BY MICHELLE SEITZ

When people discuss the history of America’s difficult economic times during the 20th century, the Great Depression and stagflation in the 1970’s will always be mentioned. However, one of the more severe recessions America has endured is rarely discussed. Until recently, this period in time received very little publicity. The reason why the history of this recession is so relevant today is because the measures that were taken to revive the economy were sharply different than what was done during the Great Depression and all of the notable ensuing economic downturns with the exception of President Ronald Reagan’s approach.

President Obama has just signed the single largest spending bill in America’s history into law. Americans have been told repeatedly since the day Obama was sworn in how urgent it is that this legislation is passed. He consistently refers to the current recession as “the worst economic crisis since the Great Depression.” If only top-notch economists had that same crystal ball... The severity of this recession should not be dismissed. However, a comparison to the Great Depression is premature at this juncture.

All throughout the campaign, Obama promised that there would be transparency and bipartisanship in his administration. Instead, the single largest spending bill in America’s history was not made available to the public until after it was signed into law, lawmakers had less than 24 hours to read a bill that exceeded 1,100 pages prior to voting, and the voting was almost straight down party lines. In addition, only the lawmakers from the far left wing of the Democratic Party had substantial input.

This economic crisis is so severe, the administration just didn’t have the time to debate and seek input from those who have a different point of view and would propose different solutions. If the time had been taken to review the alternative solutions, then perhaps top economists would have reminded the Obama Administration of the 1920 recession and the government’s response.

When President Warren Harding was elected, he inherited a deepening recession. The most important aspect that separates Harding’s response from President Hoover’s, Roosevelt’s, Carter’s, Bush’s (both father and son) and Obama’s is he did not grow the size of government, spend money recklessly, raise taxes and implement burdensome regulation to address the problem.

The 1920 recession was not mild, as the country experienced very sharp deflation. The decline in the Gross National Product (GNP) price deflator from 1920 to 1921 was larger than any deflation experienced during the Great Depression. Using the Department of Commerce 1986 estimates, the 1989 Balke & Gordon and Romer estimates, they produce one-year deflation figures of 18 percent, 13 percent and 14.8 percent, respectively. The closest competitor is the 11.5 percent deflation recorded for 1931-32, the third year of the Great Depression. (1)

Unemployment did not reach Great Depression level heights; however, job loss was fairly rapid from 1920 to 1921. Unemployment rose from 5.2 percent to 8.7 percent during that time, and farm income dropped 40 percent. (2)

One can make an argument that the economic downturn from 1919 to 1921 was more severe than the current recession. It’s important to distinguish between future speculation and actual data. Unemployment at the beginning of the downward economic trend (December 2007) was 4.8 percent and is now currently 7.6 percent. (3) Although the numbers climbed sharply, the pace and decline in income was more severe in 1920.

Given the magnitude of the 1920 recession, President Harding could have made a case for government intervention and expansion. Much like the current crisis, commercial banks were failing, property value was declining, and people were losing their jobs and their homes.

President Harding’s response was to let businesses fail, cut government spending, balance the federal budget, reduce taxes and remove burdensome government regulations. How’s that for an economic stimulus package? It’s safe to say that if he were running for President in 2008, he would have been laughed off the campaign trail. The media would have destroyed him.

However, this unsung fiscal hero’s accomplishments are no laughing matter. The Harding and Coolidge (Harding died in office in 1923) Administration cut the top marginal tax rate from 73 percent to 25 percent in four years’ time. Although Harding dramatically reduced taxes, he was still able to reduce large budget deficits resulting from World War I and eventually run a surplus. This is one of the better cases for the argument that tax cuts increase tax revenue. Federal government spending was cut in half between 1920 and 1922. Harding also believed that burdensome regulation (think of the modern day Sarbanes-Oxley Act) stood in the way of private sector growth.

America’s first experiment with supply side economics was a success. The tax cuts and reduced regulation allowed business to grow capital and create jobs. The reaction by the Harding/Coolidge administration gave way to the “Roaring 20’s” economic boom – among the most rapid periods of economic growth in America’s history. The technological advances made during the 1920’s were also among the greatest in America’s history.

The recession that began in 1920 ended before 1923. Harding’s response makes a very strong case as to why government intervention is not the answer. The Great Depression may not have been so “great” if a hands off approach were taken. The Great Depression lasted until World War II, and some analysts believe that the war itself ended the Great Depression. Imagine if Presidents Hoover and Roosevelt responded in a similar manner as Harding instead of tripling tax rates, bailing out failed institutions, expanding government to unprecedented levels and imposing massive government regulations. The stagflation coupled with double digit unemployment in the 1970’s was brought to an end only when President Reagan reintroduced the supply-side theory.

History has shown us what works, which begs the following question: Why do our elected officials continue to ignore history? The Democrats are determined to prove to the world that FDR was one of America’s best Presidents regardless of the fact that fiscal history shows otherwise. People did not have history as evidence to illustrate that FDR’s policies would fail; however this is not the case for President Obama. America will not stand for unemployment that exceeds 20 percent or wait over a decade for measurable results that would stem from a third world war.

Upon implementation of America’s largest spending bill in history, the federal budget deficit could spike to an extraordinary $2 trillion. President Obama has bet big on FDR’s policies. However, he may want to consider Harding’s if he plans on winning a second term...

(1) http://www.questia.com/googleScholar.qst;jsessionid=JdJSGMq9Ls020nnSvSGMvBVYtnQTkMjNyNGwq9BfMTGfNnMZ1LpF!-165377178!2064305130?docId=96522339

(2) http://eh.net/encyclopedia/article/Smiley.1920s.final

(3) http://www.bls.gov/news.release/pdf/empsit.pdf

The last two Presidents have made use of this tool and it works.

President Bush used it to get the debate on the first TARP (Troubled Asset Relief Program). Bailout over with and a vote cast before 'it was too late'. Speaker of the House Nancy Pelosi said this 'must' get passed or the economy will face complete ruin. We simply cannot wait or it will be too late. After a quick recess for 2 days, they then voted and the TARP bill passed.

President Obama (President Elect, at the time) said on many occasions that 'this is the worst economy since the great depression' and 'something must be done now', just like the President before him. Now that he is the President, this continues as he goes back on the campaign trail selling his 'Economic Stimulus Package' to the masses. Once again in both Indiana (a town devastated by the loss of the RV industry, yet he fails to state which party was the main cause of that) and Florida, we hear President Obama talking down the economy and instilling fear into the masses that if this bill is not passed we could face economic ruin.

Nancy Pelosi again adds to the fray by stating that every month this bill does not pass 500 million Americans will face unemployment. The fact there are only about 300 million Americans on the planet doesn't seem to bother her, though. The key here is that since Timothy Geithner announced his TARP II, the stock market has dropped almost 300 points. Since Obama (who stated before the election that he would not use 'the politics of old') became the President, the market has done little to correct itself.

As strange as it may seem, the markets are reacting to what the President and government are saying. I'm not saying its the main reason, but they are being affected. If you hear the leader of the free world state how bad the economy is and that if government doesn't take action soon it will 'be the end', how would you feel?

My guess is that you are scared for the future. My guess is that you are holding off doing anything with your money. My guess is you are cutting back, saving money, and riding out the storm.

Now, what if the President stopped saying it was 'SOOOOO' bad, and laid off of the doomsday predictions? What if Obama stopped saying 'government is the only one who can solve this crisis' and started being more positive?

I know so many are saying that, if he did that, he would just be covering up the truth and lying. I can completely understand that, and we don't want a liar for a President, but being so doom and gloom, I believe, is actually keeping the markets down and keeping people scared. What if Obama said it was bad, as bad as it is, but then said we as Americans can get through this. Do not be beaten into submission by what the media says. Do not hide under the bed and wait, we need to get out there, and build on this economy. I know you're scared, and I know you're uncertain, but if we just sit back and do nothing it will get worse.

If you weren't so scared and uncertain, what would you be doing? I personally believe that if people weren't so scared, that they would be out spending in the shops and the economy would be on the up. But with Obama and Pelosi both stating 'this is terrible, its the worst economy since the great depression, we need to spend $1 trillion to fix it, and only government can do it. All I see are scared faces waiting for government to fix it. Truth be told, government caused this and will make it worse with spending their way out of it.

Government is not the 'only one' who can fix this. Look back into history around the time of the Great Depression.Why, in other countries, is it called 'the depression', when in the US its called the 'Great Depression'?

One answer: GOVERNMENT!!

The government programs put forth to 'save the economy' actually prolonged the recession into a long depression. What do we all see at the end of the 'great' depression? World War II. Come forward in time to President Carter. As he was leaving office and Ronald Reagan was entering office, the US was in a deep recession. We've all heard about the high interest rates, gas lines, and unemployment, etc. How did the US get out of that? Ronald Reagan cut taxes, plain and simple. (well obviously he did more, but this is the main factor in growth). Due to this revenues to the government were increased, new jobs were created, and American businesses had more money in 'their' pockets to put back into the economy.

So looking back over history, government spending has prolonged a recession (into a Great Depression), yet tax cuts have helped grow the economy and recover.

As the government votes on the now approximately $800 billion 'stimulus' package, Americans can expect to see about $13 a week extra in their paychecks. Then, come January 2010, this will drop to $8 a week if you make under $75,000 a year. The majority of this $800 billion is not geared towards 'stimulus', but toward more spending what can anyone do with $13 a week?

If government cut your taxes as well as taxes on business....what could you do with more of your own money each month?
Spend more? Invest more? Expand your business more?

What's the difference here? Obama is stating tax cuts won't work and 'only' government can resolve the crisis. This is flat out, and the fear within his statements is making us more reliant on government, making us hold onto our money so the market cannot recover, and furthering the policies hidden with the $800 billion bill (Government controlled health care is one of them, but that is another topic).

In the last few days, it was reported that spending was up 1% and the housing market has picked up. Be very careful how this is interpreted. So far, nothing has been 'done' by Obama and his administration to aid the economy. So, if the market is indeed correcting, then it is a natural correction. We will, of course, hear people say that this is due to government, but be careful.

Do not listen to the fear being broadcast to us by those in Washington. Evaluate your own circumstances, spend and save based on your own thoughts and feelings, and America will recover without government take over.

You are who you are, do not be a part of 'the masses'.

I, for one, will not be participating in this recession.
Everyone else is free to decide, but I'm sitting this one out.

The Arrogance of Power - FEAR! - Tony Leach

Sources of Interest
Reagan Economics - 'Reaganonics'
Fiscal Policy

Not everyone knows history as in-depth as others. Some only get an inkling of our past and those some rely on what's termed “common knowledge” for conversation. Tidbits like the stock market crash created the Depression or that Hoover was a free marketer. When asked to explain how they know this, they defer to the higher ups who taught them or told them. The ever-dwindling knowledge of history leads to our current predicament: the passing of the “stimulus” package.

Faking history for political gain is not a left-wing or right-wing trait. Politicians of all stripes, colors and animal symbolism tweak or outright massacre history to get their agenda made into law. In today's case, its been the Democrats and the left who have fudged history so badly that it is a complete one-eighty of reality. To get a $800 billion dollar “stimulus” package past a skeptical public, one has to make that public believe that government spending in a time of recession works and that free market solutions will only lead to more misery. The Dems and the left link today's problem with the Great Depression, a free market President Bush with free market President Hoover (in reality, both believed in harnessing the government for economic ends) and the prosperity of the late 1940s with the stimulus package's spending (the 1940s had war spending, the Dems want social spending). On their faces, these comparisons are false because the “common knowledge” history they are based on are false.

For example, today's credit crisis was a gradual downturn that began with the decline in the national housing market. That downturn was accentuated by the government mandated practice (Community Reinvestment Act) of lending to high-risk, minority borrowers looking to get a home. In turn, those high risk borrowers were given interest rates and/or mortgage plans in accordance with there bad/lack of credit. Adjustable rate mortgages and interest-only loans dominated the housing market and those mortgages were then turned into securities by the banks and traded (an idea, while free market in principle, is just stupid). When the high risk borrowers turned out to be exactly what their credit score said they were the market slumped. Those defaulted loans made those traded securities worthless, and the banks that hedged their books on those securities went down as well. For the most part, the Great Depression began as a unusually hard recession, but was amplified. Not by greed. Not by capitalism. In fact, it was government. The Smoot-Hawley Tariff Act leveed heavy costs on imports. In retaliation, the world did the same. World trade died, money dried up and the global economy shrunk. Not because of free flow of capital, but of government restriction of it.

Contrast this history with the “common knowledge” pontificated by our dear Congressional Democrats and the media. Speaker of the House Pelosi attacks Wall Street and invokes the myth capitalism broke America. Congressman Barney Frank, the man behind the financial regulation committee, calls Wall Street bonuses bribes when, as Congress's financial honcho, he should know that Wall Street firms pay their employees through a meritocracy, with yearly bonuses taking place of commissions. Even President Obama railed on the country's financial core for its immorality and blamed free markets at the same time his nominations for Health and Human Services and Treasury have major glitches in their tax payments. All this sounds a little bit populist and little less historic.

One can't be blamed for thinking the Democrats are trying to take advantage of our state-amplified downturn to light a populist fire. The “stimulus” package has more to do with expanding government, the biggest cause of our current position and a Democratic baby, than with economic growth. When there is more money going towards broken entitlement programs than small business tax cuts; when there is more money going to Washington renovation than to corporate tax cuts (our corporate taxes are one of the highest in the world), there is certainly something very rotten in Denmark.

There will come a time in American history when a radical shift is needed. During the Cold War, it came under the name of Ronald Reagan, confrontation and offensive liberty. With our concerns more focused on ourselves than our external Islamist enemy, we need to have a radical shift in perspective again. We can no longer hold ourselves up with a dollar losing its value due to our debt. We can no longer live on promises of paying back the future generations. We can no longer try to keep ourselves afloat on half-baked pseudo-economic theories (I'm looking at you, Keynesians!) that promise to keep us exactly where we are with little consequence.

To live through adversity, you must lose something.

To escape the fire, you must get burned.

To be able to prosper economically, you must first scrape the dead ideas and dead industry from your nation and then fuel growth with free-flowing capital. You can't do that by bailing out California's irresponsible legislature or rolling back every reasonable welfare reform made by Newt's Republicans.

The only way this “stimulus” and its base idea gain traction is by someone or something taking advantage of a lack of education and using it for their political ends. This is exactly what the Democrats have done with the public school system's failure to educate its wards in accurate history. I learned what I have from using my own to feet to take me to the local library or to the book store so I could buy books recommended by actual economists (check out Amy Shales) and actual historians, not by failed comedians-turned-mouthpieces. I used my common sense and an open mind to revise my world view. I did not cry like a baby when the “common knowledge” perceptions drilled into me by mothering teachers and politicians were challenged.

I, like any self-respecting independent human being, learned.

All it takes is the idea that politicians and pundits are wrong.

I don't think that's a concept that's hard to understand.

BY: MIKE PORTER

All economists agree America is currently in a recession. Whether this turns out to be the second coming of the Great Depression remains to be seen, but America is in a serious recession nonetheless. Barack Obama has said, “Failure to act on an economic recovery package could plunge the nation into a long-lasting recession that might prove irreversible.” (1) Our government and the Federal Reserve Bank (Fed) work endlessly to prevent recessions from happening. In most cases, they work too hard to try to prevent them. Few people truly understand what a recession is and what the effects are in the long term. Can our government and the Fed prevent recessions from ever happening? If we do find our country in a recession, what can be done to get us out of it? Do recessions really mean the end of prosperity? The truth is recessions do provide a lot of opportunities, and our government can do very little to prevent them.

What is a recession? A recession is defined as two consecutive quarters of Gross Domestic Product (GDP) decline. When GDP begins to contract, that means the economy is beginning to shrink instead of grow. Businesses and consumers become fearful and hold onto their money. Many may choose to pay down debt instead of expanding their business or purchasing unnecessary goods and services. Businesses holding the line on expenses will tend to cut back on purchasing supplies and even cut back on employees if demand for their product is down. Unemployment goes up as consumer demand falls. Some companies will go out of business and salaries drop as people who are unemployed scramble to find new jobs.

How can recessions be good for anyone? Well for starters, recessions are a time for lagging and mismanaged companies to decline or in some cases, go out of business. While this is hard on the employees who used to work there, it does provide opportunities for the companies who survive as well as opportunities for new companies to start up. Less competition in the market means companies who do not go out of business will start to see some additional revenue with existing customers spread out among fewer firms. A company going out of business in a recession can actually save the other companies in the industry. In some cases, the remaining firms will hire some of the people who lost their jobs to keep up with demand. Some companies are counter cyclical, which means they tend to do more business during recessions than during thriving economies. Some examples of counter cyclical companies are private education companies, service and repair businesses, firms that deal with the bond market, some law firms and mortgage companies. When the government tries to prevent a recession, the government is really telling counter cyclical companies they aren’t allowed to prosper. Doing so could put industries like these in jeopardy and can actually make the effects of a recession more severe.

When a recession begins to loom, the Fed reacts by lowering interest rates and increasing the money supply. The Fed is hoping people and businesses will take advantage of the low rates. Many people use these attractive rates to consolidate debt or refinance their home. Prices tend to come down because demand for goods and services drop. Oil prices have fallen considerably since last summer’s peak of $140 a barrel because of lower demand. For the investor, stocks drop in price and allow the opportunity to buy more stocks at or below what they are really worth. Many investors say recessions are the best time to buy stocks or invest in stock related funds. Those who wish to protect short-term investments will find bond and currency markets may improve as investors look for safe places to put their investments.

A recession is really a normal part of a cycle and unfortunately cannot be stopped. This cycle is known as a business cycle, and these cycles happen regardless of what our government does. Although recessions can be painful for many, they are necessary for any market in the long run. Even the best managed companies in the world do not have record profits every quarter. A recession is the market’s natural ability to keep prices in line when price levels get too high. For example, back during the dot com boom during the late90’s, demand for dot com and tech stocks went through the roof due to Y2K. Dot com and tech stocks were sky high and continued to grow even though most of them had never showed a profit. After the year 2000, the market began to lose patience in the technology industry, which was beginning to slow after Y2K. The market dropped and worsened after the 9/11 attacks. Prices for dot com stocks were too high during the boom so the market shifted and began to sell off their interest. Many dot com companies went under and, as a result, the economy began to slip into a recession. This is an example of the tech stock market correcting itself, and a short recession kicked in after years of prosperity. Demand for Information Technology services slowed after the private sector spent billions on Y2K prevention. After the dot com fallout, the economy eventually recovered and prospered for many years after. This is a perfect example of an economic boom followed by a bust which eventually recovered.

What can our government do? Well in most cases our government can only prolong, speed up the arrival, or make a recession worse. Look no further than FDR for a great example of how big government policies caused the depression to linger (See my previous article titled “FDR’s New Deal Made the Depression Worse”). Our government can only cut taxes and try to create a business environment that is friendly for entrepreneurship and investing. The rest is up to the private sector to recognize and take advantage of that environment. If the market is due for a correction, the market will correct itself and a recession will ensue. Nobody is above the market and markets cannot be controlled by any politician. If an economy enters a recession, eventually market prices will get low enough to where it will be worth the risk to invest again. Once this starts to happen, the market will begin a recovery on its own. Government trying to stop business cycles is just as ridiculous as trying to stop waves in an ocean. The more they try to intervene, the worse the economy will become. That being said how many politicians would say this: “I’m not going to do anything about the economy. I am going to stay out of it because I don’t understand the private sector and I do not want to make it worse. Instead I would like to wait for the economy to correct itself.” I will show you a politician who will lose their election or get forced out of office.

Obama and Pelosi’s stimulus package will be no different than FDR’s New Deal and will make the current recession worse. This stimulus bill, along with most stimulus bills, will do nothing to encourage investment by the private sector. No government program can force the private sector to invest in any economy. Investment has to happen naturally when the investor decides the rewards for a profit outweigh the risks involved. Instead of creating complicated tax incentives and expanding government at the expense of tax payers, it would be nice if all politicians took some time to study the free market and how well it can work with limited government intervention. Our government does not understand that a recession is as much a part of a healthy free market as an economic boom. Trying to bottle up and prevent a recession can actually be harmful to the long term economy. An economy due for a correction is natural and will always correct itself whether our government likes it or not.

(1) http://news.yahoo.com/s/ap/20090205/ap_on_go_pr_wh/congress_stimulus_126

By Michelle Seitz

....five hundred million jobs will be lost according to the Speaker of the House, Nancy Pelosi. An embarrassing gaffe perhaps, but it’s quite evident that the fear mongering from the Obama Administration and Democrats in Congress is now out of control.

Americans should be fearful as the current recession is not mild. Unemployment has soared to a 16-year high at 7.6 percent. However, the fear should not be concentrated on whether or not Congress passes a Christmas tree full of goodies for far-left constituencies, ineffective tax cuts and spending provisions that will not have an immediate impact on the economy; but rather on the long-term effect this kind of spending will have on our nation’s status.

Let’s focus on two key issues that are currently being ignored by our always reliable mainstream media:

America’s budget deficit will exceed $1 trillion this year.

That’s only the deficit folks. This means we are spending $1 trillion more than revenue inflow. Our current debt is closing in on $11 trillion, which means that the deficit is now approximately 10 percent of our overall debt. People thought billion-dollar deficits were out of control a decade ago. Billions are now pocket change in our current fiscally reckless environment.

Worldwide investment in America’s Treasury Bonds is very likely to slow down.

America is not the only country feeling the recession, as economic downturns are global. Soon the days will be gone where America can rely on China, Japan the United Kingdom and Russia to buy our debt. In the past, America was able to entice other countries into buying treasury bonds to finance reckless spending. However, the severity of this recession is making U.S. debt unattractive.

President Obama has told Americans that they need to get used to the prospect of trillion-dollar deficits for years to come. The question that has gone unanswered is how is he going to raise the funds if our two biggest foreign investors, China and Japan (1) will no longer buy our bonds? The global recession has caused these countries financial woes of their own. A lack of tax revenue and the need to enact their own economic stimulus packages has left these countries without an appetite for our debt.

One option that has been recently discussed is the Federal Reserve issuing its own debt. This new angle poses many problems:

1) The Fed’s bonds would be competing with U.S. Treasury Bills which has a major potential to drive up interest rates in the future.

2) The flood of cash on the market would pose significant inflationary problems in the future. This type of cash influx would make it extremely difficult to restrict money supply when the market stabilizes.

3) The Fed already has abusive power, and giving it the ability to issue debt would allow policies to create more artificial bubbles and have the downfall be more severe than what we have already seen.

The only way America can reach prosperous times again is to do something it hasn’t tried before during difficult economic times: shrink the size of government, end the reckless spending and foster growth in the private sector. However, it seems we are going down the same road of politics as usual with pork-filled spending bills to appease lobbyists and calling it “stimulus” – the very premise Obama said would end if he were elected. In just over two weeks’ time, we have seen some very questionable leadership from our President – from questionable appointments to national security decisions. America’s love hangover is beginning to surface....

(1) http://www.treas.gov/tic/mfh.txt

In ‘the worst economy since the great depression’ (according to President Elect Obama) what position would you as a working American be in if you were able to keep more of your paycheck instead of paying taxes? To be more specific, what financial position would you be in if you as a working American were able to keep more of your paycheck by not paying any federal taxes on your income?

One major problem with the economy right now is that people are not spending money. When people hear the economy is just terrible and government action is needed straight away, they cannot wait. Yet, one $700 billion bailout bill later (one which, according to speaker Pelosi, was urgent for the sake of Americans and their livelihood, but could wait while Congress went on a two day vacation) nothing has changed. Banks are hoarding the money or using it to buy other banks and now, Obama is asking for the remaining $350 billion of the bailout. What does he plan to do with that?

Back to your taxes.
If you had more money come payday (lets say a minimum of 20% more), what would you do with it? Would you save it? Invest it? Put more into your retirement? Spend it?

What if you owned a small business?
What if all federal taxes were removed on employers, savings, investments, capital gains and indeed all income you received?
What would you do with those extra funds?
Save them? Invest more in your business? Expand your business? Hire more people?

What would that do to the economy and the stock market in a short period of time?
Would companies continue to ship jobs overseas to avoid the punishing tax code that no longer exists? Or would companies come to the US to take advantage of the new tax haven?

I know what you’re thinking.
You’re thinking, "Sounds great, but the government needs to be funded somehow!"
And you are right. But isn’t taxing people and businesses on productivity just punishing hard work and success? Correct me if I’m wrong, but isn’t that stifling the US economy? If you punish success, won’t it limit the success people are working towards?

Now, as you may know, businesses do not pay taxes directly. If a business sells an item and pays taxes in the process of manufacturing/selling that item, they include those taxes into the final cost of the item. So really the only people paying taxes are you, the consumers. For example, a loaf of bread during each stage of the manufacturing has a tax bill included. The gasoline tax for the farmer harvesting the wheat. The baker, the bag manufacturer, the shipping company and then the retail store all have to pay taxes during their part of the process, which they all factor into the cost of the item you pay.

Independent research has shown that these ‘embedded taxes’ total approximately 22% of the final cost of an item. So, if that loaf of bread cost you $1.00 then with all these taxes removed you would only have to pay $0.78 for that loaf of bread. So, with all the federal taxes on productivity removed the cost of all items will be reduced by about 22%

Now, let’s get back to funding the government. What if those embedded taxes that have now been removed were replaced with an inclusive sales tax? By inclusive I mean the tax is calculated on the final cost of the item (much like the payroll taxes we all pay every payday). So if that loaf of bread, which originally cost $1.00, had the 22% in embedded taxes removed and replaced with the sales tax, it would still cost $1.00. The only difference is instead of reimbursing the manufacturer for taxes they no longer have to pay, you’re funding the government like you do every payday.

The only problem though is that to fund the government at its ‘current’ level, the sales tax would have to be 23%, so the cost of that loaf of bread would be $1.01. But, since you get to keep all of your paycheck, does that 1% raise bother you that much? I’m sure it will for some people, but to some it's 10 steps forward and only 1 step back.

Now think on this for a second:
-You get to keep a lot more of your paycheck.
-You’re not taxed on what you do with that money, should you want to invest, save or expand your business, if you own one.
-You can even take a second job and not be penalized for it.
-Yet, when you spend the money you’re funding the government the same as you do today.

Sit back and picture this for a moment.

Would we need these planned trillion dollar bailouts by the Obama administration?
Would we need to spend billions (yes its billions) to file our taxes with the IRS each year and fear an audit?
Would this still be ‘the worst economy since the great depression’ for the foreseeable future?

The answer is no. If Americans just save the money, then that beefs up the financial markets, putting more money into the system. If Americans invest, then that helps grow the economy, which is what is needed right now. If Americans spend it, they’re funding the government.

I know there are plenty of people reading this saying, "This is great, but it will never happen." To those people I say, "Of course it won’t, if that’s all you have to say!" But for those people saying ‘This is great, but won’t be an easy task’ I say, "You are right, but it’s not impossible."

Just because a great idea will be tough to pass, doesn’t mean it should be abandoned. This program of replacing all federal taxes on income and productivity with an inclusive national sales tax is called ‘The FairTax’.

The 23% FairTax is only paid on ‘new’ retail items and collected at the point of sale.
So, items are only taxed once, and that’s it. Retail locations already collect state taxes so, the transition will not be terribly difficult.

No matter how you get your money: paid by your employer, capital gains from your business investments, from selling drugs, or being paid under the table as an illegal immigrant, you pay the FairTax when you spend that money. Of course, people will still try and cheat, but its much more difficult when a business with a reputation to uphold is involved.

"But how is that fair?" I hear some people saying, "Rich people and poor people are all paying the same tax rate." Yes, they are. In fact not only do they pay the same tax rate, but neither pays the FairTax on the necessities of life. Each year, the Department of Health reports ‘the poverty level’ which is an estimate on how much income is needed to live in the US at the poverty level. Each month, the government would reimburse each American household the taxes they would pay on that amount, called a ‘prebate’. So, for a family of two, the poverty level is about $16,000 a year. That household of two is reimbursed every month 1/12 of the 23% FairTax they pay. This household would receive approximately $307 a month. The bigger the household, the more money they would receive.
American households will not pay any taxes up to the poverty level, literally un-taxing the poorest households in America yet they still keep more of their paychecks if they are working. So, while everyone (regular tax payers, illegal immigrants, drug dealers, tourists) are paying the FairTax, only those American households receive the prebate.
You can’t get much fairer than that.

You may not have thought of this, but do you know approximately how much money is held offshore by American businesses to avoid the current tax code? You’ve all heard of those banks in the Cayman Islands that are so popular, right? Not sure how much this will shock you, but it’s approximately $10 trillion. Now, imagine that amount coming back into the US economy tax free? Think of it as a privately funded $10 trillion stimulus package.

Don’t get me wrong, the FairTax is not perfect, but when compared to our current system it’s amazingly better for America and Americans as a whole. The only trouble is it takes the power of the tax code away from politicians and lobbyists in Washington and puts it squarely back in the hands of Americans. And that is the main hurdle of the FairTax, as it would be the biggest transfer of power since the birth of this great country.

For this bill to pass politicians need to be hounded by their constituents, so they know their job is to do what’s best for you and not what’s best for them and their special interest groups. Too many politicians have forgotten who put them in office and need to be reminded.

Also, as this is such a troubling issue for politicians and people who profit from the current tax code, misconceptions and lies have been put out about the FairTax. To help educate Americans I’ve explained a few here:

Let’s go back to the inclusive sales tax. Bear with me as mathematics are involved:

Inclusive tax or exclusive tax?

22% of that $1.00 loaf of bread is $0.22. Yet with the taxes removed the cost of the item will be $0.78, so that $0.22 is actually 30% of the cost. This calculation is known as ‘exclusive sales tax’. The amount is calculated from the original cost of the item.
The final cost you as a consumer pay has not changed, but 30% seems a lot ‘scarier’ to most people than 23%. However, payroll taxes which we all already pay are calculated ‘inclusively’, so, for example, when you’re told you only pay 7% of your check in payroll taxes, you’re really paying almost 10% when calculated exclusively. The FairTax is calculated inclusively because it is replacing a tax calculated the same way. So, be it 23% inclusively or 30% exclusively the price of items remain unchanged.

Along similar lines, many people also say the FairTax will just add 23% to the cost of items. So, again that $1.00 loaf of bread now costs $1.23. Of course these people have not factored in the removal of the 22% embedded taxes.

What about a flat tax?

People will tell you a flat tax is better for the country. What they won’t tell you is that our current bloated tax code started out as a simple flat tax on the rich. Yes, it would be better for America than the current system, but can you trust our politicians to not evolve it slowly back into the system we have? My simple answer to that is ‘no’.

Government will have to pay the 23% FairTax!

This is correct. If government were exempt from paying the FairTax, this would give them a great advantage over private business. With the current tax code, government and politicians are able to pick winners and losers in the market by manipulating the tax code. Besides, the government still pays the embedded taxes so the issue is a moot point. The only difference is the taxes are known and not just embedded in the final cost they pay. With the FairTax, it levels the playing field so there are no winners and losers. Many misconceptions about the FairTax are easily explained with some simple research and details are readily available out there.

I highly recommend you do some reading, because this new system of taxation will help in resolving the economic crisis, will not require trillions of dollars of bailouts, and will put more money back in the pockets of Americans.

April 15th will just be another spring day and the IRS will be out of business.

If you like the plan, all we ask is that you spread the word.

If people have heard about it but are scared of the 30% rate or the cost of all items going up 23%, tell them the truth and correct them on the misconceptions they’ve heard.
Government will not pass this bill without Americans demanding it.

You can contact your state representative in Washington and ask them to co-sponsor the FairTax bill (House Bill HR.25 and Senate Bill S.1025).

If you wish to learn more about this system, you can check out the listed online sources or search on any online community like Facebook. The FairTax is a grass roots movement so it will only move forward with your support.

Websites/Communities
www.FairTax.org - Americans For Fair Taxation
www.BlogTalkRadio.com/FairTax - Online Radio Show on the FairTax
www.ZapTheIRS.ning.com - An online society for FairTax supporters
www.FairTaxNation.ning.com - An online society for FairTax supporters

Books
The FairTax Book – Neal Boortz & John Linder
FairTax – The Truth - Neal Boortz & John Linder
The FairTax Bill – Available In Plain English

Video
What is the FairTax? - Mike Huckabee
Presidential Debates 2008 - McCain vs Huckabee

Real Tax Reform - America Must Demand It – Tony Leach

Well, we're 2 weeks into President Obama’s first term and he certainly has been busy. We're now paying for abortions overseas, we’re closing the terrorist detention center at Guantanamo Bay for increased national security (not sure how that works), and we're stimulating the economy with the biggest spending bill in the history of, well, ever!

The trouble is the vast majority, and by that I mean 90%+, has nothing to do with stimulating the economy. $400 million for ATV trails, for instance. How is that doing anything? So, along with about 50% of the country, I’m simply bashing my head against the wall wondering why this is being allowed to happen. This bill has passed through the house with every single republican and 11 democrats saying ‘no’ to it, yet this pork laden steaming pile of dung passed and now moves on to the Senate.

So, America really has gone crazy. The keys to the candy store have literally been handed over to the kids and there are not enough adults to stop them. So, we hear the outrage from conservatives like myself, as well as traditional common sense thinkers who see this as nothing more than a spending bill aimed at democratic pet projects and forwarding the socialist agenda. Money was even set aside in this bill to 'prepare' America for universal health care. Being a British citizen living under this kind of program for 20+ years, I can tell you: you do not want to give up the system you have.

The outrage is heard from every corner of common sense America, and yet it still passes. But where is the scream of joy from the Obama voters? Is this not what he said he'd do?
In fact from his abortion bill, the closing of Gitmo, all the way to the $800 billion spending bill, I’ve not heard anything from any Obama voters.

Tell a lie, the most I've heard is 'well he's not even been in 10 days yet, give him a chance'. It appears that now the Obama voters are 'asleep at the wheel' and have no idea what is going on. The educated on the issues, common sense people are now the ones screaming as loud as they can at the destruction of America. Conservative talk show hosts as well as journalists are seeing what this dramatic increase in spending, as well as the vast increase in the printing of money by the fed, is going to do. And those responsible for voting Obama into office are blind to it? Can they still blame this on Bush? Will the 'inherited problems of Bush cannot be fixed overnight' be the new 'Bush's fault' answer?

I’ve heard so many stories of people screaming for Obama, thinking he will pay their bills, give them free health care, and take care of them. They will be waiting a long time.
The most they will see is a check for $500 every year, money many of them do not deserve because they pay no taxes. Yet its called a tax cut,figure that one out. Not only do the non-tax payers get the money, but so do our illegal immigrants, who not only don’t pay taxes, but still get the health care for free, as well. So, in an 'economic stimulus' package we are giving money to people who not only do not support the economy, but are not even legally entitled to any of it. Where is the stimulus?

Is this 'change we can believe in'?

Obama himself said he will not sign a bill that contains pork spending. The $800+ billion stimulus bill is about 90%+ pork. Obama himself stated he will not have any lobbyists on his staff. Timothy Geithner's number 2 at the treasury department is a former lobbyist. Is this change we can believe in?

And where are the Obama voters questioning what he said then and what he’s doing now? Surely, they cannot just vote for such a historic figure and then not keep a watchful eye on what he's doing? Well, I'm sad to say that appears to be exactly what they are doing. They voted and now their job is done, as far as they are concerned. The media honeymoon continues, but how long can they hide the dramatic spending when inflation takes over?

The hopes of Obama being a centrist president are long over. He moved to the left and he moved quickly.

Lets go back in history for a second. In a recession two forms of action have been tried by the government in the past.

1.)Increase government spending to stimulate the economy – this has failed every time. Because of this the depression of 1929 became the 'great' depression of the 1930's, and even FDR’s own staff stated that their involvement only made things worse.

2.)Drastically cut taxes – this was done when Reagan inherited the recession from Carter and it actually increased revenue to the government and let the free market get itself out of the recession.

What have we learned? Apparently nothing, since Obama is now increasing spending saying 'government is the only one who can get us out of this economic downturn' while pushing us towards hyper inflation.

If the Obama voters woke up, what would they say to this? Give him a chance; it’s only been 2 weeks or so? Well, Bush really screwed up the economy and its going to take this to fix it?

Or what if they said:
Well what if we cut taxes? What if we cut spending? What if we gave more money to businesses that create jobs?

I don’t see it happening, but what if America woke up, stopped relying on government to fix the problem it caused and relied on themselves?

I know, we can dream.

Please America, take the time to learn what is going on. We need you.

Do Obama Voters Care - Tony Leach

P.S. Thank you to all Republican members of the house.
I'm one of millions who are hoping this is the start of something unifying and new from the GOP.