Sunday, July 25, 2010
The looming Congressional battle royal over taxes
The New York Times has a nice run down on the massive fight we are about to have over federal taxes. It will generate an enormous amount of heat in advance of the November elections, and the stakes for the economy are even more significant. Unfortunately, the debate and the no doubt confusing and poorly understood legislation that will emerge will probably increase, rather than decrease, uncertainty for the people who have capital to deploy, further delaying the American recovery.
Oh, and if you contribute enough to the national prosperity to be "rich," gird yourself for another round of condemnation from the people who consume more than they produce.
25 Comments:
By 
, at
Sun Jul 25, 09:51:00 AM:
I just posted a long rant below about the Obama/Orzag budget for 2011, which was just made publicly available. My rant is here, at the bottom.
The New York Times article is about the politics of who's going to keep getting a tax cut next year: some of us ... or all of us.
My rant is about the elephant in the room: if you look at the Obama/Orzag Ten-Year Plan, we're going to have to either (A) double income taxes on everyone, or (B) eliminate Medicare entirely, but keep charging payroll tax, or (C) eliminate the Defense Department entirely.
Am I wrong?
By , at
Sun Jul 25, 10:05:00 AM:
By 
PD Quig, at
Sun Jul 25, 12:32:00 PM:
This is all picking up pennies in front of a steam roller. There is no possible way to balance the budget--ever. Even allowing for the BS accounting and off balance sheet manipulations, we are so far out of whack that only draconian cuts to politically untouchable programs would even get close.
The elephant in the room is that we have spent the last two decades pulling future economic demand into the present. By using credit to 'pay' for it, we have created debt loads at all levels that are unsupportable now that the merry-go-round has stopped. Over the past 20 yaers, tax receipts and spending outlays have both been positively skewed by all the jobs created by false demand. Many jobs are gone away, never to return.
It may seem like things are stabilizing, but that is just because we have reached constant terminal velocity. It may not be getting worse, but at some point we will have the sudden stop at the end of the fall to deal with.
By , at
Sun Jul 25, 01:42:00 PM:
"we have created debt loads at all levels that are unsupportable now"
Agreed.
So who else sees this? Orzag? Geithner? Obama? The New York Times editorial board? Are they all oblivious? Or do they welcome this?
"at some point we will have the sudden stop at the end of the fall to deal with"
Does the ultimate answer have to be a big debt default, either expressly or through inflation?
Some countries -- notably Britain, after Ireland started -- are trying austerity. The bigger the country the harder this is to make work.
Is this hopeless, or we can we make incremental changes? Like repealing Healthcare for openers -- a trillion here, a trillion there starts to add up.
By Robert Arvanitis, at
Sun Jul 25, 02:11:00 PM:
No, tell us how you REALLY feel PD! You’re quite right, except for one point – when the cash runs out, NO program is untouchable.
The problem is FDR’s folly with Social Security, repeated with Medicare.
Ten citizens, one poor. The correct thing is to take 10¢ from each of nine, and give 90¢ to the poor one.
Instead, FDR perpetrated a fraud, took $1 from each of the nine, and then gave EVERYONE 90¢.
That scheme has multiple bad effects. First, it hides the net cost of 10¢ behind the shell game of take a dollar and give some back. Second, it creates a deleterious dependency on all 10 people, making them all believe (wrongly) that government can actually give them something. Finally, it creates too much latitude for further bureaucratic tampering and interference.
Now we must bite the bullet and wean ourselves off–firmly, and without further crutches. (Remember Annie Hall? “Used to be heroin addict. Now I’m a methadone addict.”)
Wean how?
• Raise ages (the original Bismarkian 65 retirement was set to cover just 1%).
• Means test all welfare programs.
o Get rid of the “wedge.” We could raise everyone out of poverty for less cash than we spend now on the vast array of misguided, misdirected and redundant programs.
o Social security must be a safety net not a spider’s web.
• Give savers a real rate of return.
• Admit that no more than 64% of Americans can afford their own home. Stop misallocating real resources into the consumption of housing. Cap the interest rate deduction and eventually ratchet it down to zero.
• Rationalize the income tax so it just raises money and does NOT try social engineering.
o Flat tax of 18% of everything over $24,000. Everyone must have a stake in the system.
o End double taxation of equity.
o Borrowing only for capital projects, and tied to the life of the asset.
o End payroll deduction; make taxpayers write the check (!)
o End unfunded mandates and stop all block grants.
• Term limits.
• Referendum, Initiative, Petition, and Recall.
• Enumerated powers.
• Compact districts.
• Photo ID to vote.
• Line item veto.
Too much to ask? No.
If we really can’t do this before we hit the wall, then that’s how we must rebuild it afterwards.
By jfxgillis, at
Sun Jul 25, 02:15:00 PM:
Let me get this straight. A law passed by a Republican House, a Republican Senate and a Republican President is operating exactly the way that Republican House, Republican Senate and Republican President intended. And it's all the Democrats' fault.
Yeah. Sure.
By knighterrant, at
Sun Jul 25, 02:29:00 PM:
Forgive me if I can't work up any tears for the idle rich who produce nothing themselves, rely on the labor of others to reap their wealth, and treat the national economy like a riverboat roulette table. Only it is just play money to them because if they lose they can always turn to their minions in government to bail out their loses.
By PD Quig, at
Sun Jul 25, 05:42:00 PM:
Ah, the good old class warfare, 'idle rich' arguments dusted off yet again.
"Tax the rich, feed the poor, 'til there aren't no, rich no more"
Did you ever notice that those Ten Years After song lyrics didn't say, "tax the rich, feed the poor, 'til there aren't no, POOR no more"?
All those dipshit hippies dancing around naked and stoned didn't even realize that they were being lampooned by that song. The left never will learn that you cannot tax your way to prosperity, so the game goes on. In a like manner, the lesson re-learned (by all but the hopelessly economically illiterate) of the past two years is that you also cannot borrow and spend your way to prosperity.
By all means, lets let the 'industrious poor' run the show for a while, in lieu of the idle rich. Can't wait for re-education to start.
By , at
Sun Jul 25, 07:08:00 PM:
No. You are all wrong! America is a Marxist nation---always was. Ever read the Communist Manifesto, boys?
Have you?
Karl Marx, in his little bible, called for "gradual taxes". This was passed in 1913! In 1913, America passed, approved and implemented Karl Marx's plan!
If it walks like a duck, and quacks like a duck---it's a duck.
What are you all talking about with "Bush tax cuts" when you all approve of Communist, Jewish, Marxist gradual taxation that treat the well to do differently than the poor?????? That the "rich" are taxed at 39%? How is that "Equality"?'
No, that is hypocrisy! And you stupid dumb Americans accept that!
Enjoy your Third World Hell Hole people.
By VC-Ron, at
Sun Jul 25, 07:49:00 PM:
Anonymous, at Sun Jul 25, 07:08:00 PM, is partially right -- it is not the "Left" we are really fighting, it is the Progressive/Marxist individuals that have permeated both the Dems and Reps in this country. To them, it is not just the 'idle' rich that will be taken down, it is anyone or any organization that owns production capability or other capital resources.
They don't care about the outcome of the tax debate or how to reduce the deficit; they have neither goal. In fact, they probably find the whole fight amusing. Their goal is to bring the US to its knees in order to force it into a socialist state.
The progressive revolution will not be complete until all production/resource ownership is taken from individuals and made part of the "collective", and on a world-wide scale! The progressives believe that if you are not one of the owners, you MUST be oppressed and disenfranchised; it is NEVER enough for a worker merely to be compensated for his work, regardless of how lavishly.
And now, the Executive branch, with Congress's blind complicitly, has likely acquired all the power it needs to push us over the tipping point. The final push will be to raise the anger levels across the country to a boil, wait for a rupture in civility, declare a civil emergency, and put everyone under their thumbs.
That is, unless we can open enough eyes to the facade of this administration and make it clear to the general public where this train is heading!
By , at
Sun Jul 25, 08:53:00 PM:
You sound surprised that Obama plans to let the Bush tax cuts expire for the over $250K crowd? Crips, it was one of Obama's campaign promises folks! Get a grip. Better yet start paying attention.
Yes, the Bush tax cuts that were never paid for and cost a couple trillion dollars, will expire as scheduled, and the tax rate for those of us who make $250K or more will return to the tax rate under Bill Clinton, 39,6%. Ohhhh, scawey.
Just be glad you you didn't have to pay (or no longer pay) taxes when Eisenhower, Kennedy or Nixon were president.
By Gary Rosen, at
Mon Jul 26, 01:09:00 AM:
Maybe anonymous 7:08 is Oliver Stone
By , at
Mon Jul 26, 06:26:00 AM:
Speaking for myself, raising marginal rates to 40% isn't that big a deal. But Obama's on course to necissitate making the top rate 80% or 90% ... and to lower applicable brackets too. This won't rid us of the rich, but it will kill off our kulaks and strivers. The poor will only be poorer.
Top rates under Ike, JFK and Nixon only hit at much higher inflation-adjusted levels -- and we had a lot more tax-shelter deductions back then.
For the last 60 years, the federal government has taken in about 18% of GDP, and spent about 18.5% -- it didn't matter what tax regime we've had in place. Today, we're taking in 14.5% and spending over 25%, which is unsustainable.
If we were grown-up we'd be budgeting to 18%, which means making trade-offs.
By , at
Mon Jul 26, 06:52:00 AM:
The bid/ask spread on Obama is now between (1) "Jimmy Carter well-intentioned incompetent" and (2) "Clower-Piven diabolical agent."
I've long leaned to the latter. But here's my question: Can you go through Columbia and Harvard Law ... and then become a career politician ... while still maintaining a narrow shithead perspective on how the world works? One divorced from rules of reason, math and science?
Apparently, the answer is yes. I'm running into lots of supposedly well-educated people who can't reason or critically think. It's an indictment of our higher education, Ivy-League included.
Growing up in The Bronx, "shithead" had a particular meaning: people who thought they were smart, but weren't.
By MTF, at
Mon Jul 26, 09:50:00 AM:
It might be true that only a minority of American voters think as KnightErrant does and it might be true that a majority of Americans understand that wealth creation helps all of us, but it seems unavoidable that we will need to see a full scale depression before those comparatively few wealth creators are left to their business by our Congress and government. With these massive tax increases, Democrats are giving us that Depression.
By , at
Mon Jul 26, 11:04:00 AM:
Given that this thread started with a story in The New York Times, here's one from today's Times: Industries Find Surging Profits in Deeper Cuts
The NYT finds that despite lagging sales many big US companies are actually making more profit because they've cut the number of their US employees so much. Harley-Davidson cut a fifth of its jobs last year, and will cut a sixth this year. Alcoa has zero interest in hiring back any of the 37,000 they've let go since 2008. Etc Etc.
I'd bet overtime is up, for those who have jobs.
Now if the Times could only connect a few more dots, to understand why this is so.
Creating green jobs at $1 million per head -- Obama's current plan -- isn't "economic." Does Obama have a clue what that means? Does The Times?
Also in today's Times, a bitchy op-ed on Andrew Breitbart as journalist-provocatuer -- this from the paper that falsely called lobbyist Vicki Iseman a whore in a failed attempt to torpedo McCain during the 2008 campaign.
By PD Quig, at
Mon Jul 26, 11:30:00 AM:
Final thought...from me anyway:
Just WTF evidence has been adduced that BHO is a smart guy? I'm so tired of hearing how 'bright' and 'elite' he is. What was his high school GPA? What were his SAT results? What was his college GPA? How did he do on the LSAT? Why did he have virtually no publication record at Harvard Law Review? He was a mere adjunct professor of law and manifestly not a constitutional law professor. Just where has this purported intellectual firepower been manifest? In a silken-tongued facility with the TeleprompTer?
Obama is a smart guy only in the sense that he learned early on how to reflect white guilt back on itself while at the same time being a non-threatening black man. Were he actually a bright guy, he would be learning from his mistakes instead of endlessly repeating them. I'm of the opinion that he's a radical alright, but also that he's simply in WAY over his head. Even many people who voted for McCain had no idea what a zero/jerk Obama was.
Welcome to the party, pal.
By , at
Mon Jul 26, 12:52:00 PM:
My two cents.
Obama's not dumb. Don't underestimate him. He's a Man with a Plan.
He's worked out a collection of legislative initiatives that would transform the USA greatly. Some of it is subtle, much of it is long-dated. He's already gotten a lot of it passed.
In doing so, the White House has co-opted Congress in ways that we've never seen before. Rahm Emanuel is point on this. This goes beyond even LBJ -- as most Democrats in Congress today are party hacks who do exactly what they're told (many Republicans too).
You can see evidence of this in the way that the key bills have been managed, and what gets slipped into the last version.
E.g., Energy started to get passed by the House without a physical copy of the final even being in the building. The final added the Van Jones green jobs stuff, etc.
E.g., Obama stepped in to personally crush the Stupak anti-abortion resistance to Healthcare. (This might have gotten very ugly behind closed doors).
I suspect that Pelosi and Reid get "hondled" a lot by Rahm. "Hondled" ... not "rolled" -- Nancy's happy so long as she thinks she's in charge.
A key aspect of Obama's plan is to boost federal spending to over 25% of GDP and keep it there. It's actually higher if you consider unfunded mandates. This is a lot higher than the 18 - 19% we're used to.
Obama thinks that we'll then have to raise taxes enormously, and that the burden will mostly fall on the rich. 95% v 5%. Socialism effected through the Internal Revenue Code without a shot.
Obama's been careful to pay off those who brought him to the dance. That's the likes of the SEIU and the UAW, and black voters. He doesn't really give a rat's ass about gays, Jews, Hispanics nor the anti-war crowd. I'm not sure how Green he really is.
What I can't tell is whether Obama understands that he's on course to burn the entire mansion down -- that would be Clower-Piven -- or whether he thinks he'll only leave a more "just" America in his wake.
Knowing the true depth of his knowledge of market economics and science could help you tell the difference. Does he really believe we can all drive electric cars powered by windmills? He seems to -- hence his fascination with visiting battery factories. So I suspect he's pretty clueless on market economics and science -- but then so are most of our senior editors and pundits in MSM.
By MTF, at
Mon Jul 26, 02:16:00 PM:
The President and his administration are smart enough to understand they are driving us into a depression, since they themselves say that only a never before seen economic scenario can prevent it. Read this WSJ article. It says that only GOP tax cuts have in the past lead to sufficient growth to prevent further economic degradation (a depression, in other words).
The administration is obviously aware of the inverse, and that the massive tax increases they are planning will cause the disaster we should all want to avoid.
Knowing this, why are they leading us into the abyss? Because idiots on their base believe as KnightErrant and are unwilling to sacrifice class-warfare principle for the sake of economic improvement? Is there any other reason?
By , at
Mon Jul 26, 02:49:00 PM:
Like the WSJ, my long rant below also rips the Obama/Orzag budget.
If you dig into the numbers even a bit, you can see that we're being lied to.
A key driver of the Obama/Orzag budget is the assumption that we'll have GDP growth rate over 4% in each of the next few years.
But 2Q 2010 GDP growth just came in at 2.5%, down from 2.7% in 1Q 2010. This, while we're in the Sugar Rush phase of stimulus.
OMB head Orzag (Princeton '91) has to know this. So he's feeding us bullshit projections.
(I was looking up Orzag's bio and happened to notice that he wrote a paper in 2002 with Nobel Prize winner Joseph Stiglitz to the effect that Fannie and Freddie presented zero risk to the federal government. You can't make this stuff up).
Larry Summers has to know why unemployment is higher than what his Okun-law driven models previously predicted, doesn't he?
Or all they all just Paul Krugmans?
At least Fed Chairman Bernanke is honest. Last week he said the economic outlook was "unusually uncertain." That's code for "I don't know what the fuck is going to happen."
By Dawnfire82, at
Mon Jul 26, 04:15:00 PM:
"Yes, the Bush tax cuts that were never paid for and cost a couple trillion dollars..."
Federal tax revenue increased following the tax cuts, because lower taxes encouraged economic activity. It was the subject of much snark and political cartoons to the tune that 'Holy shit, tax cuts do work.'
Maybe you should pay attention...
"will expire as scheduled, and the tax rate for those of us who make $250K or more will return to the tax rate under Bill Clinton, 39,6%. Ohhhh, scawey."
Because a sizeable tax increase is EXACTLY what the economy needs right now; more money taken out of the pockets of the citizens that actually have capital and could help fuel a recovery, thrown to the ever more voracious beast of federal spending which doesn't seem to give a fuck anymore how much tax revenue actually exists.
Brilliant.
Higher taxes depress economic activity. Period. People cannot spend money that gets taken away from them, and no matter how perfectly and wisely the government spends it it will be less efficient thanks to the costs of collection and distribution. And our government is full of corrupt fools, not perfect wise men.
And the central problem with the budget is not raising revenue anyway. It's stupid, reckless, drunken sailor-style spending. To cover the deficit as it now exists would require draconian, confiscatory taxes that would 1) only stop gap for a year before 2) such taxes would absolutely wreck economic growth. Our spending is so horrific that the purported cure (more revenue) would be more dangerous than the disease itself.
Clinton-era taxes would serve to depress already anemic, stimulus-fed 'growth' without even the chimeric benefit of putting a real dent into the deficit.
Again, brilliant.
By , at
Mon Jul 26, 07:35:00 PM:
It's been a long time since I studied the causes of the French Revolution in high school. Do I have this right? The First and Second Estates got special privileges -- basically a guaranteed living. The Third Estate was expected to pay for everything, and bore all the risk of the vicissitudes of life. A series of spendthrift kings spent the country into bankruptcy. Louis XVI wouldn't cut back. His wife's excesses fueled popular outrage. Ultimately the Third Estate rebelled over the lock the First and Second Estates had over political power.
Michelle Obama will be taking three more vacations before school starts. She's going to the coast of Spain with an entourage of 50 to hang with the King and Queen, after a quick photo op stay on the Gulf Coast Redneck Riviera, and then doing the Vineyard later in August.
By , at
Tue Jul 27, 09:46:00 AM:
Obama just before election 2008: We are five days away from fundamentally transforming the United States of America
Obama rarely misspeaks in public by saying what he actually believes. When he does it can be quite revealing.
Instead, we've been mostly lied to. Obama is a lying sack of shit. The Great Dissembler needs to be called on it.
****
It's the spending, stupid!
Agree with the comments above: Obama & Co are pushing to extend the Bush tax cuts only for those under $250,000. This is already in the Obama/Orzag 2011 budget. They think they can sell this as being fiscally responsible on cutting the deficit.
But the real issue is that we've already increased "spending as a % of GDP" by 40% with no way to pay for it.
Repealing Healthcare is a start, and something to rally around. We were lied to about Healthcare cutting the deficit -- as Congressman Ryan said it was a fraud that'd make Bernie Madoff proud. Instead, it will increase spending by at least $2 trillion in the next decade.
Fraud is a lie so bad it's a crime. Had Obama & Co done Healthcare as a securities offering, the plaintiffs bar and Justice would have gone Enron-medieval on their ass.
We may get lucky here with the JournoList download, which could be quite revealing. I suspect Breitbart already has the full download and has been feeding "coming attractions" to Tucker Carlson at The Daily Caller. How else would Carlson be getting it?
****
Alinsky Rule 13: Pick the target, freeze it, personalize it and polarize it.
Peter Orzag (Princeton '91) needs to be fried on this. He's perpetrated worse frauds than anyone on Wall Street, with momentous adverse consequences.
If I were Speaker of the House John Boehner, one of the first hearings we'd have in 2011 would be to explore how former CBO head Orzag gamed the process at Obama's behest.
We may not have to wait. Orzag was a member of JournoList.
By Dawnfire82, at
Fri Jul 30, 09:50:00 AM:
Mainstream confirmation of what I said above. Just a few days late.
By , at
Fri Jul 30, 06:36:00 PM:
I don't disagree with Dawnfire82 about the adverse near-term effects of eliminating the Bush tax cuts. My point is that there's another, much bigger wave of tax increases coming if we don't radically cut expenses. Obama & Co are intent on (and are succeeding at) running up the expense side of the ledger, before the reckoning. This reckoning is probably only a year or two away.
Further to my rants above, I just learned that Geithner said the following on last Sunday's Meet the Press"
"MR. GREGORY: If deficits are unsustainable, can you give an example yet of a painful choice that the president's prepared to make to bring our fiscal house in order?
SEC'Y GEITHNER: Oh, absolutely. I mean, again, he's proposed to freeze discretionary spending, to keep the overall size of the government at a very modest level as a share of our economy. If you look again at what the president's proposing, he keeps the overall size of government at a very modest level comparable to--lower than what was in the Bush administration, comparable to what President Reagan presided over."
Once again, Little Timmy's nose is growing. He says "very modest level" twice -- but it's never been higher post WWII ... in percentage terms ... let alone in absolute dollars. It's not "comparable to" the Bush or Reagan administrations -- it's higher! Even higher than the Reagan and Bush years of peak military spending.
What he also leaves out is that, post WWII, revenue has never been lower as a %. That's why the current deficit is 10%, which is way higher as a % than any year since WWII.
You also knew during the Reagan years that things were moving in the right direction ... you could argue about the pace, and still quibble with the policy and its details ... but not with the long-term trend.
When you look at the Obama Ten-Year Plan -- unless we miraculously get the assumed 4.25% growth for the next five years -- the trends all go wrong and the numbers blow up.
Little Timmy should know this, and probably does.
