Treece: Eat the rich and starve to death
Written by Ben Treece | | ben@treeceinvestments.comIt is no secret that there seems to be a bit of a financial conundrum on Capitol Hill. The government cannot finance expenditures with current tax rates and treasury bonds are not selling due to low yields. This leaves Congress to figure out how to get more money to cover costs. Politicians have been in search for an answer without truly understanding the root problem.
Historically government spending more money has not been the answer. Once citizens become reliant on provisions that have required little or no effort to obtain, hard times have followed when those provisions are either scaled back or eliminated altogether. It is not the fault of any single person, but simply a matter of nature. Once things have been provided to us without having to work for them, we become lazy and domesticated. This mentality has certainly not worked for the Greeks; after several rounds of multibillion dollar bailouts, the country still has seen riots and looting in response to federal austerity measures.
Meanwhile, Washington has pursued a rather dangerous taxation agenda; tax the wealthy into the ground in order to balance the budget and cover expenses. In theory this sounds like common sense, after all there are only approximately 225,000 individuals in the U.S. who claim an annual income of over $1,000,000 (according to Politico); pitting the “Haves versus the Have-Nots” would be a pretty easy sell to the public. However many elected officials have failed to see the other side of the coin. The problem that we have is not a lack of funds going to the federal government; it is a skyrocketing level of expenditures.
Rick Santelli of CNBC recently ran the numbers quickly on the floor of the Chicago Mercantile Exchange and showed (if you assume that there are Politico’s reported 225,000 $1 million+ earners in the U.S.) how much money the government would obtain by taxing them each a flat $1,000,000 on top of their other taxes. By his calculations, this revenue would cover the current expenditures for only a month. I was very careful not to say “cover the budget,” because our elected officials have failed to provide us with a budget for the last two fiscal years. A federal government should have three main roles: 1) defend the nation from threats and attacks, 2) promote interstate commerce to strengthen the domestic economy, and 3) operate within a fiscally sound budget and report said budget to the taxpayers. The point is that even if you taxed these high earners at 100 percent of their income, we would still not be able to finance our federal expenditures for one year, let alone pay down any of our mounting deficit.
This concept of redistribution has been adopted by left-leaning political theorists and Keynesian economists the world over, and you heard me correctly in calling it “redistribution.” Bill Whittle recently ran the numbers and showed us that, in short, for every $10 spent the federal government taxes for $6 of it and borrows $4. When that money is spent, $4 goes to actually run the government while $6 goes toward entitlements such as welfare, food stamps, unemployment benefits, etc. Essentially, we tax our citizens to cover entitlements (money changing hands from the “Haves” to the “Have-Nots”) while borrowing from those who buy our debt to run the federal government. This all works out just fine until no one buys the debt anymore. This concept of providing to those less fortunate used to be called “charity”; however it has now morphed into what we like to call “Entitlement Spending.”
Leftists and Keynesians agree with redistribution in theory…but not in practice. The viral video out of California done by conservative group ExposingLeftists.com shows some UC students who want to redistribute wealth, but are appalled at the thought of redistributing their hard earned grades to their classmates who spent most nights out partying or slacking off.
The solution to this problem is actually very simple; the federal government must cut spending. If we continue on this path we could tax 100 percent of the citizens at 100 percent of their incomes and we still would not be able to finance our government. Even the beloved President Clinton was able to pass entitlement reform and balance the budget in the second term of his administration, and the economy boomed afterwards. We need to wake up as a nation and realize the root of our problems, not deceive ourselves with bad answers to improperly defined problems.
Currently in the U.S., we have a progressive income tax, payroll taxes, sales and excise taxes, property taxes, gift taxes, estate taxes, customs taxes, licensing taxes, “sin” taxes, taxes on business, toll roads which function as a tax for highways, energy-related taxes (carbon offsets for example), capital gains taxes, not to mention tax penalties that may be levied for myriad reasons. With all of these in mind, how can one possibly say that the government requires more? I understand the goal and the logic from a politician’s perspective very clearly; by taking from a small group who have a lot, and giving to a large group who does not have as much, the vast majority of citizens will be appeased, resulting in high approval ratings and re-election. At the end of the day, giving a politician more money has NEVER solved any problems. This political game that is being played in Washington has been and will continue to slowly eat away at the domestic economy, unless we are willing to make sacrifices and confront the spending crisis head on.
Ben Treece is a 2009 graduate from the University of Miami (Fla.) with a bachelor of business administration degree in international finance and marketing. He is a partner with Treece Investment Advisory Corp (www.TreeceInvestments.com) and a stockbroker licensed with FINRA, working for Treece Financial Services Corp. The above information is the express opinion of Ben Treece and should not be construed as investment advice or used without outside verification.
Tags: Ben Treece, entitlements, government spending, redistribution, taxes
Ben, Ben, Ben, Cannibalism, isn’t in vogue ,literally or figuratively…eating dog, is.
The returns on that may be too flatulent for the masses,though.
This comment was posted on April 22nd, 2012 at 1:13 pmWhile something needs to be done about the inefficiencies of the federal governments spending, why exactly is the Toledo free press having an investment manager write an article on taxation?
Let’s think about this for a second: what does he do for a living? He manages peoples money. For every percentage point a tax rate goes down, his job becomes easier and easier as he needs to come up with less of a return for his investors to rationalize continue having him manage their money.
I have no problem with Ben Treece writing this article. It’d be like a mechanic writing an article saying you should change your oil every 5,000 miles as opposed to 10,000: that’s what he does for a living and he could stand to benefit from writing it. I do have a problem with the Toledo free press publishing an article about the economy by an obscure money manager in Toledo who has a BA in finance and marketing. He has an incredibly vested interest in this topic and is not an economist in any way, shape, or form. Understanding an economy and understanding how to make money in an economy are incredibly different things. A good example of this would be Aaron rogers. For my money, he’s the best player in the NFL. He seems to be able to tear defenses apart at will. That being said, I don’t think he is a leading candidate to take over for Roger Goodell as commissioner of the NFL. Treece may be able to make money in the economy but for the tfp to publish this is very blade-like and disingenuous.
This comment was posted on April 22nd, 2012 at 4:11 pmThank you both Erie and Phillip for reading. As you may know I try to interact with my readers as much as possible, if they have questions or comments, I do my best to try and keep a lively discussion going.
Phillip, granted I am young, do not underestimate my knowledge regarding tax policy and the economy. I do not say that with a chip on my shoulder or as a way of bragging, but I say it out of pure necessity. Clients pay us to understand and answer all of their economic questions. A more proper analogy would be that Aaron Rogers being a QB means he has absolutely no knowledge of defenses. He MUST understand the defense to be successful, just as I must understand the economy, tax policy, monetary policy, fiscal policy, etc. to be a successful money manager.
We have a name for money managers who only understand the market and nothing else…unemployed.
This comment was posted on April 23rd, 2012 at 2:51 pmWhittle’s argument is a bit deceiving. He shows Social Security, Unemployment Insurance and Medicare tax in his tax revenue slide to demonstrate “how much money the Federal government gets” and then turns around and calls Social Security, Unemployment Insurance and Medicare entitlements that are somehow unfunded.
These “entitlements” are directly funded through taxes. As for food stamps? They cost about 10% per year of what we spend on defense. How about we cut the defense budget by 10% and keep food stamps.
This comment was posted on April 23rd, 2012 at 3:16 pmSensorG, I agree with cutting down on costs across the board, including on some excessive military bases we have overseas. However, in my humble opinion, I would cut funding on entitlements way before national security interests.
This comment was posted on April 23rd, 2012 at 3:33 pmYou didn’t really respond to any of my points except for the Aaron Rogers/Roger Goodell comparison, to which your response didn’t really make any sense.
“Phillip, granted I am young, do not underestimate my knowledge regarding tax policy and the economy. I do not say that with a chip on my shoulder or as a way of bragging, but I say it out of pure necessity.”
-I am younger than you and I will estimate your knowledge of tax policy and the economy and your experience based on the fact that you have a bachelor of arts in finance and marketing. You and I both know that you aren’t a trained economist and, as you stated, you declare you do in fact have knowledge about the economy, “out of pure necessity.” Exacty, how could you possibly say otherwise? That doesn’t mean it’s true. And it especially doesn’t mean that you don’t have a vested interest (as economists should not).
Again, I have no problem with you writing this article, it just doesn’t make any sense why the tfp would publish it as its disingenuous.
This comment was posted on April 23rd, 2012 at 7:33 pmSeriously though, your response was nonsense.
This comment was posted on April 23rd, 2012 at 7:36 pmBen,Ben, Ben, Basic economics stymies the typical voter into amazing bewilderment…go easy with them.
You may want to lay onto them something they may be able to grasp with little cognitive expenditure.
Like the National home price PLUNGE of $7.1 TRILLION that has occurred in the last 3.25 years !
Foreclosures are up 28% over January 2011 !
9.5 million homes are 90 days late in payment.
Banks: hold another 1.1. million new homes either as an asset or liability…depending on their accounting.
In Detroit, you can buy whole neighborhood blocks of homes for the price of a pack of cigarettes !?
Your home: once was the American Dream …not since Fascism, has creeped back into American politics in 2008 !
And, indicators are that things will definitely get much, much, worse if elections in November, go to the party causing it all.
The same ones that totally and completely ruined Detroit….
This comment was posted on April 24th, 2012 at 11:35 amPhillip, while I do not know your background on economics/tax policy/investing, I understand that this is a comment thread on an opinion based article. The assertions that I have made are strictly opinion. If you choose to believe that my opinions are complete nonsense, that is your choice. If your opinion is that a “trained economist” is one such as Timothy Geithner, Henry Paulson, Ben Bernanke etc., then I am more than happy to admit that I am not in that crowd “classically trained” ignoramuses. Their inability to foresee the credit crisis or promote sound regulation (i.e. Glass-Steagall) was part of why we are recovering today instead of prospering (I won’t even get in to the conflict of interest these individuals have with Goldman Sachs or any other of several Wall Street investment banks).
It is very clear from your disgruntled response that you simply disagree with the context of the article. Again this is an opinion page, I aim to put out opinions and respond to both those who agree with me and those who have differing opinions. I do however find it a little conceited of you to assume that simply because an opinion is not the same as that of your own you would discredit it as “disingenuous.” If you truly disagree, come back with an alternative opinion and cite your sources which confirm your beliefs. If you truly feel that I lack an understanding or credibility when discussing tax policy, monetary policy, fiscal policy, investing, government, etc. I simply ask that you cite specific instances where I have showcased my lack of knowledge instead citing my degree. By that logic, John D. Rockefeller never would have started Standard Oil since he never received a degree in Earth Sciences.
As always, thank you for reading. Feel free to email me with any questions or comments you may have or if there is a specific topic that you would like to see featured.
This comment was posted on April 24th, 2012 at 12:25 pmBen, You are responding to a green energy investor who lost not only his shirt.
This comment was posted on April 24th, 2012 at 6:39 pmBut, his whole wardrobe dating back to when Microsoft & Apple , were penny stocks !
Nice article Ben…everyone should see the video of the students protesting giving away their grades. Priceless.
Poor people are very generous with other people’s money.
This comment was posted on April 25th, 2012 at 12:03 pmI have a specific topic request. Ben, I would like you or another Conservative to do the actual math and create a budget for our country that works and doesn’t raise taxes. Not generalities. Specifics. In the same issue, I would like the Free Press to give a Liberal the same task. A balanced budget. Don’t even worry about the deficit for now. That would muddy the calcs up too much. Just a balanced budget. Using math. Not grade school political rhetoric. Math. The Liberal will struggle to even get close to a balanced budget. It will be easy for the Conservative because he will just slash everything and the let the poor people rot. So to make it harder for the Conservative, you have to explain the ripple effect of each program you cut. If it means people die, then you have to say that. If it means all of our insurance rates will go up, you have to say that. No more wasting our time with easily pointing out how stupid the extremists on either side are. We all know and it has been old for a century. I want math.
This comment was posted on April 26th, 2012 at 10:20 pmDear Don, Your entire argufy is nonsense !
So, if we cut just one of the 56 duplicitous Federal Programs feeding the “poor”, they will either “rot” or “die” ?!
Ridiculousness, in a debate is a loser every time !
When America’s interest payments alone on our $19 TRILLION debt load 8 years from now in 2020,equates $5 TRILLION…twice our Federal Budget NOW….we’ll all rot and STARVE !!!!!
So, you argue “let’s not do a thing but, SPEND & TAX MORE “!!???
Here Don, have a cigar !
This comment was posted on April 27th, 2012 at 11:15 amThe last one you or I ,will ever be able to afford…
Don,
That is a great request, and I think that I can do that for you but it may take some time. I want to make sure that I have done the proper research and know the accurate numbers. A lot of the funds that I personally would cut would be “wasteful spending,” such as social security checks made out to deceased individuals and cashed by their families. Search Senator Tom Coburn’s report “Government Programs to Die For” and look at the millions upon millions wasted.
I will begin working on that piece and I will also contact the TFP regarding a counter point. Thank you for reading and for the suggestion.
This comment was posted on April 27th, 2012 at 10:40 pmBen,
Thanks for taking on the challenge. I look forward to it!
ErieEagle,
I didn’t argue to spend and tax more. My belief is that Liberals and Conservatives are both wrong. I think we have to cut spending AND raise taxes to balance our budget. I’m hoping Ben can show me otherwise.
This comment was posted on April 30th, 2012 at 1:32 pmDear Don, America’s spending / wasting, is absolutely insane !
[ Which is why Senate Dims, haven't issued a budget for 3 years running ? ]
We send to the communist Chinese, $1.4 MILLION , to ensure that their prostitutes are aware of sexually transmitted diseases ?!
The communist killers are laughing so hard at our folly,it is the reason they smile like Cheshire cats when ever they meet an American !!
They think: SUCKERS !
This comment was posted on April 30th, 2012 at 2:39 pmAre YOU people really that STUPID ?!