Abu Hatem أبو حاتم

President Obama has upped the ante of class warfare rhetoric to a new level. Obama is promising the biggest tax hike since the second World War on the higher marginal tax brackets. Beware, our draconian, unjust, and repressive progressive tax system has just got harsher. While the rest of the world understands the benefits of economic growth - Russia and Eastern Europe have instituted low flat taxes of around 10-15% each which has precipitated phenomenal growth rates - Obama seeks to take us back to the future of New Deal malaise.

Obama’s irrational mantra is that the current tax system is “unfair.” Fairness, it would seem, entails cutting more and more taxes for lower income Americans and increasing taxes on those of higher incomes. Justice is no Aristotelian maxim for giving each his due or the Jeffersonian equality under the law. Obama believes that flattening our tax system by taxing all income earners by the same proportion would be unjust, even if it provided a tax-exemption to the poor. Instead, Obama calls for making our tax system “more progressive,” and rails against honest commerce - corporations and the upper classes who serve us in our daily lives with gas stations, food, clothing, etc. Please, if you truly hate Exxon and Walmart, then just quit buying gas and food.

Here is our current tax system, courtesy of good ‘ol Ross Perot at Perotcharts.com, his new venture:

The lowest 50% of Americans pay 3.2% of the taxes. The top 5% pays 58.8% of the taxes. And this is unfair to the lower classes? Not to mention the stagnation on economic growth it would cause. Increasing our real per capita GDP means increasing prosperity for everyone.

Taxing the poor does cause them to suffer, as well as Federal Reserve instituted inflation which destroys the savings of the poor and elderly on fixed incomes. I am all for tax cuts for the middle and lower classes, but I am not for tax increases. Instead, we should cut spending.

First are the good parts of Obama’s tax policy:

Obama said his tax plan would give “every middle-class family a $1,000 tax cut.” In addition, his plan aims to eliminate income taxes for seniors who make less than $50,000 a year.

Very good.

Yet Obama replaces this with more taxes on the other guy. Thus this is not a “tax cut” but a tax hike in disguise. Yes, of course, American corporatism protects the big corporations from competition, bails out big business, and gives them corporate welfare and big advantages. There is no doubt this should stop, yet two wrongs don’t make a wright. Or as Frederic Bastiat said in The Law by mutually plundering each other, the rich and poor do not achieve justice in a democracy but a web of injustice.

Obama will destroy the economy. He will increase marginal tax rates to 39% on the top income tax bracket. Two days ago Obama announced he wanted to raise the cap on payroll taxes making the upper income earners - who do not even benefit from what they pay in to social security and Medicare - responsible for paying the taxes of lower income earners. But who is the top income tax bracket? The middle class or anyone who pays taxes.

U.S. News and World Report reports that the Obama tax hike will raise taxes on the top marginal tax bracket by about 15%, making the top marginal tax rate pay net income and payroll taxes of 50.1%. THE MAJORITY IF YOUR INCOME. Does that not strike some people as startling? 50.1%. That is a whopper of a number. It doesn’t approach Jimmy Carter’s 70% but it has still been unheard of in contemporary America.

Bill Clinton, after his election in 1992, decided to concentrate on cutting the deficit and U-turned on a campaign promise made to phenomenally raise tax rates. Instead of Jimmy Carter, we got a Democratic Reagan, with top marginal tax rates barely increased to 39% which were still low and growth inducing.

There may be hope for the Obama taxation monster. And remember although this blog is critical of him, it still endorses him for president. Yet, ardent socialist airhead Naomi Klein writes in today’s Guardian that Obama’s roots at the University of Chicago and links to Chicago school economic advisers may usher in a pro-growth free market Milton Friedman approach to economics, i.e. a more fiscally conservative democratic administration comparable to Bill Clinton’s. Maybe this is all talk and lies out of Obama who has proven himself to be an excellent liar and a very good pandering politician (see AIPAC speech). Klein writes:

Obama’s love of markets and his desire for “change” are not inherently incompatible. “The market has gotten out of balance,” he says, and it most certainly has. Many trace this profound imbalance to the ideas of Milton Friedman, who launched a counter-revolution against the New Deal from his perch at the University of Chicago. And here there are more problems, because Obama - who taught law at Chicago for a decade - is embedded in the mindset known as the Chicago School.

Obama chose as his chief economic adviser Austan Goolsbee, a University of Chicago economist on the left side of a spectrum that stops at the centre-right.

Klein laments Obama’s pro-growth pro-market rhetoric but sees room for hope because of the sheer amount of pandering Obama has done. Who can truly take him seriously in anything he says? He makes his fellow flip-flop Hall of Famers - John Kerry, Mitt Romney, Hillary Clinton, and John McCain - proud. Yet perhaps Obama’s Friedmanite roots will cause him to balance budgets and keep taxes reasonable. Just maybe.

Overall however, what we are hearing from Senator Obama is the same old McGovernite package but this time its masked in Reaganite clothing.

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After Obama’s horrid economic plan, you would think that is as “class warfare” socialist you could get in America. Well, not so, because as bad as Obama’s economic plan was it does not touch the psuedoconservatism that is John Sidney McCain.

Ahem, Mr. “No Earmark,” McCain has attempted in past weeks to tout his economically conservative bona fides. The same McCain who lamented often that congress was spending money like a drunken sailor himself funded a war which has built up the biggest budget deficit in decades. And this is from a “fiscal conservative.” If thats fiscal conservatism, then who cares about earmarks. Republicans like to talk about earmarks because they realize that their wars, and democratic entitlements are the top sources of all government spending.

Anyway, McCain has truly shown his Nazism, yes Nazism or fascism, in remarks that he has given in the past two days. For McCain, taxes are a good thing, and income and death taxes make up a “patriotic duty,” a form of nationalism, for the common good. The Huffington Post reports the following on McCain’s support of the absolutely unjust death tax:

“In his 1906 State of the Union Address, President Theodore Roosevelt proposed the creation of a federal inheritance tax . Roosevelt explained: ‘The man of great wealth owes a peculiar obligation to the State because he derives special advantages from the mere existence of government.’ Additionally, in a 1907 speech he said: ‘Most great civilized countries have an income tax and an inheritance tax. In my judgment both should be part of our system of federal taxation.’ He noted, however, that such taxation should ‘be aimed merely at the inheritance or transmission in their entirety of those fortunes swollen beyond all healthy limits.’

“I agree with President Roosevelt, and I remain opposed to full repeal of the estate tax.”

Death taxes a “patriotic duty” and “obligation to the State” is not conservatism, it is fascist Statist paternalism at its worst. But not only is McCain’s über-patriotism manifest in his tax policy, it seems to be a recurring theme for his campaign. Only last February McCain said that in America’s imperialistic adventures in Vietnam he had “led the largest squadron in the United States Navy, not for profit, but for patriotism,” which distressed pro-growth conservatives even at the pro-war Wall Street Journal. McCain is surely no true conservative, nor true capitalist. I can see antiwar Russell Kirk rolling in his grave right now at McCain’s über-patriotism, his support for American democratic imperialist neoconservatism, and his “100 years of war” remark. Obviously, John Sidney McWar has no place in Kirk’s The Conservative Mind. Surely, even the most irrational reader will inquire “from whence did conservatism mean imperialism?” for without doubt it cannot be found in Burke, Eliot, or Santayana.

Yet fascist John McCain’s socialistic class warfare rhetoric does not even stop there. McCain’s socialism extends further. As the Financial Times reports, McCain said the following today:

“Something is seriously wrong when the American people are left to bear the consequences of reckless corporate conduct, while the offenders themselves are packed off with another $40m or $50m for the road.. if I am elected president, I intend to see that wrongdoing of this kind is called to account by federal prosecutors. And under my reforms, all aspects of a CEO’s pay, including any severance arrangements, must be approved by shareholders.”

So the death tax and income taxes are patriotic? Government spending of our tax money on imperial wars fulfills our “obligation to the State,” and fighting in these imperial wars expresses our “serving the State.” And to top it all off, McCain will go after honest commerce and business if he finds that CEO’s of corporations are making too much. Oh please, and he keeps repeating that the National Journal calls Obama the most liberal in the senate? Give me a liberal democrat before a pseudo-republican socialist. Barack “Class Warfare” Obama trumps John “Class Warfare” McCain, for the true conservatives at least.

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I just finished watching Barack Obama’s absolutely disgusting speech on the economy in North Carolina today, his first speech of the general election campaign. The Guardian has a summary of the speech available here.

Here is the basic gist and summary:

Free markets and ownership do not promote prosperity. Expanding the private sector and promoting economic growth only benefits the rich. Tax the hell out of rich people, and Exxon and every big corporation, and use the benefits to help the poor through a million new programs and expanding big government.

Obama was right on one thing during the speech, that you can’t just keep spending money you don’t have, and that it wasn’t fiscal conservatism. And the man is probably better than John McCain who will raise taxes (he voted against the Bush tax cuts twice), tax the hell out of companies for his “climate change” plans, increase defense spending and keep the war in Iraq going on. Yet, isn’t it funny that after all of this tax-and-spend your way into prosperity was debunked years ago by people such as Friedrich von Hayek in his Road to Serfdom, people are still taking it up and believing it?

The amount of growth and wealth in the American economy since Ronald Reagan cut the abysmal Carter-era marginal tax rates, through the Bush administration and including Bill Clinton who also kept taxes very low in comparison to former democrats (Clinton’s top marginal tax rate was about 40% while Carter’s was in the 90% range), has made America the richest country in the world. Complain about corporations and oil companies all you want, Mr. Obama, but the sheer amount of annual real GDP% growth has gone up so high in the post-Reagan era of low marginal tax rates (which includes Clinton) than in the malaise of the Carter years.

Just look at this graph to understand the difference between the GDP growth rates under Carter, and then Reagan, Bush, Clinton, and Bush who despite their economic flaws did benefit from the slashed marginal tax rates (recessions, or negative GDP growth, are in red) :

Under Reagan, and Clinton for the most part growth rates were phenomenal. Under Clinton people even expected us to be living in a “New Economy” without recessions. Despite this big error, if Obama expects to tax and spend his way into prosperity through interventionism and central planning then he can expect Carter-esque malaise. Intervention and central planning destroy wealth, while the market creates prosperity (this is the utilitarian argument, the market also is the only possible way of respecting natural rights and ensuring justice or “social justice”).

And no offense at all to Jimmy Carter. Although his economic policies were wrong, he has been one of the greatest patriots for peace in my life time, and certainly amongst ex-presidents. And peace is more important than prosperity, and also the key to prosperity (as our preemptive, aggressive, and unnecessary wars destroy our economy).

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In one of those interesting tidbits of life, I have been searching for a copy of Mario Kart for Wii for the past few weeks. I finally decided to check Amazon.com on the internet to see just how much I would have to pay for the luxury. Amazon.com has run out of copies, and the used copies are selling for from $77.89-89.00.

My first impression of course, when looking at this, is that this is a textbook example of the fallacy of just price. What would be the “just price” of Mario Kart? The answer is that prices are subjective, because the inherent value that human minds give to goods and services in the marketplace is subjective. The price of Mario Kart has gone up from its retail price of $50.00 because there is a high demand, i.e. more people find Mario Kart in their marginal utility than the amount of Mario Kart games currently on the market. Because of this, the price goes up. The price, as the Ottoman Islamic business law manual al-Mejelle tells us is the uncoerced and volitional offer and acceptance agreed upon by buyer and seller.

Jeffery Tucker, of the Ludwig von Mises institute made it ever so clear with a beautiful article on the just price this weekend:

The only real answer here is to let the free market rule, which is another way of saying that people should be free to come to their own negotiations about the prices they are willing to pay or accept for this and that. Those points of agreement should be as flexible as human valuation itself. That is to say, we should be free to change our minds, with each exchange taken as an end in itself, with no bearing on future points of agreement.

This is not only fitting with the needs of freedom — any attempt to force prices to do this or that does in fact impinge on our freedom to negotiate — but it is also essential to a well-functioning economy. That’s because the price is heavily influenced by factors such as resource availability, the subjective valuations of consumers, and the profitability of the undertaking in light of accounting costs. In the end, the books have to be in the black. The prices that are accepted in the market must sustain this state of affairs. Even in mega-industries like oil, the difference between revenue and expenses can be surprisingly thin. Even small regulatory and tax changes can drive companies of all sizes to bankruptcy.

Prices are crucial to the wise apportioning of resources in a world with unlimited wants and limited resources. Prices affect the way in which we use things, whether conserving them or throwing them away. You will note that higher gas prices change the way you make judgments about going places and doing things. This is a good thing. Higher prices signal the need to conserve — and without unworkable mandates from government. And from a producer point of view, prevailing prices provide crucial information concerning the forecasting of future profits and hence today’s investment decisions.

Tucker’s article was wonderful. When we establish the freedom of human beings to voluntarily enter into their transactions with their own voluntary prices, the spontaneous natural order of the market ripples benefits throughout the entire economy. This is the miracle of the market economy, of the right to private property and the right to buy and sell as opposed to central planning. From a spiritual point of view, when one ponders the spontaneous order of the market one ponders the miracles of God in his creation.

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I have been reading the Ottoman business law handbook al-Mejelle for the past few days which contains traditional Islamic regulations concerning the doing of business. One of the most impressive parts of the book, which is still used and studied in some Islamic countries, is the emphasis it places on the right of the seller to set a price and the right of the buyer to agree or disagree with the price. The rejection of price controls and the fallacious notion of “just price” has been central to Islamic affirmations of the market economy. Al-Mejelle also notes the importance of property rights, economic freedom, and commerce when honest and ethical.

Overall a recommended book for more on Islam and the market.

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ANALYSIS-Syria faces subsidy crunch as oil exports drop - Forbes.com

DAMASCUS,
Dec 14 (Reuters) - Syria runs on cheap gas oil but can no longer afford
to subsidise the fuel whose sulphurous fumes pervade the
traffic-clogged streets of Damascus.
State finances are already strained by depleting oil reserves that
turned Syria into a net oil importer this year.
Economists say delays in tackling the subsidy burden when the economy
was in better shape have made the problem worse.
“You cannot put it off indefinitely,” said Nabil Sukkar, managing
director of the Syrian Consulting Bureau. “And now we are losing the
stable macroeconomic framework, unfortunately.”

In the end free-trade and liberalization of markets benefits everybody. But in the beginning there are always hardships in the transition from a centralized and planned economy to free markets. Boris Yeltsin proved this when he attempted to carry out the transition from the USSR’s centrally planned model to the free market model. Such shock therapy as it was called created extreme poverty in Russia, and Russia’s economy still hasn’t reached its peak, however 10 years later there now exists a middle class and foreign direct investment in Russia’s markets.

Unfortunately, foreign direct investment in Syria is still very low. However, things are changing for the better as FDI has increased this year to approximately $600 million. A South African company bought a stake in the Syrian mobile telephone provider Areeba for example.

The liberalization plan seems to be well on its way, however the subsidy problem is going to cause some economic hard times for a period.

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Larry Kudlow, host of Kudlow and Company on CNBC, is a very intelligent man. He had a very well written blog entry on Tuesday concerning the failure of the spread of the centrally planned economic system throughout the world.

History has shown the opposite of what Karl Marx said to be true. Instead of “the peasants rising up against the exploiting rich,” the entire world has seen that - quite simply - the socialist planned market model does not work. Command economy has been an abysmal failure, and even in the sense of “social justice,” it fails - by making the populace poorer, with higher rates of inflation, and massive deficits.

Instead of peasants and “the working class,” rising up against the bourgeois, they have joined forces with them. The free-market economic model has spread throughout the world giving a rise in standards of living throughout the world. The more people see the benefits of free-trade, whether domestically or internationally, they participate more. Even those inclined to some sort of “social justice,” in the economy adopt Keynesian economic models, or mixed economy welfare states because of the failure of the socialist system.

Free trade gives more opportunity for all, it makes prices cheaper, and creates better and more innovative products - based upon the needs and wants of the populace - which improve the life of the entire populace. Ludwig von Mises made this point decades ago in Human Action, when he stated that free-market economics have improved the quality of life of the poor tremendously - just look at us now compared to 100 years ago.

The best system in helping the poor is not to force others to be taxed extensively, create extensive government bureaucracy, inflate money while curbing unemployment. And most of the world has understood this - whether democracies or autocracies. Free-market economies are growing, free-trade is increasing, product price is decreasing, innovation is increasing, and global economic opportunity is at its peak.

Kudlow’s Money Politic$: Twenty-Five Years of Prosperity (and more to come)

Across the globe, free market capitalism has been triumphant over the socialist-planning model. Karl Marx was wrong; Milton Friedman was right. Put another way, the central planning model did not work whereas the free market model did. Over the past two and a half decades, the capitalist model has spread like wildfire around the world, and it shows no sign of pulling back. In China, India, Eastern Europe, and Russia, however imperfectly, the newfound principles of free-market capitalism, economic opportunity, and “liberalism” in the traditional sense of that word are being applied and working beautifully.

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Mises Blog: Answering a Highschooler’s Questions on Intellectual Property

I was reading the Mises blog today, from the Ludwig von Mises institute, a think-tank for the Austrian school of economics, as well as some Libertarian political ideas, and I came across this wonderful article by Stephen Kinsella. Kinsella is famous for his 2001 article on the Israeli-Palestinian conflict and is a Libertarian lawyer from Arizona. While I don’t always see eye-to-eye with Libertarians, their views on foreign policy and economics are superb.

Kinsella shows the no. 1 tragedy with regards to so-called intellectual “property. He discusses John Locke’s argument of “first use,” which rationally establishes the right to private property, and in essence clarifies why intellectual “property,” cannot truly be defined as property in the truest sense. Defining it as property infringes on the property rights of others, as Kinsella explains:

So, in short, the problem with patent and copyright is that it amounts to theft of rights to scarce resources.

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“You have a right to your life, you have a right to your liberty, and you have a right to the property you earn. But you don’t have a right to a house, or a right to a job, or a right to medical care because that involves a violation of somebody else’s rights. They literally have to take it from you. But you say, ‘no it is from the government.’ The government has nothing, and produces nothing, and for the government to give you healthcare they have to literally take it from somebody else. And ultimately, its a poor person because we usually inflate, we borrow, we create economic conditions that hurt the poor - so even with this attempt to give people this free medical care this is usually what happens today. The poor people who try to make it, they get gouged.”

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America is a free country. Or at least we are told.  Why is it then, that the economic freedom in the U.S., while much better than many European countries - is extremely low, and possibly lowering.

Case-in-point: taxes. In the U.S. if I give you a gift of over $12,000 dollars a year, even if you are my immediate family member (although not my spouse), then I will be taxed at an extremely high rate. Why don’t you work for the money? Well, you will be charged payroll taxes from the government. How about my selling you goods for $12,000? Well, then there is a 7% sales tax.  And if you die with a substantial amount of money there is always the death tax.

Use the phone? There is a phone tax, which although small, does end up costing a few dollars. Drive on the roads? Well turnpikes charge $1.25 toll taxes. Watch the TV? Well, there is a cable tax. And oh, did I forget to state that Congress might even be thinking about taxing the internet.

All of this points to what economists call and measure “fiscal freedom.” It seems like no matter where we go we are being taxed. And instead of this money going anywhere that matters - it goes to paying an extremely huge defense budget, foreign aid to Israel and Egypt, pork-barrel projects by Congress, and more and more big government. Spend, spend, and spend some more.

Ron Paul wrote a very interesting column last week about Charlie Rangel’s proposed tax overhaul, which would again raise taxes on Americans. Paul stated a few things that the people in Congress don’t want to hear:

The founding fathers never saw taxation as a method to direct social behavior or enforce equality. Equality to them was equality under the law, not equality of outcome, or income.  It was not the founding fathers’ job to manage the economy, or make American businesses competitive. That was up to the free market and American businesses.  The founders sought to provide only protection of property and civil liberties such that job creation could happen naturally and peacefully in a stable, prosperous environment.  They never sought to take from the rich to give to the poor, or rob Peter to pay Paul. But today, the top 5% of earners in this country pay over half of all income taxes collected, but only bring in a third of the income.  One third of Americans pay nothing or receive subsidies from government.

 Paul concludes stating that because both sides of the government - the Administration and the Congress - are up to no good, that we can only hope for gridlock. Because a “do-nothing,” Congress is better than a “do bad,” Congress. I would have to agree here. With the President wanting to spend more and more on an expensive war, and the Congress throwing more and more money away at pork-barrel projects and increasing taxes, we can only hope for a do-nothing Congress.

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