I stumbled across a posting on Facebook called “7 Biggest Economic Lie” by Robert Reich. (See the picture to the right. To read his actual words go here). As I read through them I could not help but think that this was once again pure propaganda by the liberal left. I am a bit familiar with Robert Reich. He was Bill Clinton’s Secretary of Labor and Harvard educated in Politics and Economics. In short he should know better. At best these are all half truths and misrepresentations. At worse, to someone completely unfamiliar with these issues, they are lies. In subsequent blogs I might more directly rebut what Mr. Reich has to say. But for now, how about a list of “Seven Undisputable Economic Truths”
1) Someone has to first create wealth before it can be taxed.
You would think that there is no reason to explain this one, but for the liberal left, which Reich is a card carrying member, there is. It is impossible to tax good intentions. In order for there to be money to pay for anything government provides, someone, like the stigmatized “rich” must
created a good or service. Producing that good or service creates jobs. The jobs created income. The income is taxed. There is no other way. Anything that government pays for; be it the Army, a teacher’s salary, to build a road, or the National Endowment for the Arts is done so with money from the wealth created by others. Period.
2) A Tax Rate Cut is not the same as a Tax Cut
A Tax Rate is the level at which a dollar of income is taxed. The tax is the amount of money collected. These are not the same thing. You can tell when a politician is either ignorant or lying to you when he or she says “tax cuts for the rich” When Reagan and Bush II cut the tax RATES, the amount of money that the federal government collected went up. Again, the amount of money collected, the tax, went up. This is because “the rich” are not stupid. When tax RATES are too high, they find a way to not expose that income to be taxed. When the RATES are lower, it is not worth the effort. This relation ship is expressed in the Laffer curve. Learn about it here.
3) Government jobs are overhead.
Every single government job is funded by taking money from someone else. I am not saying that government jobs are not needed. Soldiers, police, firemen, and many more are vital to society, and needed to be funded by the public. But, that does not alter the fact that all of those jobs are overhead. Every government job, and the overpaying of a government job (caused by public sector labor unions) takes money away from the public. That is money that the public could be spending to produce a reason for private sector jobs to exist. Private sector jobs actually add to the treasury, instead of subtracting from it. Private sector jobs are good. Public sector jobs are a drain on the economy and need to be held to a minimum.
1) Someone has to first create wealth before it can be taxed.
You would think that there is no reason to explain this one, but for the liberal left, which Reich is a card carrying member, there is. It is impossible to tax good intentions. In order for there to be money to pay for anything government provides, someone, like the stigmatized “rich” must
created a good or service. Producing that good or service creates jobs. The jobs created income. The income is taxed. There is no other way. Anything that government pays for; be it the Army, a teacher’s salary, to build a road, or the National Endowment for the Arts is done so with money from the wealth created by others. Period.
2) A Tax Rate Cut is not the same as a Tax Cut
A Tax Rate is the level at which a dollar of income is taxed. The tax is the amount of money collected. These are not the same thing. You can tell when a politician is either ignorant or lying to you when he or she says “tax cuts for the rich” When Reagan and Bush II cut the tax RATES, the amount of money that the federal government collected went up. Again, the amount of money collected, the tax, went up. This is because “the rich” are not stupid. When tax RATES are too high, they find a way to not expose that income to be taxed. When the RATES are lower, it is not worth the effort. This relation ship is expressed in the Laffer curve. Learn about it here.
3) Government jobs are overhead.
Every single government job is funded by taking money from someone else. I am not saying that government jobs are not needed. Soldiers, police, firemen, and many more are vital to society, and needed to be funded by the public. But, that does not alter the fact that all of those jobs are overhead. Every government job, and the overpaying of a government job (caused by public sector labor unions) takes money away from the public. That is money that the public could be spending to produce a reason for private sector jobs to exist. Private sector jobs actually add to the treasury, instead of subtracting from it. Private sector jobs are good. Public sector jobs are a drain on the economy and need to be held to a minimum.
4) Deficits are caused by spending more than we take in.
Again, this should be simple. In 2011, according to the Congressional Budget Office, the federal government spent 3.6 trillion dollars. Revenues (taxes) were only 2.3 trillion. That leaves a 1.3 trillion. All federal spending contributes to the deficit. There is no special Social Security lock box or trust fund where money collected is set aside to pay for that program. It all goes into the same
pot. Sure there are accounting gimmicks so lefties like Reich can claim that the money is right over there. But, in reality it is spent as soon as it comes in. Anyone who tells you otherwise is trying to shine you on.
5) Medicare and Medicaid make up 23% of federal spending
Per the Congressional Budget Office Medicare and Medicaid spending for Fiscal 2011 was 835 billion dollars. Total spending was 3.6 trillion dollars. That makes these two social programs 23% of federal spending. That is the largest single expenditure. (Social Security is 2nd at 20% and Defense is 3rd at 19%). To say, like Robert Reich does, that the largest single government
expenditure is not a major driver of the deficit because health care costs are rising, is like saying that gasoline costs are not a major contributor to your own personal deficit because oil prices are going up.
6) Social Security pays out more than it takes in.
Since 2010 payroll taxes collected from current workers are less than what Social Security pays out. In 2010 the deficit was 37 billion. In 2011 it was at least 45 billion. The Obama Social Security Tax Holiday reduced the amount that workers pay in to SSA from 6.2% of the income to 4.2%. All of that money, both the existing yearly deficit and the new additional deficit (the 2%) asked for by Obama and approved by Congress must come from the General Fund. As more Baby Boomers retire, more people go onto Social Security Disability from the employment roles; it makes it imperative that we fix Social Security.
7) The richest 1% of Americans pays 37% of all federal income taxes. The bottom 47%
pays nothing.
Reich says because those 47% pay a larger percentage of their income in payroll taxes, sales taxes, user fees, and tolls, that it is perfectly fair that they pay nothing in federal taxes. Those payroll taxes are for Social Security and Medicare. These are supposed to be insurance premiums. If they didn’t pay them, it would be just another welfare program. Sales taxes are used to fund the state and local governments, which provide a disproportionate share of their services to these same people. User Fees are for things like automobile registrations and state parks. Those needed to be funded, and asking those who use them to fund them is not unreasonable. It is the same thing with tolls. Exempting the bottom 47% from paying any federal income taxes means that they get all federal government services for free. Does that sound fair? Everyone should contribute at least something for the common good.
Again, this should be simple. In 2011, according to the Congressional Budget Office, the federal government spent 3.6 trillion dollars. Revenues (taxes) were only 2.3 trillion. That leaves a 1.3 trillion. All federal spending contributes to the deficit. There is no special Social Security lock box or trust fund where money collected is set aside to pay for that program. It all goes into the same
pot. Sure there are accounting gimmicks so lefties like Reich can claim that the money is right over there. But, in reality it is spent as soon as it comes in. Anyone who tells you otherwise is trying to shine you on.
5) Medicare and Medicaid make up 23% of federal spending
Per the Congressional Budget Office Medicare and Medicaid spending for Fiscal 2011 was 835 billion dollars. Total spending was 3.6 trillion dollars. That makes these two social programs 23% of federal spending. That is the largest single expenditure. (Social Security is 2nd at 20% and Defense is 3rd at 19%). To say, like Robert Reich does, that the largest single government
expenditure is not a major driver of the deficit because health care costs are rising, is like saying that gasoline costs are not a major contributor to your own personal deficit because oil prices are going up.
6) Social Security pays out more than it takes in.
Since 2010 payroll taxes collected from current workers are less than what Social Security pays out. In 2010 the deficit was 37 billion. In 2011 it was at least 45 billion. The Obama Social Security Tax Holiday reduced the amount that workers pay in to SSA from 6.2% of the income to 4.2%. All of that money, both the existing yearly deficit and the new additional deficit (the 2%) asked for by Obama and approved by Congress must come from the General Fund. As more Baby Boomers retire, more people go onto Social Security Disability from the employment roles; it makes it imperative that we fix Social Security.
7) The richest 1% of Americans pays 37% of all federal income taxes. The bottom 47%
pays nothing.
Reich says because those 47% pay a larger percentage of their income in payroll taxes, sales taxes, user fees, and tolls, that it is perfectly fair that they pay nothing in federal taxes. Those payroll taxes are for Social Security and Medicare. These are supposed to be insurance premiums. If they didn’t pay them, it would be just another welfare program. Sales taxes are used to fund the state and local governments, which provide a disproportionate share of their services to these same people. User Fees are for things like automobile registrations and state parks. Those needed to be funded, and asking those who use them to fund them is not unreasonable. It is the same thing with tolls. Exempting the bottom 47% from paying any federal income taxes means that they get all federal government services for free. Does that sound fair? Everyone should contribute at least something for the common good.
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