Free Markets, Free People

Daily Archives: February 6, 2012


When is a tax cut not a tax cut?

When someone, anyone, is “paying” for it.

A tax cut, as I understand the term, means taxes are cut – not made up somewhere else.  In other words, it is a revenue loss for government.  Period.

Not so with the latest payroll “tax cut”.  In the case of the 2 month extension recently passed, government isn’t going to be out any revenue.  Other tax payers will be paying the freight as they refinance their houses.

Just before Christmas, American workers got a rare gift from Washington politicians – the current payroll tax cut would be extended for two more months.

At the time, both President Barack Obama and House Speaker John Boehner lauded the move to avoid a tax increase for millions of working Americans.

But there’s something the politicians weren’t bragging about – the fact that they’re paying for the two-month tax cut with what has turned into a brand new fee on home buyers.

The new fee is a minimum of one-tenth of 1 percent on Fannie Mae- and Freddie Mac-backed loans, and is likely to go much higher.

It will be imposed for the next 10 years on most mortgages and refinancings and it lasts for the life of the loan.

Got that?  This is simply unacceptable.   If you get a loan backed by Freddie or Fannie within the next 10 years, you will pay a “fee” (read TAX) that will “pay for” this supposed “tax cut”.

An Obama administration official defended the mortgage fee, calling it "modest." She said it’s "unlikely to negatively affect borrowers" because increases "will be phased in over the next two years." And it will "help bring private capital back into the mortgage market, which [is] good for borrowers over the long term."

Here, take this poison — it will be good for your long term.

Here’s how it breaks down for those who are or are planning on buying or refinancing a loan in the next 10 years:

It’s bad news for Patty Anderson, who’s buying a home in Virginia.

Anderson will save a couple hundred dollars from having her payroll tax cut extended but her mortgage broker told her the new fee would cost her almost $9,500.

"I was absolutely startled that it would add up to that much," she said.

Well yeah, it’s only about $7.50 a month for every $100,000 in mortgage you’re committed too – for the life of the loan.

I think Bill Burnett, president of the Virginia Association of Mortgage brokers said it best, and, by the way, summed up in one sentence what has become routine in DC:

"Your pocketbook is being raided in order to pay for a tax policy issue decided at the last minute by probably people who didn’t understand fully what they were legislating on."

Remember “we have to pass the bill to find out what’s in the bill”? Well here we are again.

At least one representative figured it out, but couldn’t find anyone interested in the problem. Rep.Allen West:

"I read the legislation and raised the flag. Unfortunately nobody paid attention to what I was saying at the time," he said, calling the fee a backdoor tax increase on the middle class.

Of course it’s a backdoor tax and calling it a fee doesn’t change that.

Your government at work.

~McQ

Twitter: @McQandO


An Electric Car Mandate?

The editors of the Washington Examiner consider the probable effects of the new CAFE standards (being imposed by the EPA now instead of NHTSA) and ask a pertinent question:

Getting from the current 35 mpg CAFE standard to 54.5 can be achieved by such expedients as making air conditioning systems work more efficiently. We have a bridge in Brooklyn to sell to anybody who thinks that’s even remotely realistic. There is one primary method of increasing fuel economy — weight reduction. That in turn means automakers will have to use much more exotic materials, including especially the petroleum-processing byproduct known as “plastic.” But using more plastic will make it much more difficult to satisfy current federal safety standards. The bottom-line will be much more expensive vehicles and dramatically fewer kinds of vehicles.

[...]

Total costs, as calculated by the EPA, will exceed $157 billion, making this by far the most expensive CAFE rule ever. For comparison, the previous rule in 2010 cost $51 billion, according to the EPA. But the EPA doesn’t include this fact in its calculation: Annual U.S. car sales are 14-16 million units, yet over time, this rule will remove the equivalent of half a year’s worth of buyers. Will that be when the EPA takes a cue from Obamacare and issues an individual mandate that we all must buy Chevy Volts?

I’m just curious, for those who support the individual mandate dictated by Obamacare, what is the argument that such an electric car mandate isn’t possible? If the federal government can force us to purchase insurance from the companies it allows to offer the product based on the idea that health care is a national issue, how is promoting cleaner air and more energy security not the same thing? Indeed, it would seem that the arguments are even stronger for forcing everyone to buy electric cars if furthering the “common good” is the only real restriction on federal power.

So what is the difference from a legal, constitutional standpoint? Is there one?


CAFE standards, market distortion and the usual results

In light of the article below on the failure of communism (which, necessarily, relies on central planning and ignores markets), this is an interesting topic:

The CAFE rule is the fleet-wide average fuel economy rating manufacturers are required by Washington to achieve. The new rule — issued in response to a 2010 Obama directive, not to specific legislation passed by Congress — would require automakers to achieve a 40.9 mpg CAFE average by 2021 and 54.5 mpg by 2025.

Got that folks … your representatives had nothing to say about or do with this.  It was dictated from on high.

In case you’re wondering whatever happened to the National Highway Traffic Safety Administration, it has been supplanted in the CAFE process by the EPA. The proposed regulation was designed, according to the EPA, "to preserve consumer choice — that is, the proposed standards should not affect consumers’ opportunity to purchase the size of vehicle with the performance, utility and safety features that meets their needs." But the reality is that consumer choice will be the first victim.

And that essentially means that with the switch from the NHTSA to EPA, the auto industry most likely had no place at the table.  An agency with an agenda but little experience with the industry came up with the new rules.

Also note the usual pandering to choice.  They talk the talk, but reality shows they’re not at all sincere about it:

Getting from the current 35 mpg CAFE standard to 54.5 can be achieved by such expedients as making air conditioning systems work more efficiently. We have a bridge in Brooklyn to sell to anybody who thinks that’s even remotely realistic. There is one primary method of increasing fuel economy — weight reduction. That in turn means automakers will have to use much more exotic materials, including especially the petroleum-processing byproduct known as "plastic." But using more plastic will make it much more difficult to satisfy current federal safety standards. The bottom-line will be much more expensive vehicles and dramatically fewer kinds of vehicles.

They’ll have to be much smaller and much lighter and they’ll cost an average of $3,200 dollars more (and that’s the lowball estimate).  Yup, no intrusion into the market there.  They’ve given “choice” lip service – get over it.

Result?

The U.S. Energy Information Administration projects that there will be no vehicles costing $15,000 or less, the segment of the market that college students and low-income consumers depend upon. Altogether, an estimated seven million buyers will be forced out of the market for new cars.

Note, it’s the new car market at risk. 

And:

Total costs, as calculated by the EPA, will exceed $157 billion, making this by far the most expensive CAFE rule ever. For comparison, the previous rule in 2010 cost $51 billion, according to the EPA. But the EPA doesn’t include this fact in its calculation: Annual U.S. car sales are 14-16 million units, yet over time, this rule will remove the equivalent of half a year’s worth of buyers.

But remember, to the sycophants, this is the crew that “saved” the auto industry.  Now you can understand that it was only for political reasons that was attempted.  Those jobs and industries, after this election year, are no longer critical.  In fact, they actually hamper the goal to “revolutionize” the energy sector.  That’s much more important than the middle class the left is currently and conveniently so fond of.

Put this one under “the law of intended consequences”.

~McQ

Twitter: @McQandO


Why has the collapse of Communism had so little impact on political discourse in the West?

At Powerline, John Hinderaker  points to an article by Janet Daley in the Daily Telegraph and ponders the question she asks – “why has the collapse of Communism had so little impact on political discourse in the West?”

From Daley’s column:

[I]n spite of the official agreement that there is no other way to organise the economic life of a free society than the present one (with a few tweaks), there are an awful lot of people implicitly behaving as if there were. Several political armies seem to be running on the assumption that there is still a viable contest between capitalism and Something Else.

If this were just the hard Left within a few trade unions and a fringe collection of Socialist Workers’ Party headbangers, it would not much matter. But the truth is that a good proportion of the population harbours a vague notion that there exists a whole other way of doing things that is inherently more benign and “fair” – in which nobody is hurt or disadvantaged – available for the choosing, if only politicians had the will or the generosity to embrace it.

Why do they believe this? Because the lesson that should have been absorbed at the tumultuous end of the last century never found its way into popular thinking – or even into the canon of educated political debate. …

he fall of the Berlin Wall and the collapse of communism which followed it are hugely important to any proper understanding of the present world and of the contemporary political economy. Why is it that they have failed to be addressed with anything like their appropriate awesome significance, let alone found their place in the sixth-form curriculum?

The failure of communism should have been, after all, not just a turning point in geo-political power – the ending of the Cold War and the break-up of the Warsaw Pact – but in modern thinking about the state and its relationship to the economy, about collectivism vs individualism, and about public vs private power. Where was the discussion, the trenchant analysis, or the fundamental debate about how and why the collectivist solutions failed, which should have been so pervasive that it would have percolated down from the educated classes to the bright 18-year-olds? Fascism is so thoroughly (and, of course, rightly) repudiated that even the use of the word as a casual slur is considered slanderous, while communism, which enslaved more people for longer (and also committed mass murder), is regarded with almost sentimental condescension. …

[I]n our everyday politics, we still seem to be unable to make up our minds about the moral superiority of the free market. We are still ambivalent about the value of competition, which remains a dirty word when applied, for example, to health care. We continue to long for some utopian formula that will rule out the possibility of inequalities of wealth, or even of social advantages such as intelligence and personal confidence.

The idea that no system – not even a totalitarian one – could ensure such a total eradication of “unfairness” without eliminating the distinguishing traits of individual human beings was one of the lessons learnt by the Soviet experiment. The attempt to abolish unfairness based on class was replaced by corruption and a new hierarchy based on party status.

If the European intellectual elite had not been so compromised by its own broad acceptance of collectivist beliefs, maybe we would have had a genuine, far-reaching re-appraisal of the entire ideological framework. [Emphasis mine].

We could spend a week discussing any of those highlighted passages, but the question remains – why?  In fact, if you think about it, the collapse of communism was all but shrugged off by the left.   It wasn’t, as it seemed, of any consequence to their ideology.  In fact, for the most part, other than a few “good riddance” quotes, it was business as usual for the left, pushing many of the same ideological principles that underpinned communism as if they were not a reason for that horrific system’s collapse.

As Daley says, its failure should have been a turning point in geo-political power and thinking about the state and its relationship to the economy.  But instead there was silence while left leaning governments both here and in Europe doubled down on state intrusion into the economies of their respective states.

The key is to be found in the last emphasized sentence.  Unfortunately, there has been a sea-change in much of our thinking which has indeed seen a “broad acceptance” of “collectivist beliefs”.  If ObamaCare leaped to your mind immediately, what actually makes the point is Medicare Part D.  That’s  the “broad acceptance” necessary – compromise of principle on the right – to carry this sort of an agenda forward.

Sure ObamaCare was passed without a single GOP vote, but it was set up by many past GOP compromises.  The problem is the right has allowed the left to define both the playing field and the principles of play.  It has also framed what little discussion that goes on.  It has decided on envy as its vehicle and class warfare as its methodology.  And the right has meekly accepted those parameters.  Watch the current crop of GOP candidates spend much of their time apologizing for their success instead of celebrating it and tell me the propaganda war hasn’t gone to the left.

And on the left?  Why has the result of communism’s collapse been essentially ignored?  For two reasons.  John Hideraker’s take on the left for one:

I think a very partial answer to the question Ms. Daley poses is that leftism has never been based on idealism. It has always been based, for the most part, on hate and envy. So when Communism was conclusively proved to be a failure, leftists (including not only leftists in politics, but more important, leftists in the media and in academia) didn’t change their minds or admit their mistake. For in their eyes, while there may have been disappointment, there was no mistake. Their resentments and hatreds remained. They merely sought other vehicles, other terminologies, other tactics to bring down the West and the free enterprise system and democratic institutions that define it. Yesterday’s socialists are today’s progressives. They barely missed a beat.

I think there is a lot of truth to that analysis, although I’d quibble somewhat on the dismissal of idealism.  I’ve always said the left never viewed communism as a systemic failure but more of a failure based on the fact that the wrong people were executing the idea poorly.  There’s never really been an acknowledgement on the left that communism itself was “wrong”, “bad” or even totalitarian.  Just that some of those who got into power under that system were (if they’ll admit even that). 

And it is hard to look at the left of today, view their ideology and conclude they’ve learned a thing by its collapse.   While they’ve certainly learned that it is unwise to use certain words or phrases when pushing their agenda (you won’t see “proletariat” or “bourgeoisie” tossed around by today’s lefty, but “middle class” and “[pick your favorite class to denigrate] elite” work along with “Big this” and “Big that”.

The truth in Daley’s point is to be found in reviewing how we’ve gotten to where we are today since the collapse of the Berlin Wall.  We’re much less free economically and politically.  The left continues to define the debate and the right continues to accept the framing.  How can you have a real discussion about the failures of communism specifically and collectivism in general when you continue to allow the collectivists to frame the discussion?  Naturally they’re going to pretend that nothing untoward happened with the demise of the USSR and Warsaw pact.  Why would they?

I mean think of the irony –  over 20 years after its collapse, the principles of socialism and its offspring communism continue to touted as “the answer” while the system that sharply defined the West until then and made it more successful by orders of magnitude  – capitalism (or a reasonable facsimile thereof) – is under constant and sustained assault.

Talk about a world upside down.

~McQ

Twitter: @McQandO

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