January 19, 2008
Ghosts of Taxes Past Will Haunt New President

by Donald G. Mashburn

The presidential race will generate a lot of rhetoric on taxes. Some of it may sound good at first, but unless the candidates do a better job of explaining their position, voters would do well to take the whole shebang with several grains of salt. Still better – and safer – don’t believe any of it.

The next president no doubt will face challenges from the ever-present “tax reform” pitches – reform, as in higher taxes liberals want, and tax cuts, if Republican make a serious effort to make good on campaign promises. But however the wrangling over taxes goes, the new president will be haunted most by ghosts of taxes past.

There will be, of course, the specter of new taxes, as liberal Democrats try to eliminate the Bush tax cuts, although those tax cuts fueled the rebound that got our economic engine going again. For the Dems still haven’t learned – or just can’t accept – that leaving money in the pockets of taxpayers is more effective than taxing it away and pouring our tax dollars into the bottomless pit of federal spending.

Still, it’s doubtful Congress can get any new taxes passed that are as scary as the ghosts of taxes past, namely the Alternative Minimum Tax (AMT) that Congress passed as a tax on the “wealthy,” and the tax loads imposed to fund Medicare and Medicaid.

The AMT required higher income taxpayers to pay an alternative tax on certain “preference” deductions, regardless of what the taxpayer’s overall tax bill looked like before the AMT computations.

The AMT, which was not indexed for inflation, was pitched by Liberals as a tax that would affect only the wealthy. Sound familiar? But if the present Congress had not passed a temporary patch in December, the number of taxpayers caught in the AMT net would have increased to some 25 million in 2007.

And if Congress does not change the AMT, the number of taxpayers paying more taxes because of the AMT could be well over 50 million by 2017.

These specters will haunt both Congress and the new president as they grapple with the spending realities of the bloated federal budget and the cost of waging war on three continents, counting the war on terror waged here at home.

But the scariest of all the tax ghosts are those that haunt the thoughts of anyone thinking seriously about the coming crisis involving entitlements. Medicare and Medicaid spending are already huge drains on our national resources. And with waves of baby boomers joining the retired ranks, Medicare insolvency will worsen, and the Social Security system, which now takes in more than it pays out, will be broke in just a few years.

The Congressional Budget Office (CBO), in a rose-tinted outlook that assumed a growing economy, and maintaining current levels of spending and taxation, actually projected a budget surplus by 2012.

But note the key words: current levels in both spending and taxes. Who wants to bet that a new Congress will hold spending and taxes level? Don’t bet the farm on it, especially if a Democrat is elected president and gets a Congress controlled by liberal Democrats.

Even the rosy outlook of the CBO estimates that the tab on Medicare/Medicaid will increase from 4.6 percent of our total GDP to 5.9 percent by 2017. Doing the arithmetic on the estimated 2008 GDP of some $12,000 billion, that amounts to an eye-popping $156 billion a year!

That huge increase, coupled with the coming insolvency of Social Security, are real dangers that should scare even the pandering, undisciplined Congress into sensible action. But don’t bet your retirement check on it – although that’s what our children and grandchildren, and their descendants, will be doing as they work to pay the debt Congress saddles them with.

That outlook, coupled with the sorry record of Congress in spending money the nation doesn’t have, and liberals fighting tax cuts in any form – except vote-buying welfare handouts – is a spooky scenario that voters should keep in mind during this election cycle.

A good rule for voters in November would be to vote against anyone who proposes new spending without paying for it in spending cuts.

Oil-Short, Affluent Infidels Not Likely to Touch Arabs

by Donald G. Mashburn

What a contrast! The president of the most powerful nation in the world in effect begging the royal Poobahs of Saudi Arabia to ship more oil to ease the pain at the pump for American motorists.

Meanwhile, back in the U.S., the obtuse, environmentally dumbed-down, special interest- pandering Congress refuses to permit American oil developers to drill in places we know we can get oil. Places like the Arctic National Wildlife Refuge (ANWR), off the East Coast, the Gulf waters off Florida’s western shore and the banned areas of the West Coast.

It’s a contrast of two sad pictures. The first, a president pleading with the Saudis to help lower American gasoline prices that are well below those paid by importing European nations.

As if those Wahabi Islamists (the strictest Islamic group) are concerned about the affluent infidels in the U.S., whom they condemn as being evil. And as if the pleas – which had to have a sort of whining tone to Wahabi ears – of an American president could change what the Saudis view as being best for Arabs, and Saudis in particular.

The second sad picture, back in the oil-short U.S., is as dark as ever. If past actions are valid indicators, the hopelessly political Congress will never allow drilling in the vast barren coastal plain of the 19-million acre ANWR, even if we Americans are hurting for more oil.

The idiotic part of the ANWR ban is that there’s nothing that drilling on a very small part of ANWR’s barren areas can harm. And the flip side of that is that banning oil development in this wasteland, infested with insects in the summer, and like a deepfreeze in the winter, preserves nothing that benefits anyone alive, much less American citizens.

The coastal bans are as silly. If offshore drilling were harmful to states, then Louisiana and Texas would be disaster areas. Instead, those states are thriving and oil and gas make enormous contributions to the economy and quality of life in both.

In the U.S., petroleum fuels our cars, heats our homes, and provides clothing and countless items necessary for living. How long will we, the voters, put up with a Congress that insists on politicizing our energy supplies, national security and way of life?

This president and the next one should put this issue before the citizenry, and bluntly tell them that if they want better and more secure energy supplies, don’t send politicians to Congress who think energy policy is all about restricting oil drilling and subsidizing, with taxpayer dollars, alternative fuel ventures by special interests.

Pleading with the Saudis, or complaining about the cost of gasoline won’t change a thing. Making wholesale changes in Congress this November can bring needed changes in our energy policies and security.

Pushing the Family "Car" off a Cliff

by Frank Hyland

Imagine you are on the way to a soccer game in your car with your kids and the children of neighbors in the back seat. Your SUV’s engine sputters and quits. The kids sit there disconsolately, staring out the windows, waiting for you to take some action on their behalf so that they can make it to “the game.”

Now imagine yourself walking to the rear of the vehicle and starting to push it forward, only to realize that your SUV and the children are approaching the edge of a cliff. Dumb Question # 287: What do you do when you realize that the SUV is picking up speed toward the cliff’s edge? It’s a trick question.

Of course you would do everything in your power, once you saw the danger ahead, to stop the vehicle before the children were hurt. Why, then, would anyone continue pushing your kids and others’ kids toward and over a cliff, you ask? Why, indeed.

By now you’ve figured out that the “SUV” represents the federal and state programs collectively known as “entitlements,” chief among them being Social Security and Medicare. Both have been the subject of repeated warnings, followed by repeated creation of commissions to investigate and recommend solutions. I would recommend, for openers, the near-term renaming of both to Social Insecurity and Mediscare, as a means of getting the attention of those who still hope to become recipients.

In case those pushing the two programs off the cliff haven’t noticed, we’re now in the year 2008. It was one thing for proponents to put things off when we were still in the 20th Century, back in the ‘90s, and insolvency was still more than a decade away.

For those who get elected every six, four, and two years (especially), that’s a lifetime and the problems can safely be “kicked down the road” for others to deal with. Depending on the date of the estimate and the source, the year of impending insolvency swings back and forth by a year or so.

Social Security is projected to begin taking in less money than it puts out in 2017 or so. Medicare is approaching the edge of the cliff even faster, with projected insolvency for the part that pays for hospitalization happening circa 2030. For someone who is already 86 or 92 years of age and who long ago stopped buying green bananas, that’s OK. For someone aged 40, it should be downright terrifying.

The solutions put forth during the ongoing campaign to be president, predictably range from establishing personal accounts to – you guessed it – establishing another commission to study the problem.

The idea of personal accounts is anathema to them, of course. Why? They represent competition. The very idea of tens of millions of constituents freed from the tethers of taxes for Social Security and Medicare strikes fear deep into what’s left of their hearts.

In the same manner, school vouchers that allow parents to shop for adequate education for their children throws teachers’ unions and the educational establishment into fits of apoplexy. At the heart of the matter is the belief, genuine in many cases, on the part of those who govern, that they know better than we do. It is condescension of the worst sort because it robs us not only of our money but also of our self-respect.

To top it all off, you would think that the strength of those who would have us hang onto Social Security is based on it being a superior product. It is far from that. Depending on your income, amount paid in, marital status, and age, your rate of return can vary from just over one percent to actually a negative rate of “return.”

Take a look at the rates of return offered by banks, savings and loans, credit unions, and other types of institutions, and compare those, if you can stomach it, to that of Social Security. So, as I understand it, those who govern us claim to have studied the situation carefully and to have chosen the best solution for our golden years. Instead, they are giving us an inferior return on our money that is taken out of our paychecks every payday via payroll taxes.

And they continue to favor and tinker with a system that they know is already projected to become insolvent in the not-too-distant future.

That about sums it up, except to say that, to add insult to injury, we’re told that we, too, must get behind the SUV and help push it off the cliff with our children in it.

Frank Hyland is a staff writer for the New Media Alliance, Inc.