Fancy

All the experts keep saying that Obama doesn’t have a foreign policy but I have figured it out. I call it the Fancy dress policy. This is based on the county song about a mother who was destitute and dying and she had 16 year old daughter whose assets are well described. The mother used the last dollar they have to make Fancy a red dress and sends her out into the world with her last words of advice. She tells her daughter, just be nice to the gentlemen friends and they will be nice to you. I believe that Obama is following the mother advice on his foreign policy. He seems to believe that if the United States is just nice to the rest of the world they will be nice to us.

Cruz tax plan

It is not easy to compare tax plans by various candidates but Ted Cruz came out with one yesterday and I see it as follows. A married couple with no children earning $50,000 currently pays $3,502 in federal income plus $3,825 in payroll tax for a total tax of $7,327. Under the Cruz plan this same couple would pay $1,400 in federal tax plus $1,071 in payroll tax for a total of $2,470. Don’t get too excited yet. Cruz also proposes a value added tax (VAT) of 16%. He says the corporations will pay for this but the old story is that corporations don’t pay tax they just pass the cost onto their customers. The VAT is based on consumption that is you pay for it when you buy something and since most couples earning $50,000 will spend all their after tax money they will pay $50,000 less $7,327 or $42,673 and 16% if that is $6,827. Assuming they spend all of their net income their total taxes will increase from $7,327 to $9,297. Now let’s look at one of those rich people called the one-percenters, a married couple earning $500,000 a year. Under current tax law this couple will take home $244,000. Under the Cruz plan this same couple will pay 10% on the net income and 16% VAT. If they spend all of their money they will net $370,000 which is $126,000 more.

Growing the economy

Wages for low to upper middle income workers have been stagnant for 35 years and each president during this time period has promised to resolve this problem by growing the economy. Prior to the 80’s there were two ways of doing this. It was called priming the pump at the top or priming the pump at the bottom. The first suggested that if businesses have more cash they will invest in new facilities and this will provide new jobs and competition will force waged up. The second was to lower taxes and thus give more money to consumers who will spend more causing businesses to expand and thus more jobs and higher wages through competition. Both of these methods worked during the first half of the 20th century. When Reagan tried priming the pump at the top it didn’t work. Businesses had discovered that it was more efficient to buy an existing facility than to build a new one. They avoided the cost of construction and had a ready-made well trained work force. No new factories meant no new jobs. Clinton followed Reagan in the 90’s and tried priming the pump at the bottom by lowering taxes on the middle income groups but wages remained static. This should have worked out better since there were no recessions and we had the dotcom growth in the market but the results were that wealthy people’s income rose rapidly but middle income did not. The Bush 2 years were stunted by the great recession caused by the mortgage crises and this distorted things. His plan was to reduce some of the health care cost born by companies and use this to increase wages. Companies had been holding back on wage increases to pay for increases in health care. He pushed through two major tax cuts, one in 2001 and a second in 2003 trying to prime the pump from the bottom. He was hit with the 9/11 disaster and then the great recession so the results were skewed. Obama’s approach was to transfer funds from one group to another. He pushed for more unemployment benefits, forcing companies that do business with the government to pay higher wages, raising the minimum wage, extending overtime pay to low level managers and in general using government rules to raise income for middle income workers. To date this has not worked. The Republican candidates are saying that they will removed restrictions placed on businesses by the EPA and other regulatory agencies, they will simplify the tax code, invest in infrastructure and allow the free market to work it’s magic. Hilary will do the same except she will impose more regulations not less. In addition she will build on the Obama plan to raise the minimum wage. Both parties will push for infrastructure improvements. Neither party has said much about expanding the energy business and shipping natural gas and oil around the world. Too bad!

Sweden

Bernie Sanders often talks about the utopian life in Sweden where health care is free, college tuition is free and childcare beginning at age 3 is free. The question is, who pays and the answer is everyone. Swedes who earn a salary on par with the average municipal worker contribute the equivalent of 70 percent of their monthly salaries in taxes, a new study has found. This means that if you earn $50,000 per year your take home pay is $15,000. Swedes have decided that the government knows how to spend their money better than they do and in many cases that may be true but do Americans what to give up that right. Here, if you want to go without healthcare and buy a Cadillac you can do that. It may be foolish but you have the right to make personal decisions. People like Sanders believe that the average person cannot care for themselves and they need the government to take care of them. Whether this pays off is challenged by the fact that the average Swedish student graduates with more debt than an American student. This is because other expenses like food, rent and transportation are so much more costly.

Hats off to Sanders

Hats off to Berry Sanders! I have been critical of Sanders for saying that he will pay for his programs by transferring money from the rich to the poor but now I no longer have to say that because Sanders has become an honest broker. Someone must have shown him the math. Sunday on ABC’s “This Week,” Democratic presidential candidate Sen. Bernie Sanders (I-VT) said his tax increases would “hit everybody” because he would raise the payroll tax to pay for paid family and medical leave. The payroll tax is the 7.65% that comes out of everyone’s pay check called FICA. This is where the real money is because this group includes all those who earn money. It is composed of 6.2% for social security and 1.45% for Medicaid. Using this approach, Sanders will be taking money from the low and middle income groups and giving it to low and middle income groups. This is the old liberal concept that believes that the government knows best on how to spend your money. They will do it more fairly, the key word being fairly.

Classroom

On the news today there was a situation that took place in a high school classroom, that in the past, I would have had a different take on but now that I have spent some time in the classroom, I see in a new light. A female student was disrupting the class and the teacher asked her to leave the room and she refused. He notified the office and they sent in a policy officer, (yes most schools have a police officer on staff and in the building). The officer asked her to leave and she refused and he picked her up and dragged her from the room. I say drag because she held tightly to her chair and both she and the chair were removed. The response to this scene from the public was surprise at the physical confrontation. The question is, how else could this have been handled in a way that would avoid the physical contact. Perhaps they should ask all the other students to go to another room and leave her there alone. While this confrontation is unusual it is not uncommon for one or a few students to disrupt the class. This means that the teacher must spend most of the time trying to control the behavior of a few while the others are left to fend for themselves. These students who are trying to learn might be better off going to the library and working alone without the teacher. One of the many responsibilities of parents is to teach their children to respect authority and if this is not done then these types of classroom disruptions are predictable. These same students will most likely have confrontations with law enforcement in the future. The stage was set for this young woman’s problem long before she ever came to school.

Outsiders

Over the past several decades voters have expressed their displeasure with Washington culminating in the last few polls showing congressional approval in single digits. Even individual members are only rated at 25% by their constituents. Most experts agree that there is an anti-Washington feeling spreading throughout the country. When congress is graded at less than 10% approval it must be across party lines and therein lies a dilemma. If democrats are unhappy with Washington why are they promoting Mrs. Clinton? She has spent the last 25 years in powerful positions in the Capital, including 8 years as first lady, 6 years as a senator and 4 years as Secretary of State. This tells me that party loyalty is stronger than dissatisfaction with Washington. It tells me that desire for change in Washington is exaggerated by news reporting. It tells me that people are not concerned with Clinton’s ties to Wall Street. It tells me that the public concern about her honesty is not a big deal. I have heard over and over that the reason for the rise of people like Trump and Carson is because people are fed up with Washington but that must not be the case if Clinton is going to be the nominee. The idea that this is the year of the out-sider is suspect since Clinton is anything but an outsider. The only way for this to make sense is if the out-siders drop out of contention and the republicans nominate a career politician to compete against Clinton but who says the voters have to make sense.