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Can Abusive Government Use The Constitution Against You?

By: Jay Davidson

Sunday, December 17th, 8:25 am

First, and foremost, the Constitution was created to protect the citizens’ individual rights from his own government.  Should an employee of the federal government be afforded the protection of the Constitution, especially the 5th Amendment, when that person has abused his federal power, after he acted contrary to the very Constitution he now hides behind?


American Thinker

How an abusive government turns the Constitution against you

Question: Does the Bill of Rights protect citizens from government excess?  Nearly everyone will agree that it does.  The very reason we have a Bill of Rights is to protect you, the citizen, against abuses by government.

Next question: Can the government use the Bill of Rights as a shield in order to violate your constitutional rights?

Nearly everyone would say this is the opposite of what the Constitution is designed to do.  Yet, in practice, that is precisely what happens.  Here’s how.

Government officials confidently commit crimes against you, against your nation, and against your Constitution.  Their confidence, their arrogance, really, stems in large part from the fact that, if and when their crimes come to light, they can hide behind the Fifth Amendment.  Perverting your right to be protected from them, they shield themselves behind your rights while violating your rights.

Is this not the definition of tyranny?

This perversion protects government officials from having to testify about their crimes – which, through them, become the crimes of government.  Thus, not only do they avoid punishment, but their immunity encourages further lawlessness by others in the halls of power.

Let’s be clear.  If a government official is caught shoplifting, he should be afforded the full and complete protections of the Constitution.  Such a crime is not a crime of government, but that of a private citizen.

It is a completely different story, however, when the government official uses his office, his powers of government, to violate your rights, the very rights that government is sworn to protect.  In such a case, it cannot have been the intent of the Founders to protect the government against those whose rights the government abuses.

It should be crystal-clear that the government does not have the right to hide its crimes, nor to be shielded by a Constitution designed to protect citizens from governmental abuse.  It should be just as clear that every government official has an affirmative duty, an absolute duty, to uphold the Constitution.  This means that if a government official becomes aware of official crimes being committed against the American people, by government, then he must report it.  He must make it public, or at least as public as national security permits.

What seems less clear is whether the official has an affirmative duty to report governmental crimes that he himself commits.  But there is no unclarity.  The Constitution is not a suicide pact.  It does not protect the government by shielding it from any crimes committed by use of its authority.  Fifth Amendment protections do not protect the government, nor do they shield any office-holder acting under his governmental authority – because during the commission of that crime, he is the government.

The bottom line is that, when accused of an official crime, no government official has any rights under the Fifth Amendment to refuse to reveal all he knows about that crime.  If this amounts to self-incrimination, so be it; in such a case, the Constitution he abuses against his victims offers him no protection against self-incrimination.  None.  Instead, it protects his victims against him.  Any other conclusion is tyrannical.

Whether it be Lois Lerner, Peter Strzok, Hillary Clinton, Eric Holder – the list is disappointingly long – every one of them is required to reveal every item of knowledge he has, in order to protect you against them.

Every item.  Period.

This needs to be tested in the Supreme Court.  Indict one of them, require his truthful and complete testimony, and then let the appeals process begin.  If there is any hope for the future of our nation – if there is any hope of forestalling the accumulating forces of tyranny – the court will protect you, not the corrupt officials victimizing you.

A Pro-Growth Tax Bill is on the Way – Jay Davidson

Nailed it!

A Pro-Growth Tax Bill is on the Way

A Pro-Growth Tax Bill is on the Way
As the House and Senate work their way through the tax-cut-and-reform effort, let me make one thing clear: Both plans are pro-growth where the economic power comes from the business side. And where it comes from the personal side, there will be very little growth. That was always the bet.

During the spring and summer of 2016, economist Steve Moore and I, working with Trump campaign officials Steven Mnuchin and Stephen Miller, saw major tax reductions for large and small businesses as the centerpiece of the candidate’s tax policy. Whatever Congress came up with on the personal side, so be it.

So one way or another — even with the glitches and differences between the House and Senate tax plans — Congress will come up with a significant pro-growth bill because business tax cuts are still the centerpiece. And they should do it this year.

I spoke at the Senate Republican breakfast in Washington last Tuesday. The whole leadership was there. And I observed a total commitment among the GOP senators to get a tax bill through by year-end. This will not be another health-care breakdown.

Particularly after recent GOP electoral setbacks, the party knows it needs a strong tax-cut and economic-growth narrative for the 2018 midterms. If Republicans don’t get it, they’ll lose control of Congress.

And if they do get it, they may pick up seats.

The political stakes are high.

As mentioned, there are glitches in both the Senate and House tax plans. But most of them can be corrected. And the differences between the two plans should narrow in conference.

The all-important business tax rate will come down to 20 percent from 35 percent. That’s the key to economic growth. And the biggest beneficiaries will be middle-class wage earners.

The issue of small-business pass-throughs is not completely resolved. It seems the Senate has a better take on this than the House. But there’s a small-business tax cut coming.

The Senate’s idea to phase in the new corporate tax rate in 2019 is a bad idea. (President Trump agrees.) To be sure, the GOP senators want full cash expensing for capex projects for 2018. Good. But as Art Laffer warns, if you hold back the actual rate reduction, you’ll see a lot of tax avoidance and sheltering next year.

That will include offshoring. A delay will deter foreign companies from coming to the United States. You may wind up losing revenues — perhaps $100 billion.

On the House side, the so-called “bubble rate” of 45.6 percent is also not a good idea. It’s being done to claw back the 12 percent rate high-end earners move through on the way to 40 percent. But why punish success?

Those upper-end folks are largely investment-oriented. As FedEx CEO Fred Smith says, it’s time to stop punishing investment. That includes businessesand individuals.

Let the Democrats be the class warriors who tax the rich. GOP stands for growth.

I assume this will be fixed in conference.

There are other issues. The personal side is a mishmash of credits and deductions. This is no Reagan bill of 1986. Good tax reform slashesindividual rates so that reductions and loopholes are no longer necessary.

But there’s no slashing on the personal side, and it will be a fight over deductions. And frankly, I’m underwhelmed by the deduction part.

I keep thinking: Why didn’t the House and Senate simply agree on a 3 percent growth rate? And why haven’t they embraced the Trump administration’s argument that the business tax cuts will pay for themselves and generate 3 percent growth over the next decade?

House and Senate negotiators agreed on a 2.6 percent growth baseline. It’s better than the CBO’s 1.9 percent. But with 3 percent, they would have picked up $500 billion to $700 billion in additional revenues from faster growth.

Unfortunately, no model captures the significant pro-growth effects of international flows, such as repatriation and the possible capital inflow from foreign companies. Is it possible this could be changed in conference? Just a thought.

Of course, that old bugaboo is back: the Byrd rule. It annuls tax cuts if they promote deficits after ten years.

So here’s another thought: Senate Majority Leader Mitch McConnell used the nuclear option to end the filibuster on Supreme Court justice Neil Gorsuch. So why not nuclear-option the Byrd rule? Vice President Mike Pence is ready in the wings to override any objection.

The GOP must not let process stop growth-producing tax cuts. Growth is too important.

So let’s play hardball, GOP, and do what’s necessary to get these pro-growth tax cuts legislated and signed before year-end.

That will move the American economy back to the top of the worldwide heap. As JFK and Ronald Reagan argued, when we are strong at home, we’re strong abroad.

Jay Davidson

ObamaCare Tax Relief – Jay Davidson

Simple, brilliant and the right thing. 

ObamaCare Tax Relief

Killing the individual mandate can serve the cause of tax and health-care reform.

Senator Bob Corker, right, speaks with Senator Patrick Toomey on Wednesday, Nov. 1, 2017.

Senator Bob Corker, right, speaks with Senator Patrick Toomey on Wednesday, Nov. 1, 2017. Photo: Zach Gibson/Bloomberg News


The Editorial Board

Republicans in Congress are plowing ahead on tax reform, and one obstacle is the complexity of Senate budget rules that limit how much taxes can be cut. The good news is that for once Washington’s fiscal fictions could be deployed to improve policy by repealing ObamaCare’s individual mandate as part of tax reform.

The Senate Finance Committee on Thursday released the details of its tax proposal, which includes a permanent 20% corporate rate and more. Senators Pat Toomey and Bob Corker cut a budget deal to allow for $1.5 trillion in net tax cuts over 10 years without accounting for faster economic growth (and more revenues) as a result of reform.

The trick is Senate procedure. The GOP is invoking a budget process that allows the party to pass the bill with 51 votes. But Republicans have to comply with the Senate’s Byrd Rule, which says the legislation can’t add to the deficit beyond the 10-year budget window starting in 2028. The Senate draft doesn’t meet this standard, so some parts of the bill may have to expire after a decade unless Republicans can fill the hole. It’s a shame this process pummels good policy.

Enter the idea of repealing ObamaCare’s individual mandate. The Congressional Budget Office predicts that dumping the mandate would “save” $338 billion over 10 years—and the savings continue in the following decades. The budget gnomes assume that if people are not forced to buy health insurance, fewer people will sign up for subsidies or Medicaid. The idea that millions of people will dump free health care is one oddity of CBO methods, but that’s an editorial for another day.

Some Republicans are traumatized from the GOP’s health-care failure and don’t want to complicate tax reform with fights over insurance coverage. But remember that Chief Justice John Roberts called the mandate penalty a tax. This is a political fight the GOP can win: If you like your ObamaCare plan, you can keep it. If you don’t want it or can’t afford it, you don’t have to pay a penalty. There would be no changes to benefits or coverage for pre-existing conditions, and not a dollar taken out of Medicaid, a word that would appear nowhere in the bill.

Note that the mandate is a tax on the poor. More than one in three households that paid the “individual shared responsibility payment” in 2015 earned less than $25,000 and more than 90% made less than $75,000, according to IRS data. For instance: More than 34,000 families in Maine paid $15 million to the government for the high privilege of not buying ObamaCare. Repeal would be tax relief for low-income families.

Republicans can use the money or lose it. We’re told the Trump Administration has drafted language that would expand the mandate’s “hardship exemption” that frees more people from the penalty. CBO may also revise its methods and thus its cost estimate in the coming months. In other words, why would Congress pass up this one-time-only offer of free money for tax reform?

Another dividend is that health-care reform may be easier in the future when CBO can’t terrify the public with fanciful estimates of how many Americans would lose coverage without the mandate. CBO has a lousy record of predictions—ObamaCare enrollment is 60% below its estimate—but the media treat the place as if it were run by oracles.

Democrats will call repeal a budget gimmick, and they would know: The Affordable Care Act included a long-term care program that was written to collect premiums and then go bankrupt to game the 10-year budget window, and it counted a federal student-loan takeover as a money-maker for Treasury. All of this was fiction. But repealing the individual mandate is not a ploy; it’s a GOP priority.

Senate Finance this week will mark up its bill, and the best move for tax and health-care reform is to include the mandate repeal. This is a case where budget scoring can serve the cause of good policy.

Jay Davidson

Trump Administration to Bankers: You’re Not the Villain Anymore – Jay Davidson

Mr. Quarles could be one of the most significant benefactors to the economy.  He understands the relationship of regulations to business expansion; they are inversely related, as one goes up the other goes down.  The last eight years unders his predecessor, an Obama appointee, has been like a Kafka novel – you wouldn’t believe it unless you lived through it.
Commercial banks are the final gateway that controls the flow of money into the economy.  Regulate us, as did Obama’s minions, and we are forced, by federal regulation, to stop lending.  We stop lending and small business suffer.  Small business suffers and job grow stagnates.  Sound like the last eight years?
The truly Uninformed think they are getting safety through tyrannical regulation.  The opposite is true, bank regulators have introduced systemic risk into the financial system with their excess manipulations of leverage capital and lending rules.  Just as Congress introduce extreme risk into the economy when they manipulated sub-prime lending in the 1990’s.  Mr. Quarles is a breath of fresh, invigorating air.  – Jay Davidson

Trump Administration to Bankers: You’re Not the Villain Anymore

Financial regulators, some of them longtime bankers, now sound friendlier tone

Randal Quarles, the Federal Reserve’s regulatory chief, attended a nomination hearing in Washington on July 27. Earlier this month, Mr. Quarles expressed sympathy for bankers’ complaints about annual stress tests and other matters, signaling the Trump administration’s change in tone toward the financial industry.

Randal Quarles, the Federal Reserve’s regulatory chief, attended a nomination hearing in Washington on July 27. Earlier this month, Mr. Quarles expressed sympathy for bankers’ complaints about annual stress tests and other matters, signaling the Trump administration’s change in tone toward the financial industry. Photo: Andrew Harrer/Bloomberg News

Jay Davidson

The Great Progressive Tax Escape – Jay Davidson

Progressive / Socialists aren’t that ignorant, are they?  They must know that taxing and spending are self-destroying activities, that their income redistribution only works until those with money either stop building business or leave.  Obama’s “Lost Decade” is the perfect example of Progressive economics.
So, if better jobs and economic expansion is not the Progressives’ goal, what is?  You may note that every solution the Progressive come up with leads to greater dependency on the federal government and growing federal employment.  More government, more control…less freedom.  Very much like Communist Russia and China or Fascist Germany.  By golly, is that why they’re called Socialists?
-Jay Davidson

The Great Progressive Tax Escape

IRS data show an accelerating flight from high-tax states.

Opinion Journal: Blue-State Republican Blues

Opinion Journal Video: Former CBO Director Doug Holtz-Eakin on the politics of tax reform in states like New York and California. Photo Credit: Getty Images.


The Editorial Board

Democrats contend that marginal tax rates don’t matter to investment and growth, and even some conservative intellectuals are conceding the point. But the evidence from wealth fleeing high-tax states shows how sensitive the affluent are to rate increases.

The liberal tax model is to fleece the rich to finance spending on entitlements and government programs that invariably grow faster than the economy and revenues. IRS data on tax migration show this model is now breaking down in progressive states as the affluent run for cover and the middle class is left paying the bills.

Between 2012 and 2015 (the most recent data), a net $8.5 billion in adjusted gross income left New Jersey while $6.2 billion poured out of Connecticut—4% of the latter state’s total income. Illinois lost $13.6 billion. During that period, Florida with no income tax gained $39.3 billion in AGI. (See the nearby table.)

The Great Progressive Tax Escape

Not surprisingly, income flows down the tax gradient. In 2015 New York (where the combined state and local top rate is 12.7%) lost a net $850 million in AGI to New Jersey (8.97%) and Connecticut (6.99%). At the same time, the Garden State gave up $335 million to Pennsylvania (3.07%), and $60 million left Connecticut for the state formerly known as Taxachusetts (5.1%). Taxpayers from New York, New Jersey and Connecticut escaped to Florida with $3.2 billion in income. Florida Gov. Rick Scott ought to pay these states a commission.

The affluent account for a disproportionate share of the income migration. For instance, individuals reporting more than $200,000 in AGI in 2015 made up 57% of the income outflow from Connecticut (compared to 48% of total state AGI) and 57% of the inflow to Florida.

Snowbird flight isn’t new, but migration has accelerated as taxes have increased. Income outflow from Connecticut averaged $500 million between 2003 and 2007. Then in 2009 GOP Gov. Jodi Rell raised the top tax rate to 6.5% from 5%, which her Democratic successor Dannel Malloy lifted a few years later to 6.7% and again two years ago to 6.99%. AGI outflow between 2012 and 2015 averaged $1.6 billion.

In 2004 Democrats raised New Jersey’s top rate on individuals earning more than $500,000 to 8.97% from 6.37%. Between 2012 and 2015, annual income outflow from New Jersey averaged $2.1 billion—twice as much as between 2000 and 2003 after adjusting for inflation.

Republican Gov. Chris Christie blocked his Democratic legislature’s attempts to reimpose a millionaire’s tax that lapsed in 2009. But Democratic Governor-elect won the election this month by promising to soak the rich even more, and his legislature will oblige.

The prospect of future tax hikes appears to have propelled an exodus of high earners from Illinois, which has a relatively low and flat 4.99% income tax. Democrats raised the rate from 3% in 2010, but the tax hike lapsed in 2015 after Bruce Rauner became Governor. House Speaker Michael Madigan finally this summer secured GOP legislative support to override the Governor’s veto and reinstate the higher rate.

But the tax increase won’t raise enough money to finance the state’s $250 billion unfunded pension liability, and the long-time goal of unions has been to enact a graduated income tax. The affluent know they’ll get soaked eventually and are seeking shelter. Top earners made up 47% of Illinois’s income flight in 2015 compared to 33% four years earlier. Income taxes from the 306 Cook County denizens who decamped to Palm Beach in 2015 with $258 million of income could have paid 200 teacher salaries. Alas.

This millionaires’ diaspora has harmed income and economic growth. Real GDP between 2011 and 2016 grew annually at a paltry 0.2% in Connecticut, 1% in Illinois and 1.2% in New Jersey, according to the Bureau of Economic Analysis. These states were the slowest growing in their respective geographic regions, though other high tax states in the Northeast didn’t fare much better.

As a result, revenues have repeatedly fallen short of projections in New Jersey, Illinois and Connecticut while budget deficits have ballooned. Democratic lawmakers have cut public services and funds to local governments, which have responded by raising property taxes.

The Tax Foundation says New Jersey, Connecticut, Vermont, New York and Illinois have the highest property taxes in the country. Over the last two years, the average Chicago homeowner’s property taxes have risen by roughly $1,000. Higher property taxes hit middle-class earners especially hard and are another incentive to leave a state.


As these state laboratories of Democratic governance show, dunning the rich ultimately hurts people of all incomes by repressing the growth needed to create jobs, boost wages and raise government revenues that fund public services. If the Republican House and Senate tax-reform bills follow through with eliminating all or part of the state and local tax deduction, progressive states will have an even harder time hiding the damage. They should be the next candidates for reform.


Russia. Finally, the Missing Puzzle Piece – Jay Davidson

Finally, the Missing Puzzle Piece

For the original link to the article, please go here.

It has always niggled me as to what the always arrogant 44th President of the United States, Barack Hussein Obama, actually meant when he was caught on an open microphone telling Russian President Dmitry Medvedev that he needed more “flexibility” from the Russians. They needed to give him “space” since “it was [his] last election” but “after ‘[his] election, [he] would have more flexibility.”

Medvedev’s retort was “I understand. I will transmit this information to Vladimir.”

While Medvedev may have understood what Obama was saying, most Americans were left quite bewildered by this cryptic message.

Until now.

Enter the breathtaking information that the most intricate and shady backroom deals were happening both nationally and internationally while Congress and the American public were deliberately kept in the dark, not only by the Obama administration, but also by Obama’s Department of Justice and the very same FBI officials who are now attempting to concoct a fictitious collusion story about Trump.

John Solomon and Alison Spann have discovered that

Before the Obama administration approved a controversial deal in 2010 giving Moscow control of a large swath of American uranium, the FBI had gathered substantial evidence that Russian nuclear industry officials were engaged in bribery, kickbacks, extortion and money laundering designed to grow Vladimir Putin’s atomic energy business inside the United States.

And even though it would have been an unbelievable law enforcement achievement “to have brought down a major Russian nuclear corruptionscheme that compromised a sensitive uranium transportation asset inside the U.S. and facilitated international money laundering,” nary anything substantial was done to expose this deep-seated corruption.

For those who have, over the years, watched with horror and ire as Obama usurped power and ran the government like a dictator, the latest revelations are not especially surprising.  For in our hearts we always believed that Obama was intent upon destroying this country in as many ways as he could.  Now the facts have been established with incontrovertible evidence and they confirm what we always felt given Obama’s unending anti-American stance. An extremely serious national security breach was permitted under his watch.

But now that the smoking guns are being exposed, we also wonder if the few good people who have the power to effect change will now use that power. Will they recall the Psalmistwho cried out

“O God, keep not Thou silence; Hold not thou silence, O God: hold not thy peace, and be not still, O God.

For, lo, thine enemies make a tumult: and they that hate thee have lifted up the head.

They have taken crafty counsel against thy people, and consulted against thy hidden ones.

When will “righteousness and peace” come together again?  When will our country be restored and our faith in our leaders be re-gnited?  “How long shall the wicked exult” and “speak arrogantly” as the “workers of iniquity bear themselves loftily”?

Until the swamp is truly cleaned out and our elected officials “stand up for ‘us’ against the workers of iniquity” and ensure that “the right shall return unto justice,” Obama and his ilk (Hillary Clinton, Lois Lerner, Eric Holder, Loretta Lynch, Bill Clinton, Samantha Power, James Comey, and Robert Mueller) will continue to wreak their evil.  And we cannot look to the mainstream media to faithfully execute their job.

It is with gratitude that we salute the few brave voices that have never given up in exposing the corruption of Obama. Rush Limbaugh, Sean Hannity, Mark Levin, and brave journalists such as Sara Carter and John Solomon who have diligently and faithfully led the way to exposing one of the most corrupt administrations Americans have had to endure.

But the voices must become stronger.

Eileen can be reached at

A Turnabout on Corporate Taxes – Jay Davidson

Big government politicians and bureaucrats, Republican and Democrat alike, know full well that high corporate taxes depress the economy and depress wages of non-government or private employees.  They couldn’t care less.
Their job is to increase revenue to the federal government and to federal employees.  How ironic (or is it moronic) that private citizens continue to elect public officials intent on reducing the private economy to increase the public government.  No wonder Trump is so hated.
– Jay Davidson
For the original link to the WSJ article, please go here.

A Turnabout on Corporate Taxes

Economists who favored rate cuts under Obama suddenly deny they’d result in higher wages.

Photo: iStock/Getty Images

Suddenly, an idea that has been accepted by economists and by policy makers on both sides of the political aisle—that high taxes on business hurt investment, workers and the economy—is considered “absurd.”

In 2012, President Obama and his advisers proposed lowering the corporate tax rate because it “creates good jobs with good wages for the middle-class folks who work at those businesses.” In 2013, Lawrence Summers, President Clinton’s Treasury secretary and chairman of Mr. Obama’s Economic Council, argued that the tax on corporate profits creates a burden without commensurate revenues for the government, and that changing it “is as close to a free lunch as tax reformers will ever get.”

In 2015, Democrat Chuck Schumer and Republican Rob Portman co-sponsored a Senate bill to reduce the top corporate tax rate, which is the highest of any of the 35 countries in the Organization for Economic Cooperation and Development. “Our international tax system,” Mr. Schumer argued back then, “creates incentives to send jobs and stash profits overseas, rather than creating jobs and economic growth here in the United States.” Bill Clinton in 2016 said he regretted raising the corporate rate to its current level.

Yet President Trump’s Council of Economic Advisers (of which one of us is a member) is now being accused of partisanship and unscientific analysis. When the council released areport using standard and widely accepted methods of the economics profession to find that cutting the corporate tax rate from 35% to 20% would raise the wage income of an American household by an average of $4,000 within a 10-year time-frame.

The critics include Mr. Summers and Jason Furman, who served as chairman of the CEA under Mr. Obama—both of whom backed cutting the corporate tax rate during Mr. Obama’s presidency. Their main methods of criticism include qualitative introspection—the world works this way because I think so—without reference to a supporting scientific base. Other arguments use economywide times-series correlations—taxes are not as bad because both taxes and America grew in the 1990s—omitting other variables driving them, such as the explosion of the internet. Neither method is accepted by the economics profession.

One of the few substantive quantitative points they raise is that they believe the government will receive $200 billion less in corporate tax revenue if the corporate rate drops from 35% to 20%. They write: “We see from the CEA estimates that they predict American households will receive two to three times this amount in the form of higher incomes! That’s impossible!” That’s a fundamental misunderstanding of the CEA paper—and, more important, of how the economy works. Not only is it possible, it happens every single time.

This argument also contradicts several decades of standard tax analysis. To illustrate, consider a $1 million tax on airline tickets. People wouldn’t fly, so no government revenue would be collected—and thus the harm of the tax would be infinitely as large as the revenue. Likewise, a tax cut in which the expansion of the base exactly offset the reduction in the rate would have no revenue effect, so society’s gain from the cut would be infinitely larger than the revenue loss.

In the standard economic framework, including Mr. Summers’s own work, the long-run loss in revenue to the government is always less than the addition to workers’ wages, because resources are freed up to engage in more productive activities.

The gains to factors from a tax cut is always more than 100% of the loss in Treasury revenues, but how much larger? Standard economic models of capital investment predict it’s 200% to 300% of revenue losses—as a $4,000 wage increase implies. That is supported by many different strands of the literature and why economists Edward Lazear (a CEA chairman under George W. Bush ) and Laurence Kotlikoff, a father of many organizations’ tax models, among others, find worker wage effects similar to those found by CEA. Nevertheless, according to Mr. Summers, anyone using these standard models—which includes Mr. Summers in his own work—is “dishonest, incompetent, and absurd.”

Messrs. Summers and Furman now belatedly acknowledge that standard economic analysis vividly contradicts their initial proclamations. So they have tried to backtrack by saying that basic economics omits “complex issues” and so must now be irrelevant. But these so-called complex issues are not new. Nor are they complex. Nor do they change our analysis and conclusions. Economists Robert Hall and Dale Jorgensen first analyzed these issues in 1967, and improvements of that literature have been used by CEA in both past and recent analysis.

Among these issues, the economists profession is fully aware that the corporate tax favors—among other things—investments that are debt financed, have quicker depreciation, or can be assigned to foreign jurisdictions. All these distortions by the corporate tax code suggest larger, not smaller, output expansions per dollar of revenue by the proposed tax reform.

The Obama economists go on to favor the current corporate tax rate because, although most corporations are not monopolies, the corporate tax is absorbed by those that are. Widely accepted facts contradict that argument. In particular, economists have mountains of evidence that monopolies are a problem as they withhold production to raise prices. This means that too little capital and labor get used in their industries compared with the rest of the economy, and that too little is used in the economy overall. Thus, keeping the corporate tax only exacerbates this labor underutilization.

CEA of course welcomes debate on the merits, or the existing science, of the case. But these types of argument are neither.

Mr. Mulligan is a professor at the University of Chicago and author of “The Redistribution Recession: How Labor Market Distortions Contracted the Economy” (Oxford, 2012). Mr. Philipson is a professor at the University of Chicago and a member of the President’s Council of Economic Advisers.

Appeared in the October 25, 2017, print edition.

The Wages of Corporate Taxes – Jay Davidson

In a closed system, what one gets, another pays for.  The federal tax cycle is closed.  You work for your wages, the government first taxes the company for whom you work and then taxes you.  Ergo, your wages are reduced by the corporate tax and your take-home earnings are reduced by personal income tax.  You just paid two taxes on earnings.  Then, in a twist of the proverbial knife, when you leave this earth, the government taxes your estate, again.
Next time a big-government politician wants to “help” some disadvantaged group, or even build roads, remember that higher taxes are behind his beneficence.  Consider: politician’s are perfectly fine with raising taxes at your expense – because you are paying for his great idea and the politician is getting credit for being so “nice.”  Second, ask yourself what are you getting for all the cost (taxes.)  Don’t fear the answer: Not much.
Closed markets are manipulated by a federal government; Socialism and Communism are perfect examples.  America’s economic system has been moving toward a closed system for decades.  It culminated in Obama’s regime with the attempt at final take-over through ObamaCare, Dodd-Frank, EPA takeovers, IRS manipulations, the list is long.  Citizen reaction to Obama’s socialism was extreme: Trump, majorities in the House and Senate, over 60% of state governments went Republican.  Too bad Republican politicians are so unprepared.
Economic systems, those based upon free markets, are open systems.  Free markets are simply a willing buyer and a willing seller agreeing on a transaction, without outside coercion.  In a free market economy, the gross production of the nation actually increases with less government, lower taxes and less regulation.  That fact is immutable and clearly evident in past economies: JFK’s tax reduction, Gingrich / Clinton and Reagan / Tip O’Neil.  As production increases, so too do the benefits accruing to the entire workforce.
Federal and State taxes take around 60% of gross earnings (34% Federal, 5% State, and 20% personal.)  When is it too much?  Demand that both parties implement severe reduction is federal spending.  Demand that tax rates drop significantly.  Politicians won’t do anything on their own, it’s human nature.  But they will react to massive reactions by citizens.  You get the government you deserve; you deserve better. – Jay Davidson
For the original link to the WSJ article, please go here.

The Wages of Corporate Taxes

Kevin Hassett earns the wrath of the left by showing how tax rate cuts will help workers.


Kevin Hassett, chairman of the Council of Economic Advisers, at a Senate Banking Committee nomination hearing in Washington, June 6.

Kevin Hassett, chairman of the Council of Economic Advisers, at a Senate Banking Committee nomination hearing in Washington, June 6. Photo: Andrew Harrer/Bloomberg News


The Editorial Board

What do left-of-center economists have against a tax cut that would raise wages for American workers? They’re always telling us that America needs a raise, and that labor isn’t capturing enough of corporate profits, yet along come Republicans promising to raise wages by encouraging more investment in the U.S., and they react with shock and smears.

That’s the only way to describe the remarkable attack on economist Kevin Hassett for marshaling the considerable economic evidence that cutting the corporate tax rate to 20% from 35% will benefit workers. Mr. Hassett is an expert in this field, having done his own research over the years, and now he is chairman of the White House Council of Economic Advisers.

Mr. Hassett didn’t start this fight. But he felt obliged to respond to the recent political assault on tax reform by the Tax Policy Center. The TPC, which fancies itself nonpartisan but has a record of opposing every Republican tax reform, assailed the Trump-Congress tax policy framework by inventing details that don’t exist. So on Oct. 5 Mr. Hassett responded in a speech at the TPC.

It was “scientifically indefensible,” Mr. Hassett said, for the TPC to assert that there would be little growth from the proposed reform. The static analysis, Mr. Hassett added, was “based on many fictions.” And by promoting its attack before the final details were known, the TPC had behaved “irresponsibly” and undermined hopes for “bipartisan cooperation.”

In speaking so forthrightly, Mr. Hassett unleashed the furies. Not only was he wrong, thundered former Treasury Secretary Larry Summers, the plan he defended is “an atrocity,” a combination of “ignorant, disingenuous and dishonest.” The Summers-ettes in the economic press corps all kicked in unison, and Sen. Chuck Schumer called it “fake math.”


There is a long and legitimate debate about who pays corporate taxes. Corporations essentially collect taxes that are ultimately paid by someone else: a combination of workers in lower wages, customers in higher prices, or shareholders in lower after-tax returns.

For many years the dominant belief was that shareholders bore the biggest burden, but this has changed in recent decades with new research on the impact of capital mobility in a global economy. While labor is relatively immobile, especially across national borders, capital can go whereever it wants with relative ease.

U.S. companies have taken advantage of this reality by investing more abroad in lower-tax countries. The benefits accrue to Irish or Singaporean workers whose jobs are created by that capital investment. In his speech at the TPC, Mr. Hassett noted that in 1989 the average statutory corporate tax rate in the OECD was 43%—compared with 39% for the U.S. Today the average corporate tax rate for the Organization of Economic Cooperation and Development—a proxy for the industrialized world—is 24%.

Yet the combined average U.S. federal and state rate is still 39%. By making the U.S. rate competitive in a global market, capital will flow back to the U.S. for new investment. Much of that investment will go to increase worker productivity, which would boost wages.

What really angers the liberals is that, in a paper released this month by the White House, Mr. Hassett collected years of economic evidence to make the case that cutting the U.S. rate to 20% would raise average wages by $4,000 to perhaps more than $9,000. Outrageous, says Mr. Summers.

But Mr. Hassett isn’t alone. Economist Laurence Kotlikoff wrote on these pages last week that the GOP framework would “raise real wages by 4% to 7%, which translates into roughly $3,500 a year for the average working household.” Other economists have found the increase closer to $1,000. Still others say it’s higher, but the debate is over the magnitude of the raise, not the fact that American workers will benefit if the U.S. cost of capital falls.

In their blogs, economists Casey Mulligan of the University of Chicago and Greg Mankiw of Harvard dissect Mr. Summers’ academic arguments in rigorous detail, and Mr. Mulligan does him the service of citing some of his earlier work. In a 1981 paper Mr. Summers referred to “the increase in gross wages which results from the increased capital intensity arising from eliminating capital taxation.”

In his response, Mr. Summers has grabbed for the lifeline that a small economy like Ireland has no relevance to America and that Britain saw no increase in wages after it cut the corporate tax rate. But the corporate tax rate isn’t the only factor in the cost of capital, and the U.K. partially offset the benefit of the rate cut with other tax changes. And until Brexit, the U.K. economy was still one of the strongest in Europe.

Other large economies are also cutting their corporate rates, and Emmanuel Macron wants to cut the French rate to 25% from 33%. In his paper Mr. Hassett points out that wage growth has been far greater since 2013 in the 10 developed countries with the lowest statutory tax rate compared with those with the highest.


Which brings us back to why Mr. Summers and his followers are so upset now. Our guess is that it has something to do with the disastrous record of their own policies in lifting wages. Mr. Hassett had the audacity to point out that real corporate profits rose 11% a year under President Obama, but “the pass-through to workers” was only 0.3%.

The Summers crowd that preaches about the dangers of inequality presided over an economy that increased it. Obamanomics was great for Wall Street, not for the American middle class. How dare conservatives try to do better—and with policies that look to increase supply-side incentives rather than by redistributing income, fixing prices and regulating business to the point that capital investment has been historically weak.

If we presided over that liberal record, we’d be sore, too. But if they look in the mirror with some honesty, they might understand that the failure of their policies in lifting wages is one reason Donald Trump is President. Meanwhile, why begrudge Americans a raise?

Soros has funded Socialism, Communism, death, and destruction. What is the devil’s greatest success? – Jay Davidson

Soros has funded Socialism, Communism, death, and destruction.  What is the devil’s greatest success?  That he hides in plain sight and misdirects the unwary…

Go here for the original Wall Street Journal Link.

George Soros Transfers $18 Billion to His Foundation, Creating an Instant Giant

By Juliet Chung and Anupreeta Das

George Soros, who built one of the world’s largest fortunes through a famous series of trades, has turned over nearly $18 billion to Open Society Foundations, according to foundation officials, a move that transforms both the philanthropy he founded and the investment firm supplying its wealth.

Now holding the bulk of Mr. Soros’s fortune, Open Society has vaulted to the top ranks of philanthropic organizations, appearing to become the second largest in the U.S. by assets after the Bill and Melinda Gates Foundation. Open Society has funded refugee relief, public-health efforts and other programs.







Finding America’s Lost 3% Growth – Jay Davidson

ECONOMIC RECOVERY demands economic growth in the private sector.  Show me any nation that successfully grows its federal control and its economy.  This fact is the Achilles Heal of all Socialist, Communist and Democrat rhetoric.
The best government is one that stays out of the private sector and lets market forces prevail.
Remember F.A. Hayek’s quote: “If a Socialist understood the economy, he would no longer be a Socialist.”
– Jay Davidson

Finding America’s Lost 3% Growth

For the original WSJ article, please go here.

If the country can’t grow like it once did, then the American Dream really is irretrievably lost.

Growth deniers are declaring that America’s economy has lost its ability to grow at 3% above inflation. If that’s the case, maybe we should go back to where we lost 3% growth and retrace our steps until we find it. For only with 3% or higher growth does America experience measurable progress in poverty reduction, strong job creation and income growth. If 3% growth is irretrievably lost, so is the American Dream.

Did America actually experience 3% real growth to start with? Yes. In the postwar era, the U.S. averaged 3.4% annual growth from 1948 through 2008. We averaged 3% growth for half of the George W. Bush presidency (2003-06). From 2009-12, the Obama administration, the Congressional Budget Office and the Federal Reserve all thought they saw 3% growth just around the corner. If the possibility of 3% growth is gone forever, it hasn’t been gone very long.

America enjoyed 3% growth for so long it’s practically become our national birthright. Census data show that real economic growth averaged 3.7% from 1890-1948. British economist Angus Maddison estimates that the U.S. averaged 4.2% real growth from 1820-89. Based on all available data, America has enjoyed an average real growth rate of more than 3% since the founding of the nation, despite the Civil War, two world wars, the Great Depression and at least 32 recessions and financial panics. If 3% growth has now slipped from our grasp, we certainly had it for a long time before we lost it.

So poor was our economic performance during the Obama presidency, with its 1.47% economic growth, that now many Americans believe 3% growth is gone forever. The CBO has slashed its 10-year growth forecast to a measly 1.8% per year. If we never see 3% growth again, our grandchildren may point to 2009 and say, “That was when the American economy ran out of gas.”

While Obama apologists like to claim that labor-productivity and labor-supply factors preclude 3% growth, most of the growth constraints we face today are directly attributable to Mr. Obama’s policies. The Bureau of Labor Statistics reports that labor-productivity growth since 2010 has plummeted to less than one-quarter of the average for the previous 20, 30 or 40 years. Productivity fell during the current recovery, not during the recession. With high marginal tax rates, especially on investment income, new investment during the Obama era managed only to offset depreciation, so the value of the capital stock per worker, the engine of the American colossus, stopped expanding and contributed nothing to growth.

Illustration: David Klein

A tidal wave of new rules and regulations across health care, financial services, energy and manufacturing forced companies to spend billions on new capital and labor that served government and not consumers. Banks hired compliance officers rather than loan officers. Energy companies spent billions on environmental compliance costs, and none of it produced energy more cheaply or abundantly. Health-insurance premiums skyrocketed but with no additional benefit to the vast majority of covered workers.

In a world of higher costs, productivity plummeted. Productivity measures the production of things the market values that flow from the employment of labor and capital. Try listing the Obama-era regulatory requirements that generated the employment of labor and capital in ways that actually produced something you buy.

True, America is aging. In 2006, when the labor force participation rate was 66.2%, the BLS predicted that demographic changes would push it down to 65.5% by 2016. Under Mr. Obama’s policies, it actually fell further, to 62.8%, and the number of working-age Americans not in the labor market spiked to 55 million.

By waiving work requirements for welfare, lowering food-stamp eligibility requirements and easing standards for disability payments, Mr. Obama’s policies disincentivized work. Disability rolls have expanded 18.6% during the current recovery, compared with a 16% decline during the Reagan recovery. The CBO estimates ObamaCare alone will reduce work hours by 2% and eliminate 2.5 million jobs by 2024. At the current 1% growth in the civilian population above the age of 16, a mere reversion to the pre-Obama labor-force participation rates would supply more than enough workers to generate a 3% growth rate.

Even baby-boomer retirement is driven in part by public policy. When Social Security paid its first check in 1940 average life expectancy was 64 years and benefits started at 65. Today early retirement is available at 62. Life expectancy is now projected to be 79 years. People are healthier, morbidity rates have fallen dramatically, and the retirement age can and should be raised.

Bad policies—not bad luck or a loss of God’s favor—have driven down labor productivity and the labor supply. We can change those policies. If reversing Mr. Obama’s policies simply eliminated half the gap between the projected 1.8% growth rate and the average growth rates during the Reagan and Clinton recoveries, it would deliver 3% real growth generating nearly $3.5 trillion in new federal revenues over the next 10 years. That’s not as much as the $4.3 trillion in revenues lost by Mr. Obama’s slow growth, but it’s more than Mr. Trump promises to bring back by reversing his predecessor’s policies.

America without 3% growth is not America. Since 1960, the American economy has experienced 30 years with growth of 3% or more. Seventy-nine percent of all jobs created since 1960 were created during those years. The poverty rate fell by 72% and real median household income rose by $20,519. In the 26 years when the economy had less than 3% growth, just 21% of all post-1960 jobs were created, the poverty rate rose by 37% and household income fell by $12,004. With 3% growth, the American dream is achievable and virtually anybody willing to work hard can live it. Let 3% growth die and a lot of what we love most about our country will die with it.

Mr. Gramm, a former chairman of the Senate Banking Committee, is a visiting scholar at the American Enterprise Institute. Mr. Solon is a partner of US Policy Metrics.

Jay Davidson