Stop Protecting China’s Access To Oil

Estimated Reading Time: 3 minutes

U.S. policies in the Middle East have wasted American blood and treasure and guaranteed China’s continued supply of oil

While polls show overwhelming majorities of Americans agree that the United States needs to end its many forever wars in Afghanistan, Iraq, and Syria, some in Washington’s elite foreign policy circles fear any military withdrawals, worrying about alleged vacuums our adversaries will fill. Substantial evidence, however, shows the American people have a far better grasp on what benefits our country than the so-called elite.

On Sunday, Gen. Frank McKenzie of United States Central Command said that as U.S. troops withdraw from Afghanistan—and potentially from Iraq and Syria in the near term—he worries that “Russia and China will be looking very closely to see if a vacuum opens that they can exploit.” One of the risks McKenzie cited was that Middle Eastern countries may stop buying American weapons and look to Moscow or Beijing instead.

This fear, shared by many in Washington, illustrates one of the central problems the United States has had for at least the past decade in establishing a proper balance between our interests in the Middle East and how we expend limited resources in support of them. There was a time not too long ago when securing the free flow of oil from the Middle East was a vital national security issue for the United States.

According to the Energy Information Administration, as recently as January 2007, the U.S. had a monthly net import of 12.2 million barrels of oil. By January 31 of this year, however, that number had been changed to a net export of .8 million barrels for the month. China, meanwhile, which only imported 3.2 million barrels of oil per day in 2007, has now significantly deepened its dependence on Middle Eastern oil and now imports more than 11 million barrels a day.

While global oil supplies remain an interest of the United States, without question the Middle East is far less critical to our security today than it was decades ago. Yet the dramatic changes in the relative importance of Middle Eastern oil for the United States and China has not been reflected in our foreign policy and military posture.

According to a study published in 2018 by the energy think tank Securing America’s Future Energy, the U.S. military spent approximately $81 billion a year in protecting global oil supplies; Michael Klare, author of Rising Powers, Shrinking Planet: The New Geopolitics of Energy, estimates the number could exceed $100 billion annually. Consider, then, the stark implications of what this level of American military support to the Middle East means.

The United States is spending exorbitant amounts of national treasure providing a military presence that helps guarantee the free flow of oil that benefits China. While we are at present a net exporter of petroleum, Beijing is dependent on the continued free flow of Middle Eastern oil for its survival—yet China spends virtually nothing to guarantee that flow while American taxpayers are left, every year, holding the bag. That needs to change.

America currently has combat troops on duty in Iraq, Syria, and in Afghanistan (until September), yet we have more than 50,000 troops in the greater Middle East on duty at any given time. This level of investment of troops and resources is clearly no longer appropriate and needs to change. It saps our country of power and prevents us from adequately funding and manning other, higher priorities.

One of the few things Washington is unified on is the need to update our policies on responding to a rising China. While there are disputes over whether to focus on containment or competition with Beijing, there should be complete agreement on the imperative to stop spending U.S. treasure and using American combat power that inadvertently protects China’s flow of oil from the Middle East. But the core reason we should get out of the Middle East is as simple as this: It is in our interests to do so; it strengthens our own security; and it ends the pointless bleeding of national treasure.

Rather than fearing withdrawals from unnecessary combat missions, American policymakers should place a high priority on reforming our entire foreign policy and military posture towards the Middle East and bringing it into conformity with existing realities.

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This article was published on May 28,2021 and is reproduced with permission from The American Conservative.

 

Bitcoin Uses Half the Energy of the Banking System: New Paper

Estimated Reading Time: 5 minutes

Editor’s Note:  This discussion of bitcoin or any other use of  electrical power  presupposes the existence of a connection between some types of power production and climate change.  We are not convinced of that connection.  Secondly, once gold is mined, no further energy is needed for it to  function.  Gold is created in nature.  We simply use energy to find it. Finally, we doubt government that is expanding as rapidly as ours will ever give up the power to print money, which is the power to fight wars, gain and maintain political power, and redistribute wealth.  We fully expect governments to move against the use of cryptocurrencies.

Bitcoin’s energy usage stacks up well to its competition—and then some—according to a new Galaxy Digital paper

Elon Musk recently sent bitcoin prices plummeting when he announced that Tesla would no longer accept the cryptocurrency, citing concerns over the environment.

“Energy usage trend over past few months is insane,” said Musk, one of bitcoin’s highest-profile supporters, in a May 12 tweet.

Musk’s about-face prompted criticism from the crypto community, with some stating that SpaceX would need to switch from rocket fuel to a “more sustainable energy” if Musk wished to not look like a clueless big hypocrite.”

In the wake of Musk’s tweet, bitcoin underwent a selloff that saw prices plunge from $55,000 to $49,500 in about two hours—a slide that has continued since.

Is Bitcoin Bad for the Environment?

Musk isn’t the only person worried about the amount of energy bitcoin uses. During a February interview with CNBC’s Andrew Ross Sorkin, US Treasury Secretary Janet Yellen offered a similar sentiment.

“It’s an extremely inefficient way of conducting transactions, and the amount of energy that’s consumed in processing those transactions is staggering,” Yellen said.

Microsoft founder Bill Gates offered a similar take.

“Bitcoin uses more electricity per transaction than any other method known to mankind,” the billionaire told Sorkin in a ClubHouse session.

Carol Alexander, a professor at the University of Sussex Business School, agreed. In a recent CNBC interview, Alexander said that crypto’s mining “difficulty” — a computational metric used to measure how much effort it takes to mine bitcoin — has been surging the last three years.

“More and more electricity is being used,” Alexander told CNBC. “That means that the network difficulty will also be going up (and) more miners are coming in because the hash rate’s going up.”

What the Numbers Say

There’s no question that bitcoin uses a lot of energy. Its defenders point out this is what makes the cryptocurrency so secure. But a recent study points out that bitcoin’s energy usage stacks up well to its competition—and then some.

In May, Galaxy Digital, a cryptocurrency firm founded by venture capitalist Michael Novogratz, released a paper that compared bitcoin’s energy usage to the industries that are considered its primary competitors—the traditional banking system (for savings and payments) and gold (as a value store).

Researchers at the mining arm of Galaxy Digital estimated Bitcoin’s annual electricity consumption to be roughly 113.89 terawatt hours annually (TWh/yr), a figure that includes everything from miner power consumption, pool power consumption, energy for miner demand, and node power consumption.

That’s a lot of energy, to be sure. But the authors point out there’s an important distinction many are missing.

“Given Bitcoin’s transparency, it is easy to estimate Bitcoin’s energy usage,” the study’s authors point out. “This results in frequent criticism of Bitcoin, but these critiques are rarely levied against other traditional industries. “

One of the reasons you hear much less about the energy consumption of the banking and gold sectors is that, unlike bitcoin, these industries do not disclose their energy footprints to the public, the researchers pointed out.

“If we want to have an honest conversation about Bitcoin’s energy use, it seems appropriate to consider it in light of the industries it is most often compared to,” the researchers said.

Indeed. And it turns out that bitcoin stacks up favorably to the gold and traditional banking sectors. Analyzing the four key areas of electricity consumption in banks—data centers, branches, ATMs, and card networks—the study estimates that the worldwide electricity consumption of the banking system is 263.72 TWh/yr.

Gold was slightly lower than banks, with an estimated 240.61 TWh/yr, but still roughly twice that of bitcoin. (You can learn more about the researchers’ methodology in the report.)

“These estimates may exclude key sources of energy use and emissions that are second order effects of the gold industry like the energy and carbon intensity of the tires used in gold mines,” Galaxy researchers noted.

One could reasonably ask, of course, if this favorable comparison would continue if bitcoin were to become adopted as widely as fiat moneys currently are. The answer appears to be yes for a couple of reasons.

First, the vast majority of electricity bitcoin uses is consumed in the miningprocess, so more exchanges of bitcoin will not result in a surge of electricity consumption.

Second, mining reward mechanisms and energy consumption are evolving. Bitcoin mining is complicated stuff, but one thing we know is that only 21 million bitcoins will be produced. Ever. About 18.7 million of these bitcoin have already been mined. Well before the last bitcoin is mined in 2140, however, the mining process is expected to shift. Crypto analysts say the process will likely be more efficient and less exhaustive as rewards for mining decrease and transaction fees play a larger role.

“That could eventually include a switch to a more environmentally-friendly consensus mechanism like proof of stake or another successor to proof of work,” Luka Boškin, CMO of crypto trading platform NewsCrypto, told Decrypt.

Moreover, engineers say the high electricity use becomes less of a concern as more and more mining is done in places where electricity is cheap and clean.

“Not all types of energy generation are equal in their impact on the environment,” wrote Katrina Kelly-Pitou, an energy systems strategist and University of Pittsburgh researcher, in a 2018 article for The Conversation; “nor does the world uniformly rely on the same types of generation across states and markets.”

She continued:

“In Europe, for example, Iceland is becoming a popular place for bitcoin mining. That nation relies on nearly 100 percent renewable energy for its production. An abundant supply of geothermal and hydropower energy makes bitcoiners’ power demand cheap and nearly irrelevant. Similarly, in the hydropower-driven Pacific Northwest, miners can still expect to turn a profit without contributing heavily to carbon emissions.”

Dreaming of ‘Good Money’

In his celebrated work Denationalisation of Money, F.A. Hayek argues that one of the most important lessons of human history is that governments inveterately debase currencies.

From Ancient Rome to the great powers of the twentieth century, Hayek saw that governments simply could not help themselves from manipulating currencies in ways that erode their value.

“[S]ince the function of government in issuing money is no longer one of merely certifying the weight and fineness of a certain piece of metal, but involves a deliberate determination of the quantity of money to be issued, governments have become wholly inadequate for the task and, it can be said without qualifications, have incessantly and everywhere abused their trust to defraud the people,” Hayek wrote.

The great economist dreamed of a day when governments no longer monopolized currencies.

“I don’t believe we shall ever have good money again before we take the thing out of the hands of government,” the Nobel Laureate observed in a 1984 interview with James U. Blanchard III. “Because we can’t take it violently out of the hands of government, all we can do is by some sly, roundabout way, introduce something they can’t stop.”

As fate would have it, we’ve found a way to do precisely what Hayek dreamed. There’s no question that bitcoin uses a lot of energy, though not nearly as much as its competitors.

But life, as any economist knows, is all about tradeoffs. The question is: do the benefits of bitcoin outweigh its costs?

If it can solve the problem of government monetary debasement, that answer is indeed a definitive yes. Herr Hayek would no doubt agree.

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This article was published on May 25, 2021 and is reproduced with permission from FEE, Foundation for Economic Education.

 

 

 

Buyers’ Strike? Amid Crazy Spiking Prices, Home Sales Sag for 3rd Month, Pent-Up Sellers Get Ready, New Listings & Inventories Rise

Estimated Reading Time: < 1 minute

This is a world of unprecedented Fed intervention, government stimulus, inflation that has turned red-hot this year amid a weird phenomenon of companies complaining about a labor shortage, while nearly 10 million people are deemed “unemployed” and 16 million people are claiming some sort of unemployment insurance. As 2.1 million mortgages are still in forbearance programs, investors have flooded the housing market, including individual buyers grabbing a second home in crazy bidding wars.

But sales have sagged for the third month in a row, while new listings and supply have started to rise from very low levels, and a lot more is coming on the market this year.

Sales of existing homes – single-family houses, condos, and co-ops – dropped by 2.7% in April from March, after the 3.7% drop in March, and the 6.3% drop in February, to a seasonally adjusted annual rate of 5.85 million homes, the lowest since July 2020, according to the National Association of Realtors today. Compared to April 2019, sales were up 11.8%, having now largely unwound the huge spike that started last summer (historic data via YCharts):

Investors are buying.

All-cash sales, usually a sign of investor activity, accounted for 25% of all transactions in April, up from 15% in April 2020. Individual investors and second-home buyers accounted for 17% of total home sales, up from 10% in April 2020.

Dallas Fed President Robert Kaplan pointed at the role of these investors in distorting the housing market, and named that as one of the reasons for “talking sooner rather than later” about tapering QE…..

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Continue reading this article at Wolf Street.

Arizona GOP Deadlocked, Adjourn With Budget in Limbo

Estimated Reading Time: 2 minutes

Republicans in the Arizona Legislature gaveled out Thursday, unable to agree among their caucus on a final budget.

Lawmakers were told by Republican leadership Thursday afternoon that they couldn’t find common ground that would bring all of their members to vote for Gov. Doug Ducey’s proposed budget that scrapped the state’s progressive income tax structure and replaced it with a flat 2.5%.

Both the House of Representatives and Senate adjourned until June 10 but reserved the option to reconvene sooner should lawmakers reach an agreement.

Senate President Karen Fann told lawmakers Thursday that talks had broken down over the past 12 hours and that keeping members at the Capitol would be futile.

Republicans kept thin majorities after the 2020 general election that saw the state’s 11 Electoral College votes go to President Joe Biden while also electing U.S. Senate challenger Mark Kelly over appointed Republican incumbent Martha McSally. While they maintained control of both state chambers, such thin majorities mean one or two defecting Republican lawmakers can stall any party-line vote.

Democrats responded to the adjournment in a statement, calling the budget stalemate “a disservice to the people of Arizona,” touting their proposed budget that wouldn’t cut taxes and would instead redirect those funds into education and expand Medicaid.

“Republicans have decided to take a vacation instead of working with us to pass a people’s budget,” the party said in a statement. “Arizona doesn’t need more tax cuts that will only help corporations and the wealthiest.”

In caucus meetings, some Republicans demanded the budget include language that would ban schools from requiring students wear masks when they return to class next fall. Others thought the $1.5 billion tax cut was too drastic and should be split between a smaller tax cut and spending on public infrastructure and paying down debt. Sen. Paul Boyer, R-Glendale, told The Associated Press on Thursday morning that the budget needed major changes before he would support it. 

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This article was published on May 27, 2021 and is reproduced with permission from The Center Square.

Will the Pandemic Promote Political Power in Perpetuity?

Estimated Reading Time: 5 minutes

“It’s like we created another industry in our state. The amount of money is staggering,” Andrew Schaufele, director of Maryland’s Bureau of Revenue Estimates, happily declared last week. The Biden stimulus plan is deluging governments across America with hundreds of billions of dollars of extra revenue that will allow politicians to stretch their power in ways that vex citizens long after the pandemic is over. 

One year ago writing for AIER, I asked, “Will the Political Class Be Held Liable For What They’ve Done?” Lockdowns at that point had already destroyed more than ten million jobs without thwarting the virus – a debacle that “should be a permanent black mark against the political class and the experts who sanctified each and every sacrifice.” No such luck. The article warned that “sovereign immunity… almost guarantees that no politician will face any personal liability for their shutdown dictates.”

The political class is coming out of the pandemic with far more power and prerogatives. Biden’s stimulus windfalls for lockdown governors is like giving $100,000 bounties to drunk drivers who crashed their cars. Government employees have been the ultimate privileged class during Covid-19, collecting full paychecks almost everywhere while many of them stayed home and did little or no work.

Maryland will receive between $55 billion to $60 billion in federal stimulus funds – equal to “11 percent of the state’s entire economy.” The Maryland legislature “celebrated” by giving bonuses to government employees and by funding many new programs. Many other states have similarly used federal windfalls to launch new initiatives.

Biden and his Democratic congressional allies are exploiting the pandemic to change the reality of work in America. Biden’s stimulus package included a $300 per week bonus for unemployment compensation that means that anyone who earned less than $32,000 is better off on the dole than taking a job. The unemployment bonuses were provided even while many states had canceled any requirement for claimants to actively seek a job. Alexa Tapia, the unemployment insurance campaign coordinator at the National Employment Law Project, a worker advocacy group, derided work search requirements as “just another barrier being put to claimants, and it can be a very demoralizing barrier.” To assume that people are too fragile to look for a job sounds like a vast expansion of the Americans with Disabilities Act. Federal “generosity” to individuals who choose not to work is devastating small businesses unable to hire employees.

Schools are some of the biggest beneficiaries of Biden’s handout bonanza. Biden’s Education Department is stocked with zealots who will likely exploit federal funding to dictate new curricula and mandate “equity” rules that could undermine local control of education. The same thing happened during the Obama administration when federal aid was used to bribe states into adapting “Common Core” standards that undermine students’ math competence.

Teachers’ unions used their clout to keep schools shut down long after it was clear that reopening was safe. The Chicago Teachers Union declared, “The push to reopen schools is rooted in sexism, racism, and misogyny,” while the president of the United Teachers of Los Angeles declared that reopening schools “is a recipe for propagating structural racism.” But many teachers are collecting windfall bonuses thanks to the profusion of federal aid regardless of their unions blocking schoolhouse doors.

Politicians are also exploiting the pandemic to seek to abolish fares for public transit. The Washington Post noted last week, “Transit systems for decades have been saddled with an obligation to partly support themselves through chasing ridership to increase revenue.” “Chasing ridership” is a euphemism for persuading people to voluntarily pay for a service. Sen. Edward Markey (D-Mass.) is pushing the Freedom to Move Act for federal subsidies to end local transit fares. But this is simply “Freedom to Move At Other People’s Expense.”

Free fares could quickly become a Trojan horse. Turning riders from customers into beggars would remove some of the last incentives to provide reliable service. If public transit is made “free,” then the only people that transit officials will need to please are federal bureaucrats, members of Congress, and transit union bosses. Transit systems won’t need to worry about keeping travelers safe; a survey of lapsed New York subway riders found that “nearly 90%… said crime and harassment were important factors in determining whether they return to the system.” 

Making subway rides free would also distract attention from the miserable performance of public transit systems that were losing ridership long before the pandemic. When the Washington Metropolitan Area Transit Authority received a huge boost in subsidies from the Maryland and Virginia state governments a few years ago, it promptly responded by shutting down many subway stations for seemingly eternal maintenance since it no longer needed fare revenue. Many of the same activists who want to make public transit zero cost for users also want to sharply curtail the use of private transit: citizens who refuse to abandon their cars for “free” transit could be next on the enemies list.

The Biden administration is sparing no expense to make parents grateful to Washington. Beginning July 15, the feds will begin delivering up to $300 per child to Americans’ bank accounts and mailboxes. The Washington Post noted that the administration “estimates 88 percent of all American children are slated to receive new monthly payments — with no action required.” Congress enacted a temporary program scheduled to end after December. But a temporary handout shifts the argument: instead of debating whether a program that deluges non-needy families with cash, the question will be whether needy children can be thrown into the street by cutting off aid. The Post noted that the handouts could “have significant political consequences as the White House seeks to reshape the U.S. economy.” Actually, this is an attempt to vastly change the relationship of the federal government to the American people. 

Throughout history, rulers have used cash to buy submission. “Money is my most important ammunition in this war,” said Gen. David Petraeus, the supreme U.S. commander in Iraq. Presidents and members of Congress have long relied on “money as a weapon system” to buy votes or undermine resistance to Washington. 

Government restrictions almost always follow government handouts. In 1942, the Supreme Court ruled, “It is hardly lack of due process for the government to regulate that which it subsidizes.” Because the Roosevelt administration had decided to drive up wheat prices, the Secretary of Agriculture acquired veto power over the use of every acre of cropland in the nation. In 1991, in a case involving federal subsidies, Chief Justice William Rehnquist declared that “when the Government appropriates public funds to establish a program, it is entitled to define the limits of that program.”

Every subsidy creates a power vacuum that will eventually be filled by bureaucratic or political ambition. The more things are financed by subsidies, the more activities become dependent on bureaucratic approval and political manipulation. To depend on government subsidies means either to be currently restricted – or to be only one Federal Register notice away from being restricted. Subsidies are the modern method of humane conquest: slow political coups d’etat over one swath of American life after another. The only way to assume that subsidies are compatible with individual liberty is to assume that politicians and bureaucrats do not like power.

Biden’s profusion of new handouts put a halo over his tax hike proposals and, perhaps more importantly, his plans to unleash the IRS to be far more aggressive against Americans. The more politicians promise to give some people, the more they entitle themselves to seize from everyone else. French philosopher Bertrand de Jouvenal wrote, “Redistribution is in effect far less a redistribution of free income from the richer to the poorer, than a redistribution of power from the individual to the state.” “Reciprocal plunder,” in economist Frederic Bastiat’s phrase, becomes the soul of political life.

Post-pandemic policies are far more perilous because few Americans yet recognize how badly their rulers failed them. Instead, “temporary” programs will be extended and further divide Americans into two classes—those who work for a living and those who vote for a living. The more people who view government as their personal savior, the easier it becomes for politicians to demagogue to ever greater power. But as economist Warren Nutter warned, “The more that government takes, the less likely that democracy will survive.”

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This article was published on May 26, 2021 and is reproduced with permission from AIER, American Institute for Economic Research.

Survey: Arizonans Favor A Flat Tax

Estimated Reading Time: 2 minutes

A survey commissioned by Americans for Prosperity-Arizona (AFP-AZ) reveals that nearly two-thirds of Arizonans favor reducing the personal income tax rate, inspiring AFP-AZ’s plan to reduce income tax rates starting in 2023

Arizonans believe a reduction in income tax will bolster the state’s economic growth, according to the poll. Sixty-six percent of surveyed voters said that they valued Arizonan families keeping their money. Sixty-six percent said small businesses should pay less in taxes in order to use their earnings for job creation and growth. Fifty-three percent of surveyed voters said that keeping Arizona competitive with nearby states such as Texas and Nevada without an income tax is a reason to reduce the current rate.

By 2024, nine U.S states will levy no state income tax. Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming have no income tax. Tennessee repealed its income tax on Jan. 1, 2021. New Hampshire plans to eliminate its income tax by 2024.

Arizona’s progressive income tax structure begins at 2.59%, increasing to a top marginal tax rate of 8%, one of the highest top-end rates in America. 

AFP-AZ is working on a plan to lower Arizona’s personal income tax rate to 2.5%. This would apply to all taxpayers, with the exception of those in the highest bracket who would continue to pay their current marginal rate of 4.5%. AFP-AZ plans to execute the reduction through radio advertisements, digital outreach, and mail directing Arizonans to a webpage where they may contact their lawmakers on behalf of tax reform.

AFP-AZ State Director Stephen Shadegg said in a statement that Arizona’s quest to allow Arizonans to keep their earnings stands in contrast to the tax increase plans in Washington.

“Government digging deeper into our pockets won’t help small businesses hire more workers or meet the needs of Arizona families,” Shadegg said.

Legislative Republicans have crafted a budget for the coming fiscal year that scraps the state’s progressive income tax with the aforementioned flat 2.5% rate.

Shadegg said that Arizonans support the AFP-AZ “pro-growth” plan to establish Arizona as a competitive state and a tax-reform leader.

“We are connecting with Arizonans across the state to tell them about this plan and enable them to tell their legislators they need to act now,” Shadegg said. “We look forward to igniting Arizona’s economic recovery by making our tax system simpler, fairer, and flatter.”

Opponents warn that a flattening of the state’s income tax would mean local governments, who receive a percentage of state income tax revenue, stand to lose funds which could threaten local services.

“I am very concerned about all of the talk about substantial income tax cuts,” said Alan Maguire, an economist with the Arizona Finance Advisory Committee in April. “I have said this before and I believe there is a lot of momentary money in our revenues right now that will be gone in three or four years. In Arizona it is much much easier to cut taxes than to raise taxes.”

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This article was published on May 24, 2021 and is reproduced with permission from the Center Square.

 

 

Giving the IRS $80 Billion to Raise Taxes

Estimated Reading Time: 4 minutes

The operation of the IRS is something with which I am vaguely familiar having dealt with them regularly for over 40 years.  President Biden wants to give the agency more money on the proposition that rich people and corporations cheat on their taxes. He apparently believes that greater enforcement will bring in $700 billion (Treasury Dept estimate) over the next decade. And Santa Claus and the Tooth Fairy are my personal friends.  

Let’s start with how the agency got in this fix. President Obama used the agency to squash applications for non-profit groups during his first term. Remember his henchman, Lois Lerner? The Republicans said if the agency has money for that garbage, then they have too much money. Thus, the agency lost funding and never got it back.

The Washington Post decided Biden’s plan made sense; thus, they were going to try and convince the world.  They worked with five prior IRS Commissioners to produce an Opinion piece endorsing Biden’s plan.    

Three of the Commissioners were from the last century.  In tax terms, these three may as well be Fred Flintstone given how frequently radical tax changes occur. At least they are still alive and are tax professionals. The two more current authors were Democrat appointees who never had any prior tax experience before they took office.  One left and went to work for a Hedge Fund.  

The five delineate how the agency has less money and fewer staff than it did in 2010. Then they point out a quizzical problem. The IRS has been burdened with new tasks such as enforcing Obamacare rules and sending out stimulus checks.  Someone should have thought that through and decided it best be handled by another agency.  

The authors go on to say that if you call the IRS today, the phones are barely answered (just 24%). As someone who has spent hours on hold with the IRS, their staffing for answering calls has always been horrible.  Here is the kicker:  you cannot and should not rely on any advice they give you.  The staff answering the phones are their least qualified personnel and they generally do not know tax law.  Other than getting perfunctory answers about payments made and receipt of returns, you cannot put any value into what they tell you.  Even the IRS says that.  

The IRS can hire more people to answer phones and put them through training, but what will they know? The people they hire will have zero tax background and likely barely understand the tax system. It will take years for this lower-level staff to gear up to being helpful.  

The former commissioners go on to babble about how this Biden “investment” will reap rewards. They say Biden wants more third-party compliance. Think 1099’s, mortgage statements, etc. I am not sure what else they could possibly want on that front other than copies of our bank statements.  

Third party documents sent to the IRS cause most audits today. These are called “letter audits.” You receive a letter stating, based on third-party documents received, that there is a discrepancy between what you reported and what the IRS has in its records. “Either prove us wrong or pay up.”  

The one thing the former Commissioners say that is true is that the IRS computer system is abysmal. Many times, I will be speaking to an agent and ask a question. They say I am looking that up, but our computers are slow. The IRS has spent huge amounts of money upgrading their systems in the past to no avail.  Why do the former commissioners think Biden has the magic bullet on that?  

Let us look at the big picture on taxes. There are three truisms about government income and revenues that are being omitted here. I say this because these are provable over the last 60 years. The economic studies Biden and the MSM continue to quote are simply a waste. We have these provable facts:

  1. Whenever tax rates are reduced more money flows into the government. Look it up. After the Kennedy, Reagan and Trump tax rate cuts went into effect, more revenue came in. The Biden people like to deflect about this and say that the deficit grew under Trump. That is a separate issue.
  2. Any time the government raises tax rates they NEVER, ever get the projected revenue. People alter their behavior to mitigate their taxes.  
  3. Whenever a government program is started, the actual expenditures are always grossly understated. They grow exponentially. Food stamps (SNAP) is a perfect example.

What the commissioners did not address, and the Biden people are hiding, is that Trump already achieved greater tax compliance. Corporations kept moving operations offshore to avoid onerous American tax rates compared to all countries. We had the second highest rates in the world. The Trump cuts (adding in the state tax rates) put us barely in the middle of all countries’ tax rates. Biden foolishly wants to reverse this and then the corporations will reverse their current behavior and stop moving operations and earnings to the U.S.  Biden can hire as many IRS agents as desired, but that will not stop corporations from pivoting to lessen their tax burden.

Individuals have fewer and fewer planning techniques. The IRS is already all over offshore accounts– so much so that many foreign banks refuse to open accounts for Americans who live in their country because of the reporting requirements. Tax rates are currently lower causing people to do less finagling.  

Biden is denying all three of the above truisms. He will explode the deficit with ever greater expenditures and never achieve his revenue goals. People will alter their behavior to avoid taxes.  People will once again base business decisions on tax consequences as opposed to the economics of the deal.  

Biden is using class warfare to attack successful people and corporations to accuse them of tax cheating. That is a disgusting statement by a sitting President.  

Here is a way the IRS could significantly increase compliance. Go after the underground economy. You know, the money that will not be reported by all the illegal aliens Biden is allowing in the country. I have always said the tax agencies never want to do that because they do not like to do real work.   

Instead, they will not go after rich individuals or corporations for more IRS dough. They will go after ordinary hardworking Americans because that is the easy thing to do. You can put money on that in Vegas.  

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This article was published in Flash Report on May 23 and is reprinted by permission of the author.

President Biden — Making Russia Great Again

Estimated Reading Time: 3 minutes

President Joe Biden last week removed sanctions against Russian companies to allow completion of the massive Nord Stream 2 wind turbine and solar energy project so that Russia can supply this renewable energy abundance to U.S.-allied nations in western Europe. Gotta fight global warming and reverse climate change, don’t ya know!!

Oh, wait. Let me rephrase that paragraph:

President Joe Biden recently removed economic sanctions against Russian companies to allow completion of a massive Nord Stream 2 wind turbine and solar energy GAS PIPELINE project so that Russia can supply this renewable FOSSIL FUEL energy abundance to U.S.-allied nations in western Europe. Gotta fight global warming and reverse climate change, don’t ya know!!

The opening paragraph, of course, is incorrect; the latter paragraph above is the accurate account of what occurred.

This incident reveals so much about the political and media class in America, it is hard to know where to begin. There are endless adjectives to describe this action by the Biden administration: cynical, dishonest, unserious, unprincipled, weak, hypocritical and, yes – cruel.

Secretary of State Anthony Blinken explained the president’s waiver of sanctions by saying the “actions demonstrate the administration’s commitment to energy security in Europe”. The administration’s “commitment” to America’s energy security, by contrast, is the growing problem.

The first thing Joe Biden did as president, on the afternoon of his inaugural, was cancel the Keystone XL Pipeline project that was to transport oil from Canada through the U.S. Up to 10,000 current and future jobs, many of them union labor, were canceled with that action, and gas prices have been increasing ever since from this and other actions.

The anti-domestic energy policies of President Biden continued, including halting new energy leases on federal lands, which further harms workers in communities in New Mexico, Texas and other energy-producing states.

Joe Biden and the global warming crusaders advising him have made the trade-off that American jobs and economic well-being must be sacrificed to keep the planet from warming another degree in temperature in the next 30 to 80 years — and also because their wealthy Green donor class demands climate action. That is, save the planet from climate changing to the point of what they claim is an “existential threat” for the first time in the 4.5 billion years of Earth’s existence.

For the Biden administration, cancelling energy pipelines and losing American jobs and livelihoods do not matter in the cause of fighting climate change; but allowing Russia to complete its pipeline to sell more product that is supposedly harming the planet and threatening our existence is warranted. Our German and other European allies are happy. Russia’s president-for-life, Vladimir Putin, also is happy with our president’s action, even though the media and other political opponents (including Biden) kept telling us he is modern evil personified, who tried to “influence” American elections.

President Biden’s removal of sanctions on Russian companies, primarily the majority state-owned corporation, Gazprom, will ensure completion of the Nord Stream 2 pipeline and reverses the policy imposed by President Trump and Congress. Among President Trump’s concerns was European nations and fellow members of the North Atlantic Treaty Organization (NATO), a military alliance with the U.S., should not be dependent on adversarial Russia for their energy. Mr. Trump also wanted to Europe to instead purchase more of natural gas from the U.S., which helps American workers and the larger economy.

With Mr. Biden’s action to remove sanctions and enable the gas pipeline to proceed, it turns out Vladimir Putin may not be such a bad guy after all, and has a new friend in the White House.

Even more cynical, Biden’s action indicates carbon emissions and climate change are no so bad, either.

This pipeline episode is a microcosm of the larger fraudulence and dishonesty of climate change policies and politics. If Joe Biden, Kamala Harris, John Kerry, et. al., were genuine about climate, then the administration what have retained sanctions on this pipeline. Moreover, they would be much tougher on China for the multitude of coal plants it is constructing domestically and world-wide.

Instead, the Biden administration is intent on damaging (uh, “transforming”) our own country and preventing smaller, developing nations from raising their living standards by accessing more oil and gas through World Bank financing and other means, but is all about appeasing larger nations’ energy appetites.

The politically powerful and financially robust climate change industry is what drives the Biden administration’s green policies, which are aimed at American workers and our own living standards. But Joe Biden and his crew dare not upset alleged climate malefactors like Russia, China, Iran and others, which further demonstrates how unserious is any “threat” of continual, natural climate change on humanity and the planet.

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This article was published on May 23, 2021 and is reproduced with permission from CFACT, Committee for a Constructive Tomorrow.

The War on Retirement

Estimated Reading Time: 4 minutes

Editor’s Note:

James R. Harrigan is Managing Director of the Center for Philosophy of Freedom at the University of Arizona, and the F.A. Hayek Distinguished Fellow at the Foundation for Economic Education.

Antony Davies is the Milton Friedman Distinguished Fellow at the Foundation for Economic Education, and associate professor of economics at Duquesne University.

Of the five most expensive wars the United States has waged, only one – World War II – involved an armed enemy. The other five – poverty, drugs, terror, and Covid, were all wars on nouns. Now the federal government appears to have inadvertently stumbled into another war – the War on Retirement. Unlike the other wars on nouns, this one isn’t only undeclared, it wasn’t even intended. But the federal government has taken a series of steps that, regardless of intent, have yielded a situation in which retirement may end up a pipe dream for many.

Ironically, this war on retirement began with Social Security in 1935. Rather than establishing a forced savings program wherein people would save money during their working years and have that money returned to them during retirement, the government established a Ponzi scheme wherein later participants paid off earlier participants. As with all Ponzi schemes, the program was sustainable only if there were more people paying into the system than were receiving benefits from it. By the early 1980s, too few people were paying in, and Congress fired its first salvo at retirees by making previously tax-free retirement benefits taxable. This tweak in the rules breathed new life into the Ponzi scheme, and Social Security reserves once again grew. But the scheme faltered again in 2010 and since then, Social Security has been paying out more than it brings in. Current estimates have the trust fund becoming insolvent by 2035.

To keep this bloated program afloat, Congress will eventually be forced to fire yet another salvo when it either raises workers’ taxes or reduces retirees’ benefits. And with each passing year this albatross around workers’ necks will become heavier.

The Federal Reserve, predictably, has been an invaluable ally in the government’s unwitting war on retirement. Since the late 1980s, the Federal Reserve has been relentless in driving interest rates down. Interest rates on savings accounts, certificates of deposit, and even Treasury bills are now functionally zero. Even the return on corporate bonds is so low as to barely keep pace with inflation. Fed policy has put such a squeeze on savers that the only way to save for retirement is to invest in stocks. And while younger workers have plenty of time to weather the risks of waxing and waning stock markets, forcing retirees and near-retirees into stocks exposes them to risks that they can’t weather nearly as well.

And now the Biden administration presents the coup de grace. President Biden has proposed doubling capital gains tax rates – you know, the taxes you pay when you make a profit in the stock market!

The White House says that the elevated tax will only apply to those earning over $1 million, but taxes on “the rich” have a solid history of eventually being applied to everyone else. For reference, look at the birth of the federal income tax. Politicians promised the new income tax would only be one percent and would only apply to the rich. Once instituted, it took Congress only five years to raise the income tax rate six-fold and to apply it to everyone, even the poor.

In a real war, there are rules that require humane treatment for vanquished enemies. Retirees can expect no such treatment in the War on Retirement. Those who manage to save enough for retirement, despite Social Security’s problems and despite near-zero interest rates, will be punished in death. The Biden administration intends to raise the tax on dying by slashing the estate tax exemption in half. Retirees’ heirs would have to hand over to the federal government 40 percent of whatever savings the retirees had left over above the exemption.

The proposed exemption – around $5 million – is high enough that it will apply mostly to the rich and to small business owners. But like the federal income tax, the estate tax will soon come for the rest of us. And as Biden is trying to push the estate tax exemption down to reach more estates, simultaneously, he is trying to push the values of those estates up to cross the exemption threshold by eliminating step-up in basis rules – the effect of which will be to increase capital gains taxes on inherited stock.

Death and taxes indeed.

The War on Retirement shares much in common with an actual war: World War I. A Serbian killed the nephew of the Austro-Hungarian emperor, causing the empire to declare war on Serbia. But Russia was allied with Serbia, and the declaration forced Russia to mobilize. That caused Germany to declare war on Russia, which in turn caused France to declare war on Germany. World War I shouldn’t have happened. It was an unintended cascade of what should have been isolated events. So too the War on Retirement. The government never intended to wage war on retirees, but it has set in motion policies that, collectively, do just that.

The American version of the assassination of Archduke Ferdinand, the event that began the steady march toward oblivion, was the passage of the Social Security Act in 1935. The dominos have been falling ever since, and the last ones are about to tip over, intentions be damned.

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This article was published on May 22, 2021 and is reproduced with permission from the AIER, American Institute for Economic Research.

5 Ways to Understand Biden’s $6.4 Trillion Tax-and-Spend Agenda

Estimated Reading Time: 4 minutes

President Joe Biden released three enormous spending plans within three months of taking office. These packages, each of which contain dozens of major provisions, should not be considered in isolation.

While focus is currently on the so-called infrastructure and family plans, it’s important to keep in mind the flawed “COVID-19 relief” bill that Biden already signed in March.

Combining the spending and tax credits in the three packages yields a mind-boggling number: $6.4 trillion.

Such an enormous sum is difficult to grasp. A million is already a big number, and 1 trillion is a million multiplied by a million.

Yet there are ways to break down and compare that enormous sum to better appreciate its size and scope, along with why the two plans that haven’t passed yet should be put on hold.

1. $50,000 Cost per Household
Per the recently completed 2020 census, there are 128.5 million households in the U.S. If we spread the cost of the $6.4 trillion agenda across each household, the numbers are substantial in relation to a typical family budget.

The Biden agenda is layered on top of existing federal spending that is already too high, which makes the cost of $49,825 per household so worrying. That is about 80% of the average household income.

Of that amount, about two-thirds ($33,087 per household) would be covered by tax hikes, and one-third ($16,738 per household) would be added to the national debt.

Biden and his allies attempt to bypass the heavy cost by claiming that increasing taxes on businesses and high-income households won’t affect working families. This is wrong.

If the government increases the cost of doing business by raising taxes, businesses pass those costs along by lowering wages for workers, increasing prices for consumers, and lowering the returns in retirement accounts.

The 2017 Tax Cuts and Jobs Act, which lowered personal income taxes across all income levels and made corporate taxes competitive, was followed by strong wage gains and low unemployment prior to the pandemic.

Reversing the tax cuts would have the opposite effect: reducing wage growth and limiting the number of jobs.

The national debt already stands at $28.4 trillion, or $219,000 per household. Recklessly adding to the debt would only compound our national risk.

The nearly $50,000 in additional government spending per household represents even more bureaucratic waste and more politicians’ control over peoples’ lives.

2. A 203-Year Spending Spree
If you were told to spend $1,000 per minute for an entire day, that would be tricky, especially without taking the shortcut of buying large quantities of one thing. If you were told to spend $1,000 per second for an entire day, that would be even harder to accomplish.

To reach $6.4 trillion, you would need to spend $1,000 per second—without stopping—for 203 years.

Alternately, reaching $6.4 trillion in 10 years (which is the Biden agenda timeframe) would require spending about $20,300 per second for the entire decade, on top of existing spending.

3. Combined Economic Output of 23 States
Americans are famously hardworking, averaging 1,779 hours in labor per worker per year. Any given state’s economy requires all those hours from all of its workers to yield its annual economic output.

It would take the combined economies of 23 mid-sized states (based on economic output), representing a population of 112 million people, to produce $6.4 trillion.

Given the incredible amount of work that many people do over an entire year, lawmakers should be humbler and more restrained when it comes to spending the fruits of that labor.

4. More Expensive Than World War II and Obamacare Combined
The Biden agenda isn’t just big in absolute terms, but also in comparison to previous large-scale federal efforts.

Victory in World War II required an unprecedented amount of resources, both in human and material terms. Translated into today’s dollars, it cost $4.9 trillion.

That sum was necessary to preserve civilization against the Axis powers.

Amazingly, the inflation-adjusted cost of World War II falls short of the cost of Biden’s spending plans. In fact, even if we add the initial 10-year cost of Obamacare’s spending and subsidies ($1.1 trillion in today’s dollars), we still come up short.

The most famous federal infrastructure project, the interstate highway system, cost $543 billion in inflation-adjusted dollars when it was completed in 1992. Biden’s plans are nearly 12 times as expensive.

Millions of Americans have served in uniform over the last several decades. From 1962 to 2020, the federal government spent $2.9 trillion in current dollars on veterans’ benefits, which is less than half the size of the Biden agenda.

Do the individual provisions in the Biden plans deserve such an astonishing amount of taxpayer dollars? Not even close.

5. Over $5.9 Trillion in Wasteful and Problematic Spending
The sheer volume of new and expanded programs and benefits reveals a massive expansion of politicians into every aspect of peoples’ lives.

Some examples of poor spending choices in the Biden plans include:

Welfare expansions and tax credits that would undermine families and discourage work.
Education funds structured in ways that benefit the union-dominated establishment.
Programs that advance the radical Green New Deal agenda, most of which would go toward corporate welfare and subsidizing wealthy households for purchasing electric vehicles.
Expanded unemployment benefits that are making it harder for businesses to find workers.
Opportunistic bailouts for state governments, private union pensions, and union-dominated mass transit.
All told, these plans contain upward of $5.9 trillion in wasteful spending and tax credits that serve to centralize power in Washington, D.C., reward left-wing interest groups, and further establish a socialistic cradle-to-grave welfare state. Further, the “infrastructure” and “families” packages are almost entirely wasteful.

Members of Congress were wrong to pass the falsely advertised “COVID-19” package. They have a chance to redeem themselves by turning away from the rest of Biden’s bloated agenda.

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This article was published on May 21, 2012 and is reproduced with permission from Daily Signal.