Those That Can . . .

This week the Congressional Budget Office published a report that, not surprisingly, showed that the Federal government pays its workforce 16% more on average than the private sector -- primarily through lavish retirement benefits (we don't pay you to work; we pay you to retire). What was even more interesting was that the degree of "overcompensation" was inversely related to education level.



 In other words, if you're highly capable, the government doesn't want you, but if you're not, they'll overpay to get you to work there.

This gives a new twist to the old adage. Those that can, do. Those that can't, work for the government.

Real GDP Falls Because the Rich Aren't Taxed Enough

Yesterday the "good news" from the White House was that Q4 GDP grew at a 2.8% rate. This brings GDP up to a stunning 1.5% for the year 2011. But the really important stat is that real (inflation adjusted) GDP has actually fallen by 1.2% over the last 5 years. Against a backdrop of zero growth, the biggest economic issue in the State of the Union address was  . . . .  growth?  Nope. According to the President what's been holding us back -- the reason there has been been no growth in the economy -- is that The Rich aren't paying enough in taxes. In fact in order to get more investment capital in the economy the President proposes to double the tax on capital gains from 15% to 30%. Now there's a real growth initiative. What's next? Another tax on seed and fertilizer to get crop production going?

The Food Stamp President

Yesterday President Obama blamed (what a surprise) President Bush for the expansion in food stamp recipients. Apparently it's the well-known four year lag effect, not the increase in the amount of benefits contained in his "stimulus" bill? The President just seems to have a hard time grasping Economics 101: when you increase the subsidy of an activity, you will get more of that activity.

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Unfair?

President Obama seems intent on making Tax the Rich the mantra of his reelection campaign. He eschews economics for emotion in his appeal because, well, there really aren't any good economic arguments to support that position. But just for the moment let's examine the facts behind the emotions of the "fairness" issue. The President's main complaint seems to be that it's "not fair" for The Rich to be paying less of their income in taxes than the Middle Class. First of all, that's not factually correct as is readily apparent from the CBO data below (You have to assume that the President has access to this data if I can find it, so he either has a very poor memory or is just lying about it).

	Average Income Tax As %
Quintile	Of Total Income
Top 1%	18.8%
Rest of Top 20%	11.8%
Middle 20-80%	4.2%
Bottom Quintile	-5.6% (Negative due to tax credits)

Source: Congressional Budget Office

Beyond that, though, is this word "fairness".  What exactly is unfair about the top 1% of earners paying 19% of the income in federal income tax while middle class families (presumably those in the 20th through 80th percentile of income earners) pay 4% of their income in federal income tax? Is that 4% really unfair? If so, what should it be then? Zero?  Or is the President perhaps simply disingenuously mining the economic ignorance of the public? Do you really think the Middle Class should be incensed that they are "unfairly" being forced to cough up a whopping 4.2% of their income in federal income tax?

The President is not the first person to appeal to blind envy -- nor will he be the last. After all, they always teach in debate class that when you don't have a good factual argument, call people names and appeal to their prejudices.