Sibby Online

Taxes versus economic activity

The AP is reporting a robust American economy:

Americans' incomes, bolstered by strong gains in hiring, rose by 0.3 percent in February while consumer spending climbed at an even faster pace of 0.5 percent, the government reported Thursday.

The Commerce Department said the gain in spending followed a much smaller 0.1 percent increase in January and reflected the fact that auto sales rebounded last month after having fallen in January.

The 0.3 percent rise in incomes was attributed to a surge of 262,000 new jobs in February, the biggest increase in four months. Further solid gains in both incomes and consumer spending are expected in the months ahead as the consumer continues to be a driving force in the economy.

Analysts said the February gains in incomes and spending showed that the economy was being propelled this year by continued strength in employment growth and consumer spending - which accounts for two-thirds of total economic activity.

As an ‘A’ student in economics during my college years, common sense tells me why we are experiencing such strong economic gains:

Starting with the recession in 2001, the country suffered through two years of outright declines in employment and then weak job growth in 2003. However, job gains accelerated last year, pushing employment up by more than 2 million workers, an increase that analysts expect to be matched this year.

The economic rebound was fueled by four rounds of tax cuts promoted by President Bush and easy credit from the Federal Reserve. With the impact of the tax cuts waning and the Fed now raising interest rates to make sure that the reviving economy does not fuel unwanted inflation, analysts believe that economic growth will moderate somewhat this year.

Of course, tax decreases are stimuli to the economy. Conversely, tax increases while reduce economic activity. So what are the Democrats, in conjunction with AARP, advocating as the fix to the Social Security problem…higher taxes. Yes, higher taxes meaning less jobs, meaning less payroll taxes, meaning more problems for the Social Security system. Higher taxes, meaning less economic freedom, meaning bigger government and more reasons for special interests groups like AARP to use misinformation as they pursue more and more of the Federal pie.

A Sibby Online reader reminded me about what Charles Krauthammer said last night on Fox News about AARP:

He said they exist solely to transfer wealth form working people to retired people. That is their ONLY goal.

Yes, and on Tuesday night I witnessed first hand how Tim Johnson and the AARP had joined forces, but then to say they were for more jobs. Those are lies. Higher taxes means less jobs. Johnson whined about jobs going overseas, but refused to mention that higher taxes is an incentive to drive business to such actions. AARP's idea of raising the Social Security tax ceiling from $90,000 to $140,000 will also have to be matched by the employer. Johnson didn't address that tax increase when whining about jobs going over seas. They also were not very kind to more jobs for stockbrokers and financial planners, as they made it sound like personal accounts were only going to be good for Wall Street.

AARP’s conflict of interest

Senator Tim Johnson’s propaganda program in Mitchell Tuesday night on Social Security accounts included a ranking member of the AARP:

Tuesday’s other meeting participant, Sarah Jennings, executive director of the South Dakota AARP, agreed that private accounts are not the right fix. Instead, the AARP supports raising the income cap on those subjected to payroll taxes from $90,000 to $140,000. The organization also supports taxing the 33 percent of state and local government workers who are currently exempt, and investing a small portion of the trust fund more aggressively.

Like Johnson, Jennings said Social Security problems are less severe than the president has claimed. She said minor adjustments are needed, but she cautioned against drastic alterations to the makeup of the 70-year-old program.

The Washington Post discloses AARP’s status as the top lobbying organization:

Over this week and last, AARP, the nation's largest lobby, will have spent more than $5 million on ads attacking the president's Social Security plan - nearly three times as much as all the supporters of his proposal put together. That's just for starters.

Every state that has a swing-vote senator will have AARP forums, which have been drawing about 300 people each. And every time a member of Congress holds a town meeting, AARP volunteers are dispatched there to protest the president's plan for individual accounts.

Perhaps AARP’s dislike for private accounts is due to the fear of competition that threatens their financial services income:

That kind of work is expensive but AARP can afford it. The association took in $350 million last year from a variety of royalty-producing enterprises, including insurance, prescription drugs and mutual funds.

AARP is facing criticism of its mutual fund business because that kind of investment would probably be a feature of the accounts the president is pushing. Scudder Investments Inc., a unit of Deutsche Bank AG, handles 600,000 mutual fund accounts of AARP members, with $10.5 billion in assets. AARP helped develop those accounts and earns a small percentage of the management fee that Scudder charges. Last year, the association earned about $7 million from those fees and is working with Scudder to develop more funds, AARP officials said.

"It is ironic that they would make such a fuss about risky investments in Social Security when they actually promote investments in mutual funds," McCrery said. Sen. Dick Durbin, D-Ill., an AARP sympathizer, agreed: "AARP needs to take care that when it's in the policy realm, it declares any conflicts of interest."

This puts into question AARP’s agenda, its own financial viability or its members financial viability.

On guaranteed benefits

From Social Security Choice:

The phrase "guaranteed benefits" has been used a lot recently to describe the future benefits under the existing Social Security system. The latest CNN/USA Today/Gallup survey shows that support for the President’s Social Security plan has fallen in the past months — but only when a reduction of "guaranteed benefits" is cited as a casualty of personal retirement accounts.

The fact remains that benefits under Social Security are not guaranteed. In 1960, the Supreme Court ruled that Americans have no ownership claim to their Social Security benefits (Flemming v. Nestor). Not only does this ruling clearly establish that Social Security benefits are not guaranteed, it also reminds us that Congress can cut benefits or even eliminate them altogether at any time. Moreover, as the Social Security Board of Trustee’s report clearly demonstrated this week, doing nothing is a benefit cut. If no changes are made this year, future retirees could face benefit cuts as steep as 27%.

Personal retirement accounts would grant Americans ownership rights over their Social Security benefits and would replace any cut in the benefits promised to them under the old system.

The only way to guarantee benefits would be through personal retirement accounts. In fact, under the Cato Institute’s own plan, The 6.2 Percent Solution, workers would be given a recognition bond for the contributions they made under the traditional Social Security system, which the government could never take away. In addition, workers would be permitted to invest 6.2 % of your wages — the employee’s half of their overall Social Security contribution — into a personal retirement account. The government could never take that away from them either.

Now that is a guarantee.

Only an African American can say this

I took an unwarranted hit at Mount Blogmore for being anti-women by posting the Devvy Kidd column last week. Now I am posting another column by a female who will also shake up the leftwing of the Democrat Party. Star Parker points out the hypocrisy of the class warfare Democrats:

According to public record, one of every three members of the Senate and one out of every four members of the House are millionaires. Despite popular stereotypes of Republicans as the party of the rich and Democrats as the party of the working class, the wealthiest member of the Senate (John Kerry of Massachusetts) and the wealthiest member of the House (Jane Harman of California) are both Democrats. Of the top six wealthiest senators, five are Democrats.

The ownership society has certainly found its way into Congress. But the wealthy Democratic owner class shows little interest in spreading the wealth and opportunity around.

House Democratic leader Nancy Pelosi of California, worth $16.3 million, is an appropriate spokesperson for the plantation caucus. This past week she stood at a press conference with other Democratic leaders stating uncompromising opposition to personal retirement accounts. The Democrats' message: No negotiation on Social Security until "privatization is off the table."

Star Parker then explains how important private accounts are for the poor, specifically African Americans who are poor:

The black poverty rate today is double the national average. Black-household wealth is a fourth of the national average. Blacks suffer double jeopardy as a result of the work over the last half-century of welfare-state liberals like Pelosi.

First, Social Security payroll taxes take away the few extra dollars that low-income workers could have otherwise retained to build wealth.

Second, and perhaps even worse, welfare-state liberals have educated a whole generation of blacks that they can't take care of themselves. Skills in areas such as money management may be in deficit today. But they are in deficit because they weren't learned, and they weren't learned because of hanging on the government plantation. When do we let these folks off this plantation so they can finally start learning the essential skills for improving their lives?

Social Security reform, with a crucial central component of personal retirement accounts, is being threatened by elitist Democratic liberals. They preside over a government plantation over which they do not want to relinquish control. It's time to let the slaves free. Transforming taxes into ownership is an important way to do it.

Star Parker really rips the heart out the far-left Democrats with this:

When America's political class debated emancipating slaves, an issue that dampened enthusiasm for the idea was the thought that these slaves could simply walk off the plantation and integrate into the nation and live as free people.

The owner/masters of today's Democratic plantation reject all attempts to roll back government and give working Americans more choice and freedom. The response is the same whether it's personal retirement accounts or choosing where to send your kid to school. Anything reducing government control gets rejected.

Ironically, most personal-retirement-account proposals simply make this option available. But even allowing the option gives too much freedom to working Americans for the Democrats. Apparently, we're all so dumb that not only can't we manage our own money, but we shouldn't even be given a voluntary option to do it.

This is probably the best column I have read regarding the issue of private accounts for Social Security. The debate is about freeing today’s slaves, the poor who have become dependents on government.

Another example of the lying left

From Social Security Choice:

From Paul Krugman's Friday New York Times column:

"...the caption on the corresponding chart in the 2004 booklet reads, "Current Social Security system is unsustainable in the long run." That's simply false - we can argue about whether it's a good idea to maintain the present system, but there's no question that the basic form of the system could be maintained indefinitely through some combination of tax increases and/or benefit cuts."

Krugman could use a dictionary:

Main Entry: unsustainable
Part of Speech: adjective
Definition: not able to be maintained or supported in the future, esp. without causing damage or depletion of a resource

Or in Krugmanese, Social Security is "sustainable" assuming we totally change it -- through higher taxes and/or benefit cuts.

Democrats are NOT pro-choice

From Don Luskin (via Social Security Choice):

Has anyone stopped to consider what a stunning concession the Democrats have made in the battle for Social Security reform, even as they pretend to be strong? The position articulated by Ted Kennedy and Dick Durbin on the Sunday talks was that Democrats will negotiate on anything about Social Security reform except personal accounts. Tax increases? No problem. Benefit cuts? You got it. But personal accounts? Choice? Letting every American own his or her own personal Social Security lockbox? Over our dead bodies.

The far-left AARP

From Social Security Choice:

Following up on yesterday’s post about the AARP, I found this short article on the blog, Ankle-Biting Pundits. Here is an excerpt (the headline of which should tempt you to read more. Dogs. Fleas. That’s clever.)

AARP Laying With Dogs - Fleas To Follow

The AARP likes to make the public think that they are as American as Mom, baseball, hot dogs and apple pie. After all, who would dare question the integrity or bias of an organization that is doing but looking out for Grandma and Grandpa. Why don’t you know if not for the AARP your elderly relatives would be eating dog food? But what you might not realize is that the AARP is laying down with some of the most disturbing far-left wingers in the country, and in some cases promoting their messages.

Read it all.

AARP in bed with Daily Kos

From Social Security Choice:

The writers over at Little Green Footballs notice that the AARP’s Social Security blogroll lists the Dean of the Angry Left — Daily Kos. This is in spite of the fact that the AARP lists themselves as a non-partisan organization. Maybe harmless, but in fact, their entire blogroll is a Who’s Who of the Angry Left:

Daily Kos
Donkey Rising
Dude, Where’s my retirement?
Eschaton
Talking Points Memo
The Left Coaster
There Is No Crisis

Also, I wonder if the writers for the AARP blog are old enough to be members? It would be nice to know, but their posts are anonymous.

Thanks to SSC reader, Sally Myers, for the pointer.

Oscars, The Social Security of entertainment

From Social Security Choice:

According to Millard Fillmore here, the left’s attitude that we common people are too stupid to distinguish between what things are good and bad applies to more than just Social Security.

Full size image

Krugman’s hypocrisy exposed

From Don Luskin (via Social Security Choice):

Paul Krugman has gotten his smears confused in his New York Times column today. He accuses advocates of Social Security reform of smearing AARP, a reform opponent. But Krugman himself smeared AARP in November 2003, when it supported President Bush's initiative to provide a Medicare prescription drug benefit (which, like all Bush initiatives, Krugman opposed). Then Krugman called AARP a member of "the coalition of the bought-off" -- and claimed it supported Bush's initiative in order to enrich itself through its insurance business:

Over the years AARP has become much more than an advocacy and service organization for older Americans. It receives more than $150 million each year in commissions on insurance, mutual funds and prescription drugs sold to its members.

...it may seem odd on the surface that William Novelli, AARP's chief executive, wrote a glowing preface to Newt Gingrich's book on health care reform. After all, Mr. Gingrich has long advocated turning the administration of Medicare over to private companies — an unpopular idea, and also an expensive one (forget the clichés about inefficient government: private companies have much higher overhead than Medicare). But what looks like wasted money to taxpayers and retirees looks like opportunity to private providers. Enough said.

Of course now AARP is a model of probity -- of "principle" as Krugman is fond of saying of those who agree with him.

In today's column Krugman also objects that "People like myself" are being smeared by "one scornful Bush aide" as "the 'reality-based community.'" Yet Krugman has used that term himself -- presumably not scornfully -- in a speech last November, when he was moping about how the election had turned out:

It's going to be a very grim period...In particular it's a huge blow to those of us who see ourselves as part of the reality-based community.