President Obama was quoted today at his news conference:
"Raising rates will not break the backs of the wealthy."
I agree. The wealthy are uniquely able to avoid these higher rates. The net effect of raising rates will be to lower the taxes paid by the wealthy, because they will take measures to reduce taxable income and pay less in taxes.
We are in agreement, Mr. President.
Higher rates will discourage investment, increase the ranks of the unemployment and inhibit economic growth.
What you should have said, Mr. President, and what is true is the following:
"Raising rates will break the backs of the middle class, not the wealthy."
Rabu, 14 November 2012
The Obama "Grand Bargain"
Obama proposes a $ 1.6 Trillion tax hike to solve a $ 66 Trillion unfunded liability. He then proposes another $ 2.8 Trillion in Spending cuts. This is the "Grand Bargain" that Obama seeks to strike.
Is this some kind of joke? Besides not making a dent in the entitlement disaster that looms ahead, the tax hike virtually guarantees an economy that will join the European race to the bottom. Why not cut to the chase? France just raised marginal rates to 75 percent. Why don't we follow suit? We will get to that point anyway, in time, with the President's logic.
Instead of fixing the spending imbalance that is causing our national debt to explode, the President has a temporary fix that makes the situation look better on paper for a few months. After a few months, the "Grand Bargain" will become the "National Straightjacket" as it becomes apparent that the higher tax rates reduce economic growth and dramatically lower tax revenues.
Since very little spending reduction takes place, the deficit will move from $ 1.6 Trillion to $ 2 to $ 3 Trillion annually. We will be staring at $ 22 Trillion in national debt by the time Obama leaves office with an unemployment rate within range of double digits. We will not be Greece yet, but we will be well on our way. That is what happens if we put in place Obama's "Grand Bargain."
So, why bother. Let's go over the cliff. The future will be much brighter than reaching for the "Grand Bargain." Let's deal with the emergency now while it has some hope of being dealt with. Time is not on our side in this one.
Is this some kind of joke? Besides not making a dent in the entitlement disaster that looms ahead, the tax hike virtually guarantees an economy that will join the European race to the bottom. Why not cut to the chase? France just raised marginal rates to 75 percent. Why don't we follow suit? We will get to that point anyway, in time, with the President's logic.
Instead of fixing the spending imbalance that is causing our national debt to explode, the President has a temporary fix that makes the situation look better on paper for a few months. After a few months, the "Grand Bargain" will become the "National Straightjacket" as it becomes apparent that the higher tax rates reduce economic growth and dramatically lower tax revenues.
Since very little spending reduction takes place, the deficit will move from $ 1.6 Trillion to $ 2 to $ 3 Trillion annually. We will be staring at $ 22 Trillion in national debt by the time Obama leaves office with an unemployment rate within range of double digits. We will not be Greece yet, but we will be well on our way. That is what happens if we put in place Obama's "Grand Bargain."
So, why bother. Let's go over the cliff. The future will be much brighter than reaching for the "Grand Bargain." Let's deal with the emergency now while it has some hope of being dealt with. Time is not on our side in this one.
Selasa, 13 November 2012
A "Balanced" Approach
"Balanced," according to whom. With federal and state marginal rates in excess of 50 percent in many locales, how is more taxation "balanced?"
Most Americans do not pay any federal income tax at all. Many Americans, off-the-books Americans, not only don't pay income taxes, they don't pay payroll taxes either, much less medicare taxes.
So raising federal income tax rates targets the dwindling minority of Americans who pay taxes. So this is balanced?
Instead of trying to develop government programs that help the truly needy, America has developed entitlement programs that make no distinction between Warren Buffett and his yardman. They both get social security and they both get medicare. I guess that is balance.
Over time Americans have grown accustomed to the idea that they need not pay for their retirements, health care, education, food -- frankly, much of anything. So, it is no surprise that American spending habits are incredibly reckless. Why not?
So, what exactly is balance. Balance is pretending that there is some political fix to the unfixable. Social security and medicare and Medicaid cannot be fixed. They can only be ended -- either because the money simply runs out or because they are ended voluntarily.
Snuffing out economic growth by raising tax rates (on the "wealthy," defined mostly as Americans with incomes less than $ 1 million and greater than $ 250,000) is not balance. It is foolish and cruel and will lead to a generation of economic stagnation.
The very people that the President professes to want to help will be the victims of this "balanced" program. Job prospects for folks on the way up are dismal in a no-growth economy. If this is balance, who needs balance.
Most Americans do not pay any federal income tax at all. Many Americans, off-the-books Americans, not only don't pay income taxes, they don't pay payroll taxes either, much less medicare taxes.
So raising federal income tax rates targets the dwindling minority of Americans who pay taxes. So this is balanced?
Instead of trying to develop government programs that help the truly needy, America has developed entitlement programs that make no distinction between Warren Buffett and his yardman. They both get social security and they both get medicare. I guess that is balance.
Over time Americans have grown accustomed to the idea that they need not pay for their retirements, health care, education, food -- frankly, much of anything. So, it is no surprise that American spending habits are incredibly reckless. Why not?
So, what exactly is balance. Balance is pretending that there is some political fix to the unfixable. Social security and medicare and Medicaid cannot be fixed. They can only be ended -- either because the money simply runs out or because they are ended voluntarily.
Snuffing out economic growth by raising tax rates (on the "wealthy," defined mostly as Americans with incomes less than $ 1 million and greater than $ 250,000) is not balance. It is foolish and cruel and will lead to a generation of economic stagnation.
The very people that the President professes to want to help will be the victims of this "balanced" program. Job prospects for folks on the way up are dismal in a no-growth economy. If this is balance, who needs balance.
Take the Plunge
It is time to take a ride "over the fiscal cliff." Any compromise is only likely to make matters worse by pushing the problem down the road. It will not be long before the only solution to our fiscal woes is the kind of economic and political chaos that is modern day Greece.
Far better to take the poison pill now. Yes, the economy will suffer. But, what happens in five years when the so-called compromise or grand solution unravels because it never had any substance anyway. Politicians will find a way to "extend and pretend." Why bother?
If we plunge over the fiscal cliff, then the implications of the entitlement state will be front and center for the body politic. Better to face it now than later. It is fixable now, if we see it as an emergency, which a plunge over the cliff will provide.
This Administration intends to insist on higher rates that will imperil our economic future and lead to a 1970s style economic stagnation or a 1930s style depression. Since that is the direction Obama intends to take, why not see the implications of that future sooner rather than later.
No one is pushing free market solutions. The nation has a negative savings rate (if you include government savings). There are no assets to provide income security for the elderly or bankroll the promised health care benefits. Nothing has been put aside and there is limited room to tax the middle class (where the bulk of the income is). So, why temporize?
America's problem is simple arithmetic. The great entitlement society is not affordable. It doesn't matter what tax rate "millionaires and billionaires" pay. Total confiscation won't get it done. The numbers just won't work.
Time to face the facts. Hang on to your seat belts. Lets go over the fiscal cliff, including no more increases in the debt limit ceiling. Lets go for it.
Far better to take the poison pill now. Yes, the economy will suffer. But, what happens in five years when the so-called compromise or grand solution unravels because it never had any substance anyway. Politicians will find a way to "extend and pretend." Why bother?
If we plunge over the fiscal cliff, then the implications of the entitlement state will be front and center for the body politic. Better to face it now than later. It is fixable now, if we see it as an emergency, which a plunge over the cliff will provide.
This Administration intends to insist on higher rates that will imperil our economic future and lead to a 1970s style economic stagnation or a 1930s style depression. Since that is the direction Obama intends to take, why not see the implications of that future sooner rather than later.
No one is pushing free market solutions. The nation has a negative savings rate (if you include government savings). There are no assets to provide income security for the elderly or bankroll the promised health care benefits. Nothing has been put aside and there is limited room to tax the middle class (where the bulk of the income is). So, why temporize?
America's problem is simple arithmetic. The great entitlement society is not affordable. It doesn't matter what tax rate "millionaires and billionaires" pay. Total confiscation won't get it done. The numbers just won't work.
Time to face the facts. Hang on to your seat belts. Lets go over the fiscal cliff, including no more increases in the debt limit ceiling. Lets go for it.
Minggu, 11 November 2012
In The Spirit of Compromise
Obama and Boehner have made post-election comments stating forthrightly that they are both "open to compromise." The President insists on higher "tax rates" for everyone whose incomes are in excess of $ 250,000. The vast majority of such taxpayers have incomes well below $ 1 million per year, but the President labels them "millionaires and billionaires." You wonder why he doesn't lower the threshold to $ 100,000, since the label doesn't match the reality anyway.
Boehner has offered a true compromise. He will agreed to tax changes that promise "higher revenues." That is a significant change in the Republican position. Alas, there is zero change in the Obama position. Higher "tax rates" for "the wealthy," as Obama puts it, will lower tax revenues and stunt economic recovery. That doesn't bother the president, so long as he wins the rhetorical war. The election shows that you can, in fact, fool (a slim majority of) all the people some of the time and some of the people all of the time. Hopefully, Lincoln is right. Hopefully, Obama will not be able to fool all of the people all of the time.
So look for another sterile debate and much posturing. The Republicans would be foolish to relent on the "tax rate" issue. Tax rates need to be lowered not raised. The only reason the Clinton years were not an economic disaster when rates were increased was the one time event of the "tech bubble." Remember that one. From the mid 1990s to 2000, the US economy was propelled by the beginning of the commercialization of the internet. The tech bubble, not higher taxes, is what propelled the economy in the Clinton years.
Boehner has offered a true compromise. He will agreed to tax changes that promise "higher revenues." That is a significant change in the Republican position. Alas, there is zero change in the Obama position. Higher "tax rates" for "the wealthy," as Obama puts it, will lower tax revenues and stunt economic recovery. That doesn't bother the president, so long as he wins the rhetorical war. The election shows that you can, in fact, fool (a slim majority of) all the people some of the time and some of the people all of the time. Hopefully, Lincoln is right. Hopefully, Obama will not be able to fool all of the people all of the time.
So look for another sterile debate and much posturing. The Republicans would be foolish to relent on the "tax rate" issue. Tax rates need to be lowered not raised. The only reason the Clinton years were not an economic disaster when rates were increased was the one time event of the "tech bubble." Remember that one. From the mid 1990s to 2000, the US economy was propelled by the beginning of the commercialization of the internet. The tech bubble, not higher taxes, is what propelled the economy in the Clinton years.
Rabu, 07 November 2012
Oh Well
The election shows that a slim majority of Americans seem to think that either: 1) Europe is an appropriate destination for America; or 2) Somehow, we are not headed that way. There is, of course, the possibility that a majority of Americans are simply not paying attention.
The heart of the US problem is really no different than that of Europe -- can someone work for 30 years without saving anything and live comfortably for 85 years? That is the real issue. Social security and medicare assume that the government is doing the saving. But, as we all know, the government is always a dis-saver not a saver. So, in reality, no one is saving.
If none of the squirrels gather acorns, what happens in winter? That is the American dilemna and that is the current nightmare in Europe.
The debate about free markets is important mainly because only free markets permit savers to participate in the broader economy -- something threatened in the US by the Dodd-Frank legislation. Current government policy bristles with suggestions that savers are bad people who are only concerned about accumulating wealth. Well, that's right actually. That's why people save. But, in the aggregate, Americans no longer save. The politicians have won that battle. Only a handful of people really save any more and Obama seems determined to snuff out even that small amount of frugality.
So, winter will come. It has already come for Europe. It is only a matter of time until it comes to the US.
One consolation of the election is that free market politicians are in the ascendancy in the Republican Party. The John McCains and George Bushes are being replaced by the Paul Ryans, Mario Rubios, Nikki Haleys, Bobby Jindhals, etc. So there will be a free market voice in our future.
The heart of the US problem is really no different than that of Europe -- can someone work for 30 years without saving anything and live comfortably for 85 years? That is the real issue. Social security and medicare assume that the government is doing the saving. But, as we all know, the government is always a dis-saver not a saver. So, in reality, no one is saving.
If none of the squirrels gather acorns, what happens in winter? That is the American dilemna and that is the current nightmare in Europe.
The debate about free markets is important mainly because only free markets permit savers to participate in the broader economy -- something threatened in the US by the Dodd-Frank legislation. Current government policy bristles with suggestions that savers are bad people who are only concerned about accumulating wealth. Well, that's right actually. That's why people save. But, in the aggregate, Americans no longer save. The politicians have won that battle. Only a handful of people really save any more and Obama seems determined to snuff out even that small amount of frugality.
So, winter will come. It has already come for Europe. It is only a matter of time until it comes to the US.
One consolation of the election is that free market politicians are in the ascendancy in the Republican Party. The John McCains and George Bushes are being replaced by the Paul Ryans, Mario Rubios, Nikki Haleys, Bobby Jindhals, etc. So there will be a free market voice in our future.
Sabtu, 03 November 2012
171,000 is Pitiful
The Obama Administration is doing high fives over Friday's employment report reporting 171,000 net job additions in the month of October. I recall Bill Clinton accusing George Bush of "running the economy into the ditch" at a time when the economy was routinely producing in excess of 200,000 jobs per month. Maybe we would be better off if the Obama Administration would run the economy into the ditch instead of over the cliff.
Leave it to the NYTimes to celebrate the new normal. Cheering the October numbers, Catherine Rampell of the NY Times argues in today's business section that the economy "is looking a little stronger than had been feared just a few months ago." Rampell sees these numbers as helpful to Obama's re-election chances. That seems to be all that really matters to the NY Times these days.
In an otherwise enthusiastic endorsement of Obama policies, even Rampell was forced to admit the dismal truth: "The United States has now posted job gains for 25 consecutive months, but the increases have been barely large enough to absorb the increase in the working population."
Gone are the goals of 4 percent unemployment. That's so Reagan-like. Now 8 percent unemployment is acceptable as the new normal to the Obama Administration and it's pals at the NY Times.
On to the real issues -- like taxing the millionaires and billionaires (defined as folks with income above $ 250,000 a year). So what if there is anemic job creation thanks to the Obama policies.
Leave it to the NYTimes to celebrate the new normal. Cheering the October numbers, Catherine Rampell of the NY Times argues in today's business section that the economy "is looking a little stronger than had been feared just a few months ago." Rampell sees these numbers as helpful to Obama's re-election chances. That seems to be all that really matters to the NY Times these days.
In an otherwise enthusiastic endorsement of Obama policies, even Rampell was forced to admit the dismal truth: "The United States has now posted job gains for 25 consecutive months, but the increases have been barely large enough to absorb the increase in the working population."
Gone are the goals of 4 percent unemployment. That's so Reagan-like. Now 8 percent unemployment is acceptable as the new normal to the Obama Administration and it's pals at the NY Times.
On to the real issues -- like taxing the millionaires and billionaires (defined as folks with income above $ 250,000 a year). So what if there is anemic job creation thanks to the Obama policies.
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