The Truth About the Debt Ceiling

(Austrian) Economics, Taxation, Vulgar Politics
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[I just posted this on Google+, but I figured it was worth posting here as well.]

The debt ceiling is just for show; it hasn’t stopped the federal debt from increasing and politicians just keep raising the ceiling when it’s reached.

Failing to raise the debt ceiling will not necessarily result in default. The federal government has plenty of revenue to cover interest payments, even if it must shift that money out of other parts of the budget. Any claims of immediate default and imminent financial collapse are disingenuous fearmongering designed to fool a gullible and economically ignorant public and force an increase of the debt ceiling and an increase in taxes.

Tax cuts are not the reason for the debt crisis — spending is. Spending in excess of revenue is the cause of any debt, public or private. The federal government has been increasing spending with and without tax cuts for a very long time, under both parties.

The CBO’s inclusion of tax cuts as a major source of current and future federal debt is disingenuous. Why?

  1. Tax cuts are not spending anymore than tax breaks are subsidies (sorry Rachel Maddow).
  2. All of that estimated debt increase can be eliminated by cutting spending without eliminating tax cuts or raising taxes!

The solution is not to eliminate tax cuts and loopholes, let tax cuts expire, or raise taxes. Increasing taxes, however you do it, will inevitably lead to more spending because governments will find something to spend that increased revenue on and then some.

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Sour Grapes: Politicians launch scorched earth campaign against own city in bid to raise taxes

Democracy, Taxation
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It turns our that after the voters of Colorado Springs rejected a tax increase for the city, the city’s politicians ordered their public relations staffers to bad mouth the city and to cast a negative light on the city in national media. Basically, since they didn’t get their tax increase, the politicians were determined to make the city look as lousy as possible in a sort of I-told-you-so campaign that would make the voters sorry for not submitting to their betters.

According to the Colorado Springs Gazette:

After much probing by us, it became clear that [PR Director] Skiffington-Blumberg was given direct orders, after the defeat of the proposed tax increase, to tell the outside media about the most negative aspects of Colorado Springs. The campaign may have cost our city countless tourists and jobs. The Gazette was unable to reach [City Manager] Culbreth-Graft for comment.

“Our strategic plan was to paint a picture of the dire straits of our city budget. If we could not do so locally, we would do so in the regional and national press — though I’d have preferred that it not play out with Diane Sawyer,” Skiffington-Blumberg said, referring to one of several media giants who blasted Colorado Springs.

After she admitted the existence of this scorched earth campaign against the city, by the way, Skiffington-Blumberg was forced to resign by the City Manager.

In the past I’ve noted that Colorado’s constitutional requirements for popular votes approving tax increases have created a sort of local cottage industry in which politicians and their agents manufacture hysterical little narratives in which Colorado is the worst in the nation on everything ranging from education to city parks to traffic. “We’re worse than Mississippi” is a sort of local mantra of the local pro-tax crowd. The voters haven’t drunk the Kool-Aid on this of course, and neither has most of the country’s population since demographic data shows sizable net population gains for Colorado in recent years.

But if this latest story is clear, politicians will say just about anything to get a tax increase, even it it means waging a PR campaign against their own city.

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Does the Amount of Money Change the Logic?

Business, Corporatism, Libertarian Theory, Pop Culture, Taxation
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“You had ample time over the last two years to make a proposal that would be fair to both sides, but you failed to do so. During the last week of the mediation, we waited the entire week for the NFL to make a new economic proposal … That proposal did not come until 12:30 (p.m.) on Friday, and, when we examined it, we found it was worse than the proposal the NFL had made the prior week when we agreed to extend the mediation.”

~ Letter from NFLPA to Commissioner Roger Goodell

While one would hope the fans and the public would understand what’s really going on with the NFL lockout, it is quite possible that not everyone will “get it.” Some people—and some libertarians—have used a somewhat misinformed, if catchy, description of the situation. That description is: The NFL lockout is millionaires fighting with billionaires over money. While certainly punchy, and containing a nugget of truth, this description also misses the point.

Consider: If this labor negotiation were between business owners and their workers in almost any other endeavor, but particularly one where the workers were paid sums of money that were more “normal,” almost no one would make such a statement. Were this ostensible dispute—it isn’t really a dispute, but more of a money-grab—between the owners of a string of car manufacturing plants and their assembly-line workers, not only would the public side with the workers, but the supposedly liberal media and some members of Congress would be crying loudly as well. Why? In those cases, it would be easy to sympathize with workers. In fact, in that scenario, it’s a safe bet that some would compare the plight of these workers with that of the Wisconsin teachers union. (That would be a huge mistake, but not one that will be explained here. Maybe in the next rant.) The amount of money has nothing to do with the logic.

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Down in smoke

Drug Policy, Taxation, Victimless Crimes
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My former colleague and neighbor Jesse Walker, in the course of an “appreciation” of exiting Sen. Russ Feingold — whom he calls “the Bob Barr of the left” — expresses the briefest note of sadness over the failure of California’s Proposition 19, the Regulate, Control and Tax Cannabis Act of 2010. I will demur.

Sadness? At a law that, had it passed, would have regulated and taxed the use of a common plant — a lovely weed and an amazing source of industrial fiber as well as widely used herbal remedy? No. All those regulations and taxes would only have skewed the cultivation and marketing of the plant from personal and small-business operations to Big Business. Right now Californians are increasingly cultivating and openly using marijuana. In defiance of the federal government, no less.

But with the initiative, the state would have started cracking down on little producers, and making it harder for small business to provide their customers with the drug. …

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Legalize It _\|/_ But Don’t Tax Or Regulate It, Bro

Drug Policy, Humor, Police Statism, Pop Culture, Taxation, Victimless Crimes
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“Should Be Legalized” is a a great, high quality parody of Eminem’s “Love The Way You Lie.” The video reminds us of the dangers of prohibition and urges Congress to legalize marijuana. I must, however, object to the video’s desire for pot to be regulated or taxed.

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