THE ENTERPRISE
I usually write most of the content in THE ENTERPRISE, but every now and then, I find some that is so good, so appropriate that I just must pass it on. That is the case in this issue. I strongly encourage readers to subscribe to one of the sources (of two of these pieces) http://www.ibdeditorials.com. There is no cost other than to "register." You'll be surprised at the quality of the content.
US & IRAN TALKS--NECESSARY BUT VERY RISKY--IRAN IS OUR ENEMY
The US and Iran have been talking. The good news is that this is better (for now) than shooting at each other. The better news is that Iran's youth (and religious leaders) will eventually overturn and throw out its current dangerous leader Amadinejad. The only question is how soon. Probably not soon enough. Thus the talks must go on, but we shouldn't expect anything but treachery. There is a slight possibility that enough interests of both the US and Iran can be served by solving problems in Iraq (and all the related Sunni and Shiite conflicts) and if true, perhaps something will come of these talks.
More likely, Iran will be exposed as a major enemy and we (the U. S. ) will face a most serious decision. Evidence is mounting that Iran, and its ally Hezbollah are behind the efforts that have killed hundreds of Americans in Iraq. The real question is: Did we invade the wrong country? Or is this a case where once you start unraveling this Middle Eastern tapestry of terror, there is not one, but multiple sponsors of terrorism. Will President Bush's now famous definition of an "Axis of Evil" prove to be prophetic.
(Now for the cartoon, which sort of says it all—if you know the story of the frog and the scorpion.)
BIASED MARKET RESEARCH IS VERY BAD--SO IS BIASED MEDIA INFORMATION
In business, one of the cardinal sins in doing market research is to inadvertently (or purposely) add bias in the questions, the way they are asked, etc. The results are worse than useless; they are downright misleading. Why? Because the market research does not reflect what the subject's responses would have been without the bias added. The results are a direct result of the bias in questioning and the flawed process--and they are either dead wrong, or at least highly suspect.
In America, our constitutional right to free speech, extended to freedom of the press has created a set of awful unintended consequences. Our founding fathers and the the drafters of subsequent laws were smart enough to prohibit monopoly ownership of media outlets. What they couldn't predict, and thus couldn't protect against was a concentration of like minded people, being attracted to the same profession, and largely being clustered in the same (mostly coastal) geographical areas.
The result is a creation of a huge bias in the mainstream media in the US, and this bias is passed on in its reporting that (too many) Americans rely on to form their impressions and thus their beliefs. The following is an excerpt from a recent article that documents this troubling bias.
WONDER WHY SO MANY AMERICANS ARE SO "MISGUIDED?"
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The following are EXCERPTS FROM "Extreme Prejudice" By INVESTOR'S BUSINESS DAILY, Thursday, June 21, 2007 (All Emphasis added is mine.)
Another year, another survey, and once again the conclusion is the same: The media have an overwhelming liberal bias. But sadly, they are too self-deceiving - or dishonest - to admit their tilt.
The latest survey, by MSNBC investigative reporter Bill Dedman, had a simple methodology: Go to Federal Election Commission public records and see what various media figures contributed, and to whom. The story that resulted was well-written and researched. But Dedman buried the lead in the 16th paragraph: "The pattern of donations, with nearly nine out of 10 giving to Democratic candidates and causes, appears to confirm a leftward tilt in newsrooms."
Nothing new, really. This is the same thing that surveys have found over and over again for three decades. To wit:
* A landmark 1981 study by Robert Lichter and Stanley Rothman of 240 journalists at top media outlets found that more 80% voted for Democrats for president in each election from 1964 to 1976. Further, 54% called themselves left of center, while just 19% called themselves right of center.
* A 1985 Los Angeles Times survey of journalists found the same thing - about 55% of journalists called themselves "liberal." In the 1984 election, they voted 58% to 26% for Democrat Walter Mondale, while the public went 59%-41% for President Reagan.
* A 1988 survey by the Journalist and Financial Reporting of 151 business reporters from more than 30 publications found the same thing: 54% of reporters called themselves Democrats, just 9% Republicans. And 52% gave Reagan "poor" or "below average" grades. Only 17% called him "excellent" or "good."
* More recently, a 2004 Pew Research Center survey of 547 journalists discovered five times more national journalists calling themselves "liberal" than "conservative."
The fact is - and it is a fact - the media are far more liberal than they are conservative, and far more liberal than the public at large. They represent one of the most consistently left-leaning segments of American society.
All the same, the media love to say they're not biased in their reporting. This is an obvious falsehood: No one can completely separate their ideals, feelings and political attitudes from how they report. It's just basic psychology. And when they deny bias exists, it's dangerous to democracy.
Journalists such as former CBS news anchors Dan Rather and Walter Cronkite who say, "Sure, we're biased, but it doesn't affect our reporting" are just plain full of it. A study by UCLA Professor Tim Groseclose and the University of Chicago's Jeff Milyo, "A Measure of Media Bias," carefully documented whom the media used as sources for their reports. They found very clear left-leaning bias among the mainstream outlets.
Looking at major news media, for instance, only one - Fox News Special Report - could be called "right-of-center," they said. CBS Evening News was the most liberal, followed in order by The New York Times, Los Angeles Times, USA Today, NBC Nightly News and ABC's World News Tonight.
The leftward bias is overwhelming, explaining why more and more people today hold the print and broadcast media in such low regard. People feel they can't trust reporters to tell simple, unadorned truths about things that matter. So they turn to the Internet and talk radio by the millions, as the media scratch their heads.
A Gallup Poll released just last week, for instance, found only 22% of Americans say they have confidence in newspapers, down from 30% a year ago. TV reporters fare only slightly better, with 23% saying they have confidence, down from 33% last year. These are all-time lows, by the way.
Yes, the media are biased. But it wouldn't be so bad if they just came out and admitted it, and tried to correct for it. But they don't. As they say at Alcoholics Anonymous, the first step to a cure is admitting you have a problem.
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AN EXAMPLE OF A MEDIA MANAGED ISSUE:
IT'S THE ECONOMY STUPID--OR ISN'T IT?
in past Presidential campaigns, the mantra has been "it's the economy, stupid," and that was largely true. Somehow, this time, other factors have replaced the economy as the preeminent issues in the Presidential campaign. There is no doubt that the "War on Terror", Iraq, Immigration, Entitlements, and intense bi-partisan bitterness are BIG issues. BUT--what keeps the American engine running strong enough to struggle with and deal with all those other issues is THE ECONOMY, and our CONTINUED FREEDOM FROM ATTACKS.
I don't know exactly why we have not had another serious attack on American soil, and I am distressed by recent reports of one in the planning. Whatever the reasons, thus far we have averted another 9/11 magnitude attack. Of course no credit is given to anyone in power. There is too much time being spent on subpoenas and recriminations. We could learn from the British who take a far more aggressive position on surveillance and prevention—and it is proving necessary and effective.
It's interesting that the Democrats refuse to stage one of their "debates" on Fox news. Oddly, the GOP agreed to do one and be questioned/interrogated by the extremely liberal and antagonistic CNBC crew of Chris Matthews and Keith (I couldn't make it as a sport commentator so now I do politics) Olbermann.
Strangely enough, all the Democratic Presidential candidates spent their last TV "debate" ("debacle"?) bashing the Bush tax cuts. Democrats in power and running for office and their loyal supporters are frantic to repeal the Bush tax cuts. They want to use the illusory fiscal gains to fund misguided "pipe dreams." There is just one small problem with their plans. The Bush tax cuts worked. IF the Democrats gain control of both Congress and the White House, they WILL screw up the economy. Depend on that, and the American people will never realize what happened, and here's why.
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The Tax Story Media Invariably Bury
By INVESTOR'S BUSINESS DAILY | Posted Wednesday, June 13, 2007 4:30 PM PT
One of the assertions that the media make most often about the U.S. economy is that President Bush's tax cuts didn't do what he promised. But the data clearly show nothing could be farther from the truth. Bush lowered taxes in both 2001 and 2003. During the debate for both rounds of reductions, it was repeatedly asserted that tax cuts would lead to lower revenues and not pay off with higher economic growth. Wrong on both counts.
A cursory look at the data — and that's really all it takes, so shame on the media for misreporting — show tax revenues have surged since the tax cuts went into effect. And this is the case whether you you count them on a nominal basis, an inflation-adjusted basis or as a share of GDP.
Look at the chart. Democrats argue that the government has been starved of revenues and that higher taxes are needed to make up for it. But this is arrant nonsense. Tax revenues will be about 18.5% of GDP this year — above the average of 18.2% since 1960. As for inflation-adjusted tax revenues — a little-used but equally telling statistic — they'll reach an all-time high of $2.013 trillion. That's higher even than in the last year of the dot-com boom. And by the way, it's an astounding 26% gain since 2003 — after inflation.
What about the claim that tax cuts "lose" revenues for the government? Also not true. What is true is that by creating a dynamic of powerful economic growth, lower taxes expand the economy and, therefore, overall tax revenues. They do this by giving people more incentives to work, save, invest and innovate — all drivers of long-term economic growth. If that's not true, how could taxes as a share of GDP — a sign that tax revenues are growing faster than the economy — go up?
The same is true for capital gains tax cuts. One of the greatest canards of tax-cut criticism is that capital gains taxes are a "giveaway" to the rich. A few points need to be made here. First, those with incomes less than $40,000 a year pay, on average, no federal income tax. None. As for the "giveaway" to the rich, it's a fact that many middle-income people today own stocks through 401(k), IRA or mutual fund plans. There are, in fact, about 80 million Americans who own shares. They also have potential capital gains tied up in businesses and homes.
In 2003, taxes on capital gains were reduced from 20% and 10% to 15% and 5%. As Heritage Foundation tax analyst Brian Riedl recently noted, the Congressional Budget Office expected capital gains revenues to rise from $50 billion in 2003 to $68 billion by 2006. The reality was far more substantial. Cap gains revenues jumped to $103 billion, a gain of 106%. Yes, capital gains tax cuts paid for themselves — and they always have. By far the worst misconception of Bush's tax cuts is that they did nothing for economic growth. This is just plain silly.
As we've noted repeatedly on these pages, tax cuts by President Coolidge in the 1920s, President Kennedy in the 1960s, President Reagan in the 1980s and, now, President Bush in the 2000s all show the same thing: Lower taxes mean faster economic growth. Doubts about this are amply refuted by recourse to actual data. Since the last tranche of Bush's tax cuts in May 2003, real GDP has grown 13% — or a bit more than 3.2% a year. Before that, from President Clinton's final year in office, growth averaged 1.5%. It basically doubled after the tax cuts.
As we also have noted, this is common. From 1921 to 1929, the era of Coolidge's tax cuts, real GDP rose 59%. It rose 42% from 1961 to 1968, the Kennedy tax-cut era. It added 31% during the Reagan boom, even though Keynesian economists assured us that the U.S. was a "mature" economy and incapable of such growth. Tax cuts mean growth — particularly when coming from a period of high taxation. They also mean jobs. Since the tax cuts went into effect in 2003, the U.S. economy has added nearly 9 million new jobs — a phenomenon the media, after talking up the "jobless recovery" all the way through 2004, have since tried hard to ignore.
Moreover, amid a boom in revenues and growth, another myth has been dispelled — that of tax cuts being for "the rich." This is the most pernicious notion, because it leads average Americans to think the tax code somehow punishes them while favoring fat cats. This is at best a distortion of the truth, and at worst an outright lie. As mentioned, 45 million taxpayers now pay nothing at all in taxes. Another 15 million don't even have to file.
A recent study by the respected and nonpartisan Tax Foundation found that the typical low-income household each year pays a total of $1,684 in federal taxes (including Social Security) but receives on average $17,724 in federal transfer payments. At the same time, the so-called "rich" now shoulder virtually all of the federal tax burden.
The top 1% of filers in 2004, the most recent year for which data are available, paid 36.9% of all taxes. The top 5% paid 57.1%, — in other words, more than the remaining 95%. As for those fat cats, the average person reporting income of more than $1 million paid $743,000 in taxes. Those in the $500,000 to $1 million range paid an average $164,701.
Critics say this still understates the tax burden of the poor. For instance, they pay 15.3% of their income on Social Security and Medicare taxes. Because those taxes phase out at higher incomes, it's a regressive tax, hitting the poor hardest. In fact, even when you add in Social Security taxes, those in higher incomes pay more. The top 20% of incomes, according to CBO data, paid 67.1% of all federal taxes in 2004, even though they had 53.5% of all income.
Truth is, the tax code has become more progressive, not less, after successive major tax cuts. In 1979, according to economist Bruce Bartlett, the top 20% of all earners paid 64.9% of all income taxes. By 2004, they paid 85.3%. At the same time, those we call rich today might not be rich tomorrow. As data produced recently by Congress' Joint Economic Committee clearly show, the U.S. has extraordinary income mobility — something you'd expect from an entrepreneurial nation.
Breaking U.S. incomes into five levels, or quintiles, the JEC found that from 1996 to 1999, 47.9% of all U.S. households moved to a different income quintile.
--Among the wealthiest quintile in 1996, 33.9% had dropped to a lower income level in just three years. Meanwhile, 38% of the bottom quintile in 1996 moved up.
--So, as it turns out, "rich" is very much a moving target. This is what economists call "dynamism," the hallmark of an economy that rewards risk-taking and hard work.
--Even as Americans get sucked in by the class-warfare rhetoric of the mainstream media and their Democratic Party allies, they actually understand the subject pretty well.
--For instance, a Harris Interactive poll of 2,012 adults found that a majority of American taxpayers feel taxes are too high and that the tax code is in need of "major changes or a complete overhaul."
Another poll, this from the American Enterprise Institute, found that most people think they should be paying from 10% to 25% of income on taxes. Right now, the actual number is over 30%. So it's not a stretch to say that most people feel they're overtaxed. This is why Bush's tax cuts are so popular. And why they need to be kept in place.
If they're allowed to lapse, as Democrats would like, it could be big trouble for the economy. A study earlier this year by economists Tracy Foertsch and Ralph Rector found scrapping Bush's tax cuts would:
• Deprive GDP by $75 billion a year.
• Cost 709,000 jobs annually.
• Lower personal incomes by almost $200 billion.
Note to the tax raisers in Washington and the media who carry their water: Tax cuts work. They did for Coolidge, they did for Kennedy, they did for Reagan. Now they're doing so again for Bush.
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HERE'S A SIMPLER WAY TO LOOK AT IT. THIS IS AN OLD EXAMPLE, BUT IT IS SO CLEAR I AM REUSING IT.
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Tax Economics 101—A Parable
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
----The first four men (the poorest) would pay nothing.
----The fifth would pay $1.
----The sixth would pay $3.
----The seventh would pay $7.
----The eighth would pay $12.
----The ninth would pay $18.
----The tenth man (the richest) would pay $59.
So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20." Drinks for the ten now cost just $80.
The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men? The paying customers? How could they divide the $20 windfall so that everyone would get his fair share? They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same
amount, and he proceeded to work out the amounts each should pay.
And so:
----The fifth man, like the first four, now paid nothing (100% savings).
----The sixth now paid $2 instead of $3 (33% savings).
----The seventh now pay $5 instead of $7 (28% savings).
----The eighth now paid $9 instead of $12 (25% savings).
----The ninth now paid $14 instead of $18 (22% savings).
----The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once
outside the bar, the men began to compare their savings.
"I only got a dollar out of the $20,"declared the sixth man. He pointed to the tenth man, "But he got $10!"
"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than I did!"
"That's true!" shouted the seventh man. "Why should he get $10 back when I got only two? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison, "we didn't get anything at all. The system exploits the poor!"
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!
And that, ladies and gentlemen, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up any more. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.
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SORRY, BUT IT TAKES SPACE TO EXPLAIN THESE MATTERS
I apologize for the length of this edition of THE ENTERPRISE, but we are coming in to a period when media misinformation about issues and candidates can have a HUGE EFFECT on the outcome of the 2008 elections. Somehow we must all find a way to reduce this purposeful misinformation being broadcast at all Americans. We must ALL exert whatever influence we have on friends, colleagues, relatives (including adult children).
IF ANY READERS CAN FIND WAYS TO SPREAD THIS KIND OF INFORMATION TO A WIDER MEDIA AUDIENCE, PLEASE LET ME KNOW WHO, WHERE, HOW, ETC. I have added anyone who asks to the distribution of THE ENTERPRISE, and am happy to keep adding addressees, or to have current readers forward copies or direct people to my blog. This is our country, and we have a wealth of experience we can use to help make it stronger and better. Let's use it.
Best, John
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