It is dangerous to be sincere unless you are also stupid.
George Bernard Shaw
How Serious Is the GOP About Ending Tax-and-Spend DC?
Debra Saunders, a rare moderate conservative in the bastion of all things liberal, San Francisco, has an interesting column out today called "Partisan Wars: Ending the Bush Tax 'Cuts' is a Tax Increase." (I love Debra's occasional guest appearances on Dennis Miller's radio talk show podcasts.) You might think this sounds like just another media conservative ideological blast against the Obama/Democratic position against extending the Bush tax cuts, but not really. She really echoes a number of points I've already made in this blog.
In particular, Ms. Saunders points out over 75% of the Bush tax cuts go to the middle class. Treasury Secretary Geithner wants to argue we can't afford to continue less than 25% of the cuts, but he has no problems with the rest of the tax cuts? This can only be based on ideological grounds.
There is also the conventional argument noting that the realization of income by the higher-income individuals can be influenced by tax policy. For example, if wealthier individuals expect that favorable tax rates will expire at year end, they could push profit-taking into this calendar year. This might slightly push down the deficit this year, but it takes away the incremental federal revenue expected next year. There are unintended consequences for increasing taxes on job creators in a tough economic environment--is that really worth the estimated $36B of revenue next year? In fact, Ms. Saunders notes that $36B is dwarfed by the average Democratic spending initiative, including a rumored upcoming stimulus bill redux...
Does that mean that Ms. Saunders is giving the GOP a free ride? No. She quotes former US Controller David Walker, whom notes even if we add together the Bush tax cuts, earmarks, the wars, and foreign aid, all of that only accounts for 15% of the problem. You cannot close this deficit without hitting the big budget items, like the entitlement spending. She touches on Paul Ryan's (R-WI) roadmap, which focuses on radical transformations of relevant sacred-cow budget items. But as the AP's Erica Werner noted yesterday, Democrats, including Obama, have seized on Ryan's proposals, which have not been officially endorsed by the GOP and in fact has attracted only a modest degree of support among the rank and file, as a straw man, using those ideas to spread fear, uncertainty and doubt among senior citizens, a powerful voting bloc, over the security of their benefits.
In the end there are three core ideas (as I phrase them) both Ms. Saunders and I agree on:
- there must be broad-based spending cuts;
- if American politicians do not have the political will to slash spending enough, they must raise federal revenue through broad-based taxes, i.e., shared sacrifice
- as a compromise, Obama should suggest extending ALL the Bush tax increases until the economy is on surer footing and we approach a full-employment economy.
Hiking Visa Fees on High Tech Foreign Workers? Thumbs DOWN!
In the column I just cited, Debra Saunders made a comment about rich people helping to elect Barack Obama and getting their just deserts. Warren Buffett, for instance, once scorned derivatives, calling them "financial instruments of mass destruction"; he also famously pointed out that his secretary paid a greater percentage of her income to taxes than he did. Buffett moderated his point of view on derivatives, used by his own companies, by the time the Democrats were working on their "financial reform" legislation. All those Wall Street investment bankers who gave Obama the majority of their political contributions some 2-plus years ago must have been horrified by Obama's returning the favor by repeatedly demagoguing against fat cat bankers, imposing new banking fees, and implicitly blaming them for the economic tsunami.
Another group that favored Obama's election, the high tech management in Silicon Valley and elsewhere, now find that they have been singled out to subsidize recent border protection legislation with sharply higher visa fees. It would be hard for any politician to come up with a more perverse policy than punishing the kinds of people we want to legally immigrate to the US in order to sustain a cutting-edge high technology sector.
Obama's Deficit Argument on Social Security Reform
This is a follow-up discussion on the President's weekly address yesterday hailing the 75th anniversary of social security. I have discussed the following statement by the President in earlier posts, but let's review:
One thing we can’t afford to do though is privatize Social Security – an ill-conceived idea that would add trillions of dollars to our budget deficit while tying your benefits to the whims of Wall Street traders and the ups and downs of the stock market.Let's expose the fallacious math behind Obama's statement (progressives just can't do math). What is going to cause trillions more? A partial privitization of social security is going to require trillions more payouts to beneficiaries? Of course not! In fact, quite the opposite: the partial privitization plan will result in REDUCED payouts for mostly younger worker retirements, which would be supplemented by the privitized assets. The President is stuck with politically inconvenient truths: the status quo is unsustainable in the long run. We have to reduce the fiscal drag of rapidly rising entitlement costs for the elderly. We can't afford not to do something about social security which will amount to trillions in the future we won't have. Why should Obama care? He won't be President then; he's just kicking the can down the road; let somebody else fix the problem.
So what does the President mean by adding trillions to the deficit? Well, remember how this Ponzi scheme works: any net contributions over and beyond paying current beneficiaries--and any progressive Democrat worth his salt is going to do anything in his or her power to increase those payments, hugely popular with an important voting bloc. But those goodies, like filling the doughnut holes for the new prescription drug plan, further skim off resources which should be going into the reserve. More importantly, those reserves are required to invest in Treasury bills (e.g., covering progressive drunken sailor spending).
Obama is simply referring to the fact that if, say, one-sixth of what the system is currently taking in for payroll taxes is in real assets, that money can't be used to fund current payouts or federal government debt. So the federal government will have to find another way to subsidize its inefficient, ineffective spending. That wouldn't be a problem if the social security fund reserves were throwing off real income and had a diversified base versus invested in historical progressive overspending.
All that the privitization plans do is shift dollars to the present in a way that will wash out in lower future payouts, a salient fact that Obama knowingly fails to mention.
"Whims of Wall Street traders and the ups and downs of the stock market?" Let's keep in mind historically most years on the stock market are up. Most financial planners advocate a disciplined investment plan like dollar-cost averaging--for example, buying the same amount regardless of good or bad markets. During bad markets, you buy more shares; during good years, you buy fewer shares. A similar concept holds true in terms of distributions--you sell fewer shares in good years, more in bad years. Obama is deliberately and misleadingly portraying all types of investment approaches as equally risky.
It would be one thing if the President was an honest broker, a centrist, a problem solver. When Obama, an intelligent man, constantly misrepresents the positions of his political opponents and consistently engages in partisan rhetoric, he eliminates the possibility of bipartisan cooperation. The Party of No? Obama and the progressive Congress wants the GOP to capitulate to partisan legislation; the GOP has no choice.
Political Humor
More jokes I should have covered earlier:
"President Obama is going on 'The View' to talk about the economy. Later on, he’ll go to 'General Hospital' to explain to doctors how the new healthcare system works." –Jay Leno
"Elmhurst, Illinois is going to outlaw eye-rolling. So what happens if John McCain shows up and says he still thinks he made the right choice with Sarah Palin?" –David Letterman
"BP announced that as a result of their own internal investigation, it has cleared itself of all blame in the Gulf oil spill. In a related story, Congressman Charlie Rangel has announced that he will be investigating himself and will find himself completely innocent." –Jay Leno
"The White House is very upset about a bunch of secret documents about the Afghanistan war that were leaked online. Out of habit, BP apologized." –David Letterman
Musical Interlude: The American Songbook Series
Dinah Washington, "Come Rain or Come Shine"
