• I would argue that Republican principles of small government are basically correct
• Unfortunately, all too often, once elected, many Republicans vote for wasteful spending projects, and funding of entitlements that shifts wealth from younger Americans to older Americans
• But, the main problem for the economic future and well-being of younger Americans stems from beliefs of the Democratic Party and those who vote for its candidates

• A party that promotes concentration of power in Washington by expanding government with overspending and passing deficits on to our young people
• A party that promotes concentration of power in giant corporations protecting them against competition through high corporate taxes, unnecessary regulations, and subsidies—the party of crony capitalism
• A party whose signature social programs: Social Security, Medicare, and Obamacare, unfairly transfer wealth from the young to the old to buy votes of the elderly
• The Great Pharisee Party—they want to run everyone’s lives and force our standard of living down for no cause
• The Party of a smaller economic pie—its policies stagnate the economy, reduce competition, and force high unemployment
• The Party of Socialistic Redistribution with punitive taxation on upper income earners—almost 50% marginal income tax rates + double taxation of 20% or more on capital gains which often are produced largely by inflation + taxation a third time on estates
• The party of junk climate science funded by government bureaucrats

A party that wants to create truly giant corporations will do the following:

• It will insist on high profits taxes, because high profits act as barriers to entry in industries for dynamic mid-size companies who have their main source of funds for new investments seized by the government. The large corporations can maintain market share with less investment due to weakened competition
• It will impose unnecessary regulations on businessesenabling large corporations with political muscle to capture the regulators. Also, the regulations are normally much more expensive and onerous for smaller companies to comply with
• It will give subsidies to large companiesthat employ union workers giving them an unfair edge over smaller competitors
• It will oppose free trade, protecting large inefficient companies from being subject to foreign competition and having to invest

It is the Democrats who are primarily responsible for the four policies that promote the growth of giant corporations:

• The U.S. has the highest profits taxes in the world. In addition it is the only country that taxes foreign operations of companies. In respect to profits taxes most Democrats want to raise them e.g. on oil companies, and would fight reducing them
• The Democrats are responsible for most of the regulations laid on business over the past 80 years

• The Democrats have been in control of Congress about 85% of the time since the Great Depression. They could have prevented subsidies to large corporations, but most of the time they initiated the subsidies to “save union jobs”

• The Democrats favor protectionism presumably to “save union jobs”

If the U.S. over the last 80 years had not imposed profits taxes, massive unnecessary regulation of business, and subsidies of big business, we would have a much larger economy, lower unemployment, better jobs, much wealthier citizens, and fewer large corporations due to greater competition

• 30% of the population has been effective in imposing their will on the other 70%
• Democrats want an expanded welfare state to be more like France and Sweden. They believe various redistributional policies are desirable:

• Using progressive taxation and entitlement funding to produce more equality in ANNUAL INCOME
• Using Social Security, Medicare, and Health Care to transfer massive wealth from the young to the elderly, and
• Using Federal Grants to the States reduce inequalities between States

• Big government with considerable taxation and redistributional transfers reduces incentives to produce and to invest. The economic pie is reduced and virtually everyone is poorer in the long run
• Big governments tend to run high unemployment especially among the youth reducing their long term opportunities and prospects
• If one desired to make incomes more equal, it should be LIFETIME INCOME, not ANNUAL INCOME. The U.S. does not have a caste society as liberals imagine. There is considerable mobility between population quintiles, e.g. only 14.2% of American households in the bottom income quintile in 1979 were still in the bottom quintile 9 years later in 1988
• Attempts to reduce annual income inequality by taxing the rich are relatively futile—they have tax dodges available and can pass on many of their costs through higher prices
• Progressive income taxes seldom change inequalities in wealth—Sweden and Denmark have had welfare states for 50 years and yet have greater inequality in WEALTH than the United States
• The Ponzi scheme method of financing Social Security and Medicare is a great boon to the initial recipients, but becomes a worse deal for later generation as returns become poorer and poorer
• Social Security, Medicare, and Obamacare transfer considerable wealth from young to old—the programs are unfair to the young

• It is quite clear that Obama strongly believes in redistribution of ANNUAL incomes. He has bought into the teachings of his Marxist and socialist teachers and friends
• It also is clear that he has never bothered to study the effects of attempts to redistribute income and has not been curious enough to discover that such attempts are relatively futile
• It is true that there is greater inequality of ANNUAL after tax income in the U.S. than in France, Germany, Sweden, and Denmark, for example
• Higher levels of taxation and more government transfers could reduce the level of inequality in ANNUAL incomes
• The cost of higher taxation and larger government, however, is roughly 1% of per capita growth in GDP and means virtually everyone will be poorer in the long run than if a little more inequality were tolerated. It seems that the only justification for redistribution is an irrational one—pure vindictiveness
• Standard of living is really more important than income levels, however. A farmer in Montana making $40,000 a year might have a higher standard of living than a lawyer in New York City making $200,000 a year
• It seems that more equality in LIFETIME Income or in WEALTH should be more important than in ANNUAL income. But lifetime income is virtually impossible to measure and adjust. On the other hand in the U.S. especially, there is great variability in annual incomes for many over a number of years
• It seems that more equality in LIFETIME Income or in WEALTH should be more important than in ANNUAL income. But lifetime income is virtually impossible to measure and adjust. On the other hand in the U.S. especially, there is great variability in annual incomes for many over a number of years
• It seems that more equality in LIFETIME Income or in WEALTH should be more important than in ANNUAL income. But lifetime income is virtually impossible to measure and adjust. On the other hand in the U.S. especially, there is great variability in annual incomes for many over a number of years
  • Historically the share of the top percentiles is not unusual. The most equal period was during the 1950’s and 1960’s and part of the explanation is demographic. Demographic changes have probably been a significant factor in the recent increase in inequality
  • The lower taxes from the Reagan years encourages more entrepreneurship and produces more and better jobs. One consequence is that some people will have greater opportunity to become wealthy and a little more inequality will result. But everyone is benefited more in the long run 

• It would actually seem that WEALTH is a far more important measure for comparing peoples’ relative economic well-being. It is related to lifetime income
• Had Obama investigated the potential for reducing inequalities of wealth, he would have realized that any attempts to do so are quite foolish. He would have discovered the following:
  • The wealth Gini coefficient (0 is perfect equality and 1 perfect inequality) in the U.S. rose from about .75 in 1775 to about .83 prior to WWI showing increased wealth inequality.
  • The wealth Gini coefficients of European countries prior to WWI were about the same or greater than the U.S., namely, above .8 (Great Britain’s was about .9)
  • After WWI, the Great Depression, and WWI due to destruction of buildings, etc., the Gini coefficients fell from over .8 to about .7 for France, Germany, and the UK. The impact of these events also brought the U.S. wealth Gini coefficient down—to about .75 (about the same as in 1775)
  • Interestingly welfare states like Sweden and Denmark still have very high wealth inequality
  • Sweden was neutral during wars and still has a very high wealth Gini coefficient around .89, Denmark at .86 in 1996 was occupied during WWII but had little destruction
• The Moral: If you want to redistribute WEALTH (which seems more significant than annual income), provoke a world war or precipitate a great depression. If Obama succeeds at redistribution, he will only do so by prolonging and deepening the current recession
• Conclusions:
  • In normal times wealth distributions tend to remain remarkably stable
  • Significant changes usually require a cataclysmic event
  • High taxation of the wealthy seldom has any effect on wealth distribution. There are always ways to protect their wealth and they tend to have strong political influence
• The marginal tax rate in the U.S. on the highest earners (over $374,000 AGI) is around 43% including Federal and State income taxes and FICA Hospital Insurance. If the Bush tax cuts expire, the top marginal rate will be about 48%. This is high enough to cause people to reduce their work effort and to move their assets into safer but less productive investments
• Andrew Mellon in the 1920’s determined that marginal rates over 25% would cause effects that reduced the goods and services available in the U.S. economy
• The wealthy through tax shelters (e.g. municipal bonds) and political influence seem always able to retain the same share of wealth barring cataclysmic events
• I do not believe that it is fair to have marginal rates over about 30%. Nor is it fair to tax income that has been invested a second time for capital gains (which are often artificially augmented by inflation) or to tax a third time when estate taxes are applied to wealth
• With low taxes, I believe we could increase annual growth by .5% to 1% or more. Due to compounding this would make a very big difference in the long run

• A coalition of voters who demand fiscal responsibility need to elect members of Congress who will: 1) cut government spending, 2) promote economic growth and investment with cuts in business taxes, and 3) fix entitlements in a way that will reduce intergenerational transfers
• It is important that young voters realize that they need to stop voting for Democrats
• Fiscally responsible persons need to run as independents or on a third party ticket in 2012 to provide an option for younger voters who support liberal positions on social issues
• Many young voters need to vote for them and by so doing take their support away from the Democratic Party
• A third party representing the interests of the young could be formed for the 2012 elections
• While attempts to demonize the rich and take and redistribute their wealth are unlikely to succeed, Social Security, Medicare,  Obamacare, and massive Federal debt will transfer considerable amounts of wealth from today’s young American adults to older adults
• Favored Democratic Party entitlement and spending programs also reduce economic growth and maintain higher unemployment
• If nothing is done (politicians will not do anything unless forced to) young Americans will face a much bleaker future than is necessary if entitlements are fixed properly and spending brought under control
• Younger adults tend to vote in lower percentages than older Americans and also tend to support Democrats. By doing so they are “shooting themselves in the foot” economically. It is at the expense of younger Americans that Democrats will financially fatten up the trial lawyers. Government bureaucrats, and public school teachers
• I believe it is essential that young Americans express an opposition to the strong political program consisting of running up the government “charge card” and presenting the bill to our young adults and to our grandchildren
• Many older Americans need to be opposed as well. There are signs this is happening
• Young Americans need to stop voting for Democrats—Democrats in Congress elect left-wing leaders who spend extravagantly and pass the bills on to the young
• There is a need to run candidates for Congress who may be liberal on social issues, but will be fiscally sound and committed to eliminating immoral intergenerational transfers favored by Democrats
• Independent candidates of this stripe need to run, or a political party needs to be formed, to provide socially liberal young people, who are not comfortable voting for Republicans, an opportunity to express their desire for sound financial action in Washington by voting other than for a Democrat
• Unfortunately, if they cannot feel comfortable voting for a Republican, and there is no other fiscally sound candidate, they probably do better not to vote at all than to vote for Democrats