What Is the Ex-Im Bank?

by Anita on May 7, 2015

Posted by Anita Folsom

The Ex-Im Bank (Export Import Bank) is in the news these days.  But what is it?

“Created in 1934, the Export-Import Bank was a product of [Franklin] Roosevelt’s New Deal.  FDR initially wanted the Ex-Im Bank as a foreign policy tool to make easy credit available to nations he liked….  The Ex-Im Bank often expected to lose money because it was making risky loans, or giving subsidies, to favored countries or favored American corporations.  The Ex-Im could lose money regularly and get replenished in annual appropriations” from the federal government.  (Uncle Sam Can’t Count, Chapter 7)

That spending pattern has continued to this day, and the Ex-Im Bank comes up for renewal in a few weeks.  But many Americans are waking up to the waste and political corruption caused by such a government entity.

In yesterday’s Wall Street Journal, former Texas Governor Rick Perry announced “Why I’m Changing My Mind and Opposing the Ex-Im Bank.” First of all,  on April 13 an Ex-Im loan officer, Johnny Gutierrez, pleaded guilty to accepting bribes on nineteen separate occasions from clients of the bank.  And that doesn’t include the 31 corruption and fraud investigations still pending in regard to mismanagement at the Ex-Im.

Perry admits that during his tenure as governor, he liked the fact that 1200 Texas businesses received help from the Ex-Im Bank in funding more than $24 billion in exports.  The economy of Texas was thriving and job creation was Perry’s number one priority.

Now Perry is pointing to the sluggish national economy, and he realizes that bank loans from the government don’t fuel a robust economy.  No one can overtax segments of the population to create prosperity in another segment without damaging the people’s ability to invest and create new jobs.  Here is Perry’s three-point plan to revitalize the American free market system:

(1)  Simplify the tax code and reduce corporate taxes.   The corporate tax rate in the U.S. is among the highest for industrialized nations.  Start-up companies face an avalanche of regulations just to open their doors.

(2)  Reduce the federal debt by reducing spending, and no new tax increases.

(3)  The U.S. needs a regulatory system that is stable.  Regulations under Obamacare, the EPA, and the IRS have grown by the thousands under the Obama administration.  If regulations change rapidly or constantly increase, businesses tend to locate in other countries, avoiding the U.S.

From 2008 until 2011, more American businesses closed their doors than opened them.  This dismal statistic serves as a wake-call to all Americans, including Rick Perry.  The Ex-Im Bank under both Democratic and Republican presidents has been a ready-made candy jar from which to dollop handfuls of cash – in the millions – to political allies.  That is what the Ex-Im Bank was set up to be, that’s what it has been for years, and that’s what it is today.  It is time to abolish the Ex-Im Bank.

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Is This the Most Difficult of Times?

by Anita on April 9, 2015

Posted by Anita Folsom

Is this the most difficult of times for Americans?  As a comparison, let’s look at two earlier periods in our history.

On this date 150 years ago, the Civil War finally came to an end as General Robert E. Lee surrendered to U. S. Grant at Appomattox, Virginia.  About 620,000 men had died during the previous four years of fighting, all on American soil.  Almost another half million men had been wounded.  Many cities in the country were devastated waste lands.  And four million former slaves were free, but where could they live and what was to become of them?

Such wars have long lasting effects on society.  The Civil War created hundreds of thousands of widows and orphans.  Among soldiers on both sides, doctors estimated that there were 60,000 amputees, which meant that tens of thousands of men had to adjust to a different way of life after the war.

The national debt had exploded to $2.7 billion, and some wondered if the country would ever pay that debt.  But because of limited government after the war and frugal budgets, two-thirds of the national debt was paid in the next 28 years. With a society that valued inventions and entrepreneurs, the United States became the world leader in industrial production.

On this date seventy years ago, World War II was coming to a climax.  American soldiers, sailors, and Marines were fighting in every corner of the globe.  U. S. deaths in WWII totaled 405,000, not as many as during the Civil War.  Better medical treatment was the reason that more soldiers survived, including the immunizations given to all American personnel when they entered military service.  In World War II, epidemics didn’t ravage our troops.  And penicillin became available by 1944, saving thousands of lives.  DDT is controversial now, but during WWII its use saved millions of people in Europe and the Pacific from contracting typhus, malaria, and dengue fever, spread by fleas, lice, and mosquitoes. (See FDR Goes to War for more on this.)

About 14 million American men served in the military during the war.  Many were away from their families for years at a time.  In 1945, Americans were also prisoners of war in German and Japanese camps.  The odds of surviving captivity varied from camp to camp.  POWs in Germany – 93, 941 Americans – usually survived because German policy followed the guidelines of the Geneva Convention for the Treatment of Prisoners of War (unless the Americans were also Jewish). POWs in Japanese camps suffered a different reality.  With a death rate of 40%, American POWs in Japan received starvation rations and performed hard labor for their captors.

On the home front in the U. S., shortages of everything from tires to shoes to sugar were the reality during the war years. Intrusive government regulations covered every aspect of society.  Taxes devoured extra income of two-thirds of Americans.

Yet at the end of WWII, Americans chose to cut taxes and abolish many wartime regulations.  FDR had loved high taxes, because he wanted the government to direct the economy.  But with lower taxes in 1946 and 1947, politicians were amazed to see the economy soar while the federal government still reaped larger tax amounts than expected.  Why?  Because the American people were free to invest and build and invent without much government interference, and without federal taxes that sucked away productivity.

So, how does our current situation in the United States compare to 1865 and 1945?  Are times uncertain?  Yes.  Does violence seem to abound?  Yes.  Is government too intrusive?  Yes!  Are many Americans sacrificing themselves to defend our country?  Yes.

During these challenging days, if we study history we learn that generations before us faced huge problems.  Times have been uncertain.  Yet the standard for each generation of Americans is to deal with the problems at hand while maintaining the principles that have made the United States an exceptional nation:  limited government, rule of law, charity and compassion for those in need, property rights, equality of opportunity.  And each generation has been forced to press through the problems of its time, believing that these American principles are worth preserving.  That is the challenge of our time.



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I Paid My Income Tax Today

by Anita on April 1, 2015

Posted by Anita Folsom

“I paid my income tax today.

I never felt so proud before,

To be right there with the millions more

Who paid their income tax today.”   (Song lyrics by Irving Berlin)

Are you ready to sing those lyrics by the tax deadline on April 15? Probably not.

This musical ditty was actually a propaganda masterpiece used by the federal government during World War II.  Knowing that the war would cost billions of dollars, President Franklin Roosevelt used the war emergency to push a new tax program through the federal bureaucracy.  But how could FDR’s administration whip up patriotic fervor and encourage Americans to pay so much in taxes?  The answer:  Use all types of media with the message that paying taxes would help to win the war.

Two weeks after the attack on Pearl Harbor, composer Irving Berlin penned a tune about paying taxes entitled “I Paid My Income Tax Today,” and the government asked radio stations across the country to play the recording early and often.  The goal:  remind the public to pay their income taxes before the new deadline of March 15, 1942. (For more information and more verses to Berlin’s lyrics, see FDR Goes to War, Chapter 9.)

Roosevelt and his advisors had tried for years before the war to begin a system that would tax a majority of Americans. Before World War II, only about 6% of American citizens with the highest incomes paid any income tax at all.

But suddenly the United States was fighting a two-front war on both the Atlantic and Pacific Oceans. So during World War II, FDR’s administration pushed through new regulations that meant about two-thirds of Americans would pay income tax beginning in 1942. And those Americans with the highest incomes would pay 94% of their total income to the government!

“Pay as you go,” or what we now call “withholding,” became a part of American life.  Employers were responsible for deducting wages from each employee’s compensation during each pay period and sending those funds to the government.  Voila!  Uncle Sam had a new stream of cash flowing into federal coffers–permanently.

The government also appealed to the public with slogans and posters.  One of the most popular pro-tax mottos was “taxes to beat the Axis!”

Even Walt Disney’s studios became a part of the propaganda machine. The Treasury Department asked Disney to produce an eight-minute film, The New Spirit, to play in movie theaters. The program showed Donald Duck paying his taxes and then seeing the weapons produced to win the war. The narrator concluded at the end of the script, “Taxes will keep democracy on the march!”

Unlike many Disney films, the story of American taxation does not have a happy ending after World War II.  The income tax for most Americans was kept in place and even expanded.  Withholding became an integral part of American society. And the battle for freedom from usurious taxes continues to this day.


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Basketball and Taxes

by Burt on March 19, 2015

This time of year, Americans are thinking primarily about two things: basketball and taxes. As the NCAA Men’s Basketball Tournament gets underway, millions of fans are filling out their brackets. The winner of each game is easy to determine. Whoever has the most points wins the game.

Taxes are a bit more complicated, because of the thousands of tax regulations put in place by both state and federal governments, and because of all the misinformation on tax policy. Here are three myths about taxes:

1.  We need the income tax to pay all the costs of running our federal government.  No, the current income tax is a huge premium we pay for the services and the meddling we receive from our government.  Only for the last 100 years have we had the 16th amendment, which permits an income tax.  Before that we supported our government through taxes on imports, taxes on whiskey and tobacco, and on the sale of federal land. That was it.  Even with that limited tax base, our leaders usually spent money wisely, and we had budget surpluses most years before 1913.  We actually cut our Civil War debt in half.  We learned this lesson:  When our politicians had little money to spend, they rarely went over budget.

2.  We need a large income tax to give more needed social services to the American people.  No, the greater the flow of cash into the government, the greater the waste and the worse the social services.  In the 1800s, people in need got help from churches and local charities. People helped people directly; almost no one depended on federal bureaucrats and welfare checks.  In the late 1800s, various entrepreneurs and community leaders began the Red Cross, the Salvation Army, humane societies, and orphanages across the country. In 1885, President Grover Cleveland vetoed a bill to give seeds to drought-stricken farmers in Texas because he wanted people, not government, to help bail out those in need.  Charities throughout the U.S. rushed to help their fellow Americans; more money was sent to the needy farmers than was provided in the bill Cleveland had vetoed.

3.  The rich ought to pay proportionately much more income tax than everyone else.  Wrong again.  The rich already pay much more than everyone else–and taxing them even more only causes them to hide their wealth, or take it elsewhere.  The 14th amendment promises equal protection of the laws to all citizens, and if we discriminate against the rich, the door is open to pass laws discriminating against blacks, women, and old people.  When President Franklin Roosevelt began taxing the rich at rates of 80, 90, and 94%, he discovered that their wealth vanished from sight.  When that happened, he could have let the rich keep more of what they earned.  But he chose to keep taxes high on the rich, and instead he hiked taxes on the middle class and poor to make up for the revenue lost because rich people were now sheltering their income through various tax dodges.  Should we be following FDR’s example today?

With all of the government red tape and waste in using tax money, it’s easy to see why Americans probably prefer to think about basketball these days. At least everyone knows the real score.

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Equality of Opportunity Is the Framework

by Burt on February 26, 2015

The subject of “equality” is the source of much political debate these days. Ever since the founding era, free-market thinkers have argued for equality of opportunity in the economic order. Equality, in other words, is a framework, not a result. In modern terms the goal is a level playing field. Government should be a referee that enforces property rights, laws, and contracts equally for all individuals.

What the free-market view means in policy terms is no (or few) tariffs for business, no subsidies for farmers, and no racism written into law. Also, successful businessmen will not be subject to special taxes or the seizure of property.

In America this view of equality is enshrined in the Declaration of Independence (“all men are created equal and are endowed by their creator with certain inalienable rights”) and the Constitution (“imposts and excises shall be uniform throughout the United States” and “equal protection of the laws”).

Much of America’s first century as a nation was devoted to ending slavery, extending voting rights, and securing property and inheritance rights for women–fulfilling the Founders’ goal of equal opportunity for all citizens.

Progressives and modern critics of equality of opportunity have launched two significant criticisms against the Founders’ view. First, that equality of opportunity is impossible to achieve. Second, to the extent that equality of opportunity has been tried, it has resulted in a gigantic inequality of outcomes. Equality of outcome, in the Progressive view, is desirable and can only be achieved by massive government intervention.

To some extent, of course, the Progressives have a valid point–equality of opportunity is, at an individual level (as opposed to an institutional level) hard to achieve. We are all born with different family advantages (or disadvantages), with different abilities, and in different neighborhoods with varying levels of opportunity. As socialist playwright George Bernard Shaw said, “Give your son a fountain pen and a ream of paper and tell him that he now has an equal opportunity with me of writing plays and see what he says to you.”

What the Progressives miss is that their cure is worse than the illness. When government, for example, tries to correct imbalances in family, ability, and neighborhood, government intervention produces other inequalities that maybe worse than the original ones.

Thomas Sowell writes, “Attempts to equalize economic results lead to greater — and more dangerous–inequality in political power.” Or, as Milton Friedman concluded, “A society that puts equality–in the sense of equality of outcome–ahead of freedom will end up with neither equality nor freedom. The use of force to achieve equality will destroy freedom, and the force, introduced for good purposes, will end up in the hands of people who use it to promote their own interests.”

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Disturbing Parallels: Banzai and Allah Akbar

by Anita February 19, 2015

Posted by Anita Folsom Here are the headlines: “Civilians Massacred!” “Contest to Kill 100 Civilians with a Sword!” “Hospital Bombed!” Do these lines describe the Middle East today?  No, they describe atrocities in China 75 years ago.  The Japanese had invaded China in 1937, and until the end of World War II in 1945, the […]

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Is the U.S. an Unjust Nation?

by Burt December 18, 2014

Yes, but only if we are judged by a divine standard. Indeed, by that standard we have many imperfections. One of our nation’s sins, for example, is that at different points in our history we have almost fully denied natural rights to several different groups: Blacks, Indians, Japanese during World War II, and even rich […]

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Let’s Not Relive The Day After Pearl Harbor

by Anita December 8, 2014

Posted by Anita Folsom In recent years, we have discussed the anniversary of the bombing of Pearl Harbor by the Japanese:  December 7, 1941.  This event led to the entry of the United States into World War II.  On that day at Pearl Harbor, 2,403 Americans died, the U.S. Pacific fleet was severely damaged, and […]

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Thanksgiving Peace In the Midst of Turmoil

by Burt November 25, 2014

“A historic power grab!” “A naked political move to win over Hispanics!” “Unprecedented seizure of power!” These are some of the alarmist cries that have filled the air waves after President Obama signed his executive order to legalize millions of illegal aliens. Pat Buchanan, an expert on presidential politics, called Obama’s power play the “beginning […]

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Whose Executive Order will be Worse—President Obama’s or President Roosevelt’s?

by Burt November 18, 2014

The big political talk of the last two weeks has been President Obama’s threatened executive order to grant amnesty to perhaps 4-5 million illegal aliens. The Republicans oppose this move, and cite their landslide election victories earlier this month as evidence that Americans want Congress to make laws according to the Constitution, not the president […]

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