The Fiscal Cliff “Deal”

Right after we rang in the new year, Congress rang in the new year with more disastrous legislation.  Of course, it isn’t disastrous for them.  It is disastrous for the average American.  Most of the tax rates on income were kept in place and not allowed to go up.  This did not include tax rates on high income earners (single filers with an income over $400,000 and married filers over $450,000).  We often hear them referred to as the “wealthy”, but high income earners is a far more accurate term.  You could have someone win Survivor (the reality show) or have a lottery winner and that person may only be a high income earner for one year.  It does not mean the person is necessarily “wealthy”.

I’d say the biggest thing that will affect most Americans in the short run is that the payroll tax cut did not get extended.  The Social Security portion paid by employees will go back up from 4.2% to 6.2%.  So any low or middle income American will see 2% of their take home pay disappear.  This affects any person working in the U.S. who is reporting income.  This hurts the low and middle income brackets disproportionately.  (And it is not a “premium” for Social Security because it isn’t going into your own account.  There is no actual money for Social Security.  It has all been spent.)

Having Congress agree to allow the payroll tax cut to expire should tell us something.  It means that they are even a little scared of the massive deficits.  The Laffer Curve does not apply much to the Social Security payroll tax.  While it could hurt economic growth and employment eventually, it will not do much to change the behavior of workers.  It is not like someone earning $40,000 per year is going to work less because he is paying an extra $800 per year to the government.  So, at least in the short run, the higher payroll tax will probably lead to more “revenue” to the government.

It is no surprise that the Congress is also kicking the can again on spending.  This was easily predictable.  It is the opposite of what we need.

From everything I’ve read, it looks like no actual cuts will be made.  Anything referred to as budget cuts is actually just a smaller increase in future budget projections.  There are no cuts.  This will just make the day of reckoning that much worse.  As the days go on and things are looked at closer, we will see more pork and more items to favor those who are the most well-connected to the government.

By the way, if the Republican Party really were the party of smaller government, then it would still hold  an ace in the deck.  The Republicans have a majority in the House, which controls spending.  An easy way to balance the budget would be to refuse to raise the debt ceiling.  For right now, Geithner and the Treasury are coming up with tricks (accounting fraud for anyone else) to prevent default, even though the government debt has already passed the debt limit.

But don’t worry.  The Republicans will capitulate on the debt ceiling too.  I’m sure they will raise it by another couple of trillion dollars.  They don’t want to actually cut any spending.  They just want to continue to trick and deceive their constituency into thinking that they really want to cut spending.

At this point, my only advice is to not pay too much attention to all of this garbage.  We are still going off the fiscal cliff and the monetary cliff and the debt cliff.  It is unavoidable.  I would suggest that you prepare for it in any way you can.  And since there is not much you can do to stop the hacks in Washington DC, try to focus on things in your own personal life to help you and your family.  It looks like the economy will have to get worse before things can get better.

A Libertarian New Year

Harry Browne wrote a piece 14 years ago entitled “A Libertarian’s New Year’s Resolutions“.  He wrote 14 resolutions on helping the cause of liberty.  There were a few points in particular that stuck out to me.  While I have known they are good resolutions, it is not always easy to keep them.  It is good to remind yourself every now and then.

For number 2, he said, “I resolve to keep from being drawn into arguments or debates.  My purpose is to inspire people to want liberty – not to prove that they’re wrong.”

I recently read something similar by Doug Casey.  He said he doesn’t like to get into debates with people.  He doesn’t mind discussions where people can think about things and learn things.

I admit that I get sucked into this more often than I’d like.  I don’t think I can ever completely stop because sometimes I feel it is necessary to defend myself and my ideas.  But I do need to remind myself that there is no point in arguing with someone, particularly friends and family, especially when it will not change the person’s mind.  I resolve that I will try to take these discussions and instead of having arguments and debates, that I will try to pose thought-provoking questions that places the burden on the other person.

You can lead a horse to water, but you can’t make him drink.  It is important to realize that sometimes you have to introduce the water to the horse slowly and gently.

I do make certain exceptions with this though.  If you are on the radio with Sean Hannity or in some other public forum where you have a large audience, then I think it is acceptable to debate the person and be strong.  Just don’t be rude, or you and your position will look bad.  In this scenario, you are not trying to convince the person you are debating.  You are trying to convince the audience.

Another point made by Harry Browne that stuck out at me was number 7.  He said, “I resolve to acknowledge my good fortune in having been born an American.  Any plan for improvement must begin with a recognition of the good things we have.  To speak only of America’s defects will make me a tiresome crank.”

I know this is a problem for a lot of libertarians.  They always talk about the bad things.  They don’t offer the benefits of liberty enough (other points that Harry Browne made).  They complain about America, when they really mean the U.S. government.  They don’t acknowledge the benefits of living in America, even today.

If you are having trouble finding positives, I will offer a few quick ones.  America is still the best, or one of the best, places in the world when it comes to free speech, freedom of religion, free press, gun ownership, and individuality.  In particular, that last item is important.  While this may have faded somewhat, there is still a big streak of rugged individualism in the average American.  There is also no shame in being an entrepreneur and being successful in America.  A lot of Americans take these things for granted because they haven’t seen enough of the rest of the world.

I would add one more resolution for libertarians to Harry Browne’s list.  While it is important for libertarians to educate others on the benefits of liberty, don’t forget about yourself.  If you are going to be a spokesman for the cause of liberty, you should never stop learning.  You should be continually reading, writing, watching videos, or just sitting there and thinking about liberty and various issues.  Read more on issues that you aren’t as comfortable or familiar with.  Try to learn something new every day, even if it is not directly related to the cause of liberty.

I hope everyone has a happy, prosperous, and free 2013.