I firmly opposed and voted “no” on HR 1586. Let’s first understand exactly what the bill does. It imposes a 90% federal income tax on any bonus paid to any employee of any company that has received over $5 Billion in federal rescue funds. Such companies include, Bank of America, Wells Fargo Bank, Chase Bank, JP Morgan, CitiBank, Morgan Stanley, Merrill Lynch, Wachovia, Washington Mutual, Countrywide, Goldman Sachs, AIG, Fannie Mae, Freddie Mac amongst others. The tax would only apply to people with total joint incomes over $250,000 or single individuals with income of over $125,000. When combined with California Income taxes which now top out at 10.55%, this can be a tax just short of 101% of the income.

Under this law, a bank teller at Wells Fargo could receive a bonus of $1,000 for doing a great job. If that bank teller was married to a physician who made $175,000 and they had some additional investment income, that bank teller would pay a tax of $1,055 on the bonus of $1,000 that they received for doing a good job. This is horrible!

This is not raising revenues, this is punishment. It is a terrible precedent to use the tax laws for punishment. If we go down this road, the government can impose a 100% tax on anyone they don’t like, or anyone they believe is paid too much. Employees of other companies, doing the same thing for the same bonus, will not receive this tax. That probably makes it unconstitutional and I hope it does.

I understand the public outrage over these bonuses and I share much of it. But this is not the way to fix it. Sue them to get the money back. But don’t do this.

You may or may not realize it, but embezzlement income is taxable today, but at normal rates. So if you steal money, you will not have a tax higher than normal. You may be forced to give the money back because you stole it, but it will not be taxed away from you. This bill makes a bonus from Bank of America a more egregious offense under the tax laws than bank robbery.

All of this was caused because we nationalized companies that are created to make a profit. Throughout time, governments have shown themselves to be particularly inept at such an enterprise. This is another example of why.

Yesterday I appeared on CNBC's Closing Bell to unveil legislation that I will be introducing which will repeal the Capital Gains Tax to spur economic activity in 2009. 

My interview is featured below.

Stimulus Factoid: States, cities, and private companies from around the country are applying to get some of the $850 billion ‘non-stimulus package’ signed by the President last month. Many of the applications are unbelievable. West Virginia is applying for $380,350 to contact 160 landowners and encourage them to grow shiitake mushrooms and ginseng. By the way, that’s $2,377 per call to each landowner.

Omnibus Factoid: There’s $1.8 million to study and manage the odor from “swine manure” in Iowa. Look, I could never think of stuff like this to make it up. This is proof that sometimes, fact is stranger than fiction.

Last week’s witness in this committee was Treasury Secretary Timothy Geithner talking about the President’s budget. He vigorously defended the budget, which I would expect from any member of the President’s cabinet. But I was disappointed that he did not acknowledge any of the highly questionable projections and assumptions that were made in order to make the deficit appear to not increase so drastically.

The budget predicts economic growth of 3.2% next year, increasing to an astounding 4.6% by 2012 with inflation levels staying at or below 2.0% during that time. If growth turns out to be that strong, we will indeed have inflation because of the monetary policies that have been pursued during this crisis. If inflation is that low then there won’t be growth. But budget numbers look better if there’s tax revenue from growth and low interest rates on the expanding national debt.

Geithner also made it clear that virtually all of the first $700 billion of TARP funds has been committed. The President’s budget calls for another $750 billion of TARP money but it does not say when it will be requested, or for what it may be used.

Here is my exchange with Geithner on these issues.

I have been telling you for some time now, a number of things that I think we should be doing to make this recession shorter and shallower while minimizing damage to the eventual recovery. You all know that I think the actions of Congress and the President thus far, have been counterproductive. Certainly the markets agree with me at this point.

Well, here is an idea that was sent to me by a concerned citizen. And it’s one of the best ideas I’ve heard yet. So good in fact, that I will be introducing it as a bill this week and talking a lot about it.

The bill would eliminate all Capital Gains taxes for any assets purchased in 2009, regardless of when the asset is sold. So, people would be encouraged to purchase homes, property, stocks bonds and businesses in 2009. This incentive would alter the risk/return ratio and likely spur a great deal of economic activity that is currently paralyzed by fear and uncertainty. And from the federal government standpoint, there might be an increase in revenue to the federal government now as the sellers report capital gains. The “loss” of revenue on the sale would not occur until some years later when the asset is sold and hopefully the government is also on better footing.

This would stimulate lots of job-creating economic activity NOW, with no cost to the taxpayer and no reduction in federal revenues until later.

I’ll keep you posted on how much traction this idea gets.

Last week, I spoke to Dave Weigel from the Washington Independent about the applicability of the fabled Ayn Rand novel, Atlas Shrugged, and it has generated some considerable buzz among liberal and conservative blogs and activists alike.

If you are unfamiliar with the book, this is the synopsis the Washington Independent provided:

Creative people (the “Atlases” of the title) are hounded and punished for their labor by an oppressive, socialistic state. In response, they retreat from society to a hidden enclave where they watch civilization’s slow collapse.

I spent the last few weeks recovering from surgery, and I’ve had a lot of time to talk with business owners in my district, and to be perfectly blunt, I am hearing more and more of those owners thinking of “Going Galt” in response to President Obama’s spending spree. After all, someone is going to have to pay for this massive expansion of government.

This is troubling because small business supplies a substantial number of jobs in America, and now they are beginning to see that they are being force-fed a de facto punishment for their ambitions and success. 

Don’t worry, I am not predicting a mass revolt by world economic leaders; we are a ways off from that. But what I am seeing, is a sort of protest, on the micro level from people that create jobs and those who create all the things the rest of us benefit from.

Let’s hope I am wrong, and let’s hope President Obama has a change of heart.  

Last night Senate Majority Leader Harry Reid was unable to come up with the necessary votes in order to pass the Omnibus Appropriations Bill for 2009.  Why you ask?  Earmarks and oversized spending. 

Senator Reid, who has 58 Senators on his side of the aisle, was unable to garner the necessary votes in order to cut off debate, in fact was unable to sway the coax enough Republican support for the bill, and actually saw a few from his side of the aisle switch sides.  Needless to say this is major victory for fiscal responsibility.

So what happens next?  Today the House and Senate will pass a Continuing Resolution to fund the government at its current levels.  Then next week Congress will likely be debating this bill once again. 

Either way, President Obama should veto this bill unless the nearly 9,000 earmarks are taken out.  It’s time for President Obama to exercise the fiscal discipline we so commonly hear him talk about.

This morning, the DC Examiner, a beltway newspaper, featured an interesting editorial about President Obama’s rhetoric versus actions on earmarks.

The editorial highlights a question from Time Magazine, “Does Obama have a double standard on earmarks?”  I am not sure if you caught it, but during the President’s speech to a Joint Session of Congress, he boasted that there were no earmarks (however, earmarks have a multitude of guises) in his $787 billion dollar ‘Big Spending Package’ disguised as “Stimulus.”  Yet the President remains quiet when Speaker Pelosi and House Democrats ram a bill through Congress the very next day, neatly stuffed with nearly 9,000 earmarks.

To say that each of these earmarks is ‘worthy’ is complete fantasy, here is a healthy sampling courtesy of the Examiner’s Editorial Department:

“$1.8 million to manage swine manure in Iowa, $190,000 for a “Buffalo Bill Historical Center” in Wyoming, $2.2 million to study grape genetics in New York, $175,000 for “fa?ade improvements” on a dilapidated theater in Pennsylvania, $162,000 for cricket control in Utah, and a total of $41.5 million for the presidential libraries of three former Democratic presidents: FDR, JFK and Lyndon Johnson.”

Nevertheless, the American taxpayer will be on the hook for these projects, worthy or not.  President Obama has repeatedly said he “Get’s It,” but perhaps it is time he gets on board with the rest of America on earmark reform.  Even Congress is slowly beginning to get the message; this issue is not going away.

Today, the Wall Street Journal featured an Editorial by Indiana Senator Evan Bayh regarding President Obama’s Omnibus Appropriations Bill.  He encourages a ‘No’ vote and a return to fiscal responsibility in Washington.

Deficits and Fiscal Credibility

A Democratic senator says no to a huge federal spending bill.

By: Evan Bayh

This week, the United States Senate will vote on a spending package to fund the federal government for the remainder of this fiscal year. The Omnibus Appropriations Act of 2009 is a sprawling, $410 billion compilation of nine spending measures that lacks the slightest hint of austerity from the federal government or the recipients of its largess.

The Senate should reject this bill. If we do not, President Barack Obama should veto it.

The omnibus increases discretionary spending by 8% over last fiscal year's levels, dwarfing the rate of inflation across a broad swath of issues including agriculture, financial services, foreign relations, energy and water programs, and legislative branch operations. Such increases might be appropriate for a nation flush with cash or unconcerned with fiscal prudence, but America is neither.

Drafted last year, the bill did not pass due to Congress's long-standing budgetary dysfunction and the frustrating delays it yields in our appropriations work. Since then, economic and fiscal circumstances have changed dramatically, which is why the Senate should go back to the drawing board. The economic downturn requires new policies, not more of the same.

Our nation's current fiscal imbalance is unprecedented, unsustainable and, if unaddressed, a major threat to our currency and our economic vitality. The national debt now exceeds $10 trillion. This is almost double what it was just eight years ago, and the debt is growing at a rate of about $1 million a minute.

Washington borrows from foreign creditors to fund its profligacy. The amount of U.S. debt held by countries such as China and Japan is at a historic high, with foreign investors holding half of America's publicly held debt. This dependence raises the specter that other nations will be able to influence our policies in ways antithetical to American interests. The more of our debt that foreign governments control, the more leverage they have on issues like trade, currency and national security. Massive debts owed to foreign creditors weaken our global influence, and threaten high inflation and steep tax increases for our children and grandchildren.

The solution going forward is to stop wasteful spending before it starts. Families and businesses are tightening their belts to make ends meet -- and Washington should too.

The omnibus debate is not merely a battle over last year's unfinished business, but the first indication of how we will shape our fiscal future. Spending should be held in check before taxes are raised, even on the wealthy. Most people are willing to do their duty by paying taxes, but they want to know that their money is going toward important priorities and won't be wasted.

Last week I was pleased to attend the president's White House Fiscal Responsibility Summit. It's about time we had a leader committed to addressing the deficit, and Mr. Obama deserves great credit for doing so. But what ultimately matters are not meetings or words, but actions. Those who vote for the omnibus this week -- after standing with the president and pledging to slice our deficit in half last week -- jeopardize their credibility.

As Indiana's governor, I balanced eight budgets, never raised taxes, and left the largest surplus in state history. It wasn't always easy. Cuts had to be made and some initiatives deferred. Occasionally I had to say "no."

But the bloated omnibus requires sacrifice from no one, least of all the government. It only exacerbates the problem and hastens the day of reckoning. Voters rightly demanded change in November's election, but this approach to spending represents business as usual in Washington, not the voters' mandate.

Now is the time to win back the confidence and trust of the American people. Congress should vote "no" on this omnibus and show working families across the country that we are as committed to living within our means as they are.

Mr. Bayh, a Democratic senator from Indiana, served as governor of Indiana from 1989 to 1997.

Occasionally, I post political cartoons that illustrate an issue without the need of a lengthy description.  I feel this cartoon encapsulates the stimulus package perfectly.  It was featured in yesterday’s version on CongressDaily by National Journal.

This Op-Ed was published in the New York Times on Saturday February 14, 2009.

Thirty Years Later, a Return to Stagflation

By Representative PAUL D. RYAN

Congress has made a terrible mistake. Amid a rhetorical debate centered on words like “crisis,” “emergency” and “catastrophe,” it acted too fast. While arguments were made about the stimulus bill’s specific components — taxpayer money for condoms, new green cars and golf carts for federal bureaucrats, another round of rebate checks — its more dangerous consequences were overlooked. And now the package threatens a return to the kind of stagflation last seen in the 1970s.

To get a sense of the pressures ahead, we must first assess our fiscal health. We started this year with a projected trillion-dollar budget deficit for the 2009 fiscal year. In 2008, we spent $451 billion just to pay the interest on our debt.

With the stimulus bill now becoming law, we’re digging even deeper into debt. The headline price tag of $787 billion doesn’t include the extra $348 billion it will take to finance the new debt, or what it will cost when Congress extends the spending programs in the bill, as is likely — as much as $2 trillion more. Add in the billions that are being used to prop up the financial system, and when the dust settles on 2009, with millions of baby boomers retiring and entitlement spending exploding, taxpayers will face a financial nightmare.

From a global perspective, the picture only looks worse. As we have debated how much money to borrow and spend in hopes of jump-starting our economy, we’ve ignored the worldwide stimulus binge. China, Europe and Japan are all spending hundreds of billions of dollars they don’t have in hopes of speeding up their economies, too. That means the very countries we have relied on to buy our bonds, notably China and Japan, are now putting their own bonds on the global credit markets.

American Treasury bonds have been selling briskly on the global credit markets because they have been the calm in the storm of the global credit crisis. This has allowed advocates of borrow-and-spend to argue that for the United States, borrowing is uniquely cheap. But what happens when there is an excess supply of bonds on the worldwide markets? The cost of borrowing will rise. Today we fear deflation, but eventually our fears will turn to inflation.

It seems that no one in Washington is discussing what happens when the world begins this gargantuan borrowing spree. How high will interest rates rise? And more fundamentally, who will have the money to buy our bonds? It is possible that the Federal Reserve will succumb to pressure to “monetize” our debt — that is, print new money to buy our bonds. In fact, the Fed is already suggesting that it will buy long-term Treasury securities in order to lower borrowing costs. If it does, then our money supply, which has already increased substantially over the past year, will grow even faster.

As Milton Friedman noted, “Inflation is always and everywhere a monetary phenomenon.” It is a situation in which too few goods are being chased by too much money.

To American families, inflation is a destroyer of savings, a killer of wealth, a crusher of confidence. It calls into question the value of our money. And while we all share in the pain, the people whom inflation hits hardest are elderly people who live on fixed incomes, those in the middle class who are struggling to save for retirement and college and lower-income people who live paycheck to paycheck.

Combine high inflation and high unemployment and you have stagflation. Hindsight shows how the pain of the late 1970s and early 1980s could have been avoided, yet we’re now again planning to borrow and spend — and raise taxes — as President Jimmy Carter did. Soon we may again find ourselves watching a rising “misery index” of inflation and unemployment together. If that happens, individual earning power will evaporate, and our standard of living will decline.

To prevent stagflation, we should enact fiscal policy reforms that apply the lessons we learned from the 1970s. Keynesian stimuli based on borrowing and spending have not worked and will not work. One-time rebate checks do not increase the incentive to expand business operations and create jobs. But marginal cuts in tax rates do. We also must lower our job-killing corporate income tax rate, the highest in the industrialized world after Japan, and ease business worries by making it clear that there will be no tax increases in 2010.

We should also re-establish the sound dollar. For the past decade, the Federal Reserve has manipulated interest rates and vastly over-expanded the money supply — and in so doing fueled the housing bubble that precipitated our current crisis. To end uncertainty about the economy, to keep interest rates down, and to give Americans the confidence they need to take risks and ensure future growth, we should make price stability a priority, guaranteeing the value of the dollar.

Finally, we should tackle the entitlement crisis, which will be a $56 trillion liability that we have not figured out how to pay for. As members of the baby boom generation retire, and health care costs continue to spiral out of control, Social Security, Medicare and Medicaid will collapse. By reforming those programs and bringing their costs down to sustainable levels, we will show the world and the credit markets we are serious about reducing our debt. Then our credit will improve, the cost of necessary borrowing will drop, and we can stave off stagflation.

Paul D. Ryan is a Republican representative from Wisconsin, and the Ranking Member on the House Committee on the Budget

Guest Blog by Senator Jim DeMint (R-S.C.)

Just a few hours ago, the U.S. House of Representatives voted 246-183 to pass the so-called “economic stimulus” package proposed by President Obama and written by congressional Democrats. Every single House Republican opposed the bill. (Roll Call)

This evening members of the Senate will meet to cast their votes as well. Sadly, three Republicans will likely join Democrats to ensure the bill is passed.

The massive spending bill, filled to the brim with a liberal wish list of pork projects, spends a minimum of $789 billion and possibly as much as $3.27 trillion (Heritage Foundation).

As my friend, South Carolina Governor Mark Sanford, and I wrote today in the Washington Examiner (DC Examiner):

"Each and every one of the $800 billion in  taxpayer dollars that Mr. Obama wants to inject into the economy has to come from somewhere, and in this case, we are laying the bill at the feet of those  very children and grandchildren whose future the President says he’s committed  to protecting. And we share the belief that mortgaging the economic future of  successive generations of Americans in order to buy ourselves some short-term  job relief is not only bad policy, it’s an abdication of our  responsibility.  A moral argument is certainly in play here—Obama just  happens to be on the wrong side of it."

The final version of the bill was made available to the public (and to us Republicans in Congress) yesterday at 11 p.m., which gives us less than 24 hours to read 1,071 pages. I can guarantee you that none of my congressional colleagues will have read this bill in its entirety before they vote on it today. It will likely be years before we learn the true consequences of today's irresponsible action.

It is disappointing to see the same old games being played in Washington after being promised that things were finally going to change. However, there is reason to be hopeful. For weeks my office and others on Capitol Hill have been flooded with calls and letters from constituents voicing angry opposition to the stimulus package that will do little, if anything, to stimulate the economy. (McClatchy) It’s heartening to hear from so many of my fellow Americans who are informed and involved and anxious to preserve their freedom.

So while liberals rushed through a temporary victory for Big Government today, I am confident Americans will win the final battle for freedom in the days to come -- as long as they are vigilant in their quest and speak out to protect their liberties.

Elected as South Carolina’s 55th senator in 2004, Senator DeMint quickly established himself as one of the most effective conservative leaders in Washington, seeking to enact innovative solutions to improve America for future generations. He has been a tireless advocate for smaller government, individual liberty, a strong national defense and traditional values.

I listened to many of the speeches given by supporters of the bill yesterday. I also had the opportunity to question the Director of the Congressional Budget Office on the subject. The tepid arguments and weak rebuttals of the proponents here lead me to believe that perhaps even they know that this is not really about stimulus. Being generous, I can say that maybe 25% of the items in this bill have some multiplier effect. But the rest is just spending. Just 2 months ago, President Obama’s Chief of Staff, Rahm Emmanuel, said “Never let a serious crisis go to waste. What I mean by that is it's an opportunity to do things you couldn't do before."  

Couple that statement with the President’s repeated comments yesterday that this is just “the first” in a series of economic recovery actions, and it becomes clearer to me that this bill is really about getting about a 20% annual increase in non-entitlement federal spending right now, and paying for it with tax increases to be named later. The public would not stand for that in the normal course of politics.

If you don’t believe that, I hereby submit for your consideration a document that was sent to me by a Democratic Congresswoman from California in order to entice me to vote for the package because of the money that California would receive. It actually pushed me even further in the opposite direction. I think it will have the same affect on you so here is link. Virtually all the spending in here is merely the federal government paying for programs that the state is already doing. In another case,  billions of dollars are allocated for more school construction, at a time when we have just borrowed and spent $30 billion on school construction in California, and where some of our failing schools happen to be housed in beautiful new buildings.  The State of California will get a $32 billion spending increase in this bill, paid for by federal taxpayers. I hope that the idea of raising taxes in California will be dead now. Isn’t $32 billion more spending enough for now?

Last night, the House of Representatives passed a “so-called” stimulus bill, without any Republican support.? In my previous posting, I explained why this bill is not, and will not be stimulative.? In fact, I am not even calling it a stimulus bill, I am calling it a “big spending bill”, because that is exactly what it is.

I know it is easy to criticize, and not offer alternatives, but don’t worry, I have my own ideas on what should have been included in the stimulus package. ?

The main part of any stimulus should be to create consumer demand for homes and cars. This economy will not recover until the housing and car markets find a bottom and start rising again. An up-to-$25,000 refundable tax credit for the purchase of a house (new or existing) and an up to $4,000 credit for a new car, coupled with aggressive loan rates from Fannie Mae and Freddie Mac (4.5% or less), would get a lot of people to overcome their economic fears and take advantage of a great deal.

These should be short-term (no more than 10 months), and then phase out. Obviously, no sub-prime stuff here. This would only be for people with the ability to make real down payments and who have real credit.

That should be put together with a short-term Capital gains tax holiday, in order to get capital to move to more efficient uses.

It is also important to include some infrastructure spending such as creating a national Wi-Fi broadband system, which would generate huge job creation as the tech sector figures out new ways to use that capability.

These are things that will create many downstream jobs in the private sector that are sustainable and would also serve to settle down the panic that is now out there in the minds of consumers, rather than creating a one-time, feel-good government job.

It is frightening if one of your neighbors has lost his job and another her home; but? if one neighbor comes home in a new car and another rents their house out because they just bought a new house, while you may not run out and do either of those things, you will likely at least go out to dinner.

More than anything else, businesses need a market to sell to. That is how recessions end.

This plan would cost only a fraction of the $825 billion in the Democrats’ giant spending package.