Thomas Jefferson described writing the first draft of the Declaration of Independence as streaming thought from quill to papyrus in a single sitting.  Not all of his original prose survived the committee edits leading up to the Fourth of July signing.  Some of his wording was shamefully omitted; some much improved.

But the quintessence of Jefferson’s missive was beautifully crafted by the council as, “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. undefined That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governedundefined That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.”

The phrasing is so elegant, it should be set to a cantata.

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From El Krueger:

Much of the Western world has been conditioned to a "return to the mean" paradigm for the past 60 years. Yes, there are recessions, but they are temporary lulls in a prevailing growth dynamic. The growth trend has been more or less inexorable. And we have become accustomed to it. Mainstream economic thought and forecasting are based upon the "past performance" that economic growth will resume. But lately that has not been the case. Economic growth after the credit crisis has been decidedly lackluster.

That return to the mean has gone missing of late. The reason is that we are coming to the end of the debt supercycle. Debt-fueled growth in the "developed" world is coming to an end as the cost of debt rises and the bond markets abandon one country after another, seemingly overnight. One minute debt is easy, the next it is hard to get.

Europe is coming to the make-or-break point rather rapidly. As noted last week, the recent summit did not solve the real problems. The distraction of the British veto served for a while to obscure the lack of any significant solutions. My friend Mohamed El-Erian, who is the CEO and co-chief investment officer of PIMCO, wrote rather alarmingly in this week's Foreign Policy ( http://www.foreignpolicy.com/articles/2011/12/15/downward_spiral) about the choices facing Europe. Remember, this is one of the most thoughtful and influential investors in the world. He knows he is sitting on the world's largest pile of bonds. He is not given to rash analysis (as is so often the case with your humble analyst, who sits on next to nothing). The following is raising eyebrows all over the world (emphasis mine!):

"It is critical for the welfare of billions around the world that Europe get its act together now. The continent faces an increasing probability of having to navigate a fourth potential morphing in the next few months. Should it materialize, this would take one of two forms:

"… either a disorderly and highly disruptive fragmentation of the eurozone, or the establishment of a smaller and less imperfect eurozone that has a different relationship with the rest of the EU.

"Both possibilities involve yet another set of immediate disruptions for Europe and the global economy. As such, the temptation among politicians will be to avoid making any active choices. But that would constitute a huge mistake. It would further reduce their future degrees of freedom due to an even narrower set of possibilities and, with that, erode their ability to influence outcomes.

"As time passes, the option of a smaller and less imperfect eurozone is becoming the only way to ‘refound' a union that would have the chance to stand the test of time and, thus, constitute a key component of medium-term efforts to restore global financial stability, meaningful economic growth, and plentiful jobs. It is not an absolute best, and it would be a messy process involving the risk of collateral damage and unintended consequences. Yet, when judged in terms of feasibility and desirability, it sure dominates the alternative of a full fragmentation."

The High Cost of Leaving

Let's think about what it means for a country to leave the euro (hat tip to Daniel Stetler of the Boston Consulting Group, from the paper I previously mentioned, augmented by a few of my own thoughts).

They would immediately have to impose capital controls. That means closing the border to prevent physical capital flight with piles of cash. And of course it means trade controls, or otherwise any company would rig the books to get as much cash out as possible. Extended bank holidays would be a necessity.

What would be the new official exchange rate? What would be the black market rate? Would euros be somehow marked as the new currency while they waited for the printing presses to spit out the new currency?

How would euro-denominated debt be handled? Not just country debt, which would be relatively easy, but business debt, much of which falls under UK law in Europe. What would it cost to recapitalize the banks? Who runs the stock market and in what currency?

Any sober thought given to exiting the euro, whether by your country or a neighbor, gives one considerable pause. This is what European leaders are so desperate to avoid, yet making the hard choices they now have in front of them is so very difficult. Austerity? That leads to a severe recession at a minimum, and in some countries to a long depression. Defaulting on the debt? That pushes austerity onto the bond holders and banks, which is another form of recession and depression.

How do you pay for those easily promised pensions and health care in such extremes? What about simple basic services? The chaos that will result from exit is more than most people can now imagine. While people may get nostalgic for "their" currency, to go back will not be easy. It will wipe out much of the savings of a generation.

That crisis will come to the shores of the US, and will reduce our GDP. I think it does so next year, pulling us into recession. That means revenues are down and costs are up. The deficit gets larger, not smaller. The costs of not dealing with the problem will mount with every passing month, here just as they do in Europe. Europe has kicked the can down the road, but it is coming to the end of that road. We are going down the same path unless we make the hard choices. The longer we wait, the harder the choices. Again:

"As such, the temptation among politicians will be to avoid making any active choices. But that would constitute a huge mistake. It would further reduce their future degrees of freedom due to an even narrower set of possibilities and, with that, erode their ability to influence outcomes."

Must we wait until a crisis forces the hands of politicians? Not just in the US, but throughout the developed world?



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To Defend Against an EMP Attack

(Heritage Foundation)

Posted 12/17/2011

El Krueger

When Americans think about the threat from foreign missiles, it’s nearly always the catastrophic effect of a conventional nuclear blast that comes to mind. We think of the doomsday scenarios that have played out in so many movies and TV shows: a nuke explodes over a large city -- leveling buildings, crushing houses and creating a swath of destruction.

But that’s not the only threat that can come from a missile fired from a rogue nation, or one that has fallen into the hands of terrorists. We could also fall victim to the devastating effects of an electromagnetic pulse. With an EMP, almost everything powered by electricity would be effectively wiped out -- not physically, but practically. They would simply cease to work.

Imagine the havoc this could cause. Your cell phone? Useless. The same goes for your TV, radio and computer. Your car might still run, but good luck driving on roads with no working stoplights, accessing your GPS devices for directions, or buying gasoline from pumps that won’t pump. We’d be in the dark, literally -- plunged into the early 19th century in a matter of seconds.

Sound like science fiction? It’s understandable that some people would think so, especially anyone who has seen the flashy EMP attacks dramatized in shows such as “24.” Unfortunately, it’s all too real. Why? Because an EMP isn’t an altogether new, high-tech weapon. It’s the same nuclear blast we’ve come to fear as a potential destroyer of our cities. It’s just used in an alternate way.

The difference: the location of the blast. In a conventional nuclear attack, the bomb is timed to explode close to the ground. The resulting radiation blast wreaks great physical damage. But with an EMP, the same kind of bomb is set to explode high in the air. When that happens, the blast doesn’t level a city. But it does knock out the power grid, leaving the residents that have come to depend on it largely helpless.

And who among us doesn’t depend on electricity? What a chaotic, dangerous mess this weapon could leave in its wake. Everyday life would grind to a halt. Almost every feature of 21st century life that we’ve come to rely on, from fully-stocked grocery stores to fire and ambulance services, would be gone in an instant.

We can’t take comfort in the thought that an EMP is something beyond the reach of a rogue nation or terrorist group. “Several potential adversaries have or can acquire the capability to attack the United States with a high-altitude nuclear weapon-generated electromagnetic pulse,” the 2004 Commission to Assess the Threat to the United States from Electromagnetic Pulse Attack reported. “A determined adversary can achieve an EMP attack capability without having a high level of sophistication.”

The threat of an EMP attack makes it all the more imperative that we pursue an immediate and comprehensive missile defense, as I urged in one of my most recent columns. Missile defense was conceived as a way to counter a conventional nuclear attack. But there’s no reason it can’t serve a dual purpose. The same missiles that can knock down a rocket delivering a low-altitude nuclear payload can do the same to a high-altitude one equipped with an EMP.

But we need to ensure the system we deploy can do the job. That’s what I mean by “comprehensive.” We need to make it a layered system -- one on land, sea and air, and with the ability to take out missiles in almost any stage of flight. What the Obama administration is currently proposing, in terms of funding and design, simply won’t do the job.

That’s unacceptable. The EMP threat isn’t going away -- at least, not until we show that we’re serious about disarming it. The sooner, the better.

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12/17/11

From El Krueger:

Wow, it wasn't so much that I had been unaware of most segments of the CRA/GSE housing bubble crisis, just never really formulated in my mind the total picture until reading this composite history!  

Thanks! K  (see link below)

Explaining the U.S. housing meltdown

http://tjhancock.wordpress.com/housing-bubble-financial-crisis-detailed-comprehensive-assessment/

 

Comment from Anna:

Hard to believe Americans are so ignorant of these corruption in government...but most of us are until someone exposes the truth.  Thank you for forwarding this important info.

The quotes below (from the link above) are crucial in understanding the rest of the history, read the whole article in the link to fully inform yourselves of this travesty.
ag

Housing Bubble, Financial Crisis – What Happened, Who is Responsible

“I don’t mind cleaning up the mess that some other folks made, that’s what I signed up to do” – Barack Obama (D-IL), October 20, 2009

“I think that the responsibility that the Democrats had may rest more in resisting any efforts by Republicans in the Congress, or by me when I was President, to put some standards and tighten up a little on Fannie Mae and Freddie Mac.” – Former President Bill Clinton (D-AR), September 25, 2008

“Like a lot of my Democratic colleagues I was too slow to appreciate the recklessness of Fannie and Freddie. I defended their efforts to encourage affordable homeownership when in retrospect I should have heeded the concerns raised by their regulator in 2004. Frankly, I wish my Democratic colleagues would admit when it comes to Fannie and Freddie, we were wrong.” – Congressman Artur Davis (D-AL) , September 30, 2008

undefinedundefinedundefinedundefined-

President Obama is using the financial crisis to make Americans doubt themselves, their values, and the very system they had believed enabled their specialness.  In the vacuum of this doubt, he is moving his agenda to radically alter the fiber of what it means to be American. – TJ Hancock (American)

http://tjhancock.wordpress.com/housing-bubble-financial-crisis-detailed-comprehensive-assessment/

 

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12/17/11

From:Kayvee

        I take issue with a comment made in Facebook

You printed the following

"Conservatism is always naive and self-confident; believing that it will immediately win once recognized. That is the reason why the forces of Conservatism are so poorly organized. On the other hand, the modern progressive democrat is cynical, sly and fantastically organized. It never ever has the illusion of the ability to stand on its own feet and to win in a fair competition. That is why it is ready to use any kind of means without hesitation. And of course it does - under the banners of the most noble ideas."

My God, where to begin???  Let's start with semantics.  What is a modern Progressive?  He's not a Socialist or Communist.  Soviet Union, Red China, Cuba, North Korea, et alia aren't Socialist or Communist for that matter.  They are Fascists... every damn one of them.  What do Fascists embrace?  A Bolshivik-style elite to guide the community.  What do modern Progressives embrace?  An elite "intelligencia" of bureaucrats to guide the community.  Modern Progressives (as opposed to most members of the Democrat Party) are Fascists and are idealogues committed to the quest for power, bound together in a tight Bolshevik style organization.  Conservatives range from Tea Party patriots to Rotary Club members. They comprise the majority of Americans most of the time.  To compare the Conservatives with Modern Progressives would be like comparing Big Ben to a Rolex wrist watch.  As we speak, the Democrat Party is controlled by Modern Progressives, I'll grant you that... but that is a fairly recent turnover... literally a coup d'etat.  The Modern Progressives are not a political party like the Conservatives, they are criminals like the Bolsheviks.  They must be dealt with as criminals.  Alas, few in this country or even in the Republican Party see that.  K


Anna's comment after reading this:
                       " Thank you for the intellectual, educational dialogue"


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Posted 11/30/11

Thomas Sowell: Lessons of History?

From El Krueger:

It used to be common for people to urge us to learn "the lessons of history." But history gets much less attention these days and, if there are any lessons that we are offered, they are more likely to be the lessons from current polls or the lessons of political correctness.

Even among those who still invoke the lessons of history, some read those lessons very differently from others.

Talk show host Michael Medved, for example, apparently thinks the Republicans need a centrist presidential candidate in 2012. He said, "Most political battles are won by seizing the center." Moreover, he added: "Anyone who believes otherwise ignores the electoral experience of the last 50 years."

But just when did Ronald Reagan, with his two landslide election victories, "seize the center"? For that matter, when did Franklin D. Roosevelt, with a record four consecutive presidential election victories, "seize the center"?

There have been a long string of Republican presidential candidates who seized the center -- and lost elections. Thomas E. Dewey, for example, seized the center against Harry Truman in 1948. Even though Truman was so unpopular at the outset that the "New Republic" magazine urged him not to run, and polls consistently had Dewey ahead, Truman clearly stood for something -- and for months he battled for what he stood for.

That turned out to be enough to beat Dewey, who simply stood in the center.

It is very doubtful that most of the people who voted for Harry Truman agreed with him on all the things he stood for. But they knew he stood for something, and they agreed with enough of it to put him back in the White House.

It is equally doubtful that most of the people who voted for Ronald Reagan in his two landslide victories agreed with all his positions. But they agreed with enough of them to put him in the White House to replace Jimmy Carter, who stood in the center, even if it was only a center of confusion.

President Gerald Ford, after narrowly beating off a rare challenge by Ronald Reagan to a sitting president of his own party, seized the center in the general election -- and lost to an initially almost totally unknown governor from Georgia.

President George H.W. Bush, after initially winning election by coming across as another Ronald Reagan, with his "Read my lips, no new taxes" speech, turned "kinder and gentler" -- to everyone except the taxpayers -- once he was in office. In other ways as well, he seized the center. And lost to another unknown governor.

More recently, we have seen two more Republican candidates who seized the center -- Senators Bob Dole in 1996 and John McCain in 2008 -- go down to defeat, McCain at the hands of a man that most people had never even heard of, just three years earlier.

Michael Medved, however, reads history differently.

To him, Barry Goldwater got clobbered in the 1964 elections because of his strong conservatism. But did his opponent, Lyndon Johnson, seize the center? Johnson was at least as far to the left as Goldwater was to the right. And Goldwater scared the daylights out of people with the way he expressed himself, especially on foreign policy, where he came across as reckless.

On a personal note, I wrote a two-line verse that year, titled "The Goldwater Administration:"

Fifteen minutes of laissez-faire, While the Russian missiles are in the air.

Senator Goldwater was not crazy enough to start a nuclear war. But the way he talked sometimes made it seem as if he were. Ronald Reagan would later be elected and re-elected taking positions essentially the same as those on which Barry Goldwater lost big time. Reagan was simply a lot better at articulating his beliefs.

Michael Medved uses the 2008 defeat of Tea Party candidates for the Senate, in three states where Democrats were vulnerable, as another argument against those who do not court the center. But these were candidates whose political ineptness was the problem, not conservatism.

Candidates should certainly reach out to a broad electorate. But the question is whether they reach out by promoting their own principles to others or by trying to be all things to all people.

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Expertise: Economics, social decision making, ethnicity

Recent Commentary

November 29, 2011 | Creators Syndicate

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Lessons of History?

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Controversial Essays

 Open the links below to read the complete story about  S.1867  to be voted on Monday

11/28/11 -or- Tuesday or 11/29/11

http://bungalowbillscw.blogspot.com/2011/11/s1867-national-defense-authorization.html

From:  EL  KRUEGER

Ask your typical Democrat or liberal about the idea of increasing taxes on upper-bracket earners, and what will they say? In my experience, the answer's always the same: "We're not out to soak the rich. We just want them to pay their fair share." We've seen it over and over for years. For example:

"Were [the politicians levying taxes on Americans] seeking to redistribute wealth, to recast society along more egalitarian lines? Or were they simply trying to ensure that rich people paid their "fair share"? The answer, predictably, is both. . . .

"If poor and middle class Americans were going to be asked [by President Roosevelt], of necessity, to shoulder much of the fiscal burden, then they needed assurance the rich were paying their share. . . .

"No one made the case more succinctly than Rep. Cordell Hull, legislative father of the 1913 income tax. 'I have no disposition to tax wealth unnecessarily or unjustly,' he explained in his memoirs. 'But I do believe that the wealth of the country should bear its just share of the burden of taxation and that it should not be permitted to shirk that duty.' "

("Soaking the Wealthy: An American Tradition" The Wall Street Journal, January 29-30, 2011)

The rhetoric remained unchanged in the late twentieth century:

" 'We will lower the tax burden on middle class Americans,' [Bill Clinton] pledged in 1992, 'by asking the very wealthy to pay their fair share.' " ("The Middle-Class Tax Trap" The New York Times, April 17, 2011)

More recently, President Obama carried on the tradition.

"I will veto any bill that changes benefits for those who rely on Medicare but does not raise serious revenues by asking the wealthiest Americans or biggest corporations to pay their fair share." (The New York Times, September 20, 2011)

And here's another reference from just a month ago:

"In proposing a 5 percent surtax on incomes of more than $1 million a year to pay for job-creation measures sought by President Obama, Senate Democratic leaders on Wednesday escalated efforts to strike a more populist tone and to draw Republicans into a confrontation over how much affluent Americans should pay to help others cope with a struggling economy. . . .

" 'It's interesting to note that independents, Democrats and Republicans and even the Tea Party agree it's time for millionaires and billionaires to pay their fair share of taxes,' [Senate Majority Leader] Reid said Wednesday."

(The New York Times, October 6, 2011)

But what is the fair share? How is it to be determined, and by whom? When Senator Reid says, "it's time for millionaires and billionaires to pay their fair share," he implies they haven't been doing so thus far. How does he know? What's the standard? If there's an objective standard for one's fair share, why does it only seem to be those from the left side of the political spectrum who say it's not being paid? And if there isn't an objective standard, how can the fair share be determined? The truth is, fairness is almost entirely in the eye of the beholder, and "get them to pay their fair share" seems like just another way to say "raise their taxes."

There's probably only one element of fairness that's beyond discussion: those with higher incomes should pay more in taxes.After that, everything is up for grabs.

• For example, we have a progressive system of taxation, meaning that higher earners don't merely pay more in terms of dollars; they generally pay a higher percentage of their incomes in taxes. Most people agree that this is fair. But is it? Why should success be penalized through greater taxation? And if the tax rate for those who earn more should be higher, how much higher? Should the top marginal tax rate be double that applicable to lower-income taxpayers? Triple? What's fair?

• Are some forms of income more desirable to society and thus deserving of taxation at lower rates?
• And should we encourage certain expenditures by making them deductible from taxable income?

The fairness of all of these things is subject to discussion and disagreement. They come under the heading of tax policy.

Is Taxation Progressive? Progressive Enough?

Under the U.S. system, people in higher income brackets pay tax at higher rates. (However, Mark Twain said, "All generalizations, including this one, are false." For an exception to the generalization above, see the discussion of the "Buffett Rule" on page 5.) In large part, the question of fairness primarily surrounds whether the higher rates are high enough.

Talk about "the eye of the beholder." There's evidence on both sides of this debate:

• The top 1% of U.S. taxpayers pay 38% of all individual federal taxes. The top 10% pay 70% of all taxes, the top 25% pay 86%, and the top 50% pay 97%.
• That leaves the bottom 50% of all taxpayers paying only 3% of the total.
• About half of Americans pay no federal income tax, and almost 25% pay no federal taxes at all.
• The average federal income tax rate for the top 1% of Americans is 23% (and for the top half it's 14%), while the average rate for the bottom half is 3%.

Notwithstanding the rhetoric, there's no doubt about the fact that America's top earners are taxed more heavily than the rest. On the other hand, they pay at lower rates than they used to (when I was a boy the top marginal rate was 94%), and it seems progressivity has declined.

". . . the effective federal tax rate, including payroll taxes, for the wealthiest 0.01 percent of earners fell to 31.5 percent in 2005, from 42.9 percent in 1979 [for a decline of 26.6%], according to data from the Congressional Budget Office. Over the same time, effective rates for taxpayers in the center of the range fell to 14.2 percent, a decrease of just 4 percentage points [or 22.0%]." (The New York Times, September 21, 2011)

Total revenues from income taxes have declined in the U.S. – they "are at a historical low of 15.3 per cent of the gross domestic product, compared with a postwar average of 18.5 per cent" (Financial Times, September 25) – and they've declined more for top earners than for the rest. This is because of both specific rate cuts that have been enacted and the fact that the rates applied to dividends and capital gains – which clearly flow more to people in the upper income brackets – have declined relative to the rates on salaries and wages.

On average, higher earners absolutely do pay a higher percentage than those who earn less. But the decision as to whether the differential is just right, too little or too great is highly subjective and certainly a valid topic for debate.

Righteous Income

In the U.S., different types of income are taxed at different rates, suggesting some are considered more virtuous than others. For example, profits on investment assets held for more than a year, so-called "long-term capital gains," are taxed less than "ordinary income" such as salaries and interest. This has been the case for so long that we consider it the norm, and what we're used to often becomes the baseline for "fairness."

Long-term capital gains are taxed at reduced rates because of a judgment that long-term investment in things like securities, companies and real estate is beneficial for the economy and should be encouraged. Right now, the top tax rate on long-term investment profit is less than half that on short-term gains and ordinary income. And in recent years, the taxes on dividends have been reduced to similar levels, in part to mitigate double taxation of corporate profits but also because of a judgment that the equity investments that give rise to dividends are good for our society.

Is it appropriate to tax profits on long-term investments at rates below those on other forms of income? Certainly we should encourage investment, but there's no consensus that the tax code is the place to do it. Some foreign jurisdictions don't tax capital gains at all, while others tax them at the same rate as all other income.

What about interest? Why are dividends taxed at preferential rates and interest at ordinary rates? The explanation may lie in the fact that interest is deductible for corporations, while dividends aren't. Interest is paid out of pretax income, while in theory dividends are paid out of after-tax income – although the existence of corporate deductions and credits means dividends may, in fact, be paid out of income that hasn't been taxed by the U.S. Alternatively, the difference in tax treatment may be the result of a desire to encourage investment in "risky" equities rather than "safe" debt. But some companies' dividends are no doubt safer than some other companies' interest payments, so this distinction is questionable. If the goal is to encourage risk bearing, is dividend versus interest the right criterion?

While on the subject of gains from investments, it's interesting to note that, not long ago, dividends were included with interest under the rubric "unearned income." This pejorative phrase implied that income on capital, not requiring labor, was less virtuous than that stemming from labor, so-called "earned income." Thus unearned income – primarily dividends and interest – was taxed more heavily than wages.

But now things have turned 180 degrees, and returns on capital are taxed at lower rates than wages. It's worth noting that the Democrats – commonly considered the party of labor – controlled the government for much of the period 1928 to 1980, when earned income was favored. On the other hand, the Republicans – the party of those with capital to invest – have been in control more of the time since 1980, and the taxation of returns on capital has declined in relative terms. The definition of virtuous income that should be encouraged through lower taxes clearly is subjective, impermanent and subject to change with the winds of politics.

One debate that has arisen recently surrounds the so-called "Buffett Rule." For the last few years, Warren Buffett has been speaking about the fact that he pays a smaller percentage of his income in taxes than does his secretary. Presumably this is because his income consists primarily of long-term capital gains and very little of salary, bonus and interest.

(As an aside, it should be noted that Buffett's lower tax rate, while not unique, is far from the norm. According to The New York Times of September 24, "The number of people who fall under the Buffett Rule is quite small, only 60,000" out of 450,000 taxpayers who make over $1 million. "And the amount of revenue that would be generated [by the Buffett Rule] over the next 10 years is equally small – just $13 billion. . . .")

Buffett's tax status is a function of policy choices made by the people who wrote our tax laws. According to The New York Times of September 21, "President Obama's proposal for a new tax on millionaires . . . would counteract decades of tax reductions for most Americans that have given the wealthy the most benefit. . . ." Do we consider these decisions appropriate in principle and Buffett's just an extreme case? Or do we want to change things so returns on capital are less favored and big earners can never pay overall taxes at lower rates than those who earn less? (And, as an aside, are all long-term profits truly beneficial to society? How, for instance, does society benefit when someone buys a bar of gold?)

Deductions, Loopholes and Tax Incentives

Speaking of gold, in "All That Glitters" on that subject, I quoted from a speech by Mississippi state legislator "Soggy" Sweat that showed his ability to simultaneously praise and condemn whiskey with equal conviction. Outdoing Soggy, depending on who's talking, Washington politicos use the three very different terms above to describe the same thing: offsets to taxable income.

The drafters called them deductions: provisions that reduce the net income on which taxes are levied. Critics call them loopholes, suggesting there's something underhanded about those provisions. And politicians use the laudatory-sounding term tax incentives to describe tax code provisions that reduce tax revenues in order to encourage certain behavior. It all depends on your point of view.

Let's take a look at one of the most popular deductions: interest on mortgages. For as long as I can remember, interest on home mortgages has been treated as a desirable expenditure that should be encouraged. Because home ownership is considered part of the American dream, the tax code subsidizes it by reducing the after-tax cost for those who borrow to buy homes (and are able to itemize rather than take the standard deduction). While everything else may be arguable, certainly this seems fair. But is it?

• Are homeowners more virtuous than renters? If mortgage interest is deductible but rent isn't, we're requiring renters to subsidize owners. Is that appropriate?
• On average, homeowners are from the middle and upper income brackets. Is it fair that poorer renters provide a benefit for richer owners?
• And is it desirable that those able to buy more expensive homes should get more of a subsidy than those consigned to cheaper ones?

As with the taxation of dividends, judgments on these matters change over time. Until 1987, there was no limit on the amount of mortgage interest that could be deducted. If you could afford to own ten homes with multiple million-dollar mortgages on each one, taxpayers would collectively share the cost by reducing your income taxes due. Today interest is deductible on only a maximum of $1.1 million of debt, and only on first and second mortgages, and only on a primary residence and a second home. So the tax treatment of owners of many homes and more expensive homes has become less generous. But it's still better than that of renters. Is that proper?

What about the tax deductibility of charitable donations? As I travel the world visiting with clients, I see that two things about the U.S. are quite uncommon: (a) Americans give a lot of money to charity and (b) donations to charity are deductible in calculating taxable income. Everyone tells me the latter is the main reason for the former. In particular, these things are part of the explanation for the existence of the many private, non-state-supported colleges and universities in the U.S., the best of which are so good at least in part because of their significant donor-provided endowments. For example, Harvard and Yale are only half as old as England's Oxford and Cambridge, but they benefit from endowments that are far larger.

Part of this is true because legislators decided at some point to subsidize non-profits by encouraging contributions through the tax code. That's certainly understandable. And yet, changes were made in recent years to limit upper-bracket taxpayers' use of deductions in order to ensure that they pay some minimum tax rate.

What about the unevenness of the subsidy? The cost of giving $1 to charity is reduced by the amount of taxes it saves the donor, which is equal to $1 times the person's tax rate. So today, speaking simplistically, it costs a top-bracket taxpayer 65 cents to give a dollar to charity, while it costs a bottom-bracket taxpayer 85 cents. Is that fair? Should the bigger earner receive a greater reward for a dollar of philanthropy than someone who can afford it less easily? And should those who aren't inclined to give to charity be required to subsidize those who are?

Finally, what about state and local taxes, the third of the significant deductions? Here tax deductibility isn't due to a decision to encourage people to pay non-federal taxes, but rather to cushion the effect of being taxed in multiple jurisdictions. Texas, Florida and five other states have no personal income tax, California has a heavy one, and someone living in Manhattan pays tax to both New York State and New York City. Deductibility on the federal tax return somewhat evens out the burden and ensures that (a) the states get first crack at taxing income and (b) the federal government can only tax what's left, in line with federalist principles.

This raises a number of questions. Is the deductibility of state and local taxes fair? As with other deductions, the key question is "fair to whom?" Some people pay more state and local taxes than others, meaning they get greater deductions than others. As a result, while a person with a given income who lives in a high-tax state pays higher total taxes, he or she pays less federal tax than someone in a low-tax state. Is that fair?

Further, what all of this means is that by providing more benefits to its residents (or at least spending more money, whether beneficially or not), a high-tax state creates a deduction for its residents and thus reduces the federal government's total tax take. Is this right? Should the federal government subsidize spending on the part of high-tax states? That is, should residents in low-tax states bear part of the expenses of high-tax states? There's nothing simple about these matters.

While the source of an exemption rather than a deduction, what about interest on "municipal bonds" issued by states, counties, cities and local agencies. This is exempt from federal taxation, under the legal doctrine that the federal government mustn't tax the operations of the states. ("The power to tax is the power to destroy," one of our great Supreme Court decisions held.) But here again, we're talking about a federal benefit (in the form of a lower cost of capital) for the biggest-spending local governments and their citizens, and a tax break for people who lend to them.

And what about property taxes? These are deductible without limitation. Thus the owner of a mansion – or ten mansions – receives more of a tax benefit than a low-income earner. And it's another subsidy for homeowners versus renters. Is this right, or should it be changed?

To date, it has been deemed fair for state and local income tax to be deductible on federal tax returns. But is this immutable? Sales tax used to be deductible, too (meaning the buyer of a Rolls Royce got assistance from the federal government). Now it's not. More fair?

What if the deduction for state and local taxes and the exemption for muni interest were ended? This would increase the cost of financing for state and local governments and most impact the highest-spending states, potentially requiring higher taxes causing people to move away. This would reduce those states' revenues and require them to raise taxes further (and drive away still more taxpayers) in a painful cycle. And are those states profligate or just burdened (like California by a substantial low-income population) or natural-resource-poor (lacking Texas's oil)?

So even in "small" matters like the tax deductibility of mortgage interest, charitable donations, and state and local taxes, there are lots of difficult questions. While on their face the deductions seem fair to homeowners, philanthropists and residents of high-tax states, they're simultaneously penalizing renters, non-donors and residents of low-tax states (as well as taxpayers in low tax brackets and those without enough deductions to itemize).

How about the biggest exclusions of all: employer-provided health care and the deferral of taxation of contributions to pension plans? In both cases, those receiving these employer-paid benefits enjoy a substantial benefit not shared by those not fortunate enough to participate. For instance, is it fair that many better-paid workers get thousands of dollars a year in untaxed health-care benefits, while other workers enjoy no such subsidy?

Fairness turns out to be quite an elusive concept.

Reasons for Increasing Taxes

As U.S. leaders wrestle to reduce the budget deficit in the coming months and years, spending cuts are a certainty. But the question of whether taxes should be increased is sure to be hotly debated. A number of justifications for doing so are advanced:

• Some people want wealth to be redistributed throughout society by taxing the rich and giving to the poor. They want the government to do more for those who are less fortunate (or less able), and that means having the rest pay for it.
• There's an argument that for the deficit solution to be equitable, all citizens should contribute to it. Though some government spending benefits all citizens alike, such as national defense, national parks and the administration of justice, much spending disproportionately benefits lower earners, in the form of public education and transportation (which are supported by the federal government), unemployment insurance, food stamps, Medicare and Medicaid, etc. Thus the effect of the coming spending cuts will fall more heavily on the poor. Some argue that since they receive less in benefits and are therefore less likely to experience their loss, the wealthy should share the burden of reducing the deficit through increased tax payments.
• As opposed to the ideological arguments reviewed above, tax increases are among the limited number of possible contributors to deficit reduction listed on page 1. Thus, in the simplest terms, we can cut more from the deficit if we tax more (all else being equal).
• The ultimate practical point is that spending cuts alone won't do much to eliminate the deficit.
• Viewed another way, promises of entitlements have been in place for decades, people have relied on them, and those promises have to be kept. This is clearly impossible without increased taxes and/or exploding deficits.

Is redistribution a valid goal? To some people, it is part of the process of helping every citizen in the "pursuit of happiness." To others, it's akin to socialism and contrary to the American ethic in which rewards follow ability and hard work.

Should everyone contribute to deficit reduction, including bigger earners through the biggest tax increases? Or should the savings come primarily through sacrifices on the part of those who to date have been the primary beneficiaries of excessive government spending? I have no doubt that we'll see fireworks on these topics.

Reasons for Not Increasing Taxes (or for Lowering Them)

Before concluding that the above points are persuasive, you should consider the equally numerous arguments to the contrary.

• Many believe our massive deficit stems from a government (and an entrenched army of government employees) willing and able to spend all available cash (and more). A bureaucracy will always find uses – many of them wasteful – for available revenues. Thus the only solution is to "starve the beast": only tax cuts and restraints on borrowing will force the government to limit spending.
• It is argued that by decreasing the after-tax proceeds from a dollar earned, tax increases reduce people's incentive to work, and thus cut into a nation's overall productivity. From 1974 to 1979, Britain's top marginal rate was 83% (although with a 15% surcharge on interest and dividends, it could rise to 98%). I remember reading about a banker who took time off without pay to paint his house. Society benefits when each of us does the things we're best at. But if a banker who earns $20,000 a month only gets to keep $3,400, he's better off forgoing a month's salary to avoid paying a painter who gets $5,000 a month.
• Research into the "elasticity of taxable income" (ETI) shows that "when marginal tax rates go up, the amount of reported incomes goes down," suggesting higher taxes do reduce productivity. (The Wall Street Journal, March 30, 2010). Of course, it's also possible that when rates go up, the incentives for failing to report income also go up. Thus part of the ETI effect could come from under-reporting, as opposed to reduced effort.
• Taking the above a step further, the "Laffer curve," named after economist and presidential adviser Arthur Laffer, posits that by discouraging work (and thus reducing incomes), raising income tax rates actually reduces income tax collections. Thus, by increasing taxable income, rate reductions bring revenue gains.
• Last but especially timely is the classic Keynesian argument that raising taxes and thus reducing after-tax incomes shouldn't be done at a time when the economy is weak and spending should be encouraged, not inhibited.

For me the bottom line – the real reason why many people don't want rates to go up – is that they don't want to pay more taxes. I think people tend to "vote their pocketbooks," meaning many people with incomes to tax will vote for the candidate who promises lower taxes. But the economic theories discussed above certainly lend validity and even nobility to the pursuit of higher after-tax income . . . and the fact that their supporters are self-interested doesn't make them wrong. Finally, for whichever reason, a good portion of the electorate buys these arguments. And The New York Times reported on November 2 that "Americans for Tax Reform, a taxpayer advocacy group . . . says that 41 senators and more than 235 House members have pledged in writing to oppose all tax increases."

Topics in the News – Income Inequality

One of the outstanding characteristics of the U.S. economy at this time is the rising dispersion between incomes. The percentage of total income going to higher earners has been increasing dramatically, whether because of (a) the rising importance of education and technological literacy or (b) the movement of work offshore, the declining availability of blue-collar jobs and the reduced power of private-sector unions to garner wage gains. And given the pattern of tax cuts and the special treatment given to income on capital, the tax system has magnified the divergence.

A recent report from the Congressional Budget Office provided dramatic evidence of the divergent trends in income. It outlined the percentage gain in average inflation-adjusted after-tax income of various income groups between 1979 and 2007:

• Top 1% of the population in terms of income: 275%
• Next 19%: 65%
• Middle 60%: 40%
• Bottom 20%: 18%

According to the CBO:

• The share of income going to higher-income households rose, while the share going to lower-income households fell.
• The top fifth of the population saw a 10-percentage-point increase in their share of after-tax income.
• Most of that growth went to the top 1 percent of the population.
• All other [quintile] groups saw their shares decline by 2 to 3 percentage points.

An October 26 article in The New York Times reported the following conclusions:

". . . the report said government policy has become less redistributive since the late 1970s, doing less to reduce the concentration of income.

" 'The equalizing effect of federal taxes was smaller' in 2007 than in 1979, as 'the composition of federal revenues shifted away from progressive income taxes to less-progressive payroll taxes,' the budget office said.

"Also, it said, federal benefit payments are doing less to even out the distribution of income, as a growing share of benefits, like Social Security, goes to older Americans, regardless of their income. . . .

"Also cited as factors contributing to the rapid growth of income at the top [in addition to federal tax and spending policies] were the structure of executive compensation; high salaries for some 'superstars' in sports and the arts; the increasing size of the financial services industry; and the growing role of capital gains, which go disproportionately to higher- income households."

The implications for tax discussions are obvious. Upper earners have moved further ahead relative to lower earners, and tax policies have contributed to this trend. For those who think progressivity should be bolstered, income should be redistributed, and those most able to pay should contribute more heavily to solving the deficit problem, upper-bracket earners make a most attractive target.

Topics in the News – The Sputtering Economy

In early 2011, there was a growing consensus that the U.S. economy was on an upward trajectory – that recovery had taken hold. Reported growth in GDP was accelerating. Orders, sales and profits were strong. Cash was piling up in corporate coffers. The Fed gave increased thought to increasing interest rates to cool off the economy and prevent the rekindling of inflation.

But in the summer it was reported that the economy had cooled, and earlier estimates of GDP were revised downward. A possible double-dip recession became the topic of the day. At the same time, an unseemly political confrontation regarding the U.S. federal debt ceiling exposed a flawed, unconstructive political system at work; produced a downgrade of long-term Treasury debt on the part of Standard & Poor's; seemed to take us to the brink of a default; and sapped confidence at all levels.

Despite the economy's weakness, further government aid for the economy has been rendered untenable by widespread negative feelings about the stimulus programs of 2007-08 and the popular view that the government took care of Wall Street but not Main Street, combined with the nearness of the next presidential election. Especially with stimulus unlikely, government actions that discourage growth should be viewed skeptically.

In the U.S. – just like in Greece and elsewhere in Europe – the answer to problems of excessive deficit and debt can be summed up in one word: austerity. Everyone's after debtor nations to practice austerity; that is, to spend less and tax more. The problem is that such behavior will reduce citizens' incomes, discourage consumer spending and slow or reverse economic growth. While on paper austerity will cut deficits, it may actually add to them by reducing government tax collections. In this way, it would necessitate further borrowing.

There's no doubt that, along with spending cuts, tax increases would have a detrimental impact on the prospects for economic recovery. Thus even people who are open to tax increases may not want them to be effective until the economy is out of danger. As the Financial Times put it on October 29, "Many households are so badly overleveraged that a balanced federal budget would ruin them."

But our economic problems aren't just cyclical. There are worrisome secular trends, many surrounding the scarcity of new jobs, the movement of manufacturing overseas, and the low level of business investment in the U.S. The best cure for our cyclical and secular difficulties would be growth based on industrial expansion. This would put people to work, support increases in spending, reinvigorate the housing sector, increase tax revenues and shrink the deficit. But for this to happen, we need (a) tax rates that allow successful entrepreneurs to retain a substantial percentage of the resulting profits and (b) confidence that the tax system won't be made more confiscatory after they've made their investments. At the present time, the latter, in particular, is very much lacking.

Topics in the News – Flat Tax

It's interesting to note that writers of tax law have two main routes to a given revenue total: low rates without deductions, exemptions and credits, or high rates with them. To date they have chosen the latter course. An article in The Wall Street Journal of January 29, 2011 marked down this choice to pure politics:

"Why did [Roosevelt's high tax rates] last so long . . . beginning their long steady decline only during the Kennedy administration? . . . In part to fund the Korean conflict and the Cold War, but also to grease the skids of modern politics. Lawmakers were able to blunt the effect of high statutory rates by handing out tax preferences to their friends, constituents and contributors. Steep rates preserved the appearance of progressivity (and, to be fair, some of the reality), while supplying politicians with their stock in trade: favors."

There are periodic calls for lower "flat" income tax rates and the elimination of deductions and other wrinkles, and we are hearing them today. The main goal is tax simplification. I commend this. (I have to admit that I, with my MBA in accounting, stopped being able to understand my own tax return decades ago.) But of course we cannot convert to a flat tax system without altering people's relative taxes. A change would require sweeping policy decisions.

Flat tax proposals are often accompanied by calls for a national sales, consumption or "value added" tax on spending, such as many other nations have. The problem here is that those with low incomes spend most or all of their earnings on life's necessities, and as incomes rise, people gain the possibility of spending less of their incomes and saving more. Thus sales taxes tend to take a higher percentage of income the lower one's income. That's why, in contrast with progressivity, sales taxes are described as "regressive."

Last month, Republican presidential candidate Herman Cain announced his "9-9-9 plan," which features a flat 9% income tax rate, 9% national sales tax and 9% business tax. Let's take a look at it. The Tax Policy Center is a non-partisan joint venture of the Urban Institute and Brookings Institution. The St. Petersburg Times's politifact.com summarized the results of the TPC's analysis as follows: "83.8 percent of tax filers would get a tax increase . . . compared with current tax policy. On the other hand, most of the tax filers who make more than $1 million would get a tax cut . . . about 95.4 percent of this high income group."

Would it be right to make poor people pay income tax at the same rate as rich people and pay a higher percentage of their incomes in a national sales tax? Anything's fair game, I guess, but if the TPC's analysis is correct, this plan would represent a step away from progressivity and further skew after-tax income toward the wealthy. Yet we're likely to hear a lot more about flat tax during the coming campaign. When confronted with complex problems, people often welcome simple solutions.

Topics in the News – Political Posturing

A Democratic politician I know decided not to run for president in 2008 because he expected a rising tide of populist rhetoric to be required. He was right: classist speech rose substantially. And the rise continues unabated.

Democrats tend to lean toward bigger entitlement programs, greater governmental involvement in the economy, deficit spending, progressive taxation and income redistribution. These things are in contrast to Republicans' averred traditions of small government, individual self-sufficiency, free markets, balanced budgets and tax reduction. At the present time, with the economy performing poorly, Democrats are glad to describe Republicans' laissez faire policies as having contributed to joblessness and economic hardship. With difficulty more prevalent than prosperity today, populism – appealing to disadvantaged economic classes based on claimed inequities – represents a compelling brand of politics.

Thus in recent months we've increasingly heard Democratic politicians sneer at "millionaires and billionaires" (see Senator Reid on page 2), an epithet aimed at a group that's supposedly been getting away with something. (In the past, I seem to recall, it was instead a group most people wanted to be part of.) To date, the preferred Republican label for people with money has been "job creators," although this line of defense may be tough to maintain in the current climate.

The Financial Times of October 29 carried an article headlined "Obama takes high-risk stance against the rich." It described a decision to emulate Roosevelt's Depression-era rhetoric and point an accusing finger at the Republicans as the party of wealth.

"Throwing out the standard presidential playbook dictating an aspirational approach to centrist voters, the White House is cementing a message that strikes at wealth and privilege.

" 'There is surging sentiment among voters that the economy is weighted towards the wealthy,' said a senior White House official.

"The White House strategy will make the 2012 election a generational test of the Republican push of the last three decades for cutting taxes, in ways their critics say have been constantly skewed towards the highest earners."

However, the article goes on to say Republicans may respond in kind to this tactic, joining in support of the common man rather than standing up for wealthier supporters:

". . . Republicans are tweaking their public message, with the hardline [H]ouse majority leader, Eric Cantor, recently acknowledging the need to address the rich-poor gap.

"Mitt Romney, the frontrunner in the race to challenge Barack Obama in 2012, has taken to saying that he is standing up for the 'middle class' because the rich 'can look after themselves.' "

With candidates in both parties competing to sound less pro-wealth, top earners and their supportive tax policies should expect to be rhetorical targets in the coming election. Whether this will extend to Republican candidates dropping their resistance to tax increases remains to be seen.

The Ultimate Worry: Tyranny of the Majority

The elements that contributed importantly to America's success included economic aspiration, upward mobility and a tax system that encouraged labor and risk-taking. In short, we all could get rich. As a result, both those with money and those hoping to make money were attracted to the idea of low taxes. This made tax reduction a very popular theme over the last few decades.

But when people without money start to believe they can't make money, there's little to keep them from taking it from those who have it. This represents a threat to our way of life.

As I've written before, I was very impressed when, as a young man, I heard an interesting explanation for America's economic progress relative to Great Britain: "When the worker in Britain sees the boss drive out of the factory in his Rolls Royce, he says ‘I'd like to put a bomb under that car.' When the worker in America sees the boss drive out of the factory in his Cadillac, he says ‘I'd like to have a car like that someday.' " This tale says a lot about how we achieved our success . . . and also about what we'd better retain if we want to keep it.

The truth is, in a democracy, the lower-earning majority is perfectly capable of voting to confiscate the wealth of the minority. A lot of people have written about this and associated threats to our system:

" 'If Sparta and Rome perished,' asked Rousseau in his Social Contract, 'how can any state hope to live forever? The Body Politick, like the body of a man, begins to die as soon as it is born; it contains the seeds of its own destruction.' " (Financial Times, October 29)

" 'When men get in the habit of helping themselves to the property of others,' warned the New York Times in 1909, 'they are not easily cured of it.' " (The Wall Street Journal, January 29, 2011)

"Some people regard private enterprise as a predatory tiger to be shot. Others look on it as a cow they can milk. Not enough people see it as a healthy horse, pulling a sturdy wagon." (Winston Churchill)

"As Margaret Thatcher famously said, the problem with socialism is that sooner or later 'you run out of other people's money.' " (New York Post, January 12, 2011)

The risk is exacerbated today by the fact (as noted earlier) that about half of all Americans pay no federal income tax. This makes me wonder whether our democracy can make good decisions about taxation when half the people are outside the system.

Obviously, it's tempting to many to increase taxes on the rich, seeing it as a harmless way to enhance the welfare of the many at a small cost to the few. But the damage to the U.S.'s success machinery could vastly outweigh the sums confiscated from those who are targeted. The "fair share" taken from upper bracket earners has to be kept as small as possible if the tax system is to benefit all of our society. The coming debate over tax increases will be very important in this regard.

There can be no easy solution. Social programs and tax policies have been put in place that will combine with demographic and income trends to create challenging conditions. "The Middle-Class Tax Trap" (The New York Times, April 17, 2011) outlined the consequences:

"[Consider] the 'current law baseline,' a Congressional Budget Office projection in which the Bush-era tax rates aren't renewed in 2012, the Alternative Minimum Tax (which is supposed to hit only the rich but increasingly bites into middle-class paychecks) isn't indexed for inflation, and Medicare payments to doctors are slashed 20%.

"With these changes, the deficit drops away in the next 10 years, and more important, it stays manageably low for the decades after that. . . .

"This is how the 'current law baseline' cuts the deficit: Thanks to inflation and bracket creep, its tax code generally subjects more and more Americans to rates that now fall only on the wealthy.

"Today, for instance, a family of four making the median income . . . pays 15% in federal taxes. By 2035, under the C.B.O. projection, payroll and income taxes would claim 25% of that family's income. The marginal tax rate on labor would rise from 29% to 38%. Federal tax revenue, which has averaged 18% of G.D.P. since World War II, would hit 23% by the 2030s and climb ever higher after that.

"Such unprecedented levels of taxation would throw up hurdles to entrepreneurship, family formation and upward mobility. . . .

"They could have ugly political consequences as well. Historically, the most successful welfare states (think Scandinavia) have depended on ethnic solidarity to sustain their tax-and-transfer programs. But the working-age America of the future will be far more diverse than the retired cohort it's laboring to support. Asking a population that's increasingly brown and beige to accept punishing tax rates while white seniors receive roughly $3 in benefits for every dollar they paid in (the projected ratio in the 2030s) promises to polarize the country along racial as well as generational lines.

"The Republican vision for entitlement reform, President Obama said last week, would lead to a "fundamentally different America" than the one we inhabit today. He's right: asking the elderly to pay more for their health care, as [Representative] Paul Ryan proposes to do, would transform the American social contract, and cause no small amount of pain.

"But what Obama doesn't acknowledge is that the alternative path could lead to a different country as well – a more stagnant and balkanized society, in which our promise to the elderly crowds out the fundamental promise of America itself." (Emphasis added)

Will we keep the promise of entitlement programs or cut them back? Given the prominence of entitlements in the U.S. budget, in large part it comes down to that.

Over the last 80 years, politicians in the U.S. created entitlement programs that we cannot afford. Likewise, to varying degrees citizens throughout the developed world have been given promises their governments can't keep. That a day of reckoning would arrive is not news – credible observers have warned of our current problems for decades – but few politicians have been willing to fall on the sword of unpopular solutions.

Whatever action is taken now, it will not be pain-free. The unpayable debts run up in the past will have to be dealt with. And as for the future, there are only three possibilities: the promises will have to be scaled back, the tax burden will have to grow, and/or the deficits will have to be permitted to increase. If nations are to limit deficits – and it seems they may be forced to – there is no alternative to the first two of these. This fundamental truth will constitute a major portion of the public debate in coming years.

Tax policy consists of deciding who to take from (and how much) and who to give it to. There are no easy answers. We should all throw our support behind the common good and not just our individual interests.

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Scotland Yard: Islamic terrorists arrested and charged in Britain

Four men detained earlier this week in Birmingham, the second largest city in Britain, were charged with terrorism offenses on Friday and will appear in a London court next week.Khobaib Hussain, Ishaaq Hussain, Shahid Kasam Khan and Naweed Mahmood...

http://www.examiner.com/public-safety-in-national/scotland-yard-islamic-terrorists-arrested-and-charged-britain

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Thomas Jefferson

Posted 11/11/11

This is amazing. There are two parts. Be sure to read the 2nd part (in RED).

Thomas Jefferson was a very remarkable man who started learning very early in life and never stopped.

At 5, began studying under his cousin's tutor.

At 9, studied Latin, Greek and French.

At 14, studied classical literature and additional languages.

At 16, entered the College of William and Mary.

At 19, studied Law for 5 years starting under George Wythe.

At 23, started his own law practice.

At 25, was elected to the Virginia House of Burgesses.

At 31, wrote the widely circulated "Summary View of the Rights of British America” and retired from his law practice.

At 32, was a Delegate to the Second Continental Congress.

At 33, wrote the Declaration of Independence.

At 33, took three years to revise Virginia?s legal code and wrote a Public Education bill and a statute for Religious Freedom.

At 36, was elected the second Governor of Virginia succeeding Patrick Henry.

At 40, served in Congress for two years.

At 41, was the American minister to France and negotiated commercial treaties with European nations along with Ben Franklin and John Adams.

At 46, served as the first Secretary of State under George Washington.

At 53, served as Vice President and was elected president of the American Philosophical Society.

At 55, drafted the Kentucky Resolutions and became the active head of Republican Party.

At 57, was elected the third president of the United States .

At 60, obtained the Louisiana Purchase doubling the nation's size.

At 61, was elected to a second term as President.

At 65, retired to Monticello .

At 80, helped President Monroe shape the Monroe Doctrine.

At 81, almost single-handedly created the University of Virginia and served as its first president.

At 83, died on the 50th anniversary of the Signing of the Declaration of Independence along with John Adams

Thomas Jefferson knew because he himself studied the previous failed attempts at government. He understood actual history, the nature of God, his laws and the nature of man. That happens to be way more than what most understand today. Jefferson really knew his stuff. A voice from the past to lead us in the future:

John F. Kennedy held a dinner in the white House for a group of the brightest minds in the nation at that time. He made this statement: "This is perhaps the assembly of the most intelligence ever to gather at one time in the White House with the exception of when Thomas Jefferson dined alone."

"When we get piled upon one another in large cities, as in Europe, we shall become as corrupt as Europe ." -- Thomas Jefferson

"The democracy will cease to exist when you take away from those who are willing to work and give to those who would not."

-- Thomas Jefferson

"It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world."

-- Thomas Jefferson

"I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them." -- Thomas Jefferson

"My reading of history convinces me that most bad government results from too much government." -- Thomas Jefferson

"No free man shall ever be debarred the use of arms." -- Thomas Jefferson

"The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in government."

-- Thomas Jefferson

"The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants." -- Thomas Jefferson

"To compel a man to subsidize with his taxes the propagation of ideas which he disbelieves and abhors is sinful and tyrannical."

-- Thomas Jefferson

Thomas Jefferson said in 1802:

"I believe that banking institutions are more dangerous to our liberties than standing armies.

If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property - until their children wake-up homeless on the continent their fathers conquered."

I wish we could get this out to everyone.

I'm doing my part. Please do yours.

                                                                                     SOLYNDRA

P.8-B#157

Despite the fact that Solyndra went bankrupt even after the government loaned them more than a half billion dollars in stimulus loans, Sen. Jim DeMint says that Obama calls such loans “investments” when actually they are really venture socialism.  Obama and his administration have shoveled more money in just a few months after Obama came to office than has happened in world history.  Then you have the Department of Energy offering loans totaling $38.6 billion for green energy projects, one of which was Solyndra.  It was supposed to create 65,000 jobs.  The Department of Energy struggles with the auto-industry as well as funding solar panels and wind farms.

To promote the building of smaller cars that can meet federal fuel-efficiency mandates, Nissan was given a $1.4 billion loan in 2010, and Tesla Motors received a $465 million loan to build an electric sedan and the battery packs to power it.

The taxpayers are still holding the bag for the auto bailouts that were given to protect union jobs and benefit packages.

The government gave General Motors $50 billion in loans and owns 500 million shares, or 32% of GMs common equity.  When these shares are sold, trading around $22 per share the taxpayer is likely to take a huge loss.

In the meantime Freddie Mac and Fannie Mae continue to drag down the federal portfolio.  These government mortgage companies hold $5 trillion in debt since the government took control in 2008.

Freddie and Fannie run continual deficits and their coffers are regularly replenished by the Treasury Department.  They have allocated $46 billion for the Home Affordable Modification Program which was declared a “failure” by the special inspector general.   (Continued on the next page)

                                                                      SOLYNDRA

P.9-B#157                                    (Continued)

High-ranking officials have suggested that the government turn owned foreclosures into rental properties.  Despite all of these billion-dollar busts, Obama is pushing for massive tax increases to pay for more of his “investments.”

If his new Jobs Bill were made law, it would create a new “permanent venture socialism fund.”

Senator Jim DeMint concludes that the Republicans shouldn’t be the party of big labor.  We should all be working together to promote a free market which allows innovative businesses to succeed instead of subsidizing failing companies.

“Playing investor on the taxpayers’ dime won’t rebuild the economy, it will destroy it.”

                                                         THE GROUND ZERO MOSQUE

The facts come from the Christian Action Network news letter.  Would you believe that the Muslims in charge of the Ground Zero Mosque that is now called Park 51 are asking for $5 million in federal tax dollars to help construct the mosque building?  Their request was denied because they have not yet met the criteria for non-profit certification.  Once they get their paperwork in order they can reapply for taxpayer funds and receive money.

To get even more money the developers are suing the former building owners for an additional $4.5 million to fund their victory tower at Ground zero.  The whole thing is maddening.  As Rep. Allen West (R-FL) said, the Islamic ideology must be challenged, not accommodated.  We even have an Islamic training camp called Islamaberg in New York.

Thos of us who know about the Islam religion know that this mosque is a victory mosque for the Muslims.  Ground Zero will be tainted by our enemy.  It is another cultural jihad victory for Islam.     Leonor