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October 14, 2010


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The best chance for the Democrats to cut their losses is to recall Congress and extend the tax cuts. Here is the best way to explain why the wealthy should be included. By the way I'm pretty good at drinking beer. Some humor for my liberal friends to use on Nov 2nd about 6 PM.

The tax system explained by means of beer drinking.

Suppose that every evening, 10 men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do. The 10 men drank in the bar every evening and were quite happy with the arrangement until one day the owner said, "Since you are all such good customers, I'm going to reduce the cost of your daily beer by $20".

Drinks for the 10 men would now cost just $80. The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what about the other six men, the paying customers—how could they divide the $20 windfall so that everyone would get his fair share? They realised that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.
So, the bar owner suggested that it would be fair to reduce each man's bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.

Therefore, the fifth man, like the first four, now paid nothing.
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).

Each of the six was better off than before and the first four continued to drink for free. But, once outside the bar the men began to compare their savings.

"I only got a dollar out of the $20 saving," declared the sixth man. He pointed to the tenth man, "but he got $10!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a buck too. It's unfair - he got 10 times more benefit than me!"

"That's true!" shouted the seventh man. "Why should he get $10 back, when I got only $2? The wealthy always win!"

"Wait a minute," yelled the first four men in unison, "we didn't get anything at all. This new tax system exploits the poor!"

The nine men surrounded the tenth man and beat him up.

The next night the tenth man didn't show up for drinks so the nine sat down and drank their beer without him. But when it came time to pay the bill they discovered something important. They didn't have enough money between them for even half of the bill!

And that, boys and girls, journalists, labour unions and government workers, is how our tax system works. The people who pay the highest taxes naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy and they just may not show up anymore. In fact, they might start drinking elsewhere, where the atmosphere is somewhat friendlier.

For those who understand no explanation is needed.

For those who do not understand no explanation is possible.

Interesting election coming up. It appeared last night on Fox that the Democrats are closing the gap in many elections especially those where Tea Party candidates are involved. This morning however on other news programs I heard the opposite--that Democrats are now behind in 75 House elctions and virtually tied in 24 more.

What will happen? What polls have a hard time measuring it seems is turnout. While some polls focus on all registered voters and others try to focus on likely voters it seems this year they cannot keep up with the tides. The dems have called on all their top guns to try and minimize the losses. Clinton, Biden,both Obamas and now even, yes, Jimmy Carter are on a nonstop tour trying to stem the tide. Jimmy Carter/--now that is desperation. Isn't Jimmy Carter the standard by which all Presidents are compared to when we talk of the worst President in modern times? The common theme of all these campaigners is the venom they spew at the Americans who disagree with them. And, Jimmy Carter is among the best at criticizing his fellow Americans. So why not invite the man to join in? Ugliness works in the polls but will it work in the voting booth? We'll see.

The Tea Party started their tour on Monday and we can expect the Palin effect to begin in these last 2 weeks. Interesting that it started in Nevada. This election is not about issues as the positions are crystal clear on those. It has become about turnout.
Dems desparately trying to anger their base to turnout while Republicans remind voters what they are so angry about already.

Can the polls measure the turnout expectations? Or just the emotional sways each day? I suspect the issues will drive voters to the polls more than venom will in the end. The "I" man is losing his voice and his temper --that could be a sign of what he knows is coming.

The problem with all this debt as most of us have found out in our personal life or our businesses is that there is no escape from it. The interest is like a cancer and sooner or later you either get off the debt roller coaster or you are faced with tragic consequences. At this point for America we are on the verge of using debt to service debt and that is unsustainable. So, now government is not so much faced with how do we spend our money as much as it is faced with how do we pay our debt and stop spending money we've promised to people. There is no bankruptcy option for the USA rather only tragic consequences and they are looming on the horizon for the next generation to clearly see if they look. So Liberal or Conservative matters little as our alternatives vanish. While Bo's state of California wander's through the jungle led by Liberals the state of New Jersey addresses the problem led by a conservative. Which state will balance their budget first do you think, Harrycat?

I guess it all depends on your starting point.

Hi Harrycat, I appreciate your response. I spent way too much time on mine for you. But, the dialogue is interesting. Here's my thoughts on your response:

1. The money is not spent yet Harry and that is the whole idea of getting these guys out of there. $300B to $400B of the stimulus money is still unspent. The healthcare taxes and costs are not yet on line. The impact of the healthcare bill is already killing small businesses as insurance companies raise premiums to cover the add ons they were forced to provide. The TARP money is still sitting out there and from time to time Obama targets it for spending to bail out someone new. The entitlement programs are unfunded and until we fix them represent huge deficits. Obama wants to spend huge amounts of money on alternative fuels in his Cap and Trade program. The Feds have passed on huge expenses to the states in the form of mandated Medicare and Medicaide payments. A trivial amount of the money is spent. And there is no plan to pay for what has been promised but not funded.

2. By "con man" I mean that his basic value system is the the "end" justifies the "means". He deems it to be so important that he get his way and install his programs and wishes that it matters not what he says or does to get there. Thus, he is in a continuous mode of campaigning with promises he has no intent of keeping and misinformation designed to mislead people into believing he is talking about one thing when he means another. Healthcare was an example: he led us to believe he was addressing the costs of healthcare in reform. He really was aiming to expand coverage of healthcare. His references to transparency, the end of earmarks, bipartisanship, inclusion of all ideas and all people were simply words used to win the election and discarded immediately after he won. Con men cannot exist in a world full of realists. Realists see through the con and are not smitten by the charming methods of promising everything we ever wanted if only we will listen, believe and follow. For those of you who were hearing what you wanted to hear he is the leader of your dreams. For the 60% of Americans who were cautious he is the devil and they are quickly seeing through the smoke and mirrors. The rise of the Tea Party was the first sign, the election of Brown to Teddy's seat was second, and November 2nd will be the next big blow to his charming methods. Con men always try to win by promising what you want to hear. And, just last week I saw Obama utter "perhaps some bipartisan ideas can be considered after the election"---what other choice will he have as they dismantle his programs to save them once the veto ink dries up?" He can Veto his way out of office in 2012 or he can horse trade.

3. You strongly disagree about the bailout of the auto industry because that's what he told you. But many big companies have failed before. Just because he bailed them out doesn't mean they won't fail. GM will need more than a few Billion dollars to survive. They will need to produce somethig besides trucks that the public wants to buy. Ford has beaten Chevy for 33 straight years in truck sales. Electric and Hybrid cars? Maybe for a while while the market is still small and uninterested. But eventually when markets support it Ford and the foreign guys will beat them there as well. You probably can't see it but Obama saved GM not for the manufacturing industry but he saved them becasue he is owned by unions. They fund his campaigns, they bring him votes, they employed him and put him into the Senate. He owes them his political life. He bails out their companies, gives them preference on government bids and he bailed out their pensions. He even tries to give them advantages in union elections and recruiting. His contribution to small business where 75% of Americans work? $30B to the banks to loan out. That came 2 years into his presidency and it might not have come had I not been beating on Harry Reid every week to do something for Small businesses. Now he accuses the Chamber of Commerce of criminal activities raising money from Millionaires and US companies. Hmmm the mafia that runs most of the unions is what---the Boy Scouts? Jimmy Hoffa was ---? Con men feed off the weak. He caught the country in a moment of weakness but the con is over.

4. Obstruction by the Republicans? Yes there has been some. And I was not too happy about it. I actually wrote a letter to every Republican Senator and asked them to go see Harry Reid and work to get a healthcare bill that we could live with. But, by then the doors were closed and the only thing that Obama wanted was someone to be the 60th vote. So they knocked mostly on Snowe's door. Eventually she let them get it out of committee but when they tried to pass universal coverage she refused to go along. But, in the end the Republicans knew Obama was too far away for compromise and too hellbent on his own policies, armed with the mandate and a super majority. So they obstructed. And, thank goodness they did otherwise we would have universal, single payer healthcare, cap and trade, and be well on our way to a European system of sociasm.

5. His accomplishments: Saved the great deprssion? No, if anything helped it was TARP and that was Bush. If anything caused this mess it was 15-20 years of lower standards for housing loans which perhaps was triggered when Congress eliminated interest except that on your mortgage from being tax deductible. What that did was set up the banks and the homeowners to begin a cycle of refinancing all debt into the house mortgage so that interest would be deductible. So people racked up debt then refinanced it onto their house lowering their equity. For 50 years Americans saved through their home ownership and the equity. Some still do. But, the rules changed. Kids could finance 100% of the cost of the house. As they gained equity the could refinance more debt into it. But they had no savings and no equity. It was a trap and Freddie and Fannie encouraged it led by Barney abd Dodd. Of course the banking institutions recognized the folly of these weak mortgages and created a smoke and morrors deriatives game to hide them and dispense with them to investors. It all came crashing down and both Political parties can share in the blame. But, no, Obama did not save us from the recession. In fact his stimulus plan may have prolonged it as investors sit on the sidelines waiting for rational behavior to return and the con to end.
Rescued the banks?___No TARP rescued some. Mergers rescued many. Many still failed and are still failing. TherE are still around 5 million houses to be foreclosed on. There is estimated to be $3 Trillion in commercial foreclosures to come. None are rescued yet. An econmic turnaround is the only thing that can rescue that. And, it will not come until the taxing and spending are stopped.

Saved the US auto industry?--already discussed that. Any industry that needs TO be saved is already gone--you just buy time.

Got us out of Iraq?? Please--give the credit where it belongs: GWB,McCain and Gates.

Close to a political solution in Afghanistan--you really are a dreamer Harry. giving it back to the Taliban is not a solution --it is capitulation.

Passed a centrist,moderate health plan---about 65% of Americans beg to differ.

The beauty of America is you hear every point of view imaginable on every issue and you have yours and I have mine. Thanks goodness we still have the freedom to vote so I can cancel yours and America is free to choose. Just kidding, Harry, I appreciate your rosy view of Obama. Maybe if I had the goggles I could see more clearly what I am missing though the smoke and mirrors. Best, Bill

Response to Bill M. response:
Certainly agree that all spending cut ideas must be on the table. However, it is very troubling that some on the Left will not consider any changes to social programs, and some on the Right will not consider any increases in taxes or decreases in the military. We have already spent the money - now we must pay it back.

I really don't understand how you consider Obama to be a "con man". He has been very clear from the start about his political interests and which issues are important to him. For me and many others he is the only adult in the room. Can you name another?

Strongly disagree with your thoughts on the bailout of the auto industry. As Bush was leaving office he bailed them out to the tune of $25b so they would not implode before Obama could consider what to do. What he did was continue the bailout with $60b more. If GM had failed the jobs lost would have exceeded 1m. The ripples would go far beyond just GM. GM doesn't make cars, they assemble cars with pieces purchased from an army of suppliers. They would all be gone and in the wake it is very doubtful that Ford could have survived without the suppliers leaving the US with no domestic auto industry except those owned by foreign interests. There also would be closed dealerships in every town in America. Not saving GM was not an option. Bush knew that.

It is highly optimistic that the pieces could have been put back together. Who would have done it and where would the money have come from? The only player who might have had the clout would be the Chinese. Not a happy option.

Obama has actually done a lot in two years, especially when considering the near complete obstruction by the Rep party. Consider:
- prevented a second Great Depression, a very real possiblity
- rescued the banks without nationalization
- saved the US auto industry
- got us mostly out of Iraq with a plan to greatly reduce our troops further
- may be close to a political solution in Afg
- passed a centrist, moderate health plan so that all Americans have access to health care

Could things have been done differently and better? Of course, but hindsight is always 20/20. Do you really think McCain would have been better?

Last night I watched the Angle-Reid debate on CSPAN. Even though Harry Reid is a friend of mine and a true patriot I could not help but think to myself what a troubled government we have. These two displayed the problem we as Americans face in trying to elect people who will actually sit down and work together to solve our problems. Neither of these candidates would even hint at a possible working relationship with the other (side). Instead they openly accused each other of things that matter little and defended positions neither really stands for sincerely, just politically.

On one side you have a man who after decades of service to his nation who understands the issues very well but is unable to articulate under pressure what his solutions really mean or why he thinks they will really work. A glaring example is his comments continuosly that he wants everyone in America to have what he has: an open choice of insurance plans based on large pools and competition. And so, my friend, what is this thing you have delivered to us? It has no similarity to the US government plan what so ever. There are no national pools. There are no alternative choices except to be fined if you don't buy insurance, and taxed if you give too much.

On the other side you have a lady who under pressure can barely speak and certainly has trouble thinking quickly. But in her defense she did not spend the last 6 years as the leader of the Senate and she has not had to defend the Obama policies. However, she has taken stances in the past in her conservative approach to attempting to slow down and stop both rampant government spending and tax increases at the state and local level that she now (on the national stage) is unwilling to admit fully. She perhaps typifies the "people's candidates" who have little polish or experience with the world's problems. They have not been to Iraq, Afghanistan. They do not meet with the Federal Reserve or ask questions of the CBO. They are not professional, seasoned politicians. In a way they are Barrack Obama--inexperienced theorists who think they know a better way.

So what do we want America? Fresh faces, with little experience, hellbent on changing Washington. Or, professional politicians who are already in bed with their special interest groups and intellectually set in their beliefs and, yes, hatred of the oppositions' policies. Harry Reid called George Bush his friend and we all thought he was referring to GWB. But, no, in fact, Harry Reid despises GWB. It is the father that Harry Reid respects and admires specifically for his pulling together the international team that agreed to take Saddam out of Kuwait and stopped short of finishing him off. It is a tough choice and Washington has a way of
"training" the new faces each session to become one of them or be frozen out of committee work, money for their state/district and inclusion in the strategy making until they conform. Thus, year after year we rally to the cry of "throw the bums out" --even the new bums we just elected..

Bill paints a likely scenario here: the new guys will invade, threaten, propose and eventually adapt to become a part of the "Washington" scene. It will be the influence of the message sent by the people that will be understood by the "in crowd" who survive and we will likely see constraints on the Obama move to the left. We will likely see less spending and more talk of budgeting and cost cutting but until there is a leader in the White House who truly beleives in the people's messsage it will not come about. And, thus, the referral to Obama's veto ready pen. But at least these elections will apply a tourniquet to the deficit spending and landslide of programs being brought too quickly to an economy still reeling from the "house for all" policies of the past.

Insightful and prescient.

Thank you for this contribution.

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