Jon Stewart from The Daily Show and his double standard on wealth.

Jon Stewart, the host of the liberal comedy show, "The Daily Show" is known for bashing conservatives including those who are wealthy.  For instance he went after Romney for his wealth.  It turns out Stewart is also very wealthy and uses tricks of the trade to avoid paying taxes.  For instance, he holds some of his luxurious homes in trust so he can avoid paying higher taxes.

Comedy Central host Jon Stewart regularly bashes American multimillionaires for their wealth while ignoring the awkward fact that he’s one of them.

Though Stewart distances himself from the “one-percenters” and bellows over their extravagance, his bank accounts bear all the marks of the “multi, multi, multi, multi millionaires” he mocks. The 49-year-old Stewart, born Jonathan Stuart Leibowitz, makes more than 300 times the median American salary, owns three luxury homes and sometimes doesn’t pay his taxes.

In January Stewart exploded on-air over Republican presidential candidate Mitt Romney’s income level. “That’s almost — that’s almost $57,000 a day!” he gushed.

But Stewart’s own income level brings him and his wife Tracey approximately $41,000 a day. The celebrity income-handicapping website Celebrity Net Worth lists his annual salary as $15 million and estimates his net worth at $80 million.

And then there are the houses. When Arizona Sen. John McCain ran for president in 2008, he was criticized for not knowing how many houses he owned. (The answer: seven.) Stewart is well on his way to McCain country, with three opulent mansions whose combined value is $12.8 million.

\He doesn’t technically own those homes: Using a trick mastered by countless one-percenters, the properties were purchased by private trusts. Stewart’s trusts are named after his pets.

The super-wealthy often make big-ticket purchases through trusts in order to protect their other assets from lawsuits, diminish estate tax liability, and avoid public scrutiny.

The satirist started his real estate empire in 2005 when The Stanley Monkey Trust — named after his cat Stanley and one of his pit bull terriers, Monkey — purchased a two-story Manhattan penthouse for $5.8 million.

That deluxe apartment in the sky spans 6,000-square-feet and has 40 windows, a 600-foot terrace, and a 1,200-foot private roof, the New York Observer reported in 2005.

Another legal entity, The Shamsky Monkey Trust, purchased two more houses in 2009 and 2010. (Shamsky, named after 1969 “Miracle Mets” outfielder Art Shamsky, is Stewart’s other pit bull terrier.)

The lakefront mansions Stewart bought in 2009 and 2010 are in Red Bank, New Jersey. They cost him $3,800,000 and $3,200,000 and — for reasons TheDC was unable to determine — are next door to one another.

Online real estate search engines show that the Shamsky Monkey Trust also owns a $675,000 house in North Haven, New York. Public records indicate that Stewart’s older brother, Lawrence Leibowitz, lives there.

With serious wealth often come serious tax problems. In January the comedian blasted Romney for paying a 15-percent tax rate on his earnings, most of which come from capital gains on stocks and other securities.

 I guess when you avoid higher taxes it's OK but when you're a conservative and do it it's not OK.

Phil Mickelson won the British Open but the government won as well.

Phil Mickelson won the British Open tournament and with it the winner's purse of $2 million.  But it really wasn't a $2 million win.  That's because taxes took a 61% bite out of his profits.  And may even be closer to 30% tax home pay.

Mickelson capped a dominant fortnight in Scotland by shooting a final round 66 to come from behind and win The Open Championship. He also won the Scottish Open the previous week. For his two weeks of play, the world’s best golfer (rankings be damned) earned £1,445,000, or about $2,167,500.

The United Kingdom, which has authority to set Scotland’s tax rate until 2016, graduates to a 40% tax rate when income hits £32,010 then 45% when it reaches £150,000. Mickelson will pay £636,069 ($954,000, or 44.02%) on his Scottish earnings.

But that’s not all. The UK will tax a portion of his endorsement income for the two weeks he was in Scotland. It will also tax any bonuses he receives for winning these tournaments as well as a portion of the ranking bonuses he will receive at the end of the year, all at 45%....

The UK is one of few countries that collects taxes on endorsement income for non-resident athletes that compete in Britain (the US also does). The rule has kept track star Usain Bolt from competing in Great Britain since 2009, outside of the 2012 Summer Olympics when the tax was suspended as a condition for hosting the Games. Spain’s Rafael Nadal has also allowed UK tax policy to dictate his tennis playing schedule.

The good news for Mickelson is that he can take a foreign tax credit on his US return so he is not double-taxed at the federal level on this income. The bad news is that the credit does not cover self-employment taxes (2.9%) or the new Medicare surtax (0.9%). Additionally, California does not have a foreign tax credit so he will have to fork out 13.3% there as well. Although he receives federal deductions for his California tax and half of his self-employment tax, these deductions do not benefit him on this income because as they reduce his federal tax they reduce his foreign tax credit.

Without considering expenses, Mickelson will pay 61.12% taxes on his winnings, bringing his net take-home winnings to about $842,700. When expenses are considered (10% to caddy Jim “Bones” Mackay, airfare, hotel, meals, agent fees on endorsement income/bonuses—all tax deductible here and in the UK), his take-home will fall closer to 30%.

At what point do regressive tax policies disincentive people to work?  While Phil is certainly happy to win the British Open and he makes lots of money from endorsements, such tax policies hit other people as well.  Not only are there disincentive problems but moral problems with redistribution of income which these heavy tax burdens and welfare policies are all about.

A revealing headline: "Minnesota House DFL tax plan goes after drinkers, smokers, high earners"

The above headline is from a Star Tribune news story on Monday.  It struck me that the easiest way to raise taxes is to go over the fewest number of people so there's less political push back.  In this case, as the headline suggests, that includes consumers of alcohol, cigarettes and those with higher incomes.

A new House DFL tax plan would raise $2.6 billion by tapping high earners, smokers and, in the newest wrinkle, drinkers.

The plan would place a temporary surcharge on the wealthiest wage-earners, catapulting Minnesota’s income tax rate to third-highest in the nation. At the same time, state taxes on beer, wine and hard liquor would double.

The alcohol tax, which hasn’t risen in more than 20 years, would increase by 7 cents a beer, 47 cents per bottle of wine and $1.58 cents per bottle of hard liquor.

 Ironically, Speaker Thissen says higher taxes means a "stronger and more prosperous future."  The only problem is the government isn't a wealth creator.  More government doesn't mean more growth.  In fact it's the exact opposite.

“Minnesota residents have paid the price for too long for irresponsibility budgeting,” House Speaker Paul Thissen, DFL-Minneapolis, said in releasing the tax proposal on Monday. “It’s time we turn the page on that past and look toward a stronger and more prosperous future.”...

The amount and breadth of proposed tax increases is amazing.

While much of the proposal had dribbled out in recent weeks, the dramatic alcohol tax hike is a new component that is drawing furious criticism from Republicans. Democrats are looking to raise an additional $350 million every two years from a tax that hasn’t been raised since the mid-1980s. As Thissen pointed out, for someone who drinks a beer a day, the new tax would cost about $25 a year.

House Republicans say the mashup of taxes goes far beyond the DFLers’ campaign pledge to erase a state deficit by raising income taxes on the wealthy...

House DFLers would raise income on the top 1.1 percent of the state’s taxpayers. For married couples that would kick in at taxable income above $400,000. That’s a scaled-down version of DFL Gov. Mark Dayton’s plan, which would raise income taxes for the top 2 percent of wage-earners.

But House DFLers would tack on a two-year, 4 percent income tax surcharge on taxable income above $500,000 a year. Revenues from the surcharge would help pay off the remaining $808 million the state borrowed from public schools and would allow the state to offer tax breaks to businesses for new equipment purchases. Dayton and Senate Democrats have not embraced the House tax plan, but Thissen said he believes most Minnesotans will support it.

The proposal includes direct property tax relief for 1 million homeowners and renters, along with money to help the city of Rochester with a massive, 20-year expansion of the Mayo Clinic. The House also sets aside money to aid expansions of 3M’s Maplewood campus and the Mall of America.
Sin taxes would go up

The proposal raises nearly $790 million from the so-called sin taxes.

Cigarettes would go up $1.60 per pack, taking total taxes to $2.83 for a pack of cigarettes.

“There is overwhelming evidence that tobacco and alcohol consumption cost the state billions of dollars,” Thissen said. “These user taxes will allow the state to recover some of those costs.”

The House proposal carves out a tax credit for small craft brewers that produce less than 200,000 gallons a year and wineries that produce less than 100,000 gallons a year.

 Of course Republicans are having a field day going after these proposed tax increases.

“I think Democrats in the House need to start a new reality TV show called Taxes Gone Wild,” said state Rep. Greg Davids, a Preston Republican and former taxes committee chairman. “There’s a tax increase for everybody, the rich, the middle income, the poorest of the poor. It’s an outrageous proposal.”

Rep. Pat Garofalo said this is proof the Democrats are not able to control spending. “This is why you don’t let the Democrats have total control over the state of Minnesota,” said Garofalo, R-Farmington. “There’s no adult supervision to stop these crazy things.”

The problem with going after the wealthy is they are often the small business owners and businessmen who create jobs and generate economic growth.  Eventually, some of them will decide it's just not worth doing business in Minnesota.

I'm afraid those in power can't say no to many of their special interest groups.  One of the consequences of this is it means a significant shift of resources from families to the government.

Governor Dayton's priorities - higher taxes, more government and gay "marriage" aren't what the patient needs.

Governor Dayton's State of the State laid out a clear vision for Minnesota - more government, more taxes and gay "marriage".

Gov. Mark Dayton made an impassioned defense of his budget proposal and vision for Minnesota in his State of the State address Wednesday, blasting critics who don't offer solutions.

"Trying to cut our way to a better Minnesota is a failed experiment," Dayton said. "If you're interested in nothing more than throwing rocks and casting blame, send the rest of us a letter or a postcard."

Dayton spent much of his nearly hourlong address defending a budget proposal that would usher in the biggest tax overhaul in a generation but is also proving to be a harsh test for the new DFL leaders in both chambers.

Dayton's new budget proposal would wipe out a $1.1 billion deficit, provide direct property tax rebates for homeowners and boost money for education. To pay for that, Dayton wants to raise income taxes on the wealthy and dramatically expand the sales tax to include higher-end clothing and many services, including business-to-business transactions.

The new sales tax proposals, particularly the taxes on business-to-business transactions, are triggering strong opposition. If legislators reject that portion of the proposal, it would blow a sizable hole in Dayton's budget and prevent him from paying for many of his most prized initiatives.

"No one likes paying more taxes, even when necessary to make them fair," Dayton said. "But when taxes are unfair, and remain unfair, not only do the people who are forced to pay more rightfully resent it, but they also lose faith in their elected officials who won't change it."

Speaking to a rare joint session of the Legislature, Dayton reaffirmed his support for legalizing same-sex marriage but stopped short of calling on legislators to pass a bill this year.

"I believe that every Minnesotan should have the freedom to marry legally the person she or he loves, whether of the same or other sex," Dayton said. "I want Minnesota to be a state which affirms that freedom for one means freedom for everyone, and where no one is told it is illegal to marry the person you love."

The problem with his prescription for what ails us, e.g. a weak economy and social, family breakdown, is it isn't what the patient needs.  In fact, it will exacerbate our problems.  Higher taxes are ultimately paid for by families either directly through higher sales taxes or indirectly through higher prices passed on by businesses.  Higher income taxes discourages the wealthy, many of whom are business owners, to expand their businesses and hence create jobs.  And it will motivate some wealthy individuals to leave the state.

More government is called for to take over the responsibilities of parents to raise and educate their children, e.g. all day kindergarten and so forth.

And redefining marriage won't stem the tide of family breakdown but will only accelerate it.

This isn't what the patient ordered.

Are the wealthy paying their fair share in taxes? And then some.

There's always talk about taxing the rich to bring down the deficit and allow for the continued expansion of state spending.  Some argue they're not paying their fair share.  Turns out they're paying significantly more than their percent of the population. 

Steve Moore who writes for the Wall Street Journal has written a book entitled:  Who's the Fairest of Them All?:  The Truth about Opportunity, Taxes, and Wealth in America."  He notes that European countries tax their richest 10% at lower rates than the US.

According to Moore, these earners pay almost half (45 percent) of the country's total taxes. This conclusion flies in the face of the liberal concept that top earners in the U.S. are not paying their "fair share" in taxes. Moore explains:

"The United States is actually more dependent on rich people to pay taxes than even many of the more socialized economies of Europe. According to the Tax Foundation, the United States gets 45 percent of its total taxes from the top 10 percent of tax filers, whereas the international average in industrialized nations is 32 percent. America’s rich carry a larger share of the tax burden than do the rich in Belgium (25 percent), Germany (31 percent), France (28 percent), and even Sweden (27 percent)."

Why do Europeans tax the rich at lower rates than the US?  I wonder if it's because they realize the wealthy are often business owners who provide jobs.  High taxes on these business owners only serves to discourage them from growing their businesses.

Interesting polling results in Minnesota on voter ID, stadium, marriage amendment, etc.

The Survey USA poll had some interesting results beyond the marriage amendment (up by 15%, 52% to 37%) and the presidential race (Obama up 46% to 40% over Romney).

It shows the photo ID amendment winning 65% to 28%.

Voters opposed to the Vikings stadium deal are more passionate about it than proponents.  If a legislator voted for the amendment, 33% of voters say they are less likely to vote for him while 23% say they are more likely to vote for him.  42% say no difference.

And the biggest issues for state voters are not surprisingly job creation 32% and taxes 27%.  Then comes health care 17% and education 15%.

Takeaways from the polling numbers on the ballot questions?  Opponents won't win on the merits so their only recourse is mislabeling and obscuring what "yes" and "no" votes mean so voter's won't vote on the merits of the questions. 

Leaving America...because of taxes.

The tax policies in the US are starting to scare away the wealthy who are changing their citizenship to avoid our heavy tax burden.

This story points out that the number of Americans jettisoning their US citizenship increased from 235 in 2008 to 1,780 in 2010.Wealthy Americans are choosing to give up their U.S. citizenship rather than pay high taxes when living outside of the country, according to a new Bloomberg report. The number of people giving up their nationality at U.S. embassies has risen over the past few years after facing a crackdown on tax evasion.

Four years ago, whistle-blower Bradley Birkenfeld triggered a crackdown on tax evasion, which was meant to stop wealthy Americans who stored money in offshore accounts to avoid paying high taxes.

Though this was intended to stop Americans living in the country who stored money in other places, it also applies to individuals living outside of the U.S. who store money in the banks of countries they reside.

The U.S. is the only nation in the Organization for Economic
Cooperation and Development that taxes citizens wherever they reside. In facing taxes within foreign countries they live in as well as paying American taxes due to their U.S. citizenship, many wealthy Americans are weighing whether remaining a U.S. citizen is worth it.

Andy Sundberg, secretary of Geneva’s Overseas American Academy, shared that 1,780 expatriates gave up nationality at U.S. embassies last year, which is an increase from 235 in 2008. The number has increased so quickly that the embassy redeployed staff to clear the backlog of Americans queued to relinquish their passports.

Another reason Americans are ready to give up their passports is that many non-U.S. banks feel it’s too risky to deal with Americans abroad after the Birkenfeld and the U.S. probed USB and 11 other Swiss financial firms for aiding offshore tax evasion.

Due to difficulties acquiring accounts in some countries and facing taxes from the United States, Americans are deciding  that giving up their U.S. passports and relinquishing their citizenship is the right choice to make.

I suspect that number will only grow if major tax increases are used to address our enormous federal government deficits and debt problems.

State facing structural deficit of $6.2 billion. Time to reduce the size and scope of government.

The state is facing a projected budget deficit of $6.2 billion over the next two years. That's bad enough but an added problem is it's a structural deficit, meaning that even with strong economic growth, we're spending more than we're due to take in via tax receipts.

As Tom Stinson, the state's economist, said in a recent interview with Capitol Report, we're coming out of the worst recession since World War II, plus we're facing an ongoing structural deficit in our state finances.

This was the worst recession since World War II. We’re coming out of it, and everybody would like us to come out of it as quickly as possible, and we are coming out of it, but it’s going to take some time.

The good news, from the Minnesota point of view, is that we seem to be coming out of it faster than the national economy. But, to put it in perspective before we pat ourselves on the back too much, you’ve got to remember that California is part of the U.S. economy and the situation there is much worse than it is in Minnesota, so we better be doing better than the U.S. average....

We have a $6.2 billion structural shortfall. The revenue forecast for 2012-2013 went down by about $900 million [in November] because of some economic changes….

But I think the important thing to know is even if it went up twice - if we gained back that $900 million and then the economy improved enough so that we actually added another $900 million - we’d still have $4.4 billion worth of problem to deal with.

That means on an ongoing basis we're spending more than we have been taking in. The funding shifts and delay of payments used in the past to balance the budget aren't available. That means tough decisions about cutting spending and tax increases will have to be faced now.

I believe government is too big and needs to be cut back rather reverting to raising taxes. That will be very painful for those who have come to expect government to do more and more but in the long run expanding government isn't in the best interest of society or the family. Growing government has meant government taking over more and more family responsibilities which not only costs lots of money but also means people are becoming more dependent on the government for those services.

This dependency on the government hasn't improved the condition of the family, rather it's contributed to its decline. We can see government's ineffectualness by looking to results of anti-poverty programs. Despite spending trillions and trillions of dollars since the 1960s, poverty rates haven't decreased. Instead the health and well-being of the American family has declined dramatically. I believe the government has played a significant, though not the exclusive, role in that decline.

Minnesota's most liberal Congressional representative per their district? Without a doubt Tim Walz in the 1st Cong. District.

Without a doubt the liberal representative in relation to his or her district is Rep. Tim Walz in the 1st Congressional District which runs along the southern border of Minnesota. I've noticed that on our last two voter's guides, he's in lock step with Ellison and McCollum in terms of votes taken on issues.

He voted for federal health care takeover.
He voted for government subsidy of abortion.
He voted for cap and trade.
He voted to fund abortion promoting organizations like Planned Parenthood.
He voted for repealing "Don't ask, don't tell".
He voted for the massively expensive "stimulus' bill.
He voted to expand hate crimes to give special status to sexual orientation.
He voted to federal fund the destruction of human embryos.
He voted to give special employment protections to homosexuals.
He voted against making the tax cuts permanent.

You get the picture. Whether it's abortion, taxes, family, cap and trade, government spending, Walz votes on the left side of the spectrum. The American Conservative Union gives him a lifetime score of 8% through 2009.

Walz got elected in 2006, a strong anti-incumbent year. With voters again aroused, they're no doubt paying closer attention to his liberal voting record which is far, far out of touch with his district. The more scrutiny his record receives the more problems he'll have.

Parenting isn't a priority in today's society.

Robert Samuelson has a great commentary, "The Parent Trap" on the priority or rather lack thereof given parents and parenting in American society.

He notes the cost of raising a child:

Among the government's most interesting reports is one -- published by the Agriculture Department -- that estimates what parents spend on their children. The latest version finds, not surprisingly, the costs are steep. For a middle-class husband-wife family (average pre-tax income in 2009: $76,250), spending per child is about $12,000 a year. Assuming modest annual inflation (2.8 percent), the report estimates that the family's spending on a child born in 2009 would total $286,050 by age 17. A two-child family would cost about $600,000. All these estimates may be understated, because they do not include college costs.

Society doesn't put much value on raising children as reflected in our tax code which is biased against raising children.

These dry statistics ought to inform the deficit debate, because a budget is not just a catalogue of programs and taxes. It reflects a society's priorities and values. Our society does not -- despite rhetoric to the contrary -- put much value on raising children. Present budget policies punish parents, who are taxed heavily to support the elderly. Meanwhile, tax breaks for children are modest. If deficit reduction aggravates these biases, more Americans may choose not to have children or to have fewer children. Down that path lies economic decline.

Fertility rates are dismal in Europe and OK in US but will we move in the direction of Europe given other trends in American society?

Societies that cannot replace their populations discourage investment and innovation. They have stagnant or shrinking markets for goods and services. With older populations, they resist change. For a country to stabilize its population -- discounting immigration -- women must have an average of about two children. That's a "fertility rate" of two. Many countries with struggling economies are well below that. Japan's fertility rate is 1.2. Italy's is 1.3, as is Spain's. These countries are having about one child for every two adults.

The U.S. fertility rate isn't yet close to these dismal levels. In 2007, it was at the replacement rate of 2.1 children per woman, reports the National Center for Health Statistics. Hispanics were at 3.0, and other groups clustered near replacement: 1.9 for non-Hispanic whites; 2.1 for non-Hispanic blacks; and 2.0 for Asian-Americans. (Not all the news is good. About 40 percent of births are to unmarried mothers; many children are entering poor or unstable homes.)

Though having a child is a deeply personal decision, it's shaped by culture, religion, economics and government policy. "No one has a good answer" as to why fertility varies among countries, says sociologist Andrew Cherlin of Johns Hopkins University. Eroding religious belief in Europe may partly explain lowered birth rates. In Japan, young women may be rebelling against their mothers' isolated lives of child-rearing. General optimism and pessimism count. Hopefulness fueled America's Baby Boom. After the Soviet Union's collapse, says Cherlin, "anxiety for the future" depressed birth rates in Russia and Eastern Europe.

Bias against families in tax policies will reduce fertility rates in US as well.

In poor societies, people have children to improve their economic well-being by increasing the number of family workers and providing support for parents in their old age. In wealthy societies, the logic often reverses. Government now supports the elderly, diminishing the need for children. By some studies, the safety nets for retirees have reduced fertility rates by 0.5 children in the United States and almost 1.0 in Western Europe, reports economist Robert Stein in the journal National Affairs. Similarly, some couples don't have children because they don't want to sacrifice their own lifestyles to the time and expense of a family.

Families need to be considered when establishing tax policy.

We need to avoid Western Europe's mix of high taxes, low birth rates and feeble economic growth. Young Americans already face a bleak labor market that cannot instill confidence about having children. Piling on higher taxes won't help. "If higher taxes make it more expensive to raise children," says demographer Nicholas Eberstadt of the American Enterprise Institute, "people will think more about having another child." That seems common sense, despite the multiple influences on becoming parents.

How to reconcile this with deficit reduction is unclear. From 2011 to 2020, the Obama administration projects budget deficits of $8.5 trillion. Other estimates are higher. Even if spending and benefits for the elderly are cut -- as they should be -- higher taxes will still almost certainly be needed. Parents ought to be shielded from the steepest increases.

Any tax system rewards some activities and punishes others. A case in point is the mortgage interest rate deduction that rewards people for buying larger homes with more debt. We might reduce this dubious subsidy and shift some savings toward children. Stein advocates combining existing pro-child tax breaks (the personal exemption, the child tax credit, the child-care credit and the adoption credit) into one generous credit. Whatever the details, policies should have a pro-family bias because parenting is, as he writes, "one of the most important services any American can perform."

I would argue the overall level of government and taxation needs to drop rather than merely shielding families from assumed tax increases. Families will invariably be hit with higher taxes because they're where the money is. High income folks are few and sustaining big government will invariably fall back on families to fund.

What issues are Americans concerned about? Economy, ethics and corruption, health care, and taxes.

What issues are Americans concerned about? According to a Rasmussen Poll, number one, not surprisingly, is the economy at 85%. Next is government ethics & corruption at 72%. Then health care 70%. Then taxes at 66%. Interestingly, terrorism and national security came in 7th at 57%.

Rasmussen notes that interest in taxes has jumped 10 points from May.

The number of U.S. Voters who view the issue of Taxes as Very Important has jumped 10 points from May to its highest level ever in Rasmussen Reports tracking. Still, Taxes rank fourth on a list of 10 issues regularly tracked by Rasmussen Reports.

The economy (85%), government ethics and corruption (72%), and health care (70%) are the top three issues....

Just below government ethics and corruption is the issue of health care, with 70% of voters placing this issue at the top of the list.....

Sixty-one percent (61%) of voters nationwide now expect the cost of health care to go up under the new health care reform law, the highest level of pessimism measured since the law was passed in March. Most want the law repealed.

The tax issue will continue to rise in importance if Congress lets taxes rise with the expiration of the Bush tax cuts.

I think it's interesting that ethics and government corruption are very important to people; rated number 12. While terrorism is way down the list.

An articulate case for why Obama's fiscal policies are bad for the economy.

Here's a very readable case by economist Allan Meltzer for why President Obama's fiscal policies are bad for the economy. If he's right we're in for more or continuing tough times.

The administration's stimulus program has failed. Growth is slow and unemployment remains high. The president, his friends and advisers talk endlessly about the circumstances they inherited as a way of avoiding responsibility for the 18 months for which they are responsible.

But they want new stimulus measures—which is convincing evidence that they too recognize that the earlier measures failed. And so the U.S. was odd-man out at the G-20 meeting over the weekend, continuing to call for more government spending in the face of European resistance.

The contrast with President Reagan's antirecession and pro-growth measures in 1981 is striking. Reagan reduced marginal and corporate tax rates and slowed the growth of nondefense spending. Recovery began about a year later. After 18 months, the economy grew more than 9% and it continued to expand above trend rates.

Two overarching reasons explain the failure of Obamanomics. First, administration economists and their outside supporters neglected the longer-term costs and consequences of their actions. Second, the administration and Congress have through their deeds and words heightened uncertainty about the economic future. High uncertainty is the enemy of investment and growth.

Most of the earlier spending was a very short-term response to long-term problems. One piece financed temporary tax cuts. This was a mistake, and ignores the role of expectations in the economy. Economic theory predicts that temporary tax cuts have little effect on spending. Unless tax cuts are expected to last, consumers save the proceeds and pay down debt. Experience with past temporary tax reductions, as in the Carter and first Bush presidencies, confirms this outcome.

Another large part of the stimulus went to relieve state and local governments of their budget deficits. Transferring a deficit from the state to the federal government changes very little. Some teachers and police got an additional year of employment, but their gain is temporary. Any benefits to them must be balanced against the negative effect of the increased public debt and the temporary nature of the transfer.

The Obama economic team ignored past history. The two most successful fiscal stimulus programs since World War II—under Kennedy-Johnson and Reagan—took the form of permanent reductions in corporate and marginal tax rates. Economist Arthur Okun, who had a major role in developing the Kennedy-Johnson program, later analyzed the effect of individual items. He concluded that corporate tax reduction was most effective.

Another defect of Obamanomics was that part of the increased spending authorized by the 2009 stimulus bill was held back. Remember the oft-repeated claim that the spending would go for "shovel ready" projects? That didn't happen, though spending will flow more rapidly now in an effort to lower unemployment and claim economic success during the fall election campaign.

In his January 2010 State of the Union address, President Obama recognized that the United States must increase exports. He was right, but he has done little to help, either by encouraging investment to increase productivity, or by supporting trade agreements, despite his promise to the Koreans that he repeated in Toronto. Export earnings are the only way to service our massive foreign borrowing. This should be a high priority. Isn't anyone in the government thinking about the future?

Mr. Obama has denied the cost burden on business from his health-care program, but business is aware that it is likely to be large. How large? That's part of the uncertainty that employers face if they hire additional labor.

The president asks for cap and trade. That's more cost and more uncertainty. Who will be forced to pay? What will it do to costs here compared to foreign producers? We should not expect businesses to invest in new, export-led growth when uncertainty about future costs is so large.

Then there is Medicaid, the medical program for those with lower incomes. In the past, states paid about half of the cost, and they are responsible for 20% of the additional cost imposed by the program's expansion. But almost all the states must balance their budgets, and the new Medicaid spending mandated by ObamaCare comes at a time when states face large deficits and even larger unfunded liabilities for pensions. All this only adds to uncertainty about taxes and spending.

Other aspects of the Obama economic program are equally problematic. The auto bailouts ran roughshod over the rule of law. Chrysler bondholders were given short shrift in order to benefit the auto workers union. By weakening the rule of law, the president opened the way to great mischief and increased investors' and producers' uncertainty. That's not the way to get more investment and employment.

Almost daily, Mr. Obama uses his rhetorical skill to castigate businessmen who have the audacity to hope for profitable opportunities. No president since Franklin Roosevelt has taken that route. President Roosevelt slowed recovery in 1938-40 until the war by creating uncertainty about his objectives. It was harmful then, and it's harmful now.

In 1980, I had the privilege of advising Prime Minister Margaret Thatcher to ignore the demands of 360 British economists who made the outrageous claim that Britain would never (yes, never) recover from her decision to reduce government spending during a severe recession. They wanted more spending. She responded with a speech promising to stay with her tight budget. She kept a sustained focus on long-term problems. Expectations about the economy's future improved, and the recovery soon began.

That's what the U.S. needs now. Not major cuts in current spending, but a credible plan showing that authorities will not wait for a fiscal crisis but begin to act prudently and continue until deficits disappear, and the debt is below 60% of GDP. Rep. Paul Ryan (R., Wisc.) offered a plan, but the administration and Congress ignored it.

The country does not need more of the same. Successful leaders give the public reason to believe that they have a long-term program to bring a better tomorrow. Let's plan our way out of our explosive deficits and our hesitant and jobless recovery by reducing uncertainty and encouraging growth.

State Budget deficit -- some slightly good news and then some more very bad news.

The state released the latest projections for the state's budget deficit. The good news is the forecast deficit through June 2011 is it's down from $1.2 billion to $994 million. That still means cutting nearly a $1 billion over the next year.

The bad news is the financial forecast for the next two years just got worse. According to news reports:

Minnesota's deficit projection shrank to $994 million for the rest of this budget cycle, down from the $1.2 billion projected late last year.

But there are dark times ahead -- state economists predict Minnesota's budget deficit will be $5.8 billion in the next two-year cycle.

The forecast deficit for the next two years went from $5.4 billion to $5.8 billion.

The reality of that coming deficit tsunami hasn't sunk in yet with lawmakers. It should be addressed now rather than put off until next year. How is that to be done? By cutting back on built in structural spending.

Even if lawmakers split the difference in 2011 that would mean, if distributed equally, a family of four paying $2,000 more a year in increased taxes. Without spending cuts that's $4,000 per a family of four.

The problem? We've been living well beyond our means and are still in denial. Our economic difficulties aren't over by a long shot.

Gubernatorial candidate Mark Dayton wants to tax the rich in Minnesota - big time.

Former US Senator Mark Dayton, who wants to be our next governor, announced his proposal to "tax the rich" and receptivity for a new state owned casino.

Former U.S. Senator Mark Dayton, a DFL candidate for governor, is offering new details of his "tax the rich" proposal.

Dayton has frequently talked on the campaign trail about his proposal to raise income taxes for the wealthiest 10 percent of Minnesotans. He said the change would bring fairness to the tax system and provide the state much-needed revenue.

During a wide-ranging news conference Monday, Dayton said he would propose three new income tax tiers. He also said households with annual income of $150,000 and above would have to pay more.

"You've got three ways you can balance the budget," said Dayton. "You can raise taxes on the richest Minnesotans. You can raise taxes on the rest of Minnesotans, or you can pretend you're going to wave some magic wand and $5 billion to $7 billion is going to disappear from state spending without consequence to anyone, which is the Republican answer right now, which belongs more on the comic page than it does on the front page"...

In another place, he suggests this would raise about a $1 billion.

This tax favoritism for the rich is costing our schools, universities, hospitals and other essential services upwards of $1 billion per year. It may be great for political support and campaign contributions. But it's terrible for Minnesota. It's unfair, and it's wrong.

Then he says he wants to open a state run casino to raise $200 million a year.

Dayton also said Monday he would consider supporting a Twin Cities casino to raise money for Minnesota's ailing budget, but not for a new Vikings stadium. He said a metro-area casino would raise about $200 million a year.

He says such a facility would bring "much needed competition" to Mystic Lake Casino, the only tribally run casino in the Twin Cities. The Prior Lake establishment is owned by the Shakopee Mdewakanton Sioux Community.

A few observations.

• He would seem to not realize or care that "the rich" are also the people who create jobs which employ lower income folks. So one can expect his proposal to hurt employment and cause businesses to leave the state.
• His casino idea will no doubt alienate the Indian Tribes which have been huge DFL supporters.
• Casinos and gambling actually cost the state money in terms of all the social problems which result.
• Raising taxes on the wealthy would only hit a small portion of the current state deficit. If it's a $5.4 billion deficit that's $1,000 per man, woman and child. I'm curious how much of that deficit he'd be willing to eliminate through spending cuts.
  
• I have to give him credit for being very up front with his desire to raise taxes rather than being vague and non-committal. Hopefully, his announcement will make people realize that this is probably the tip of the iceberg. There will be a lot more tax increase proposals following this one if it's already a centerpiece of his campaign.

To raise taxes or not to raise taxes, that is the question.

The Star Tribune ran a story Sunday entitled, "Governor's race is all about taxes. Minnesota's budget budget picture is so bleak that some candidates are already discussing tax increases". The big issue in the governor's race and the elephant in the room is whether or not to raise taxes to close an expected $5.4 billion budget deficit in the next biennium.

Talk of tax increases can sink a gubernatorial candidate during good times.

These are not good times.

That's why the message that major DFL candidates are offering recession-weary Minnesota voters seems so unlikely: We must raise taxes, because cuts alone can't do it.

GOP candidates say the state must manage without taxes, or risk further economic malaise.

The painful solution may end up somewhere in between. Minnesota faces a $5.4 billion shortfall through 2013, which amounts to a staggering $1,038 for every man, woman and child if nothing else changed.

Of course, Representative Tom Rukavina says anybody who says they will not raise taxes is either a liar or stupid.

"Anybody saying you can do it with cuts -- on either side of the aisle -- is a liar or stupid," said state Rep. Tom Rukavina, a DFL candidate for governor.

But even assuming Democrats are willing to go 50/50 tax increases and spending cuts, that's still a $2,000 tax increase on a family of four. Those are big bucks.

The problem is up to now the hope was the economy would strengthen and there wouldn't need to be tax increases. Or more likely, we've built in structural deficits resulting from built in spending increases unsustainable with our current tax base. Now with the financial crisis and deep recession the problem has only worsened.

I think fundamentally government is too big and doing too many things. From the bureaucratic nature of public education and public universities to skyrocketing health care costs, we've been living beyond our means. Government needs to do things differently. And of course necessity is the mother of invention.

I wonder if the public isn't ready for a return to simpler and smaller government. We'll certainly see how it plays out in the governor's race and in the next several years at the legislature.

"The Worst Bill Ever" and is history about to repeat itself?

That's the headline from a Wall Street Journal opinion piece on the House Health Care bill. After looking into the bill I can see why the author would have those sentiments.

It's a massive expansion of government control and regulation of health care system which constitutes roughly 15 to 20% of our nation's economy. While the US has been slipping and sliding in a more socialist direction over the past several decade, this bill constitutes an aggressive movement in that direction.

Speaker Nancy Pelosi has reportedly told fellow Democrats that she's prepared to lose seats in 2010 if that's what it takes to pass ObamaCare, and little wonder. The health bill she unwrapped last Thursday, which President Obama hailed as a "critical milestone," may well be the worst piece of post-New Deal legislation ever introduced.

In a rational political world, this 1,990-page runaway train would have been derailed months ago. With spending and debt already at record peacetime levels, the bill creates a new and probably unrepealable middle-class entitlement that is designed to expand over time. Taxes will need to rise precipitously, even as ObamaCare so dramatically expands government control of health care that eventually all medicine will be rationed via politics.

Yet at this point, Democrats have dumped any pretense of genuine bipartisan "reform" and moved into the realm of pure power politics as they race against the unpopularity of their own agenda. The goal is to ram through whatever income-redistribution scheme they can claim to be "universal coverage." The result will be destructive on every level—for the health-care system, for the country's fiscal condition, and ultimately for American freedom and prosperity.

Here are some of the specifics. First, spending.

•The spending surge. The Congressional Budget Office figures the House program will cost $1.055 trillion over a decade, which while far above the $829 billion net cost that Mrs. Pelosi fed to credulous reporters is still a low-ball estimate. Most of the money goes into government-run "exchanges" where people earning between 150% and 400% of the poverty level—that is, up to about $96,000 for a family of four in 2016—could buy coverage at heavily subsidized rates, tied to income. The government would pay for 93% of insurance costs for a family making $42,000, 72% for another making $78,000, and so forth.

At least at first, these benefits would be offered only to those whose employers don't provide insurance or work for small businesses with 100 or fewer workers. The taxpayer costs would be far higher if not for this "firewall"—which is sure to cave in when people see the deal their neighbors are getting on "free" health care. Mrs. Pelosi knows this, like everyone else in Washington.

Even so, the House disguises hundreds of billions of dollars in additional costs with budget gimmicks. It "pays for" about six years of program with a decade of revenue, with the heaviest costs concentrated in the second five years. The House also pretends Medicare payments to doctors will be cut by 21.5% next year and deeper after that, "saving" about $250 billion. ObamaCare will be lucky to cost under $2 trillion over 10 years; it will grow more after that.

• Expanding Medicaid, gutting private Medicare. All this is particularly reckless given the unfunded liabilities of Medicare—now north of $37 trillion over 75 years. Mrs. Pelosi wants to steal $426 billion from future Medicare spending to "pay for" universal coverage. While Medicare's price controls on doctors and hospitals are certain to be tightened, the only cut that is a sure thing in practice is gutting Medicare Advantage to the tune of $170 billion. Democrats loathe this program because it gives one of out five seniors private insurance options.

As for Medicaid, the House will expand eligibility to everyone below 150% of the poverty level, meaning that some 15 million new people will be added to the rolls as private insurance gets crowded out at a cost of $425 billion. A decade from now more than a quarter of the population will be on a program originally intended for poor women, children and the disabled.

Even though the House will assume 91% of the "matching rate" for this joint state-federal program—up from today's 57%—governors would still be forced to take on $34 billion in new burdens when budgets from Albany to Sacramento are in fiscal collapse. Washington's budget will collapse too, if anything like the House bill passes.

Then taxes.

• European levels of taxation. All told, the House favors $572 billion in new taxes, mostly by imposing a 5.4-percentage-point "surcharge" on joint filers earning over $1 million, $500,000 for singles. This tax will raise the top marginal rate to 45% in 2011 from 39.6% when the Bush tax cuts expire—not counting state income taxes and the phase-out of certain deductions and exemptions. The burden will mostly fall on the small businesses that have organized as Subchapter S or limited liability corporations, since the truly wealthy won't have any difficulty sheltering their incomes.

This surtax could hit ever more earners because, like the alternative minimum tax, it isn't indexed for inflation. Yet it still won't be nearly enough. Even if Congress had confiscated 100% of the taxable income of people earning over $500,000 in the boom year of 2006, it would have only raised $1.3 trillion. When Democrats end up soaking the middle class, perhaps via the European-style value-added tax that Mrs. Pelosi has endorsed, they'll claim the deficits that they created made them do it.

Under another new tax, businesses would have to surrender 8% of their payroll to government if they don't offer insurance or pay at least 72.5% of their workers' premiums, which eat into wages. Such "play or pay" taxes always become "pay or pay" and will rise over time, with severe consequences for hiring, job creation and ultimately growth. While the U.S. already has one of the highest corporate income tax rates in the world, Democrats are on the way to creating a high structural unemployment rate, much as Europe has done by expanding its welfare states.

Meanwhile, a tax equal to 2.5% of adjusted gross income will also be imposed on some 18 million people who CBO expects still won't buy insurance in 2019. Democrats could make this penalty even higher, but that is politically unacceptable, or they could make the subsidies even higher, but that would expose the (already ludicrous) illusion that ObamaCare will reduce the deficit.

Government takeover of insurance.

• The insurance takeover. A new "health choices commissioner" will decide what counts as "essential benefits," which all insurers will have to offer as first-dollar coverage. Private insurers will also be told how much they are allowed to charge even as they will have to offer coverage at virtually the same price to anyone who applies, regardless of health status or medical history.

The cost of insurance, naturally, will skyrocket. The insurer WellPoint estimates based on its own market data that some premiums in the individual market will triple under these new burdens. The same is likely to prove true for the employer-sponsored plans that provide private coverage to about 177 million people today. Over time, the new mandates will apply to all contracts, including for the large businesses currently given a safe harbor from bureaucratic tampering under a 1974 law called Erisa.

The political incentive will always be for government to expand benefits and reduce cost-sharing, trampling any chance of giving individuals financial incentives to economize on care. Essentially, all insurers will become government contractors, in the business of fulfilling political demands: There will be no such thing as "private" health insurance.

Expansion of government involvement in health care

All of this is intentional, even if it isn't explicitly acknowledged. The overriding liberal ambition is to finish the work began decades ago as the Great Society of converting health care into a government responsibility. Mr. Obama's own Medicare actuaries estimate that the federal share of U.S. health dollars will quickly climb beyond 60% from 46% today. One reason Mrs. Pelosi has fought so ferociously against her own Blue Dog colleagues to include at least a scaled-back "public option" entitlement program is so that the architecture is in place for future Congresses to expand this share even further.

As Congress's balance sheet drowns in trillions of dollars in new obligations, the political system will have no choice but to start making cost-minded decisions about which treatments patients are allowed to receive. Democrats can't regulate their way out of the reality that we live in a world of finite resources and infinite wants. Once health care is nationalized, or mostly nationalized, medical rationing is inevitable—especially for the innovative high-cost technologies and drugs that are the future of medicine.

Mr. Obama rode into office on a wave of "change," but we doubt most voters realized that the change Democrats had in mind was making health care even more expensive and rigid than the status quo. Critics will say we are exaggerating, but we believe it is no stretch to say that Mrs. Pelosi's handiwork ranks with the Smoot-Hawley tariff and FDR's National Industrial Recovery Act as among the worst bills Congress has ever seriously contemplated.

In the last line, the author mentions the Smoot-Hawley tariff bill which was passed at the beginning of the Great Depression. Many "credit" Smoot-Hawley with extending and deepening the Great Depression. Is history about to repeat itself?

Whither global warming and "cap and trade" expected to cost Minnesota families $1,700 a year.

With unusually cold temperatures there hasn't been as much talk about global warming. The operative code word now is "climate change".

Yet despite the refusal of Al Gore to acknowledge the errors of his work on global warming, the push for "cap and trade" continues. The proposal is expected to cost the typical American family between $1770 and $2900 a year.

Passage of cap and trade will be one of those tax increases which will force the already shaky US economy off into a ditch like ill-advised government policies did in the 1930s, extending the Great Depression through the entire decade.

We shall see what happens in the coming years of this decade.

MN Lottery sales go up and expect a push for more gambling in Minnesota.

The Minnesota state lottery reports record sales of lottery tickets, $481 million sold in fiscal year 2009. And a record $123 million going into the state's coffers. The result? Expect a push for more gambling in Minnesota.

Reasons there will be a big push for expanding gambling in the state are the state's ongoing budget deficit and the need for a new Vikings' stadium. One's already hearing on sports talk radio, the answer to building a new Viking stadium is one arm bandits. And Rep. Tom Hackbarth recently proposed a constitutional amendment to place slot machines at the horse race tracks. This would put the Vikings and the NFL in a tough spot, because the league is very nervous about any link between football and gambling. If this were to pass, it would mean gambling efforts directly subsidizing a NFL football team.

Beyond those issues, gambling is simply a bad idea. We already have too much gambling in Minnesota. Gambling constitutes a tax on the poor who gamble in disproportionate numbers to others in society. And the social costs far outweigh any social benefits, e.g. crime, family break-up to mention a few. It's a corrupting influence on society and should be rolled back not expanded.

Solve our state $5 billion budget deficit by raising taxes? That's $1,000 per man, woman and child.

Looking at and talking to people about our projected state $5 billion budget deficit will be an enormous challenge. The simple math says it would mean raising taxes $1,000 per man, woman and child to eliminate it for this biennium, 2009-10. And then it's projected to be another $4.6 billion for the 2011-12 biennium. Or about $900 per person all over again. For the average family would mean a tax increase of $4,000 per family or a 30% increase in the average family's state tax bill.

That's an enormous amount of money and shows how our state expenditures have gotten out of control. We were expecting a $950 million deficit even before the economy went into a deep recession and sent it to nearly $5 billion.

Of course, there's no talk of just raising taxes but from conversations with DFL legislators, there's an expectation there will or should be a tax increase.

I think that would be a mistake. For one, any tax increase will be passed along to individuals and families in one form or another; a bad idea during a recession. Second, government is doing far more than its capable of handling effectively. And third, we need to disabuse ourselves of the idea that government is the solution to all our societal problems. Currently, the thinking is -- there's a problem let's have government spend more money to solve it.

What needs to be done is change the way the state/government does business and scale back expectations. Government needs to do things differently and smarter. Instead of looking to government to solve social problems other institutions and groups in society need to step into the gap. That can and I believe will happen but not immediately because people have become conditioned to looking to government to do it.

That has to change and I believe will change whatever happens with our state budget deficit this session. That will be painful and difficult but necessary and in the long run in the best interest of Minnesotans.

It's all about worldview: Biden, charity and helping others. Or is that the government's job?

There are more interesting comments coming from Vice President candidate Joe Biden. They reveal how he views the world.

In addition to ticking off Catholic bishops with his pro-abortion views espoused as a self proclaimed practicing Catholic, he's also used Catholic doctrine to support his view that people have a patriotic duty to pay higher taxes. He said, "Catholic social doctrine as I was taught it is, you take care of people who need the help the most."

He sees the answer to the social problems of the day resting squarely on the shoulders of government not private individuals and groups. The Wall Street Journal reviewed the release of his and his wife's tax returns and found that they "reported an average of $380, or 0.2% of their income, in annual charitable contributions over a 10-year period.” He doesn't believe he has a responsibility to help the less fortunate; that's the government's responsibility. That's reflected in him giving close to nothing from his personal income to help the less fortunate.

The problem with his views and actions, which no doubt reflect his worldview, are they're fundamentally wrong. Government is institutionally unable to give to the poor and less fortunate what they truly need the most -- personal involvement and moral challenge and encouragement.

It's said, "Look at a person's checkbook to see what they value." In Joe Biden's checkbook, there's nearly nothing to help the less fortunate.