Tax Increase or Gold Standard?

The Midas Letter (h/t Kitco) predicts that there will a bi-partisan consensus as to a massive tax increase following the midterm election this fall. This will harm the United States economy.   Midas writes:

"Washington's elites are quietly preparing a post-election fiscal compromise that will fund much of President Barack Obama's domestic spending agenda with huge tax increases. They aim to create a value-added tax and will argue that there is no alternative even though doing so will leave the United States resembling the stagnant, bureaucratic nations of Western Europe."

This is only a prediction, of course, but would this scenario differ much from the history of the past 40 years?  Ever since Richard M. Nixon abolished the gold standard and Ronald Reagan adopted Keynesian monetary expansion, both New-Deal policies, the Republicans have largely adopted a strategy of "Democratic Party light."  Under Reagan the GOP held the line on domestic spending as a percentage of real gdp but did not begin to reduce total government spending until the end of the Cold War, following Reagan's departure.  Thereafter, there was a small drop in total federal spending, which remained in the 16-18% of real gdp range until the end of the Bush II administration.  In 2009, the Democrats once again proved to be the leaders in government bloat and expanded real spending by more than ten percent, to 20% of real gdp. President Obama should be renamed the Emperor of Bloat.

The 20% expansion of government spending as a percentage of real gdp directly followed the largest expansion of monetary reserves in living memory in 2008.  Perhaps the expansion of the Continental during the Revolutionary War was comparable to the expansion of the monetary base two years ago.  Obama then increased real domestic spending, in part through a painfully nonsensical "stimulus" plan.  Although the Democratic Party's media has downplayed this, as of this month the unemployment rate is higher than it was last year on a non-seasonally adjusted basis. In other words, government has expanded, it has failed to reduce unemployment, and now new investment will be crowded out if the spending increases are validated through tax increases next year.

If the GOP goes along with any sort of tax increase now, and does not demand sharp spending reductions, it does not warrant any further support.  A third party will be needed. Hopefully, this scenario will not play out. If the GOP stops further increases in government and proves that it aims to reduce government, it can redeem itself.  But any sort of bi-partisanship with the pigs in the Democratic Party ought to spell the end of the GOP.  A replacement party will be needed just as the GOP replaced the Whigs in the 1850s.

The Midas Letter suggests an alternative to a tax increase:

"The U.S. could return to a gold standard, a system that would not only prevent the government from running chronic budget deficits but would also curb attempts to manipulate the value of the dollar for political reasons... The first step...is an American commitment to a dollar convertible to gold on a date certain. The second step is allowing the market, in the run-up to that date, to find and fix a dollar price of gold that would encourage other nations to replace dollar reserves with gold holdings as their new monetary base, whether or not they choose initially to join the new international gold standard...Legislation restoring dollar-gold convertibility should be accompanied by passage of a constitutional amendment guaranteeing the American people a right to conduct their economic affairs in gold, regardless of the future status of gold as the official money of the United States."

Which would you prefer--a massive tax increase, or a return to the gold standard?  Write your Congressman, even if they're as incompetent and corrupt as mine. 

Freedom of Information Act Request for Accounting of Olive Budget Surplus

I am sending the following freedom of information act request to the Town of Olive Town Supervisor, Berndt Leifeld. The Democratic Party lied to the American people. It claimed to be the party of the poor and middle class. But when Barack Obama was elected, his first and so far only tangible series of acts was to transfer four trillion dollars to America's super-rich. That is the largest example of corruption in American history. If you combine the corruption associated with Jay Gould, Jim Fiske, John D. Rockefeller, Willy Durant and his insider trading while at General Motors, the corruption on Wall Street in the 1920s that preceded the Great Depression, Enron, Worldcom and the other late 1990s scandals, the S&L crisis of the late 1980s, you combine them, and triple them, they are less than the corruption associated with Barack Obama and the Democratic Party of 2009. Yet, the American media continues to crow about the Mr. Obama's supernatural powers. He is not only the most corrupt president, he is the most corrupt individual in American history.

In our little Town of Olive, we see a microcosm. Corrupt Democrats, who justified the massive wealth transfer to banking interests in the name of "deflation", aim to raise taxes by nearly nine percent. It doesn't bother the Democrats to talk about "deflation" and nine percent tax increases (with utterly no concomitant increases in services) in the same breath. The degree of stupidity and corruption in American politics is nonpareil.

After two trips to the Town of Olive offices I was able to obtain a copy of the September 2009 year-to-date budget variances. The variances indicate that spending has been at approximately 69% of the budget but 75% of the year has passed. That makes it difficult to understand why a nine percent tax increase is necessary.

I reproduce the letter, which I am sending certified mail this morning.


PO Box 130
West Shokan, NY 12494
October 21, 2009

Mr. Berndt Leifeld
Olive Town Supervisor
45 Watson Hollow Road
West Shokan, NY 12494

RE: Freedom of Information Act Request

Dear Mr. Leifeld:

Thank you for providing most of the budget reports I requested upon my second trip to your office. I have a few questions for public consumption.

1. The highway and general fund budgets indicate that the Town has spent 69.01% of the amount budgeted as of September 30, but 75% of the year had passed as of that date. This indicates a budget surplus.

2. Where do budget surpluses get deposited and what are the balances in all of those accounts?

3. When have surplus, unspent monies been used to reduce taxes, and when have they been used to increase special and earmarked accounts?

4. This is a freedom of information act request for copies of all current monthly or quarterly bank account and certificate of deposit (not to exceed 50 pages) statements pertaining to the Town of Olive Highway Fund; the Town of Olive General fund; and special or earmarked funds. These should encompass all town cash, certificate of deposit and other liquid holdings.

5. If (4) does not encompass all town cash holdings I would appreciate an explanation as to what funds have been excluded.

6. This is a freedom of information act request for the accounting reconciliation of cash and fund accounts involving end-of-year transfers from the Town’s general and highway funds to earmarked accounts (not to exceed 25 pages).

Sincerely,


Mitchell Langbert, Ph.D.
Town of Olive Republican Committee