Tag: Politics

Special MLLG New Year Posting…. DANGER: 2022 Will Be An Annus Horribilis

George Noga

If Putin or Xi ever intend to invade Ukraine or Taiwan, it will be in 2022.

Special MLLG New Year Posting . . .
DANGER: 2022 Will Be An Annus Horribilis
By: George Noga – January 1, 2022
This posting is unplanned. After formulating my investment plan for 2022, as I do at the beginning of each year, I decided to share my analysis with readers. As I reviewed the geopolitical, economic and political landscapes, it scared the hell out of me. It looks like 2022 will be an annus horribilis with a phantasmagoria of likely horrors.

Geopolitical Horrors

Russia has massed 100,000 troops, poised for invasion, on the border of Ukraine. No one other than Putin knows his intentions. Perhaps he just wants to use this threat to exact major concessions. Either way, it is a bitter pill for the US and Europe. China is seriously threatening Taiwan but is unlikely to act until after the Beijing Olympics in February. If Putin or Xi ever intend to invade Ukraine and/or Taiwan, they will do so in 2022 when the US has its weakest leadership ever. Moreover, Putin is visiting Xi soon amidst increasing evidence of an entente forming between Russia and China.
The geopolitical horrors also include Iran and North Korea. Iran could race to develop nuclear weapons, threaten Israel and Saudi Arabia and foment terrorism throughout the Middle East. Kim Jung Un could invade South Korea using the same calculus as Putin and Xi. The greatest horror would be multiple threats materializing simultaneously, such as if attacks against Ukraine, Taiwan and South Korea were coordinated.

Economic Horrors

The greatest economic horror, by far, is inflation. The 7% inflation the US has experienced in recent months is backward looking. In coming months, I expect inflation in double-digits. Inflation savages not just your current income but also your investments. If you have managed to save say $1 million toward your retirement, you will need to have $1.1 million at the end of 2022 (assuming 10% inflation) just to stay even. Inflation will have cost you $100,000 in one year; that’s how pernicious it is.
Inflation destroys not only your income but also your investments
And inflation is just the beginning. The longer and higher inflation goes unchecked, the more Draconian will be the correction needed to restore the status quo ante. Ultimately, the Fed will have to surge interest rates; the last time inflation was this high, rates skyrocketed to 21%. Taming inflation will result in a deep and prolonged recession which will cause the deficit to go thermonuclear. Tax collections will plunge and Biden will print trillions upon trillions of borrowed dollars – all in a futile attempt to end the recession and to salvage progressives’ tattered political prospects. As always, the worst suffering will be among the poor and the middle class.

Political Horrors

One more thing is needed to complete the circle of our horrors – non compos mentis and feckless political leadership. Biden’s cognitive struggles are apparent to everyone including Putin, Xi, Kim and the ayatollahs. Other top US leaders have been selected based on identity, not competence, none more so than Kamala Harris, who got her big break in politics on her back. Their weakness and ineptitude was on full display in the departure from Afghanistan. Did I mention Biden wants to cut defense spending?
The Biden political horror show encompasses every issue: (1) Afghanistan with 60,000 yet to be evacuated; (2) rampant inflation; (3) lack of control over immigration and the border; (4) science-defying lockdowns, vaccine and mask mandates and school closures; (5) lawlessness, looting, bail elimination and non-prosecutions; (6) supply chain disruptions; (7) loss of US energy independence; (8) canceling US pipelines while approving Nord Stream 2; and (9) BBB’s $5+ trillion of added spending.

Investment Horrors

All the aforementioned horrors profoundly impact investing. Financial and retirement plans of Americans are being savaged by inflation and are subject to unknown and unknowable risks. FYI – I have actively invested for 50 years and owned an investment firm for 40 years. Following are the actions I have taken in the past few weeks.
I have moved my investments into a highly defensive posture. I now have over 70% of my investment assets in cash, cash equivalents and ultra short-term assets. Virtually all my fixed income (bonds) assets have durations of only one to two years. I have doubled my allocation to gold and commodities, the best inflation hedges. I want to be positioned to weather the coming apocalypse and to reinvest at or near the bottom.
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I take no pleasure whatsoever in any of this and hope I am wrong about 2022; but I call them as I see them. Worst of all, the horrors all are self inflicted and for the wrong reasons. Americans voted for the phlegmatic government they now have mainly because suburban women voted on the basis of personality rather than competence. They sowed the wind and soon we all will reap the whirlwind!
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Our next scheduled posting is on January 16, 2022.
More Liberty Less Government – mllg@cfl.rr.com – www.mllg.us

The State of the World is Better Than You Think

George Noga

Human nature causes us to measure progress against utopia rather than against the past.

The State of the World is Better Than You Think

By: George Noga – January 17, 2021

This is our first post of 2021 and we are starting out on a positive note. Most people believe the world is going to hell in a handbasket. Recent polls show only 6% of Americans think the world is getting better. Many tacitly assume that for humanity to be better off, everything must be getting better for everyone everywhere. Reality never works that way; some unfavorable trends coexist with many more positive ones. Moreover, many people tend to measure progress against utopia rather than the past.

Humans are hard wired to be pessimistic as we evolved from risk-averse ancestors. When our Paleolithic forebears heard a noise in the bushes, it could be caused by either the wind or a predator. Those who assumed it was the wind did not live to be our ancestors. We therefore are descended from people who tended to worry a lot.

We worry about, inter alia, the Covid pandemic, climate change, politics, civil unrest, the environment, crime and terrorism. Following are some key megatrends showing that Homo sapiens, far from perdition, really is getting better and better all the time. Note: much of the data used herein are from a Cato Institute book: Ten Global Trends.

Eradication of extreme poverty: In the past 200 years the world economy grew 100 fold, while population grew only 18 fold. If the same growth rate is maintained, the economy will grow 10 fold by 2100, while population will be about the same as today.

Natural resources are plentiful and becoming more so: Over the last 40 years, out of 50 commodities studied, 45 of them are less expensive (adjusted for inflation) meaning they are more plentiful relative to demand for them. The average price for all 50 commodities fell 35%, while during that same period wages grew 80%. We have never run out, or are in any danger of running out, of any nonrenewable resource!

Population soon will peak and then decline: Several demographic studies agree that human population will peak soon after mid century and then begin to decline such that in 2100 population will be close to its present level and continue to decrease thereafter. This should go a very long way toward a solution for climate change.

Abundance of food with less land: The world food supply is now 3,000 calories per day per person, an increase of 36% in 60 years despite a burgeoning population. This level exceeds the USDA’s recommended daily caloric intake. Except in war zones, famines are ancient history. More and more land (1 million square miles) has been reclaimed for nature due to use of GMOs and more efficient farming practices.

End of wars between countries: In the past 50 years, wars between nations have been rare and those that did occur resulted in much fewer casualties; this is true even though we went from 50 countries in 1946 to about 200 today. This trend is attributable to increases in democracy, greater wealth and intertwined trading patterns.

All around better world: In recent years democracies increased from 31% to 49%, while autocracies fell from 39% to 11%. In the past 100 years the chances of someone dying from a natural disaster have declined by 99%. Virtually every metric extant evidences that we live in a far safer world and it is getting better all the time.

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As this year progresses, MLLG will address many of the problems America and the world face. It is wise however to begin 2021 with some perspective, so that our problems do not cause us to lose sight of the big picture, i.e. the enormous progress humanity has made and continues to make – contrary to the beliefs of 94% of Americans. Whenever you hear a rustling in the bushes, it is not always a lion.

Our January 24th post deals with the integrity of elections in the USA.

More Liberty Less Government – mllg@cfl.rr.com – www.mllg.us

Political Principles and Fake Media Honors

George Noga
Americans prefer to vote for the fool they know rather than for the devil they don’t.
Political Principles and Fake Media Honors
By: George Noga – April 11, 2019

          Previously, we blogged about some key non-partisan principles of American politics ; (1) there are no permanent majorities; (2) the longer any party is in power, the greater the chance it will lose; and (3) the role of money. Now, another principle, i.e. the power of incumbency.  We will identify more principles in future postings.

Principle: The Power of Incumbency

           In the 126 years since 1893 there have been only two elected presidents who lost reelection in a head-to-head race. Hoover lost because of the Great Depression and Carter lost due to economic disaster and fecklessness. Throughout history, Americans strongly prefer to vote for the fool they know rather than for the devil they don’t.

       And yes, this bedrock principle of American politics applies to our current president. According to econometric models with sterling track records for picking presidential winners, Trump would be a heavy favorite if the election were held today. Donald Luskin of TrendMacrolytics, which tracks GDP growth, gas prices, income, inflation, tax burden and payrolls, has Trump with 294 electoral votes in a blowout. Yale/Fair asserts Trump will win 54% to 46% even with just a mediocre economy. Politico says Trump has a strong shot at winning reelection in a landslide.

           Anything can – and likely will – happen between now and November 2020, but it would be a huge mistake to underestimate the power of incumbency. By the way, you won’t see anything like this (see infra) in the New York Times or on CNN.

Democrat Party 2020 Platform

          Based on their own proclamations, democrats stand for: reparations for slavery, a new wealth tax, impeachment, late-term abortion and infanticide, 70% top income tax rate, giving felons and 16-year-olds the vote, refusal to repudiate anti-semitism, free college tuition, Medicare for all, abolition of the electoral college, amnesty for illegal aliens, packing the Supreme Court, federal jobs guarantee for all, $15 minimum wage, green new deal (no air travel or cows and one car per family), abolishing ICE, major cuts to defense, abolishing filibusters, single-payer (government) health care, federal licensing and control of large corporations, gun control, nationalizing voter registration, abolishing or changing the Senate, imposing democratic socialism, statehood for DC and Puerto Rico and tearing down the existing walls on our southern border. With popular ideas like these, how can democrats possibly lose?

Journalistic Honors: The Pulitzer Prize and The Cronkite Award

          Recently, my wife and I spent a few weeks in a remote venue with access only to the New York Times and CNN. I had forgotten how truly horrid they are. There was no line demarcating news and opinion; they covered only stories fitting their narrative; and much of it was fake. They persisted in ballyhooing Trump-Russia collusion long after it was dead obvious to most regular people that it was mighty thin gruel.

         It is therefore fitting that the most prestigious journalistic honors are named after purveyors of fake news. Joseph Pulitzer was a scurrilous, muck-raking yellow dog publisher, best known for his fake news promoting the Spanish-American War. Walter Cronkite achieved his acclaim based on fake reporting of the Tet offensive. Moreover, these awards are given only to progressive journalists who toe the party line.

Fake reporters reporting fake news receive fake journalism

awards named for fake journalists famous for fake reporting.

       These journalism awards are so fake they inspired us to come up with similar awards for other professions such as: the Kevorkian/Gosnell Prize for Excellence in Medicine, the Bernie Madoff Award for Distinction in Finance or the John Gotti Prize for Accomplishment in Law Enforcement. We could go on, but you get the drift.

Next on April 14th – Did HRC really win the 2016 popular vote?

MLLG Collection of Ultra-Short Posts

George Noga
Education spending before and after the lottery – Hate crimes really are political crime. Thirty reasons why Hillary lost – Participation trophies –  Americans’ New Way of Life
MLLG Collection of Ultra-Short Posts
By: George Noga – May 27, 2018

       From time to time we bale together a short stack of pithy topics that, although blog-worthy, cannot justify an entire 500-word posting; this is one of those times.

Lottery and Education: MLLG compared Florida’s per pupil spending on education before and after the lottery. The year before voters approved the lottery (1985), Florida spent $4,060 per pupil – equivalent to $8,000 in 2017.  Actual 2016-17 spending was $7,500 on a comparable basis – $500 less per student than before the lottery. This is unsurprising; anyone with a modicum of walking-around sense knew lottery money would supplant other money over time. What’s truly pitiable is that clueless teachers, who fervently bought in to this three-card monte, are still teaching our kids.

Why Hillary Lost: Hillary has proffered myriad reasons why she lost; following are a few she omitted: Marc Rich pardon, sniper fire in Bosnia, trashing Jennifer Flowers, Paula Jones, Kathleen Willey, Monica Lewinsky, calling half of America deplorable, cheating Bernie Sanders, Vince Foster, travelgate, Whitewater, cattlegate, troopergate, $15 million Chelsea condo with campaign funds, Loretta Lynch interference, accepting stolen debate questions, secret server, deleting 30,000 subpoenaed emails, destroying phones and hard drives, Benghazi, Haitian thefts, Russian uranium deal, Wikileaks, Anthony Weiner, compromising top secret data, Clinton Foundation pay for play, avoiding Michigan and Wisconsin and just being an all-around horrid person.

Self Esteem and Participation Trophys: Self esteem is unearned confidence and hence a lie. American students fed self esteem rate themselves high even though they score below average. Such students will feel good about themselves as they flip burgers while their foreign counterparts own the place. I once supported a charter school in a tough neighborhood. The students were indoctrinated in self esteem and bought into the hype as did their parents. Unfortunately, they learned nothing else; the school’s test scores tanked; the school failed and the students were even worse off than before but they had their participation trophies. Self esteem must be earned through achievement.

New American way of life: A guy with a girlfriend and 2 children receives $90,000 per year as follows. Buy a house, live with your girlfriend, don’t get married and continue to use your parents’ address. Rent to your girlfriend for $900/month paid by Section 8. Your girlfriend receives Obamacare, cell phone and utilities, $600/month food stamps and free college tuition. You each claim one child on your tax return and both claim head of household for credits of $1,800. Your girlfriend claims disability (easy) for another $1,800/month. Married couples get none of these benefits but by following this plan, as many now do, they receive $90,000/year. Is this a great country or what?

Airbnb and Uber Under Attack: Deep blue cities and states continue attacking Airbnb and Uber at the behest of their unionist paymasters. Progressives insist any two people can share a marriage but are adamantly opposed to two people sharing a ride or an apartment. Liberals likewise believe in a woman’s right to choose provided her choice is not about where to school her children, owning a gun, joining a union, buying health insurance and obviously not about sharing a ride or apartment. While Uber and Airbnb were investing in transformative technology, taxi owners were investing in politicians and morphed into powerful, politically connected, state-sponsored cartels.

Hate Crimes are Political Crimes: Millennia of conflict and confrontation were needed to purge the world of the notion that a crime against one person should be treated differently than the same crime against another person. Hate crime laws diminish the actual crime and contain different standards of justice for different victims. Whether or not a crime is a hate crime is purely a political decision which ultimately depends on whether charging a hate crime advances a certain political narrative. Hate crimes, thought crimes and hate speech are throwbacks to the middle ages and the inquisition.

Next: The second anniversary of the Pulse nightclub tragedy. Do not miss this one!
MLLG

My Days with Jeb Bush and Rand Paul 

George Noga
By: George Noga – January 10, 2016

     I have spent the better part of entire days one-on-one with Jeb Bush and Rand Paul; this is a simple account of the time I spent with each. Let’s begin with Jeb.

In the 1990s I founded the first school choice program in Florida by raising money to pay for private school for disadvantaged kids. The program was an instant success and I asked Jeb to speak at our inaugural banquet. While conversing with Jeb at the dinner, he asked if there was anything further he could do to help. Not being one to pass up an opening of such magnitude, I averred that since we had a waiting list of over 2,500 children, he could help me raise more money to fund these kids.

Without a moment’s hesitation, Jeb committed a day of his time to help raise money. The arrangements soon were made; I was to pick up Jeb at the airport one morning and drop him where he had a speaking engagement later that afternoon. Jeb was by himself, without staff or security, and we spent the day driving from meeting to meeting with heads of foundations and corporations. Jeb was well briefed and did his best to help me raise money. He solicited my thoughts about how best to expand school choice in Florida. He always was pleasant, modest and unassuming.

Jeb later got a corporate tax credit scholarship bill through the legislature permitting businesses to obtain dollar-for-dollar tax credits for donations to qualified scholarship funding organizations such as the one I started. Fast forward to 2016; the organization I founded now raises $300 million annually to fund nearly 70,000 scholarships for children from poor families attending failing government schools.

My day with Rand Paul occurred recently. Senator Paul and his family had planned a vacation to Disney World and, being a low handicap golfer, he wanted to play a great course while here. I serve as co-chair of the Center-Right Coalition of Central Florida and am known in political circles; further, my son had once done volunteer work for the senator. To complete this circle, I happen to belong to a club with a highly regarded golf course. The arrangements soon were cemented.

Rand drove his wife and children from Kentucky to Orlando without staff or security, He arrived at my club precisely on time. We practiced, played 18 holes (sharing a golf cart) and had a two hour lunch afterward. He never once used or even looked at any electronic device. He was an accomplished golfer and shot his handicap on a difficult golf course. At lunch, where we were joined by a few others I had invited, he solicited advice from each person about what needed to be done for the good of the country and answered all questions in a straightforward manner.

Both Jeb and Rand met Teddy Roosevelt’s famous approbation of “Hale fellow, well met“. They were unerringly pleasant, modest and solicitous of others. They did exactly what they said they would. Our beloved republic would be in good hands with leaders that had the character of Jeb Bush and Rand Paul.
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The next MLLG post identifies the keys to the 2016 election – look for it in about a week
MLLG

The MLLG Blog Returns for 2016 

George Noga
By: George Noga

      It’s baaacck! After taking 2015 off for reflection and discernment, the MLLG blog returns. To be sure, there are changes of which the principal ones are:

  • We have a new commercial email provider with greatly enhanced readability; with few exceptions (such as mobile devices and Roadrunner email), you will see exactly what was written in the format it was written;
  • Our website is being upgraded to contain past posts from June 2011 onward and new posts on a timely basis; there will be subject and chronological indexes as well as a section containing the best of MLLG writings. The new site should be 100% functional soon; when it is ready, we will let you know on these pages;
  • Posts are shorter – 500 words more or less – readable in 2-3 minutes;
  • Current events and opinion are emphasized; however, economic, political and human interest content continues – fact based and principled as always; and
  • Frequency is not on a set schedule but expect 3-6 posts per month.

There is no cost to receive posts via email or internet. We will not request financial support until 2017 at which time we may ask readers and supporters to make voluntary contributions. The costs of operating the blog are not onerous but are nonetheless very real. There are costs for using a commercial email service for tens of thousands of emails and for, inter alia, maintaining a domain name and website.

Why do we need another blog and what can MLLG offer that is not currently being provided elsewhere? If you stay with us for a while, you should agree that you are receiving perspectives not usually found elsewhere. The author’s background as a financial analyst, economist, CPA and high level political operative confers a special knack for combining fact, logic and insight – not to mention well over a half century as a keen observer of life in these United States and beyond.

We unabashedly approach matters from a more liberty – less government perspective but never – absolutely never – at the expense of facts or logic. We have many progressive readers who respect being presented with principled analyses, even ones contrary to their cherished beliefs. However, the MLLG blog is not intended to convert liberals – but to witness the blessings of liberty to a candid world.

      Enough explanation. The next MLLG post you will soon receive is a memoir of the days the author spent with Jeb Bush and Rand Paul. Not many bloggers have spent full days one-on-one with two 2016 presidential candidates. Other upcoming posts deal with the 2016 election, radical Islam, EPA carbon regulations, how bottled water gives the lie to socialism and a special multi-part series about guns in America. Stay tuned!
MLLG

Letter to Liberals

George Noga

Defining Liberalism – Part 4

By George Noga – November 22, 2014

Dear Liberal Friends:

Although I find liberal ideas (to the extent such exist) jejune, vapid and repugnant, I always have accorded you personal respect and dignity, a courtesy few of you have reciprocated. This is akin to the Christian concept of condemning the sin while loving the sinner. Most of you have been quick to call me racist, evil and other vile epithets but I do not reciprocate, again defaulting to a Christian concept, turning the other cheek. Although I have many liberal readers, my blog is not aimed at those impervious to truth and logic. This post is an exception and is expressly for you, my liberal friends.

Our personal lives, dreams and hopes are not dissimilar; we all want a brighter future for our children and a healthier planet; we live within our means; we assist those in need; we consider ourselves moral and try to do the right thing. We live-and-let-live, which interestingly is a libertarian principle. We enjoy similar pursuits and generally get along very well together. When politics rears its head however, it seems we are from different planets – make that different galaxies.

“Your credo is sentio ergo sum – I feel therefore I am.”

I view your liberalism as an emotional state in which obvious contradictions, disdain for facts, utopian fantasies, obsessive desires to control and to take from others and antipathy for all who differ – in various degrees and patterns – come to dominate your thinking. It seems that you feel rather than think; hence your credo is Sentio ergo sum, i.e. I feel therefore I am. Notice I say liberalism is an emotional state; I do not, as do many others, term it a mental illness. Churchill described your liberalism poignantly as: “the philosophy of failure, the creed of ignorance and the gospel of envy.”

Perhaps your liberalism was caused or exacerbated by fluoridation, EMT, the ozone hole, acid rain, GMOs, Thimerosal, dioxin, PCBs, acrylamide, BPA, pink slime or any combination of these and the 50 other instances of junk science in which you once believed – and perhaps continue to believe – and all of which have been proven false or grossly exaggerated. Did I mention anthropogenic global warming and organic foods? You embrace unreason because your progressive dogma is antithetical to objective reality and you prefer the ersatz comfort of mythology to the real world.

“Your liberalism is a lie.”

You believe the darndest things – many of which are contradictory. It is okay for a very young girl to have an abortion without parental knowledge or consent but not for her to sell lemonade in her front yard. Gender specific abortion is fine because we must kill females in order to protect their rights. Fifty million abortions are good but 1,300 executions are evil. Choice is your gold standard but you believe a woman cannot choose where to school her children, to own a gun and whether or not to buy medical insurance or to join a labor union. You believe more money improves schools, raising the minimum wage helps the poor, voter ID laws suppress minority voting, there is a war on women, government creates jobs,ad infinitum. Such modern day witchcraft inevitably leads to the syllogistic conclusion that your liberalism is a lie.

Most of you live inside a plastic bubble with other bien-pensant libs, in intellectually isolated and segregated enclaves; you live your lives without ever conversing with an evangelical Christian, conservative, libertarian or anyone from fly-over land. You attended government schools with a liberal curriculum using liberal textbooks written by leftist professors and taught by progressive unionist teachers in a milieu of political correctness.You are taught there are no values except that there are no values. There are no winners or losers because no one keeps score and everyone is above average. The media, pop culture and even religion reinforce your liberal mythology. If you ever venture outside your plastic bubble and perchance encounter truth, your first instinct is to deny it; your second is ad hominem attacks.

Your last liberal refuge is compassion and good intentions about which you never tire of regaling me. However, recent scholarship exposes your ersatz compassion as pathological altruism in which your attempts to promote the welfare of others, instead results in harm. The entire point of your falsetto compassion is for you to feel better when another’s suffering provokes unease; but this does not assure the sufferer of relief. Your interest is in accruing compassion points that you and others will admire. If you’re trying to prove your heart is in the right place, it isn’t. You regard your compassion as the central virtue that makes you good as distinguished from mean-spirited folks like me. But to bolster your rush of pious, pompous reaction, you need more victims in exactly the same way an addict needs more drugs.

“If you’re trying to prove your heart is in the right place, it isn’t.”

If you are so anguished about others’ suffering, why are you so disinterested in wasteful, misdirected and ineffective government programs? It is because you care much less about actually helping than you care about caring. Hence, it is more important for you to say or to do something rather than to accomplish something. Once you have written, spoken or even held forth at a social gathering about some government program, your work is done and you can bask in your own pious reaction. You always want a bigger welfare state for self validation rather than for helping others. That’s precisely why your mantra always is to spend more – it is really for your benefit for you to feel better about yourself.

To conclude dear liberal friends, you are all about feeling rather than thinking. You bought uncritically into every bit of junk science in your lifetime. You routinely accept grotesque contradictions as dogma. You believe so much that simply isn’t true, the only possible conclusion is that liberalism is a lie. You live in a plastic bubble where your myths are constantly reinforced. If you ever experience a conflict, you first deny the truth and then default to vicious and ugly ad hominem attacks. Unsurprisingly, studies show liberals hate more than any other group, a fact to which I can attest.

Even your compassion is phony; your tears are crocodile tears. If you really cared about the poor more than pumping up your self image, you would be more interested in the effectiveness (results) of programs intended to assist them rather than forever mindlessly spending more and more of other peoples’ money. By the way, study after study shows you talk a good game but don’t deliver; folks like me donate far more to charity than folks like you. You take great pride in your compassion and pristine intentions which you wear on your sleeve for all to see. Everything you do is to show your heart is in the right place; but if you’re trying to prove your heart is in the right place, ipso facto, it isn’t!  Have a nice day.

Acknowledgment and credit are due for the ideas presented herein dealing with the nature of liberal compassion. The books Never Enough: America’s Limitless Welfare State and The Pity Party both by William Voegeli, as well as his summary in Imprimis, were sources for this posting.
MLLG

What You Should Know about Tax Inversions

George Noga
By: George Noga – October 24, 2014
      I had not planned a posting about corporate tax inversions but I am working this in because I believe you will read a perspective herein not to be found anywhere else and, as a CPA, I don’t need to invest a lot of time in research. To begin, a tax inversion is the relocation of a US corporation’s headquarters to a lower tax nation so that it “inverts“, i.e. becomes a foreign corporation for US tax purposes. The US, unique among developed nations, imposes taxes on income earned abroad by American corporations – but the tax is not payable until the income (cash) is repatriated, i.e. returned to the US from abroad. Although there often are crucial non-tax considerations involved in inversions, the main driver usually is avoidance of US tax on income earned abroad and the ability to repatriate such funds.
    Because US taxes are not due until the foreign-earned profits are repatriated, US corporations with foreign operations keep the money offshore. For perspective, 75% of US corporations’ cash is kept outside the US – about $2.1 trillion currently. For example, Microsoft has $70 billion but less than $10 billion is in the US. Money held outside the US can’t be used for investment in plant, equipment or training in the US or to hire Americans; instead, it stays abroad.
       The Obama administration rails against inversions because they assert it reduces the amount of corporate income tax collected. Bear in mind that most companies currently do not pay the tax anyway – that’s why they keep the $2.1 trillion overseas. Following an inversion however, profits (cash) can be brought back into the US without tax and be used to invest within the US to create new American jobs. The increased productivity from this added investment in capital goods, job training and hiring of new workers helps all Americans and increases their standard of living. Arguably, inversions are a net blessing to America in the long run even if corporate tax collections suffer in the short run.
       I return to tax inversions and repatriation infra, but inversions do not exist in a vacuum. They are but one part – and a rather small one at that – of the overall US tax scheme. To put inversions into a proper framework, we must step back, understand what is really going on and look at US tax policy from 30,000 feet.
Getting the Most Feathers from the Geese with the Least Amount of Hissing
       As described in the above aphorism from Louis XIV’s finance minister, Jean-Baptiste Colbert, politicians approach taxation as an art form in which they pluck the geese (taxpayers) to get the most feathers with the least hissing. The main alternatives (cutting spending or raising taxes directly) are anathema. Politicians always enact or raise taxes to make everything as opaque as possible to taxpayers. This, of course, is diametrically opposed to the best interests of taxpayers who should want all taxes to be as transparent and direct as possible. The best tax for taxpayers would be a tax on consumption or a flat tax on income with no deductions or exemptions whatsoever.
“Don’t tax me; don’t tax thee; tax the man behind the tree.” 
       Let’s postulate the US had a flat consumption tax of 19% with no other federal taxes, exemptions, or  deductions whatsoever and that 19% tax represented 100% of the revenue to the government. If politicians wanted to increase spending, the only alternative would be to raise the tax rate to 20% or higher. Such a tax increase would be 100% transparent to every American every time he/she purchased anything. Citizens would know the true cost of government and everyone would have an interest in keeping spending under control. The reason we have a corporate income tax (and are now discussing tax inversions) is because it is a tax that takes many feathers from the geese without the geese ever being aware they are missing feathers. This is an important concept and is explained below.
Corporations Never Pay Taxes – Only People Pay Taxes
        Wouldn’t it be nice if no homo sapiens ever again paid tax? Only artificial constructs like corporations, with no heartbeat or pulse, would be taxed. This is like the mythical Germanic kingdom where candy grew on trees, lemonade flowed in rivers and the fattest, ugliest and stupidest  man was king. Alas, non humans paying tax can’t happen even though politicians would like you to believe it. All taxes always are paid by real, living, breathing people; corporations never have, do not now and never will pay a penny of tax. If the government increases the tax on a company by “say” $1 gazillion, there are three, and only three, possibilities for bearing the burden of the tax.
       It is true that businesses may remit tax revenue to the government, but it is not their money; they are simply transmitting funds to the government they have collected from other people. If the business chooses to pay the tax by reducing its profits by $1 gazillion, the owners (stockholders) pay the tax via lower dividends and/or a lower stock price. Most stockholders are ordinary thinking, feeling Americans investing through mutual funds, IRAs or 401(k) plans. Second, the company can cut its costs $1 gazillion; this of course means firing employees –  again, very much alive ordinary Americans. Third, the company can increase its prices by $1 gazillion (and this is what happens 90% of the time) meaning consumers, again scient, feeling ordinary Americans, are paying the tax in the form of higher prices.
       In reality, unlike in the mythical German kingdom, corporations don’t pay income taxes; there are only real-life human beings paying taxes; but politicians want to beguile you into believing fat-cat corporations are somehow not paying their fair share. Politicians want you to buy into their class warfare canard and they are counting on keeping you ignorant. In reality, the issue of tax inversions is moot and is a contrived tempest-in-a-teapot. Moreover, as observed supra, inversions in the long run may be a net benefit to ordinary Americans as it enables more money to be repatriated which can be used in America for capital investment to increase productivity and to employ more Americans.
       Now that we all understand just how inconsequential inversions are, we still are faced with a political issue searching for a solution. The US corporate tax rate is the highest in the world at 35% federal and 6% state for a total of 41%. Everyone, including President Obama, agrees it should be lowered. Everyone also agrees the $2.1 trillion being kept abroad should be repatriated. A reasonable compromise would be to lower the US tax rate to 20% for a combined federal/state rate of 26% even though this still is higher than many countries that are between 12.5% and 20%. This should be combined with a tax holiday for companies to bring home the $2.1 trillion being held offshore by paying a nominal one-time tax. This was done in 2004 and 800 companies participated, repatriating over $300 billion in overseas profits.
       In any other time with any other president, a compromise would be easy. However, President Obama, is intransigent; he will only compromise to lower the tax rate and to repatriate the funds if new and highly punitive corporate tax measures are part of the deal. Consequently, nothing will happen while Obama remains president. Inversions will continue; trillions of dollars will remain offshore; and ordinary Americans will suffer the consequences. Obama is banking that these same ordinary Americans will succumb to his anti-business, class warfare narrative that corporations pay tax and that inversions are a manifestation of corporate greed. In short, he is demagoguing the issue to death.

Why I Write This Blog?

George Noga
By: George Noga – September 10, 2014
        This posting marks the beginning of the end. Between now and mid-December I will publish the final MLLG posts. I often have been asked why I have taken the trouble. Why have I spent 1,000 hours writing 300 posts filling 900 pages containing 500,000 words since November 2007? Why have I written fact-based and principled tracts about public policy even though I am unenamored with politics and politicians? This post answers the question: why. In the Federalist, Alexander Hamilton questioned and challenged his fellow Americans thusly:
“Whether societies of men are really capable or not of establishing good government from reflection and choice, or whether they are forever destined to depend on accident and force.”
       If any society of men fails to get its politics right, it affects every aspect of life and life itself. Get politics right and we live our lives in freedom, prosperity and pursuit of our dreams. Get politics wrong and liberty, happiness and property are forfeit and life itself is nasty, brutal and brief. Politics, grubby as it is, is the sine qua non to having a life worth living.
      Examples abound of those who got their politics wrong: Hitler’s Germany, Mussolini’s Italy, Imperial Japan, Mao’s China, Pol Pot’s Cambodia and Stalin’s USSR were all black holes where life and liberty were trampled. Today we have,inter alia, Putin’s Russia, the Jongs’ North Korea, the Castro brothers’ Cuba and Mugabe’s Zimbabwe. And don’t forget the entire Arab world, nearly all of Central and South America, Africa and any place ending in “stan”.
       If you believe the western world is exempt, think again. WWI was a senseless slaughter with 40 million casualties; its politically inept conclusion led to WWII with its 150 million casualties. This was due to a failure of politics in Europe and also in the USA. In the past century and continuing to the present, “civilized” Europe has experienced 100 genocides, pogroms and ethnic cleansings. Vietnam was a  colossal failure of American politics to get it right; it cost 58,220 American lives and 303,644 more wounded. Nor have we learned; we continue to get it wrong right up to this day.

       If we don’t get our politics right, our children and our children’s children will live in an Orwellian torpor with their lives, liberty and property constantly at risk because of obeisance to failed ideologies, fantasies, vote buying, political correctness and the never ending and fruitless search for Utopias. Politics is inherently personal. Following are but some of the ways I have been directly harmed throughout my life by our failure to get politics right.

  • I had no father at home for 4 years during WWII which resulted from government ineptitude in fighting and ending WWI. Father was in Korea, also the result of political blunder, for another year during my childhood.
  • I received an execrable, pathetic non education in government schools from age 5 to 18.
  • The Federal Reserve created economic conditions that resulted in severe cycles, bubbles, panics, meltdowns and deep recessions throughout my life continuing to the present.
  • I was subject to income taxes of over 90%, creating perverse, uneconomic incentives.
  • It now requires $15,000 to buy what cost $1,000 when I was born due to government currency debasement.
  • Regulation run amok made owning my business onerous. The regulations, all in the guise of protecting consumers, in actuality, caused them (and me) great harm.
  • The politically micromanaged Vietnam War disrupted my life for the 6 years I served in the military.
  • The Fed has brutally devalued a lifetime of hard work via chronic negative real interest rates intended to protect a feckless government from the consequences of its ongoing debt binge.
  • A torpid, Europesque economy has been imposed, dooming me to economic stagnation instead of robust  growth.
  • The current crisis of spending, debt and deficits ultimately will result in a lost generation.
  • Our government has recklessly created and/or exacerbated dangerous situations throughout the world by weakening our military and appeasing tyrants. An existential crisis likely will result.
  • Obamacare death panels will ration and deny medical care and ultimately could kill me.
       Due entirely to failed politics I was fatherless for five years and lucky I wasn’t orphaned into a life of poverty. I survived utterly wretched government schools, incessant and severe economic cycles, debilitating inflation, astronomical tax rates and hyper regulation. Vietnam discombobulated my life. And all this was because of a government most consider one of the best extant. And all because we failed to get our politics right.
       Now, in my eighth decade of life, our once vibrant economy is riven by government-created anemia. America has transmogrified into sclerotic Europe where men lead lives of quiet desperation. Government has created a crisis of spending, debt and deficits, one consequence being sustained negative real interest rates that savage my decades of prudence. My final indignity is Obamacare; its rationing and death panels may end my life prematurely.
       Unfortunately, it doesn’t end with me. Our children and our children’s children are doomed to a much poorer and more dangerous future; they will be a lost generation. They will pay for our debt binge and generational theft with vastly reduced opportunity. They will inhabit a Clockwork Orange world where nuclear arms proliferate in places committed to our destruction and solely because we weakened our defense and kowtowed to tyrants. Our weakness invites terror and slaughter for which they will pay dearly, perhaps with their lives. And all this from a government most consider one of the best extant. And all because we failed to get our politics right.
“The correct answer to Alexander Hamilton’s question may be in the negative.”
       As you can see, if we don’t get our politics right, our lives are vastly diminished and trivialized in countless ways; we condemn our progeny to economic stagnation and loss of freedom. Their lives and liberty are at grave risk because we failed to get our politics right. It appears the correct answer to Alexander Hamilton’s question may be in the negative.
       I have tried mightily through this blog to show that the answer lies in more liberty and less government. Hopefully, my efforts have given our children’s children that infinitesimally better chance for liberty. And that is my answer to the question: why I write this blog.
        Note to readers:  I am striving to make the final postings between now and mid-December special as I seek to end my MLLG blog on a high note. I hope you enjoy them.

Balanced Budget Amendment No Holy Grail

George Noga

By: George Noga – Updated March 10, 2014

     A balanced budget amendment (“BBA”) is favored by 80% of all Americans in the belief it will, once and for all time, force fiscal discipline on the government. They are putting way too many eggs in the BBA basket. Watch out what you wish for. If there is a BBA, all those eggs will end up scrambled into a rather unpalatable omelet.

  There are myriad paths through, over, under and around a BBA. In short, it would not be worth the paper it was written on – assuming it can garner two-thirds majorities in Congress and ratification by 38 states. Following is a partial list of ways a BBA could be eviscerated.  

  1. A BBA appears simple but is complex. How do you define budget; what does balanced mean; what is a tax? It would be the only part of the Constitution that could be waived.
  2. What are allowable exceptions such as for military actions and natural disasters? There will be escape hatches big enough to drive a truck through. Whatever exceptions are carved out for some things, expect many more of such things. How would waivers work?
  3. How would a BBA deal with economic cycles? Revenues can both skyrocket and plunge from year to year. Are we to slash spending in a recession and be profligate in a boom? How do we define recession and boom? How is a BBA to be managed over the course of an entire economic cycle without opening to door to great mischief?
  4. Lawsuits will tie up a BBA for decades and federal judges will wind up with enormous power to change it. Consider how the federal bench has dealt with desegregation and busing; they still are entangling themselves over 60 years after the initial ruling.
  5. How do we distinguish capital expenditures from annual expenses? Surely, the argument will go, a BBA was not meant to include infrastructure spending that has a life of 50 years. If capital is treated differently, more expenditures will be classified as such.
  6. How do we address off-budget spending such as by Fannie, Freddie, USPS and the Federal Reserve? Who will prevent government from creating scores of new off-budget entities? Do we exempt interest on the debt; what happens when interest rates skyrocket?
  7. Watch out for so-called special taxing districts; these are favorites of local government with 50,000 nationwide. If they are not under the BBA ambit, they will mushroom.
  8. Are Social Security, Medicare, Medicaid and civilian/military pensions to be part of the regular budget? Are they no longer to be considered off budget entitlements?
  9. User fees will sharply increase and the government will be creative in imposing new ones. Be prepared to pay handsomely for everything you get from Washington – how about $100 to file a paper income tax return or $50 to get into a national park?
  10. Loan guarantees will become de rigueur as a way to fund programs off budget. After all, a loan guarantee is not an expenditure – is it?
  11. Instead of direct taxation, costly new regulations will flourish. Rather than spend tax money, Congress will bypass taxes and accomplish the same result through regulation.
  12. The tax code can be used for far more than raising taxes subject to a BBA. It can be larded with tax expenditures, incentives, penalties and all sorts of tomfoolery.
  13. Don’t forget mandates. Since the ObamaCare mandate survived judicial scrutiny, what is to stop government from substituting mandates for taxes or spending? The feds could   mandate that states, counties, cities (and even people) spend money not subject to BBA.
  14. A budget can be balanced with tax increases. This would strictly comply with a BBA but tax increases are certainly not what BBA proponents intended.

     Reluctantly, I have come to the view that a BBA is not the answer because: (1) we would expend lots of energy (perhaps for naught) enacting a BBA better spent elsewhere; (2) it will not work for all the reasons noted supra; (3) it would beguile us into falsely believing the problem is solved once and for all; (4) many of us would declare victory and move on while the other side would keep fighting; and (5) you can’t take the politics out of politics.

     The solution is to remain engaged permanently, albeit this is contradictory to human nature. Once a problem appears solved, we tend to go back about our private business. But big government and its acolytes never stop and neither must we. As seductive as it may seem, a balanced budget amendment is fool’s gold; it is not the Holy Grail.