I haven’t seen an ad yet where he talks about what he’s going to do. And the reason is because he knows they don’t have any good answers, they know they’ve had their turn…and made a mess of things.”

They know that you’re not real happy with them and so the only way they figure they’re going to win this election is if they make you scared of me.

If you guessed this was Mitt Romney speaking you get credit for logical thinking, but you’re wrong.  This was a direct quote of Barack Obama in October of 2008, bashing his opponent John McCain by linking him to the outgoing Bush Administration.

Now, in May 2012 the Obama campaign is coordinating with friendly media to make you scared of his challenger, Mitt Romney.  Most recently they characterized Romney as an evil rich guy who gleefully fires hapless workers, and as a bully who assaulted a high school classmate five decades ago.

The Obama campaign, in a frenzy of spin, is trying to persuade us that recent employment statistics signal economic improvement for which we should thank President Obama by renewing for four more years his project to “transform America” by expanding the power and dominance of government in our lives.  At a campaign event following release of the monthly jobs report Obama bellowed a now tediously familiar talking point:

Our businesses have now created more than 4.2 million new jobs over the last 26 months — more than 1 million jobs in the last six months alone!

If you’re not in the habit of studying Labor Dept. statistics this might seem like a lot of jobs.  But is it?  This chart provides what the Obama campaign and the media do not: context.

As the chart shows the current recovery in private sector jobs is the weakest since 1950.  The strongest was the recovery of the 1980s when the government response was the opposite of Obama’s, reduced government regulation and lower taxes.

Note that the President seeks to focus your attention on private sector jobs instead of the usual statistic, all jobs, including public and private.  He still thinks government is more important than the private sector but his stimulus, which was sold in part as insurance against layoffs at the state and local level has failed.  State and local governments have shed a half million employees over the past 26 months.

Not only is the current recovery the weakest in six decades it has come at a steep cost.  We’re living through and will eventually suffer the consequences of the largest deficits and fastest growing debt in American history.  After adjusting for inflation, the deficits of 2009-10-11 are twice the size of the annual deficits during World War II.

In the first week of his Administration in 2009 Obama’s economic team published a report with predictions of very specific outcomes from his so-called stimulus spending surge.  There were several predictions regarding jobs, none of which has come true.  This chart compares their core jobs prediction, upon which all the others were based, with reality.  In January of 2009 these economists told us that if no stimulus were enacted there would be 133.9 million jobs at the end of 2010.  Or, if Congress passed the stimulus there would be 137.6 million jobs.  At the time this was presented as verified wisdom.  We could simply choose to have 4 million more jobs by enacting a stimulus. 

As the second chart shows 2010 and 2011 came and went and we’re still 4.5 million jobs short of these predictions.  But the money has been spent, the debt is owed, interest must be paid.

The take-away should be the same lesson Americans have had to learn the hard way, over and over since the 1920s.   Ordinary men and women do not acquire super-natural powers by winning an election or being hired to make “policy”  for the President.  Yet the political-media establishment will always present the economic predictions and projections of these ordinary men and women as if they were indisputable truth.

The fastest growing demographic group in America is long term unemployed people who have given up hope of ever finding a job and quit looking.  The headline numbers in the government’s monthly jobs report may have seemed “OK” to the casual reader: 115,000 jobs created in April as the unemployment rate ticked down from 8.2% to 8.1%.  “Solidly in the right direction” was the spin from President Obama and the Democrats.  But, across the land there were no spontaneous celebrations.  

Even the establishment media have begun – grudgingly – to acknowledge what we’ve been reporting here since last summer: behind these marginally positive numbers are more ominous statistics that track the relentlessly deteriorating economic circumstances of tens of millions of Americans.

Included in each monthly report is the Labor Force Participation Rate or the percentage of working age people who are counted as part of the labor force either by being employed or by qualifying for the status of “unemployed.”  The statisticians properly exclude from the ranks of “unemployed” those adults who don’t want a job, such as stay-at-home moms and students.  Also excluded are those who want jobs but did not “participate” in the labor force by actively looking for a job in recent weeks.  The unemployment rate is calculated by dividing the number who qualify as “unemployed” by the total labor force.

As the above chart shows, for 31 months the participation rate has steadily declined, in tandem with the unemployment rate.  The difference between the April participation rate of 63.6% and the 65% rate of October 2009, the first month in the chart, is 3.45 million people who want jobs but are not counted as unemployed.  If they had been counted the unemployment rate for April would have been 10.1%, unchanged from 31 months ago.

All across the internet Obama supporters snort that unemployment statistics have been compiled and calculated the same way since the 1940s, but no previous President suffered critics like us calling a declining unemployment rate bad news.  They’re right.  But, since the government began compiling these statistics in 1947 there have been nine recessions with job loses.  The current recovery is the only one out of the nine to see a decline in the unemployment rate result from reclassifying millions of jobless people from “unemployed” to “not in the labor force.”

The charts to the right show the first 31 months of each of the last three post recession recoveries.  During the 2003-06 and 1992-94 periods The Labor Force Participation Rate was virtually the same at the end of the first 31 months as at the beginning.  During the Reagan recovery of the eighties, the participation rate soared higher at the same time the unemployment rate dropped dramatically.

Here are the most shocking, numbers of all:

• From the beginning of 2009 through April, 2012 the total working age population increased by just over 8 million people. 
• Over the same period the labor force, the sum of those who are employed plus those who are seeking jobs, increased by only 129 thousand, less than one percent. 
• The increase in the number classified as “not in the labor force,” or not working and not seeking a job has grown by 7.9 Million, or 99% of the increase in the working age population.
• In April alone, while employers reported creating 115,000 jobs the number of Americans classified by the Labor Department as “not in the labor force,” or not working and not looking for a job increased by 522,000.

Novelist Stephen King became the latest rich guy to board the Obama tax-hikes-on-the-rich band wagon with an angry, profanity laced essay at The Daily Beast titled “Tax Me, for F@%&’s Sake!”   It’s a long, rambling screed, based mostly on leftist folklore and tired campaign slogans.  Since the media are likely to turn Mr. King into a perceived economics scholar we’ve selected a few excerpts to examine:

At a rally in Florida I pointed out that I was paying taxes of roughly 28 percent on my income. My question was, “How come I’m not paying 50?”

In 2009, the latest year IRS statistics are available 470 thousand taxpayers reported incomes in excess of $1 million.   They paid $131.5 billion in income tax.  Mr. King asks why he’s not required to pay 50%, or nearly double his current rate.

The chart shows what would have been the effect on the deficit of doubling or even tripling tax revenue from millionaires.  In 2009 the latest year for which IRS income tax statistics have been published, the deficit was $1.413 Trillion.  Had Congress been able to triple the tax take from millionaires the deficit would still have been over $1 Trillion – far and away the largest in US history.  In fact, after adjusting for inflation, $1 trillion is twice as much as the annual deficits the government ran during World War II, the previous high water mark.

Mr. King attacked New Jersey Governor Christie’s statement that if Warren Buffett thinks he should pay more income tax he is free to write a check and pay it.  Mr. King had no rebuttal to this simple, common sense except to sneer that Christie is fat and might have indulged in “the all-you-can-eat cheese buffet at Applebee’s in Jersey City.”

Mr. King continued:

It’s true that some rich folks put at least some of their tax savings into charitable contributions. My wife and I give away roughly $4 million a year…Warren Buffet does the same; so does Bill Gates; so does Steven Spielberg; so do the Koch brothers; so did the late Steve Jobs. All fine as far as it goes, but it doesn’t go far enough. What charitable 1-percenters can’t do is assume responsibility—America’s national responsibilities: the care of its sick and its poor, the education of its young, the repair of its failing infrastructure, the repayment of its staggering war debts…

Mr. King seems to believe millionaires can pay enough additional tax to make add significant spending to all these priorities, education, entitlements, infrastructure and repayment of the debt.

The chart should help Mr. King put his ideas in context.  Put simply, there aren’t enough millionaires to fund significant spending increases for his favored government activities, even if it were possible to double their tax payments, which, as we’ll discuss below, is probably not possible.  In fact, the cost of entitlements was virtually equal to all, pre-tax income earned by millionaires.

By the way, since the Obama Administration began in 2009 the combined cost of Iraq, Afghanistan and the wider “war on terror” has totaled about $554 billion or 11% of the $5 trillion increase in the national debt since the day the President was sworn in.

Mr. King continues:

That annoying responsibility stuff comes from three words that are anathema to the Tea Partiers: United American citizenry. 

Mr. King like the President, is angry because more than half of America has refused to unite behind an agenda of ever increasing government cost, intervention and control over the private economy that inevitably results in lost economic opportunity for most of us, with the blatantly obvious exception of a politically connected unions and campaign-donor cronies rewarded with funds for unworkable, green energy schemes.

Mr. King’s angry rant continues:

Most rich folks paying 28 percent taxes do not give out another 28 percent of their income to charity…And what they do give away is—like the monies my wife and I donate—totally at their own discretion. That’s the rich-guy philosophy in a nutshell: Don’t tell us how to use our money; we’ll tell you.

The opposing philosophy of the progressive left is that by running for office, or securing a job in the bureaucracy ordinary men assume the self-anointed power to manage other people’s lives and other people’s income.  Mr. King doesn’t seem to notice the manifest failures of vast government bureaucracies, not the  least of which is Congress and the President running up spending so high that there is no plausible scenario wherein the tax payers ever catch up and balance the budget and start chipping away at the debt.

Mr. King complains about several issues that have nothing to do with tax rates on the rich such as his opinion that America is insufficiently regulated.  But it wouldn’t require any more tax revenue for the existing bureaucrats to write even more odious regulations.  They’re only restrained by fear of voter blow-back as they recently suffered when they tried to make it illegal for farm children to do chores.

 Mr. King gives sneers and dismisses verified, validated arguments against higher top bracket tax rates:

• A dramatic tax rate increase, enough to double revenue from the rich is likely to result in less, rather than more revenue.  The rich, more than the rest of us have the means to avoid taxes by shifting income from one tax year to another, holding assets instead of selling them for a taxable capital gain, and myriad loopholes that politicians universally condemn but never seem to find a way to repeal.  The chart at the bottom of this post shows that government collected more tax revenue from millionaires when their effective tax rates were lower.
  
• The rich are the investors who provide the capital resources an economy must have.  Without capital resources jobs are not created and goods and services can not be produced.
  

Stephen King’s anger is misplaced.  Rather than blame America’s troubles on taxpayers, even rich taxpayers he should confront reality: America’s problems are not caused by a government without enough money to throw around.  Our problems are due to the people not having enough economic liberty.

The quarterly GDP report just published was disappointing, yet again.  The economy grew a tepid 2.2% during the first quarter.  This was down from an already weak 3% in the fourth quarter of 2011.  We’re told by the political-media establishment that President Obama’s tsunami of deficit spending was a brilliant stroke that saved the economy.  Yet we’re suffering through the weakest economic recovery since the 1930s.

The Chart compares recent GDP growth with the recovery of the 1980s. [continued below the chart]

Historically, deeper than average recessions, such as we suffered in 2008 and 2009 spawned stronger than average recoveries.  Before 2008 the worst economic downturn since the 1930s had been the recession of 1982.  By some measures it was worse than than 2008-09.  The unemployment rate was higher and mortgage interest rates spiked as high as 16%, compared to 4% – 5% this time.  Similar to the current downturn, house prices plummeted and foreclosures soared.  

But the 1980s recovery was much more robust.  The big difference between the two recoveries has been  government action.  Presidents Bush and Obama responded to the downturn by launching several interventionist initiatives that enhanced the power and control of government over the economy with new regulations and bailouts of insolvent financial firms and unionized car companies.  President Obama, a disciple of Keynesian economic theory launched the largest non-military spending increase ever to “stimulate” the economy.  His supporters now say the economy failed to grow and create the millions of jobs, Obama had promised not because stimulus is a bogus economic theory but because Obama didn’t spend enough!

To satisfy their political supporters Obama and the Democrats scheduled several massive tax increases to begin at the start of 2013.  Businesses appear to be scaling back in anticipation of these new burdens but Obama does not seem inclined to do anything to prevent them.  In 1982 President Reagan responded to recession with historic tax cuts and by scaling back government regulation and intervention.

In 1984 President Reagan ran for reelection on his economic record of restoration, recovery and astounding job growth.  President Obama’s reelection campaign so far has been an effort to divert attention away from his record with divisive attacks on American energy companies and high income taxpayers, most of whom are small business employers.  Reagan won a second term in the largest Electoral College landslide in American history.  Obama will be lucky to win by 1%, if at all.