Article 1 ... Section 8

1. Article 1 ... Section 8 • Congress has the power to lay and collect any taxes to: “pay debts, provide for the common defense, and general welfare of the United States.” • If not mandatory, how could we pay for services demanded by people? Consider Hym Solomon in American Revolutionary War. Who was he? • While we complain about taxes, we pay them because legislative majorities, representing voting majorities, have decided that for the common good we each should share in the cost of services we enjoy. Examples include streets, highways, safe water, parks, museums, police and fire protection, health, center for disease control, national defense, libraries, air traffic control, agriculture to assure food supply, schools and many others. They are not free. Deadbeat citizens enjoy services but want others to pay their share of taxes. That would hardly be fair. So we prosecute & punish them. • Article II makes president only cop to enforce law. Congress, by Article I law making power and its “necessary & proper” clause power - passed laws making tax avoidance a crime, and created the IRS to help President collect taxes & prosecute criminals so Congress can get the money authorized to pay for enacted laws. • Speed read frivolous tax avoidance arguments http://www.irs.gov/pub/irs-utl/friv_tax.pdf • What ended legal debate on income tax?

3. 2014 Revenue & Issues • Total federal tax revenues in fiscal year 2014 are projected to be $3 trillion from 3 sources: (1) income taxes paid by individuals (46 % of all tax revenues); (2) payroll taxes paid jointly by workers and employers (34 %); (3) corporate business income taxes (11 %). Other types like customs duties (taxes on imports paid by the importer) & excise taxes on specific goods, like gasoline. Used to be different where business paid bigger share of taxes, individuals less, but business lobbied Congress that this costs jobs so shift taxes to middle class & poor & limit minimum wage increases jobs. Poor & middle class say no, increase business taxes, decrease my taxes & increase minimum wage & our extra money/spending will create jobs (they loose because not united/lack $$$ to pressure Congress). Did you know that GAO reports 61% of corporations pay NO tax & get off easy due to off shore shelters & loopholes bought with campaign contributions? They shoulder only 11% of tax burden, 3rd lowest in world compared to GDP, compared with 50% taxation in 1940. Thus, burden shifted to working folks. So with fewer businesses taxed and with only 133 million individual taxpayers it means there are 174 million individuals who do not pay anything, some criminally evade just like some businesses, but many are not required to pay (babies do not have jobs to pay taxes, but we could put them to work).  Thus, what is the smart way to balance taxation so is the fairest to all? • Did you know that a study by the Citizens for Tax Justice & Institute on Taxation & Economic Policy ranked Texas’s tax system among 10 most regressive tax states in the USA? Texas governments tax poor families at 12.2% of their incomes, middle class families at 7.6% and the richest 1% at only 3.3%. Texas is a low tax state from the perspective of wealthy Texans who lobbied legislators with money to get it that way & they fight to keep low minimum wages on theory that the more money they make, trickle down benefits all society. Poor & middle class argue give us a bigger share (such as higher minimum wage) and we will spend to create jobs. Do you prefer the wealthy have more money or that you have more?

4. Congress Power to Borrow • Art. 1 Section 8. Only Congress (NOT president) can “borrow money on credit of the U.S.” Obligations for things we buy. IOUs. • However, legislative power is checked by a president signing or not signing budget/debt legislation. • "I sincerely believe... that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale." --Thomas Jefferson to John Taylor • “The national debt, foreign & domestic, is the price for liberty.” Alexander Hamilton • Just like family, spend no more than take in (pay as you go). When you are digging self into a hole, 1st rule is stop digging – stop borrowing! Then dedicate surplus budget to retire principal debt. But GOVT, just like a family buying a home, can badly need something now it cannot afford so it borrows. Few question this necessity. • The problem is financing long term debt on any & everything as best method of getting reelected. Many of this things purchased with long term borrowing are expendable items we use/enjoy now, which future generations will not benefit from but will have to pay for. Politicians get what they want – elected & not around when angry people get the bill.

5. Difference between deficit, surplus & debt? • 10/19/13 total debt is currently $17,075,590,107,963.57 ($17T) • Public debt (what is it?) =$12,117,282,743,815.33 ($12.12T) Treasury Bills, Notes, Bonds, TIPS, United States Savings Bonds, and State and Local Government Series all Federal debt held by individuals (you & grandma savings bonds), corporations, state or local governments (invest in federal bonds), & foreign governments. Foreigners own about half of this debt (T Bills), which makes the U.S. dependent on them, like you when owing money to a bank. • Intergovernmental debt (what is it?) =$4,958,307,364,148.24 ($4.96T) • The Old-Age, Survivors and Disability Insurance Trust Funds (social security) exist, but only on paper. They are merely accounting devices to keep track of tax receipts and benefit payments. The revenue collected from social security payroll taxes is not held in a separate account. Rather, it is invested in special-issue U.S. securities, similar to U.S. savings bonds. The federal government uses the invested cash to pay other debts. Although some critics refer to these investments as "worthless IOUs," the securities are backed by the full faith and credit of the U.S. government and earn interest, which is reinvested in the trust fund. Default means not paying grandma. • http://www.statesman.com/business/personal-finance/why-congress-owes-every-worker-18-000-for-1268052.html (read it) • For Congress to default on the national debt is as reckless as you buying a TV on Mastercard & then tell Best Buy you’ll keep it and NOT pay for it. Look who you hurt if you do that. And the 2013 debate statemate over the budget/debt cost you taxpayers $$$ billions, you will pay for, and damaged business & individual finances, and it tarnished our international reputation as nothing more than a deadbeat Greece that likes to lecture the rest of the world on how to manage finances but mismanages its own finances. READ The Damage Done by Nobel Prize economist Paul Krugmanhttp://www.nytimes.com/2013/10/18/opinion/krugman-the-damage-done.html?nl=todaysheadlines&emc=edit_th_20131018 and The High Cost of Low Politics http://www.nytimes.com/2013/10/20/opinion/sunday/the-high-cost-of-low-politics.html?nl=todaysheadlines&emc=edit_th_20131020&_r=0

6. National debt 1966-10/19/13

7. How much is a trillion? • 1 million seconds are the equivalent of 11 days; 1 billion seconds are 32 years. How much are one trillion seconds? 317 centuries. • A billion is a thousand millions; a billion seconds ago, it was the year 1959; humans first learned to write 252 billion seconds ago; a billion minutes ago, Jesus was alive; a billion hours ago, our ancestors were living in the Stone Age. • 1 trillion seconds equals 1,688 years; the oldest record of humans on earth was 110 trillion seconds ago. • It is 93 million miles to the sun. From earth to Pluto is 3,720,000,000 billion miles. 1 light-year (distance light can travel in one year) is 5,700,000,000,000 trillion miles. • The 2009 national debt was $11 trillion and in miles would get us more than half way to our next nearest star, Proxima Centauri. • "If you spent a million dollars a day for a million days (2,739 years), you'd hit $1 trillion,” American University math professor Nolan observed. • To burn through $1 trillion in the average American life span of 77 years, you'd have to part with about $35,580,857 every day from birth. • A million dollars in $20 bills weighs 22 pounds; a billion weighs 11 tons. A trillion dollars is 1,000 billions of dollars & weighs 11,000 tons; 9.4 trillion weighs 99,400 tons! Did you know that a million dollars in $1,000 dollar bills is a bundle stacked 6 inches high?  If we enlarged the stack to as high as the top of the Washington Monument (555 feet) it would be a billion dollars!  But to get to a trillion dollars the stack will rise to 100 miles high in low earth space shuttle orbit! But, as of October 2013 the government debt is $17 trillion & this stack reaches over 1,700 miles in space! • A TRILLION is a VERY BIG NUMBER!

8. October 2013 government debt is $17 trillion & this stack $1,000 bills reach over 1,700 miles in space!

9. Exercise in Hard Choices How pay off debt? • Option 1.- eliminate all of federal government for 4.5 years & eliminate debt (10/13 debt = 17 trillion & FY 2014 federal budget = $3.8 trillion). Think about what would mean! How much now pumped into FTW & how impact us & the nation? No president, no judges, no Congress, no CIA, no FBI, criminals go free, no firefighting, no air traffic controllers, no US mail, no military, no student loans, no food inspections, no future farm food planning, no safe water monitoring, no interstate highways, no border protection, no regulating the economy, no NIH disease protection, no taking care of disabled, no payments to grandma after she paid a lifetime into retirement, no nothing! Did you know that 1 in 4 Texas children are so poor that the only meal they get each day is the one given them by federal & state tax payers for free if destitute or nearly free? GOVT is complex. • The extreme right/tea party/libertarian argument that they must strangle the beast to eliminate government is as ridiculous as getting rid of the internet or strangling the internet in half & is movement toward anarchy. They ignore the essential role of GOVT to make society better. To have followed their lead would be like a pied piper leading the nation over a cliff. The power of fear to panic people could be disastrous to America, like in Great Depression. This fact does NOT mean there is not GOVT waste which should be eliminated. • During extreme recessions & depressions, the role of GOVT is critical as entity with largest finances(greatest good to greatest numbers)to stimulate the economy to avoid disaster (3 of 4 unemployment like Congo). Even in normal times business relies on routine GOVT spending.

10. Exercise in Hard Choices How pay off debt? • Option 2. Raise taxes for one year to pay off debt ($122,845 extra per “tax paying person” X 139 million individual & corporate taxpayers = $17 trillion). Working parents with 3 kids owe double. Or $12,285 per “tax paying person” every year for 10 years! Or extra $6,142 each year for next 20 years! • What about graying of America when there will be less tax payers in future and shifting of tax burden to the young --- you! Maybe we need to find new income – shift tax burden – more babies – more immigrants?? • Politicians did what they thought we wanted them to do, lower taxes but increase spending by financing on Mastercard over 30 years for the things we want. YOU have to instruct them otherwise or elect different leaders. If you sit on the sidelines or encourage fools, the problem will get worse and we all will pay the price. • Solution. Combination of both modest spending cuts & tax increases over MANY years while GROWING the economy that produces more taxes! And more surplus has to be devoted to the debt rather than finding new ways to spend which is desired by interests. Wise discipline needed. That means some PAIN for each of us, as we will have less in our pockets and will enjoy less services – less standard of living. Ostrich head in the sand will not work; ignoring will only make it worse. While meat ax budgeting is foolish & disastrous, there must be a thoughtful careful plan to deal with the deficit & debt.