Thursday, March 12, 2009

Rush Limbaugh, Sean Hannity and Newt Gingrich Are Wrong on Taxes (part 4, continued)

I have held off on the official award ceremony for this week's Flying, Fickle Finger of Fate award to Rush Limbuagh, Sean Hannity and New Gingrich because it hurts me. Plus, I was reluctant to appear to be jumping on the "attack Rush" bandwagon that Democrats and the mainstream media are orchestrating (in one of the most cynical, hypocritical political "movements" in the history of man). But this entry represents the basis for the award (award ceremony to follow).

This entry is also a continuation of part 4 of my series titled: "Rush Limbaugh and Newt Gingrich are wrong on taxes"--with the first few parts simply titled "Rush Limbaugh is wrong on taxes".

Nope. I do not favor tax increases. I favor tax cuts. And I would agree that Rus Limbaugh's wrong headed tax cut proposals are much better than President Obama's ridiculous tax and spend policies. My problem is that conservatives have abandoned the Ronald Reagan simplicity in favor of disastrous (politically and economically) tax gimmicks. Thus, you have almost every Republican and conservative (except, as usual, me) proposing eliminating the capital gains (what gains?) tax--a Wall Street gimmick which would only encourage games with the tax code to shift other income into capital gains. To compound this error, these same people are proposing drastic cuts int eh corporate income tax (Newt, all of the way down to 12.5%, as Newt goes stark raving bonkers). Problem: These same people would reduce the corporate income tax drastically, while leaving the individual rate the same. That is absolute tax policy disaster, as you favor one kind of entity over another--at the same time encourages games based solely on the tax code, especially if you reduce the capital gains rate at the same time. Finally, and worst, these conservatives propose a "tax holiday" (nothing more than a payment to people, like Obama, except limited to taxpayers). The worst part of the "tax holiday" idea (part 4 of my series) is the "tax holiday" on payroll taxes. A "tax holiday" has the fatal defect of being not only merely a gimmick to cover a welfare check, but being temporary (absolutely fatal and disastrous in tax policy, as is true of the temporary nature of the Bush tax cuts). This is a continuation of part 4 of the series (see blog archives for previous parts 1-4):

4. The Social Security system was always a Ponzi scheme. Bernie Madoff is going to jail (guilty plea scheduled for today) for the same type of scheme. Remember that Social Security was never set up as a real retirement system, where each person owns his or her own retirement account.

Rather, from the beginning (where the original Social Security recipients obviously had paid nothing into the system), present workers paid the benefits for current retirees. There never was any money "there". This is the very definition of a Ponzi scheme, where previous "investors" are paid off with funds taken from current investors.

All people "investing" in Social Security get is a promise by the Federal Government to pay them future benefits--taken from future workers in a continuation of the Ponzi scheme. The courts have held that no one has a "right" to Social Security benefits. The government can take them away (as will happen if the system collapses). You have no "ownership" of your Social Security account. In fact, there is no such thing as a "Social Security trust fund". That is merely an accounting device to reflect whether the Social Security system is "paying" for itself (with those current taxes paying previous "investors").

Even now, there is a strong welfare component, since your Social Security benefits are set at a minimum (and maximum) level, no matter how much you have put into the system. Thus, immigrants who have put NOTHING into the system still get Social Security.

Those of us who favored, and still favor, trying to "privatize" Social Security (without affecting present benefits) believe that this Ponzi scheme system is fatally flaawed. First, it is deceptive, because it is a true Ponzi scheme. NO people paying current taxes are receiving ANY ownership interest in ANYTHING. To me, and others like me, this is unconscionable. Further, as a welfare system, the system makes no sense (not "need" based, even for people who did not pay into the system).

I have told the story previously in this blog of how I argued in my honors social study class at New Mexico State University, in 1967 or 1968, that Social Seucrity was a lousy insurance system (being a Ponzi scheme where present taxpayers receive NOTHING). The professor then defended the system basically as a welfare scheme. I then said that we would be better off treating it as a welfare scheme,b ecause at least it would make sense and we would avoid the Ponzi scheme fiction that people are actually purchasing an annuity. In other words, we could pay welfare, and let those not needing welfare have a real annuity and/or account (privatization). The professor's response was that I wanted to take away peoples "dignity"--that older people wanted to think that they had "earned" what they get, rather than receiving welfare.

Notice how we don't care about "dignity" anymore. Even Wall Street and banks--not to mention GM--want "welfare". Look at Rush Limbaugh's proposed "tax holiday" on Social Security payroll taxes, and President Obama's tax credit. Do they not undermine the very concept of Social Security (as at least a modified social insurance system, where EVERYONE contributes to their own retirement t to some extent, so long as they are working). Of course this undermines the whole concept of Social Security. As far as I know, we did not have a "tax holiday" on Social Security even in the Great Depression.

The only saving grace about Social Security was that it assumed that EVERYONE had responsibility for at least contributing. Once that idea is gone, Social Security is merely another big government program. That is what Republicans, Rush Limbaugh, Sean Hannity, and the rest are now accomplishing. They are accepting the Democratic idea that Social Security taxes are just another tax, and that the Social Security program is just another Big Government program to be manipulated in the process of central planning. This is not "conservative". In fact, it is STUPID (yes, I just called Rush Limbaugh stupid--on this subject--although he is a very smart man).

This is one of the few areas in which Rush Limaugh is intellectually inconsistent (even dishonest). I actually heard him (his being the only radio program to which I regularly listen) correctly say that Obama's payroll tax credit is a "transfer payment". In deed it is, but so are the "payroll tax holiday" "ideas" proposed by Limbaugh and other conservatives.

These are merely welfare payments, limited to those who work (with the "rich" always excluded). You doubt me (and Limbaugh, when he is thinking correctly)? Don't. Look what happens when you use payroll tax money to pay people welfare. The Scocial Security system is already "going broke" It makes no sense to take money from the Social Security system--especially with this fiction of a Social Security "trust fund". So the proposal is to "reimburse" (it is all the Federal Government) Social Security system from general revenues. That means that ordinary tax revenues (graduated tax system, where 50% of the people pay NO income tax) are really being used to make the payments supposedly representing a "payroll tax holiday". How is this different from simply giving a check to people who work and not calling it a "payroll tax holiday"? It is not different at all--except that it undermines whatever samll validity thaere was to the Social Security system as a true social insurance system. It is a total fraud, and the exact opposite of Regan's move to a simple tax system where everyone paid low tax rates.

this betrayal of the Ronald Reagan move toward a simple, rational tax system of low tax rates for everyone--rather than a tax system concentrating on tax breaks aimed at the supposed constituency of the Republican Party--is exactly why Rush Limbaugh, Sean Hannity and Newt Gingrich are this week's recipients of the Flying, Fickle Finger of Fate. This reversion to favoring tax fimmicks desired by Wall Street and business is a reversion to the pre-Reagan days of the Republican Party--the days of the "country club" Republicans that Limbaugh rightly ridicules.

Low tax RATES are a good idea, and we should return to the Reagan rates (same top rate for buiness and everyone else). Tax gimmicks are a terrible idea, since they encourage people to take action based on the tax system. The goal of the tax system should be neutrality in favoring one type of economic activity over another, or one form of doing something over another. The "gimmick" approach is really central planning in another guise (albeit a guise not as bad as Big Government spending). When your gimmick involves undermining the "social responsibility/insurance" aspect of Social Security, you have joined the left--"dignity" be damned.

I don't' know how conservatives have managed to go totally off the rails on taxes--reverting to pre-Reagan, business "conservatism", while conceding leftists the field on Social Security--but they have.

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