The Intransigent Conservative

Wednesday, January 30, 2013

Wednesday's Write-up

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View the story "Wednesday's Write-up (1/23/13)" on Storify Wednesday's Write-up (1/23/13) http://theintransigentconservative.blogspot.com Storified by Brian Empric· Wed, Jan 30 2013 17:11:37 The ABC News Power Players report that multimillionaire conservative investor Foster Friess (@FosterFriess) would support Rick Santorum’s presidential campaign again if he runs in 2016.

"If people let him out of that box of social conservative, and appreciate how much more he brings to the table, I think he's still one of my favorite candidates."

"I believe we have an opportunity now to lift up a whole new group of young Republicans, and young new faces that are going to change our country back to where it was maybe 20 years ago."

"I think the smartest thing the Republican party can do is stick to the principles that Republicans stand for -- limited government, respect for the constitution and free markets. If you stick with that, there's no way we're not going to win."
Standing by his man: GOP millionaire Foster Friess wants Santorum in 2016Top Line Wealthy conservative investor Foster Friess is best known in Washington, D.C. for helping fund Rick Santorum's presidential camp... Tasha Tsiaperas reports on Supreme Court Justice Antonin Scalia’s lecture at Southern Methodist University earlier this week.

“(Scalia) said law schools don’t adequately emphasize that decisions should reflect the letter of the law.

“He spoke of schoolchildren coming to visit the Supreme Court and calling the Constitution a ‘living document.’”

“It’s not a living document. It’s dead, dead, dead,” he said.
Constitution a 'dead, dead, dead' document, Scalia tells SMU audienceU.S. Supreme Court Justice Antonin Scalia says a key part of interpreting the law properly is reaching decisions even when they contradic... Richard A. Epstein (Bedford Senior Fellow at the Hoover Institution) writes that Obama’s redistributive effort to limit charitable tax deductions will hurt the poor—and everyone else.

“On four separate occasions, President Obama has proposed limiting the deduction for charitable contributions to a maximum 28 percent.”

“The advocates of redistribution are quick to trumpet its virtue, but slow to identify the optimal level of redistribution that does not undermine the incentives for productive work… What is doubly ironic in this situation is that the champions of redistribution seek to neuter the single most effective device for redistribution that is available to modern societies—the charitable deduction.”

“It is tempting to think that the limitations on deductions will hurt the rich by cutting back on their deductions. But the burden will fall heavily on the recipients of charitable support, for as the price of making a charitable gift rises (anywhere from 30 to 100 percent), the level of charitable giving will decline. Hurt in the shuffle are, of course, the low-income beneficiaries of charity.”

“What the current tax deduction does, in effect, is to take income out of a rich person’s tax base if he or she is prepared to give it to others. It protects the incentive to create wealth, as people are far more likely to work hard to generate wealth whose distribution they can direct than to create wealth that the government snatches from them for its own purposes.”

“Why then would the government take steps to cut back on charitable giving? The most obvious explanation is both insidious and dangerous. It is to shrink the size of its main competitors in the private sector in order to increase the dependence of ordinary people on the federal government.” My take on charitable deductionshttp://www.hoover.org/publications/defining-ideas/article/139186Richard A. Epstein James Pethokoukis writes that the parties are at loggerheads over taxes, and no sweeping reform will please both sides.

“A group of House Republicans wants to put an expiration date on the 75,000-page U.S. tax code. The Tax Code Termination Act would require the repeal of the entire code in 2017 — except for the bits dealing with Social Security and Medicare — with a new system ready to go for the following year.”

“But Republicans can put aside any fantasies of starting 2018 with a flat income tax or a national sales tax such as the Fair Tax, two popular right-of-center alternatives to the status quo… First, both of those sweeping reforms would likely either raise taxes on middle-class voters — including millions who currently pay no income tax — or be huge revenue losers… Second, unless Republicans score a historic landslide in the 2016 presidential and congressional elections, the folks on the other side of the aisle will have a major say in any tax revamp.”

“Liberals start with a belief that America is severely undertaxed… Also making bipartisan agreement harder is the new left-of-center consensus that marginal tax rates can go dramatically higher before they weaken economic growth and become self-defeating.”

“Maybe there’s no better example of how Democrats are veering sharply from both the GOP and mainstream economics on tax reform than the reemergence of the old idea of slapping a wealth tax on the fortunes of rich Americans.”

“Republicans view tax reform as way of making the tax code more efficient and amenable to economic growth; Democrats see it as a crude tool for financing an ever-expanding welfare state.” My NR column on why getting a tax reform deal with Dems is almost impossible http://www.nationalreview.com/articles/338947/total-tax-code-termination-james-pethokoukisJames Pethokoukis Robert C. Pozen (Nonresident Senior Fellow, Economic Studies at the Brookings Institution) writes that the need to reduce the current corporate tax rate is one policy that both parties can agree to. Pozen estimates that a 65% cap on deductions for corporations for gross interest would be enough to finance a corporate tax rate reduction from 35% to 25% (financial institutions would be allowed to deduct 79%).

“The current rate, highest in the advanced industrial world, disincentivizes investment and encourages corporations to relocate overseas.”

“Because of the fiscal pressures facing the government, most politicians recognize that any corporate tax rate cut must be paid for by eliminating tax preferences and ‘loopholes.’ But few politicians have identified enough revenue-raising measures to offset the cost of a significant reduction of the corporate tax rate-cutting the rate from 35% to 25% would cost roughly $1.2 trillion over ten years.”

“…the bipartisan Joint Committee on Taxation has estimated that the elimination of virtually all corporate tax expenditures would not be sufficient to reduce the corporate tax rate to 25%.”

“Currently, corporations may fully deduct the interest they pay on their bonds and other forms of debt. This deduction costs the Treasury a significant amount of money, and encourages corporations to take on too much debt, increasing the fragility of the economy.”

“My proposed ‘interest cap’ would also reduce a significant distortion in the tax code. Currently, if a corporation finances an investment with debt, it can deduct the interest that it pays on that debt. If a corporation finances an investment by issuing new shares of stock, or by using money in the bank, there is no equivalent deduction. As a result, the tax code effectively encourages corporations to load up on debt. This makes companies more vulnerable to downturns-exposing their employees to a greater risk of layoffs and prolonging recessions in the broader economy.” My piece in @rc_markets explaining why a corporate tax cut should be funded by limiting interest deductions: http://www.realclearmarkets.com/articles/2013/01/29/35_is_way_too_high_for_corporate_taxes_100117.html #liBob Pozen John B. Taylor (former Treasury undersecretary for international affairs) writes that while borrowers like near-zero interest rates, there is little incentive for lenders to extend credit at that rate.

“The Fed ratcheted up purchases of mortgage-backed and U.S. Treasury securities, and now they say more large-scale purchases are coming. They kept extending the near-zero federal funds rate and now say that rate will remain in place for at least several more years. And yet—unlike its actions taken during the panic—the Fed's policies have been accompanied by disappointing outcomes. While the Fed points to external causes, it ignores the possibility that its own policy has been a factor.”

“The Fed's current zero interest-rate policy also creates incentives for otherwise risk-averse investors—retirees, pension funds—to take on questionable investments as they search for higher yields in an attempt to bolster their minuscule interest income… And extraordinarily low rates support and feed the spending appetites of Congress and the president, increasing deficits and debt.”

“Consider the ‘forward guidance’ policy of saying that the short-term rate will be near zero for several years into the future. The purpose of this guidance is to keep longer-term interest rates down and thus encourage more borrowing… Effectively the Fed is imposing an interest-rate ceiling on the longer-term market by saying it will keep the short rate unusually low.”

“Ironically, the harmful effects of these interventions lead policy makers to expand them, which further increases their harmful effects. No one should want a continuation of this vicious circle.” John Taylor: Fed Policy Is a Drag on the Economy http://on.wsj.com/XNGOBjOpinion & Commentary David Mamet (author, playwright, producer, screenwriter, and director) writes that the individual is the best and only one qualified to provide his own personal defense, and the right to do so is guaranteed by the Constitution.

“President Obama, in his reelection campaign, referred frequently to the ‘needs’ of himself and his opponent, alleging that each has more money than he ‘needs.’

“But where in the Constitution is it written that the Government is in charge of determining ‘needs’? And note that the president did not say ‘I have more money than I need,’ but ‘You and I have more than we need.’ Who elected him to speak for another citizen?”

“The Founding Fathers, far from being ideologues, were not even politicians. They were an assortment of businessmen, writers, teachers, planters; men, in short, who knew something of the world, which is to say, of Human Nature. Their struggle to draft a set of rules acceptable to each other was based on the assumption that we human beings, in the mass, are no damned good��that we are biddable, easily confused, and that we may easily be motivated by a Politician, which is to say, a huckster, mounting a soapbox and inflaming our passions.”

“Healthy government, as that based upon our Constitution, is strife. It awakens anxiety, passion, fervor, and, indeed, hatred and chicanery, both in pursuit of private gain and of public good. Those who promise to relieve us of the burden through their personal or ideological excellence, those who claim to hold the Magic Beans, are simply confidence men… It was to guard us against this inevitable decay of government that the Constitution was written. Its purpose was and is not to enthrone a Government superior to an imperfect and confused electorate, but to protect us from such a government.”

“The Left loves a phantom statistic that a firearm in the hands of a citizen is X times more likely to cause accidental damage than to be used in the prevention of crime, but what is there about criminals that ensures that their gun use is accident-free? If, indeed, a firearm were more dangerous to its possessors than to potential aggressors, would it not make sense for the government to arm all criminals, and let them accidentally shoot themselves?”

“More legal guns equal less crime. What criminal would be foolish enough to rob a gun store? But the government alleges that the citizen does not need this or that gun, number of guns, or amount of ammunition.”

“The police do not exist to protect the individual. They exist to cordon off the crime scene and attempt to apprehend the criminal. We individuals are guaranteed by the Constitution the right to self-defense.” Cover Story: David Mamet says the individual has a right to defend himself with a gun http://nswk.ly/X8mZp6Newsweek Michael Tanner (senior fellow at the Cato Institute) writes that prominent liberals are now insisting that we face no debt problem at all.

“Bolstered by a study from the left-wing Center on Budget and Policy Priorities, the debt deniers claim that a combination of economic growth, tax hikes, and projected (but not yet realized) spending reductions have already significantly reduced deficits. They argue that a mere $1.2 trillion in additional tax hikes over the next ten years, and the resulting savings on interest, would enable us to ‘stabilize’ our debt at a mere 73 percent of GDP by 2022.”

“But even if you think that’s good news, it’s not really the truth. The 73 percent figure actually represents only that portion of the federal government’s debt classified as ‘debt held by the public,’ primarily those U.S. government securities that are owned by individuals, corporations, and other entities outside the federal government itself.”

“Moreover, by cutting off the trend line in 2022, the debt deniers ignore the enormous unfunded liabilities of Social Security and Medicare, the costs of which will kick in mostly beyond this limited budget window.”

“True, those obligations represent the ‘softest’ form of debt. But ‘soft’ does not mean debt that can be completely dismissed. According to generally accepted accounting principles (GAAP), by which private corporations abide, promises to pay future benefits are generally categorized as debt.”

“The International Monetary Fund looked at the relationship between debt and economic growth, concluding that, from 1890 to 2000, countries with high debt levels have consistently experienced slower economic growth than those with low debt levels. Similarly, economists Carmen Reinhart and Kenneth Rogoff concluded that countries with debt totaling more than 90 percent of GDP have median growth rates one percentage point lower than countries with lower debt levels, and average growth rates nearly four points lower. The slow economic growth that the United States has seen coming out of the recession is likely due in part to our high levels of government debt.” The Debt Deniers’ Fantasy http://j.mp/11d7gLfMichael Tanner