Quantifying the shift to government dependence

I love lists, indices, and other interesting compilations of information. However, a recent report by the Heritage Foundation called the Index of Dependence on Government was very disturbing indeed. The numbers numbers this report certainly makes one look and they should be most alarming to even the most casual observer.

The index looks at several indicators when it comes to the growth of dependence on government. For example, how much have federal social programs grown? To what degree have such programs "crowded out" what were once social obligations and services carried out by the family, community organizations (e.g., churches), and local governments? In sum, William Beach, Director of the Center for Data Analysis at the Heritage Foundation, asks, has the civil society yielded significant ground to the public sector? After all, problems are solved by friends, neighbors, family, and religious groups, they are simply maintained when they fall into the hands of government. Quantifying the size of the shift to dependence is exactly what the index attempts to do.

The index currently stands at 240, based on data running through 2008. That is up three points from the 237 points from 2007. The growth in the index has been astonishing since 2001, growing by 31.2 percent when it stood at 183. The growth is even more profound when you look at the orgins of the indes in 1980, in which the base year for the index started at a mere 100). This enormous growth has happened over 30 years.

The rapid increase in the number of dependents has been accompanied by a comparable increase in the number of people who do not pay taxes. That number has grown from 21.3 percent in 1980 to 34 percent in 2008. 20 million tax filers did not pay a penny in taxes, 48 million Americans paid nothing at all.

Beach believes this shift to government dependence should be alarming to Americans. In addition to providing a huge financial drain on social service programs and the probability of long term dependence without consequences or shame (after all, recipients are mere "numbers" in the bureaucratic game); this harms civil society of its traditional and necessary role in providing assistance and the path towards independence through relationships that are closer to home. These include the family, community groups, religious organizations, and local governments. Local governments are far more effective than the federal government in breaking dependence because of their much more limited budgets and greater accountability, because they are closer to voters. Although the focus of the index is on the shift from society to government, this study also indicates the decay of civil society itself as reflected in its declining role in this most important area of life.

The biggest concern of all that comes from this index, in my opinion, may be what is around the corner -- the huge number of Baby Boomers that will bring the largest retirement of people in the history of the world. This phenomenon is taking place at a time when the number of people who do not pay taxes is growing rapidly. America has been on the path towards economic ruin for years. Now it seems we are in the process of fast tracking that process.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN 650). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Are the Democrats really for the Poor?

One of the big debates over fiscal policy is the discussion of "priorities." Government, is going to spend, it is merely a question in what areas, we are told. In that debate we are told that Democrats (or liberals of any political party) are for the "poor," while conservatives are for the "rich." We often hear about "rich Republicans" and "poor Democrats," but how does this line up with reality?

In the last Presidential election, the only two serious contenders on the Democrats side were Barack Obama (who eventually won) and Sen. Hillary Clinton. Both used very populist rhetoric and to varying degrees, both sounded as thought they were pulling chapters out of the works of Karl Marx. Yet there is a cloud that hang over these "poor Democrats." That is the political realities that financially drove both of their political campaigns.

Personal income is a strong indicator of ones relationship to the constituents they represent. Barack Obama made ten times more than Sen. John McCain (who became the Republican nominee in the last year) accounted, with over $4 million in income. Meanwhile his wife cries poverty over having to have to make "outrageous" student loan payments to their old schools -- Princeton, Columbia, and Harvard (where's the violin music when you need it?).

In the same vein, Sen. Hillary Clinton, made an impressive five times more than Obama at approximately $20 million. My mathematical skills suggests I refrain from attempting to calculate the difference between McCain and her.

But personal wealth is only the beginning, there is also the lessons we learn from those who supported their campaigns. From the media we would have to assume that McCain certainly received much more from his rich Republican buddies than either (or even both) of the Democrats. The reality could not be further from the truth, Sen. John McCain raised a fraction of what Obama raised (who broke a presidential campaign record) and during the primaries, he could not keep pace with Clinton.

The debate about wealth, poverty, and politics, is really quite cloudy. I sincerely doubt that homeless and other poor people (the alleged beneficiaries of Democrat policies) are fueling their Presidential campaigns. In fact, a Fortune Magazine article implied that business was voting for Hillary. What kind of business? The big corporations that can actually afford liberal and big government policies and see such as a way of keeping smaller competitors at bay. We saw from the so-called stimulus packages (designed by Democrats in Congress, yet supported by both parties) in September of 2008 and again in the early days of the Obama Administration, that some of the biggest beneficiaries were the largest corporations in the United States.

The truth of the matter is that the mega rich support liberals over conservatives. In fact, Obama's support was 3 to 1 in that category. The reasons the rich supports liberal candidates might be quite cynical. Major corporations know they can absorb the regulations, tax requirements, and other obligations that come with being large. They also know such laws could put their aspiring competition -- the rising enterprises often driven by the middle class -- out of existence. Americans need to get serious about this issue and start by asking the question, what type of policies actually help the poor?

Kevin Price is Host of the Price of Business, the longest running show on AM 650 (M-F at 11 am) in Houston, Texas and on AOL Radio. His articles often appear in Chicago Sun Times, Reuters, USA Today, and other national media. Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.

Only Barack Obama Could Pull this Off and it Would Cure Economic Woes

Every week we here of increasingly higher jobless numbers and policy makers are dumbfounded as to what to do about it. Approximately one year ago we had virtually full employment at around 5 percent unemployment. At current trends, it will likely be ten percent or higher by the end of the year, unless something miraculous happens.

However, we are not hearing about any stroke of genius, but rather traditional government "solutions" to economic problems. We are hearing about "make work" programs and "bailouts" that have government at the center of the solution. It is interesting that Barack Obama, who was marketed as an agent of change, would find his solutions in the waste bin of government created work, for answers. He needs to go deeper, he needs to pursue an entire paradigm shift.

Obama campaigned as a candidate who supported transparent government, but there is nothing more deceptive than our current tax system that discourages wealth creation and places businesses in the role as tax collector. Remember, businesses don't pay taxes, they are merely tax collectors. Taxes are a fixed cost of doing business. If taxes on businesses were eliminated, consumers would enjoy the savings over night because businesses couldn't afford to be reluctant to transfer the savings due to competition. These taxes on businesses are the single force undermining job creation today. They force businesses to find countries that are cheaper for doing business, be it in labor, taxes, or other factors. Currently, the US has the second highest tax rate of any industrialized country in the world and we do not even want to compete with cheap salaries (nor can we). Eliminating dishonest business taxes would restore some transparency to government and create many more jobs. It is as simple as that.

But those taxes would have to be replaced with others and the only honest place to raise those revenues are directly on the people and on their consumption (rather than income), however challenging to pursue. This is contrary to Obama and the Democrats class conflict philosophy, but it is the most honest, efficient, and the least damaging on all job creation (in fact, it would generate more jobs). Obama could make history with these realities.

No one, but an anti-Communist like Richard Nixon, could open relations with the Chinese. If any President who had a history of being "soft" on Communists open these doors, they would have been denounced and dismissed. Nixon brought an element of surprise that made the move possible. So, too, was the case with Bill Clinton who truly did end "welfare as we know it." It took a progressive Democrat to break the cycle of poverty that was holding the poor hostage. If a Republican President had proposed such a policy he would have been dismissed as being "cruel" and "heartless." To change our tax code towards a consumption system would require a similar element of surprise and would need to be done by someone who has promoted himself as a champion of the poor. That describes Obama very well.

With such a policy, the only serious challenge he would face is among his fellow Democrats in Congress. However, if he continues to pursue policies that destroy jobs, he will likely have a Republican Congress in 2011. This is a similar situation that Bill Clinton had in the 1990s in which a Republican Congress played a role in getting his reform passed. Clinton's welfare reform is one of the greatest policy achievements of the second half of the 20th century. A change in the way we collect taxes by Obama could be one of the greatest policy achievements of the 21st century and it is one many would love for him to seriously consider. Especially those facing unemployment.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Link Between Poverty and Politics

Several years ago I served on a panel in a televised debate in which three conservatives faced off against three liberals on how to solve poverty problems. The only person I remember on the other side was Congresswoman Sheila Jackson Lee. Over the years I have participated in a huge number of debates and other forums, but this was one of my favorites. I got to call one of the most liberal Members of Congress that she was a "poverty pimp" to her face. I doubt I will ever forget the look on her face.

Sheila Jackson Lee is one of many liberal politicians who survive off of poverty. If her constituents some how became affluent -- in spite of her best efforts to fight such -- they would throw her out of office at their earliest opportunity. This is because her high tax and big government worldview is opposed to the idea of wealth creation.

Lee is not the only one. The United States Census Bureau creates an annual list of the poorest cities in the country. It is pretty easy to notice the link between the cities economies and their politics. The following list is in their proper order and includes the percentage who are in poverty:

1. Detroit, 32.5. Detroit has consistently been one of the most Democratic cities in the country for almost four decades and during that time, one of the most poor.

2. Buffalo, 29.9. This city has not elected a Republican mayor since the 1950s.

3. Cincinnati, 27.8. This poor city actually had Jerry Springer as a mayor and has not had a Republican mayor since the early 80s.


4. Cleveland, 27.0. This city has not had a Republican mayor since 1989,'

5. Miami, 26.9. This city has never had a Republican mayor.


6. St. Louis, 26.8. This gateway to the west hasn't had a GOP mayor since the 1940s.

7. El Paso, 26.4. This town has never had a Republican mayor.

8. Milwaukee, 26.2. You have to go to the turn of the last century to find a time this city has elected a Republican mayor.

9. Philadelphia, 25.1. Not since the 1970s has this town been able to produce a Republican mayor.

10. Newark, 24.2. Like Milwaukee, you have to go back to the beginning of the last century to find a GOP chief executive for this city.

Democrats consistently promote policies that are hostile to business, gives incentives for people to be poor, and punishes success. They simply don't understand that the behaviors that people promote on the micro level -- rewarding good behavior, discouraging sloth, and encouraging achievement -- work equally well on the macro level.

This may be why so many businesses are concerned by the rise of a Barack Obama. He grew up as a "community organizer" (which is a politically correct euphemism for "poverty pimp") and made his money helping people be comfortable in their economic condition rather than encouraging them to get out of such. This unique background and his stated economic policies may be the exact reason why we are seeing the massive layoffs today. Yes Mr. Obama, business gets the message and so are millions of other Americans facing poverty.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Obama, Wealth, Work, and Poverty

We should want a tax code that rewards wealth to create work. Not a tax code that rewards work, instead of wealth. The latter would “succeed” only if the government was the primary source of job creation. That describes societies with command economies, such as what we saw in Eastern Europe and the former Soviet Union before the fall of Communism and in struggling developing countries today that have yet to figure out why their economies haven’t worked. Such hostile views towards wealth creation should not be found in free market economies, such as the United States, but it is exactly what we saw and heard during the Democratic National Convention (DNC).

Its funny, in my circle of friends, decrying the engines that create wealth is the equivalent of economic blasphemy. At the DNC, it was a virtue. The message of “we need a tax policy that rewards work, not wealth” wasn’t merely seen on the signs of delegates or alternates. It wasn’t the occasional mentioning of one of the many speakers that passed in front of the microphone. It came from the keynote address of the Party’s nominee for President. Barack Obama.

This sentiment of wanting to bite the hand that feeds the economy (wealth created by corporations and small businesses, not revenue confiscated by taxpayers) stood in contrast to the message heard by the candidate that I hoped would get the Republican nomination and who spoke at the his party’s Convention on behalf of Sen. John McCain, former Sen. Fred Thompson of Tennessee.

Thompson uses a Southern charm and has a disarming approach to speaking that made the logic of what he said perfectly clear, regardless of party affiliation or philosophy. Paraphrasing the Senator, Thompson pointed out that the Democrats only want to increase the taxes on a small group of people – the top 5 percent. This, we are told, has no effect on the common person. Unless you buy milk, bread, or any other consumer product at the store. Or if you have a job that is dependent on someone (or company) subject to that top five percent. The Democrats like to bemoan “trickle down economics” (where the government ostensibly benefits the wealthy, which in turn creates opportunities for others). But the trickle can be seen in more than one way. The trickle can be policies that hurt the rich and, out of simple self interest, they share the misery with everyone else. Thompson did an excellent job of warning us of that possibility.

According to economist Stephen Moore of the Wall Street Journal, the US already has the second highest corporate tax rates of any developed country in the world after Japan. That, more than cheap wages, has led to the flight of jobs and manufacturing to other countries. Barack Obama promises to push us further in that direction through tax increases.

Ronald Reagan use to say that “you can’t help America’s poor by making America poor.” Obama disagrees. He intends to help America’s poor by making more people poor, so they will have more company. An Obama administration will be very interesting indeed. I doubt, however, we can afford it.

Kevin Price's articles are found daily in national publications such as USA Today, Chicago Sun Times, and Reuters. Subscribe to his newsletter here.

Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review.

Why John McCain Wants to Lower Corporate Taxes

John McCain, the presumptive nominee of the Republican Party for President, is pledging to fight for lower corporate taxes if elected. The media and his opponents will likely treat this as accommodating "the rich" in a manner that Republicans are "known." Reality check: a policy such as this is one of the few ways to help the poor become middle class and the middle class move towards affluence. That is what good economic policy accomplishes.

How will lower corporate tax rates achieve such an objective? There are several reasons and here are a few:

* Currently the US is getting pounded on the world stage by economies that either have significantly lower tax rates, ridiculously low salaries, are both. Competition exists on the micro level (store "A" vs. store "B") and on the macro level (country "A" vs. country "B"). When companies stay here because of a better tax environment, we keep more jobs, which helps every income group.

* Lower corporate tax rates encourages individuals to become entrepreneurs to create businesses and to climb the economic ladder. This benefits those individuals willing to take the risk and all the people they will hire as they rise. This doesn't even address the new tax revenues these companies create.

* One of the only beneficiaries of high corporate taxes are, ironically, the very rich. Why? Because they are insulated from potential competition who are intimidated by the high price of corporate taxes. The other beneficiary would be the government, who enjoys the revenue and let's the government be the "bad guy" by letting businesses do the tax collecting. That leads to the final point: businesses don't pay taxes, they collect taxes, and if that negatively affects their business to the point of harming competitiveness, they will move their companies some where else or never create them in the first place. Who benefits from that?

For people who believe in the free market, like myself, McCain's commitment is great news and long over due.

According to recent surveys on marketing, most advertising attracts sellers (others who want you to buy more ads) and not buyers. Do you want to know why? Email info@HoustonBusinessShow.com and put "marketing audio" in the subject line and we will get it to you.

Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

On the Show: Charles Payne Tackles Poverty

Charles Payne of Wall Street Strategies (and of Fox News and Fox Business) was recently on the Houston Business Show discussing the problem of poverty facing many minorities today. Charles brings a unique perspective on the subject since he has faced both poverty as a young boy raised by a single parent and wealth because of his entrepreneurial success as an adult. As a result of his up bringing, Charles takes a some what contrarian view of poverty.

Conventional wisdom is that poor people should be given hand outs and that the poor should be treated as victims rather than as people merely seeking opportunity. Conventional wisdom fails to understand that the more you subsidize something, the more you get of it. Subsidizing poverty generates more of it.

Payne says that a big part of the poverty problem as that the focus is on the wrong thing. We don't need a "Poverty Czar" as advocated by many liberal leaders, but a "Wealth Czar" who points people away from poverty. We need to tackle the real causes of poverty in this country -- excessive taxation on wealth creation that prevents many businesses and opportunities to be created, excessive regulation that deters business growth, and licensure laws that inhibit people from entering the market place.

I love Charles' insights and he is one of my favorite contributors to the Houston Business Show. Listen to this informative two part interview here and here to understand America's poverty problems from someone who has experienced them.

For a copy of the free report, "Why Your Marketing Isn't Working," email Info@HoustonBusinessShow.com and put "marketing" in the subject line.

Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

The Wealth Gap

One of my sons sent me an interesting article from MSN about the wealth gap in the world. The article title cannot help but grab your attention: "Got $2,200? You're Rich on a Global Scale."

The artcle points out that the world's three richest people are worth more than the 48 poorest countries combined. That is a very serious gap, we are informed. Further, the article points out that the top 2% of the population makes more than half of the world's household wealth.

I believe that these articles are truthful in content, but often have an agenda beyond being informative. Often we come to moral conclusions about right and wrong when it comes to information such as this, without understanding the larger economic issues.

The question articles like this might want to address is, why are some countries wealthy and others are not?

Why is the United States the richest country in the world?

Why is Japan among the world's most affluent, yet it has virtually no natural resources of its own ("natural resources" is one of the excuses used by some to describe why some countries are affluent and others are not)

Why is Singapore, which is one of the most densely populated countries in the world, prosperous when Somalia (which has a density that is similar to the US) is one of the poorest countries in the world? We have been told that people cause poverty, but it isn't working in this and many other scenarios.

The answers to these questions are far more useful than the issuess offered in the article and the answers point to the power of free enterprise. The countries that are affluent and enjoy far more wealth, also have stronger committments to private property, lower government cost for doing business (fewer regulations, licensing laws, or taxes), and generally smaller (or at least more efficient) governments. Conversations on how the world's poorest countries could pursue such an agenda of their own, would make those countries far richer and would make for more interesting content.

Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.