Friday, May 13, 2011

Deconstructing the Delaware Liberal Myth

So I heard Rick Jensen talking about this blog post over at Delaware Liberal by "Cassandra_m".  Usually I don't even bother to present my fellow Delawareans over there with common sense facts because they often fail to listen to reason.  Governor Markell and I don't agree on much, including his own opinion that he is "pro-business".  Thus far Markell has shown himself to be almost anything but "pro-business".  When Delaware had the opportunity to push for an opt-out of Obamacare which threatens to destroy small-medium businesses and will demand more layoffs even from Fortune 500 companies, Markell supported it and refused to save Delaware businesses.  When the Obama Administration pushed Financial Regulatory reform through the Congress which has already shut down many jobs (potentially a thousand +) in the financial sector in Delaware, Markell supported it.  Markell has shown support for not only RGGI, the regional cap and trade system but also a national Cap and Trade system that would further punish (destroy) Delaware businesses and kill jobs.  So I decided to go ahead and post my critique of her blog posting here.  My comments are in bold.
Building Delaware's Future or How to Throw Taxpayer Money at BusinessesBy cassandra_m
Governor Markell has spent the past three days rolling out his plan to spend newly DEFAC-found revenues of $320M. Links to the Governor’s Press Releases on this are below, and worth looking at in their entirety:
Part I — Building Delaware’s Future Fund, Infrastructure:
Part II — Building Delaware’s Future, Tax Cuts
Part III — Building Delaware’s Future, Education
This is all being billed as a jobs plan, and some of it definitely supports the creation of employment — the Infrastructure proposals look like old school stimulus and takes into consideration that some newly built plant here will need expansion or adjustments to current infrastructure to operate.
Typically, the liberal spirit is to spend money in GOVERNMENT and to buy up as much land as possible so that future land use can be centrally planned.  In other words, if DuPont isn't playing ball with the government (say...on climate change) but Gore is playing ball, why not sell the government owned land to Gore instead of DuPont?  Don't think this could happen?  Well it already has.  Case in point: DelDOT land deals and Chris Tigani.
<back to Cassandra> The disappointing part of this is Part II, in which we find the Governor doing something I don’t think I thought I’d see — actually buying into the fairy tale that tax cuts create jobs. They don’t, of course, otherwise the 2000’s would have been way more robust than they were. And this plan actually extends the fairy tale — while it is certain that the financial industry is changing, there is no way to look at this industry and not see that the changes we see here in Delaware are structural ones. Jobs lost at Wilmington Trust and HSBC (and others, really) are due to serious restructurings that tax cuts won’t undo to any great extent.
Another glimpse into the liberal mindset here shows a complete and total unwillingness to put fact over ideology when they don't mix.  The reality is that going back to the 1920's, every time taxes have been cut, the economy has grown and revenues to the government have increased.  Every time.  Ok, ok, so THAT link was to a Heritage article and I know, YOU say they are biased.  Well, I guess that means that this link to the USA Today opinion piece by Bill Frist is out too?  Fine, I can understand that, but then how do you explain the jump in revenues in 2006 as reported by the New York Times?  The fact is that cutting taxes stimulates the economy as well as it does personal incomes.  It creates more wealth which can then be invested in new businesses or in expansion of current businesses.
<back to Cassandra> Tax cuts targeted at the Financial Industry are particularly galling — this industry has had the benefit of rivers of taxpayer funds in the form of TARP and multiple cheap lending facilities and now Delaware taxpayers are supposed to help support banks that are in trouble because of their own bad risk management. Again, without paying attention to the fact that there are quite a few of these jobs that won’t be coming back, no matter how healthy the economy gets.
Whoops!  Cassandra forgot to mention the REASON why these jobs "won't be coming back" to Delaware.  Part of it is because banks are under assault from all sides thanks to the financial meltdown.  Some of it is warranted and some of it is not so warranted.  A much larger part of it is Financial Regulatory Reform, also known as Reg Z.  Reg Z changed so much within the financial system (and the full impact to companies hasn't even been realized yet) that financial institutions now have some of their costs increased by 200% or more.  And while those who are committed to the causes of the left, namely bringing down the capitalist system in favor of a more redistributive model where your success only means we get to share more of YOUR wealth will not be convinced by a "biased source" it's telling to see what the company Accenture thinks of financial regulatory reform:
As we have seen, The Dodd-Frank Act has many interrelated implications for how all financial services firms will run their businesses, both short-term and long-term, and as a result, the financial services industry could look very different in five years time. The Act will increase costs, potentially hurt profits, produce new operational challenges and pose significant strategic questions about how firms will prop up their return on equity while absorbing the cost of more reporting to regulators, a more expensive cost of capital and the loss of some of their most profitable businesses. The most nimble and efficient banks, insurers and broker-dealers could pick up market share at the expense of their larger, less efficient competitors, which makes it crucial that firms make an efficient strategy for implementing reform part of the DNA of their businesses.
This is no insignificant point folks.  It's the very reason why banks are shedding jobs here in Delaware.  Key sponsors of the bill, Senator Tom Carper, Former Congressman Mike Castle and Vice President Joe Biden, all from Delaware.

<back to Cassandra> Tax cuts targeted at the top rate make no sense at all. (Full disclosure, I would benefit from this tax cut.) We are still in an economy that is finding its sea legs. It will take quite a long time to get to 7% unemployment rate, much less 5%.
And why would we want to cut tax rates on the people who create the jobs we are going to need in order to lower the unemployment rate?  Even if you don't buy the logic that I listed above, with a number of different factual sources from across the political spectrum that shows tax cuts in the past have always increased revenues and lifted the economy, you still can surely see how the rich provide the jobs.  People like Cassandra always like to go after the people making more than $250,000 as some sort of evil rich people who just want to take everything they can get their hands on.  The reality is that these are the people that create the jobs that lift our unemployment rate.  They are the small business owners, the upper level managers and the executives who create jobs.  With that said, it is easy to fall into the trap of desiring what others have, believe me there are times when I would LOVE to be a DuPont heir but we all have to remember that in America, you reap what you sow.  Until recently, America has been a place where you can keep the fruits of your labor but now it is increasingly becoming a place where government takes more of what YOU earn and gives it to those who have not earned it.  It's especially helpful to the liberal cause when these words come from someone who is part of that upper class.  When Joe Biden says "skin in the game" and people like Cassandra who claim to be in the upper class call for more like them to pay more in taxes, it sounds great!  But watch it, because most of them have found loopholes in the tax system that allows THEIR skin to be just a little smaller than most people.  (Tim Geithner anyone?)
<back to Cassandra> And while Delaware seems to have some control over its previous revenue problem, it is not in control of the *real* problem of government budgets everywhere — health care. Deliberately letting go of revenue streams in the midst of all of this uncertainty with no idea what kind of risks will be present next year or the following year can only make sense if you expect that you can just cover any future shortfalls by asking state workers to finance the gaps. Again. Besides, one of the *principles* of using this money is supposed to be:
Limiting our dependence on less reliable sources of revenue, specifically abandoned property. The plan suggests the best way to accomplish this is to cap the amount of this revenue being used to fund the state’s operating budget, and to use any additional collections for one-time investments.
First of all, Delaware does not HAVE a revenue problem, it has a SPENDING problem.  In 2009, Delaware spent $27,362 per taxpayer and we have gone from spending $8.3 Billion in 2009 to spending more than $10.6 Billion now in 2011.  The other problem that I have here is this idea that taxes are "revenue" to be "adjusted" at the will of the elites.  Taxes are "revenue" only in that they are income to the government.  Taxes are a public trust that the people pay to the government in exchange for core services.  With that said, our "core services" haven't been looked at in many years.  I ask you, are two golf courses and two marinas "core services"?  *I* can live without a couple of golf courses and a couple of marinas, how about you?  So if you reduce spending on these "discretionary" items, you free up enough money to reduce the tax burden on businesses and individuals.  As for asking state workers to "finance the gaps", Cassandra is using liberal speak for "taking pay cuts", I say that the New York Times admits the wage/benefit gap between the public and private sector workers.  In addition, there is plenty of room for public employees to contribute a little more toward their pensions and health care.  With that said, if you eliminate redundant, wasteful and costly state programs, it will reduce any potential pay cuts or increased benefit contributions.  But let's live in the world where taxes are "revenue"...even under that idea, tax cuts INCREASE revenue.
Bush Tax Cuts:  President George W. Bush’s 2003 tax cuts generated a massive increase in federal tax revenue and were followed by 52 consecutive months of economic growth. From 2004 to 2007, federal tax revenue increased by $780 billion, the largest four-year increase in American history.  Total federal revenue from 2003 to 2007:
2003 -- $1.78 trillion
2004 -- $1.88 trillion
2005 -- $2.15 trillion
2006 -- $2.40 trillion
2007 -- $2.56 trillion
<back to Cassandra> Unless these tax cuts are just for one year, you’ve just financed this tax cut for years assuming you’ll have this revenue on a recurring basis. And tax cuts of this kind are NOT an investment.
Reducing business taxes provides balance sheet support — not real incentives to hire. Because the majority of businesses on the planet will hire people because they can keep a pair of hands busy, cover the costs of that pair of hands and still make some money.
Oh Cassandra, you miss the points so eloquently.  Tax cuts ARE an investment, especially tax cuts for businesses and those who create jobs.  Reducing taxes provides PROFITS (what she refers to as "balance sheet support") to businesses and those profits are used by business owners to reinvest in their businesses, to expand production and yes, to create jobs.  Likewise, tax cuts for the wealthy put more money back into the pockets of the people who invest in businesses (venture capital anyone?).  This is a concept that JFK espoused and that the Congress in the 1990's confirmed. 
<back to Cassandra> Nowhere that *I’ve* ever worked has justified hiring based on the tax cuts available. (And yes, I hire people.) Tax cuts cover some of the costs of that pair of hands and/or maybe some of the profits. This is why lots of businesses who get a great deal of support from local governments can get up and go after that support sunsets.
No one has ever suggested that companies hire people only because of tax cuts.  What we've said is that tax cuts stimulate growth and stimulate hiring which is absolutely true.  This is why business exploded from 2000 to 2007 despite the 9/11 terrorist attacks, two wars and Hurricane Katrina.  
<back to Cassandra> See this book and this book for the gory details.
And once you read those books by the committed leftist former "journalist" whose wife runs a philanthropic distribution group that handled more than $160 million in donations, please take a look at this book and this book.
<back to Cassandra> It is possible that we do not have all of the details here, but there has to be a smarter use of found money than these tax cuts. At least a smarter use that still acknowledges that we are economically no where near being out of the woods. And if someone from the Administration wants to tell you that these tax cuts will pay for themselves, demand to see their calculations. Because this will be the first time that this has ever been true.
Cassandra, it wouldn't be the first time it's ever been true, in fact, Michael T. Griffith can point to 5 major tax cuts that DID pay for themselves, the Bush, Clinton, Reagan, JFK and Mellon (Harding & Coolidge administrations) cuts.  They didn't just pay for themselves, they preceded times of great economic growth and increased revenues.
<back to Cassandra> The recent budget submitted by the Governor reduced some of the grant funds available to service providers in the state. Groups that are doing extraordinary work in their communities. Groups that may be laying people off or not help others to become employable due to the reduced funds. And yet this doesn’t count in the employment calculation.
My first question is, if the work is so great, why does it require government to fund it?  As someone who runs a non-profit organization that does NOT accept government funds (by choice) I can tell you that the world of community "service providers" is muddied by many who are swimming in taxpayer dollars and providing little return on investment.  I know what it takes to run an organization on nothing but donations and I think it's a testament to the longevity of groups like Founders Values, Delaware Family Policy Council and others who operate solely on the donations of like minded individuals.  In fact, some of those groups even have entirely volunteer staff and still need to produce high quality results in order to continue providing their services.  These organizations should compete like everyone else instead of reaching for handouts of taxpayer dollars.  The best will rise to the top and the worst will dissolve and contribute their good ideas to those effective organizations.
<back to Cassandra> What is truly unfortunate is to see this genuinely smart man reduced to pushing the horribly false narrative about taxes, and basically work at reinforcing the republican-pushed idea that you can have All of the Government You Can Eat for Free. And provide a revenue stream to businesses too! Don’t expect leadership on this to come from the Dem Caucus, either. Because if Governor Markell can succumb to this fairy tale, there’s no chance the Caucus will get a sudden attack of responsibility.
What is even more unfortunate is that Cassandra does such a poor job of attempting to explain "Republican-pushed" ideas and that she attributes Governor Markell's mad dash to spend the cash to Republicans.  As you can see from this week's proposal from the Republican caucus in Dover, the Governor's plans don't even come close to meeting Republican goals.  Instead of going on a spending spree like a 17yr old girl with daddy's credit card in the Mall of America, Republicans have proposed tax cuts to stimulate the economy, spur investment, ease the pain at the pump and to fix failures in government that cost taxpayers millions of dollars.  Republicans show their responsibility and leadership in their plan by proposing to fix the way that DelDOT operating funds are spent and to provide transparency and openness with respect to how the agency works. 

Republicans as a rule call for a LIMITED GOVERNMENT (not "All of the Government You Can Eat for Free") but I'm glad that Cassandra agrees that government isn't free.  Now all we need to do is remind her that you can't get to a balanced budget simply by eating the rich:
I'm also happy to see her admitting that the Democrats have their own problems with leadership.

1 comment:

  1. Delaware Republican party which is needed to reform conservatively :)

    Delaware Independent.