David Asman: Hi everybody! I’m David Asman. Thank you for joining us. Kicking off tonight, are you better off than you were two years ago? Well, according to most polls, most folks don’t believe they are. But the president and his advisers say, “You should feel better off”, that things really are better off than they were.
Robert Gibbs: “By virtually any measure, our economy is in a better place than it was two years ago.”
David Asman: And, for those who complain about taxes, well, the president slaps down that complaint saying we should be grateful for his tax cuts.
President Obama: “One third of the Recovery Act was made up of tax cuts. Tax cuts, that already provided more than $160 billion in relief for families and businesses.”
David Asman: So, why is it that while the president says we’re paying less in taxes, a New York Times News Poll says that fewer than one in ten people even knew that the Obama administration had lowered taxes? The thing is folks are looking around and seeing a lot of government spending, trillions of dollars of spending. and they figure that somehow, some day, somebody has to pay for all that. That’s going to mean higher taxes. That’s why consumers are spending less and why businesses are borrowing less.
Folks are socking away what they have, thinking that eventually things are going to get worse. And, the fact is that state and local taxes have been going up, way up, leading to smaller paychecks. We’re also getting nickel and dime to debt by all kinds of hidden taxes like all those extra taxes tacked on to your phone bill, if you looked at those recently. And then, there are the costs of things that we go out and buy at the stores. We’re being told there’s no inflation but things are costing more.
Folks feel poor and there are figures that back up those feeling. Anyone who’s been to a grocery store knows that food prices rose 1.4%, and putting gas into cars increased nearly 4%. Those are the things that matter to us. That’s what we can’t avoid, what we have to pay for.
Now, to all these complaints, the president’s supporters counsel, “patience”. “Two years is not a long time to come out of a really rotten recession”, they say. They remind us that it took Ronald Reagan two years to get out of the recession that he inherited and that’s true enough, but, there’s a key difference. The difference between that time and now is expectations. Expectations are what all markets are really built on, after all. And, going into 1983, expectations were high because we knew that the Reagan tax cuts were about to kick in. And, along with lower tax rates, there were fewer regulations, which also lowered the cost of doing business. Now, we face exactly the opposite scenario. Right now, tax rates are probably going up and regulations we’ve seen are already multiplying like rats.
So, is it any wonder that folks are feeling the pinch? Well, not to us and we suspect, not to our next guest, Congressman Ron Paul, who joins us now.
Congressman, wonderful to see you! Sorry you had to wait while I was ranting along that way. But, kind of makes me upset, the fact that the president and his supporters are calling us “ungrateful” for not being grateful enough to his tax cuts.
Ron Paul: Well, if he wants us to be grateful, he ought to just leave us alone. Let us work hard and keep what we earn. Now then, I will be grateful. But, this idea that the people have to be grateful to government means that the government owns us. The only thing that bothers me is that you can’t cut taxes on a person because it will be a cost to government? You’ve heard that. Then the assumption is that the government owns everything we earn and if you cut some taxes, then it costs government. It should be the other way around, everybody that earns something is theirs and the government is coming to take something from you.
David Asman: Absolutely. Everything the government has comes from us, the private sector. I mean, maybe they can sell a little land here and there, but bottom-line is we’re not taking from them. They’re not giving us tax breaks. They’re taking everything they have from us, even if they are borrowing money that they don’t have, right?
Ron Paul: Yeah, they’re likely to fall back and say, “Well, we’ll just raise the corporate taxes and tax businesses. They’re making all the money.” But, how long did it take the insurance company to pass on their anticipated increasing cost with this medical dill? They’ve already raised their rates, so that was regulations and taxes like you mentioned on your opening statement. These are all costs that get passed on. So, in a technical fashion, there’s no such thing as a corporate tax or a business tax, it’s all people’s taxes. They have to pay for it or these companies can’t provide the goods and services that we want.
That’s why, I think, it’s so nice to defend the marketplace and the free market and say, “No taxes are best”, or very, very little taxes and people would be more prosperous. People, why they’re feeling so poor is that the real standard of living has been going down for ten years. Real wages and there hasn’t been good jobs. I date it from the year 2000, I think we’ve been slipping, losing the jobs and people know it. The cost of living is going up. And unfortunately, you’re exactly right, the anticipation that this is going away in a year or two, I’ve talked to some people today down in my district, and they say, “How am I going to raise my kids?” They’re looking to the future and they really feel despondent. We’re living in a pretty good area. Texas is not as hard-hit as some others, but there’s still a lot of people here that are worried about the future, so they pull back on their wants.
David Asman: On expectations, markets are all about expectations. That’s what makes stocks go up or down, the expectation whether to do well or not. Our expectations now are that somehow, some way, we got to pay for all this spending, and that usually means doesn’t mean they’re going to cut something else; that they’re going to keep everything the same and charge us more in taxes.
But, let’s drill down a little more on the regulation idea because already we’ve seen in the Health Care Bill, this 1099 provision that forces all businesses to account for every single expense above $600. That means a whole new slew of bookkeeping that small businesses can’t afford. The Financial Regulation Bill creates hundreds of new regulations. It has at least eight new agencies themselves, each one of which will probably hire hundreds, if not, thousands of bureaucrats and create regulations and then, the existing agencies that we have. Regulations from things like OSHA are multiplying. We’re horror stories from small businesses, mom and pop stores, saying that OSHA inspectors are coming in and drilling in like they never have before. These all cost money and the cost of doing business is skyrocketing.
Ron Paul: I don’t have any trouble condemning that because it’s obvious there’s a cost and we shouldn’t be doing it, but really, what bothers me is philosophically, they shouldn’t be writing these. The Constitution is pretty clear about only Congress writes the laws, but we create these creatures and then we just turn them loose. And they write regulations and they are the law, they are the force of law. But I don’t think the founders ever intended to have these thousands and thousands of pages in the Federal Register which are the law. And, nobody can read them and understand it. I mean, who can really understand the tax code, let alone all these EPA regulations. And then they say, “I wonder why our companies want to go overseas?” We’re just chasing them away. It’s such a tragedy under these circumstances.
David Asman: And then there’s another creature that our founders never envisioned, and that is the Federal Reserve Board, an institution which you love to opine on. They claim, or at least a lot of them, because there is some pushback now from some members of the board, people like Richard Fisher in Dallas and so forth, but they claim that we have no inflation and therefore, we can take a little more inflation, and therefore, we can buy some of this government debt that has been run up by the government to the tune of an extra $100 billion a month. That’s what some of these officials are saying. When are we going to feel or have we already begun to feel the effects of this? Because, I think we have when we go out shopping.
Ron Paul: Yeah, I think so. People know the prices are going up. But you know, that emphasizes the difference between the Keynesian definition of inflation versus an Austrian. Keynesians say, “When the prices rise,” but the prices go up as a consequence of inflation. Inflation is when you increase the money supply. So, we’ve had inflation when Greenspan had interest rate of 1%. He did that through inflating the money supply. And just think, with what Bernanke has done since then, doubled the money supply. There again, he spent $2 trillion bailing out his buddies. That’s unauthorization and appropriation and it’s off the books. We can’t even find out what they did.
So, it is so out of control. The one thing though, I think we all should be grateful for, is more and more people now understand that the Federal Reserve is very, very important in the problems that we have. It used to be said that, “Oh, the Fed creates good times and takes care of us when we have bad times.” But I think, those are days that have gone and passed now because I think, people now realize the Fed is responsible for so many of our problems.
David Asman: I think they do get it and that is what makes me very optimistic about the future and particularly, what’s coming in the next election. Stay with us if you can, Congressman. I want to bring in our panel as well, Fox News contributor, Andrea Tantaros and Steve Malanga, Senior Fellow at the Manhattan Insitute.
Steve, one thing we haven’t talked about is the fact that the President’s tax cuts don’t make our tax codes smaller, they make it bigger. Because, along with these “tax cuts” are all these provisions; in order to get this tax cut, you have to do this and you have to do that. We have to be more green or you have to be more this. They’re real attempts of social engineering.
Steve Malanga: That’s exactly the point. The President is saying, “Why don’t people acknowledge my tax cuts?” Well, the tax cuts are not in the form of “Gee, let’s cut your tax rate”, instead they’re in the form of “Let’s achieve social ends”, making work pay, earned income tax credit, education.
David Asman: Putting windmills on your backyard?
Steve Malanga: It’s all about credits. First of all, not everybody takes them because it’s very complex, they don’t understand. Secondly, when you cut people’s tax rates, when they walk into the office and they get their next paycheck, there’s more on the paycheck. That’s not what’s happened when you have all this social engineering. It’s the way Democrats, and also a lot of republicans unfortunately, think they want to cut taxes these days.
David Asman: Well, Andrea, despite all the rhethoric that Tea Partiers are racist, the Tea Partiers are dumb, the Tea Partiers don’t get it. They do get it! And people, for example like Joe Miller in Alaska who, by the way went to West Point and by the way went to Yale and by the way is a very smart economist like Dr. Paul is, they do get it. They’re beginning to understand and it is going to translate, I think, in the next election, isn’t it?
Andrea Tantaros: Absolutely! But if you look at what the administration is saying, they are assuming that we don’t get it. They’re assuming that we don’t understand at all and the only time conceded any liability…
David Asman: But isn’t that assumption dumb?
Andrea Tantaros: It’s very dumb. The only liability they’ve conceded…
David Asman: I mean, just wake up and smell the coffee, you know.
Andrea Tantaros: The only lliability they’ve conceded, David is that they have a communications problem; that they didn’t communicate, that we’re too dumb to get it. They’ll probably say that we’re too dumb to get the facts that they actually passed these tax cuts in the stimulus. The problem is they pass these complicated tax cuts, like Steven said, with a carrot, an organic carrot, that made it tougher for businesses to get them, to do business. They pass them with massive spending that’s going to drive up taxes. No wonder there’s uncertainty. Businesses don’t know which end is up.
David Asman: You know, Dr. Paul, I was hearing the same kind of talk back in 1979 against Reaganites saying, “Oh, these people are so naive about their understanding of government saying that government is the problem not the solution. That kind of rhethoric won’t get anything. First of all, it won’t get Ronald Reagan elected. Secondly, if he is elected, he’s a one-termer because his policies are going to fall apart.” We’ve heard this rhethoric before haven’t we?
Ron Paul: Oh, absolutely and they always assumed that if Reagan had been nominated or would be nominated, he’d be an easy target. But talking about them assuming that the people are dumb, I was sitting on the House Floor once, we passed a bill which we shouldn’t have passed and I looked to another member. I said, “Why did you vote for that? You’re just telling people what to do with their lives.” He says, “They’re too dumb.” He says, “We have to tell them.” This came from a Congressman and I was just dumb-founded because it’s so opposite of what everything I believe, but there must be a lot of them in Congress that actually believe that. Whether it’s your social life or whether it’s your economic life, people, they assume, are too dumb and therefore they need these wonderful people, the bureaucrats and these good politicians that know how to tell you how to spend your money.
David Asman: Well, guess what, they keep thinking like that and they’re not going to be long for their positions.
Ron Paul: There you go!
David Asman: Congressman Paul, great to see you again. And Steve and Andrea, we’ll see you later. We’ve got a snazzy new website, by the way that we’d love for you to check out.