Showing posts with label US Debt. Show all posts
Showing posts with label US Debt. Show all posts

Thursday, October 31, 2013

Boo!



Talk about a scary Halloween.  We're fearing little goblins with Ted Cruz masks, demanding all the Candy or else, the "trick" being they will stay at our doorstep forever, blocking our exit until we relent. Other non-Cruz goblins better watch out too, once the Cruz clan congregates. 

Until now, I've been silent on the subject of Ted Cruz.  He burst on the political scene as did Sarah Palin, but Palin was clearly a hopeless lightweight who was "hired" to play a role.  She is a reality TV star, and that's about it.  But Cruz is very different, and I've been trying to make some sense of him, his views, and where he might be going.

He is perhaps the most disturbing politician I've witnessed firsthand (only vaguely remembering Joseph McCarthy from my childhood).  I thought Barry Goldwater was dangerous, but unlike Ted Cruz I don't remember him threatening to hold the US Government hostage.  Cruz's intransigent political views, with no compromise possible, is menacing enough. He is clearly an exceedingly ambitious politician who has all the requisite American-as-apple-pie views and the mannerisms of a preacher, attributes that appeal to his Tea Party / Christian Right followers.  (His recent hunting outing was amusing, perhaps not as well staged as Sarah-got-her-gun trained from a helicopter for moose in Alaska; he was in Iowa, the first stop for the Primary.  And he looks oh so manly with a gun.  Check out the pix here.)  Furthermore, Cruz is well educated and one can only assume that his behavior is being carefully choreographed to achieve the objective of running for the Presidency of the United States. 

His call to shut down the government and have the US default on its debts is a form of economic terrorism, i.e. the "threatened use of force [in this case, legislative force]...by a person or an organized group against people or property with the intention of intimidating or coercing societies or governments, often for ideological or political reasons." (The Free Dictionary) Or at least the rubric of demagogue might apply -- "a political leader in a democracy who appeals to the emotions, fears, prejudices, and ignorance of the less-educated citizens in order to gain power and promote political motives. Demagogues usually oppose deliberation and advocate immediate, violent action to address a national crisis; they accuse moderate and thoughtful opponents of weakness." (Wikipedia)

I can't help but think of Sinclair Lewis' It Can't Happen Here, depicting the rise of a Senator "Buzz Windrip" to the Presidency, a campaign built on the back of patriotism and traditional "American values" promising economic reform, and after election appoints his own personal army ("The Minutemen" -- perhaps the NRA would apply for the job?), curtails minority rights, institutes kangaroo courts to do his dictatorial biding, while also limiting the power of the United States Congress. 

No, I don't believe that is what would happen if the unthinkable occurs, Ted Cruz being elected President, but he has mainly used his Senatorial seat as a bully pulpit for his Tea Party views, so his political ambition seems to know no bounds.  And I also can't help but think of this very loose paraphrase of a quote (sometimes attributed to Sinclair Lewis, but no one is sure)  -- if some form of dictatorship ever comes to America, it will be with a cross wrapped in an American flag. (Whatever happened to the concept of the separation of Church and State?) 

One would hope that moderates in the Republican Party can put down this radical, take-all-or-else faction.  John G. Taft, who rightly calls himself "a genetic Republican" made the brilliant case for reigning in the likes of Ted Cruz in his Op-Ed column in the October 22 NYT. He expresses my concerns exactly.

Here are some bullet point quotes from the article....

* If he [Senator Robert Alphonso Taft, his grandfather] were alive today, I can assure you he wouldn’t even recognize the modern Republican Party, which has repeatedly brought the United States of America to the edge of a fiscal cliff — seemingly with every intention of pushing us off the edge.

* Throughout my family’s more than 170-year legacy of public service, Republicans have represented the voice of fiscal conservatism. Republicans have been the adults in the room. Yet somehow the current generation of party activists has managed to do what no previous Republicans have been able to do — position the Democratic Party as the agents of fiscal responsibility.

* Speaking through the night, Senator Ted Cruz, with heavy-lidded, sleep-deprived eyes, conveyed not the libertarian element in Republican philosophy that advocates for smaller government and less intrusion into the personal lives of citizens, but a new, virulent strain of empty nihilism: “blow it up if we can’t get what we want.”

* This recent display of bomb-throwing obstructionism by Republicans in Congress evokes another painful, historically embarrassing chapter in the Republican Party — that of Senator Joseph McCarthy.....There is more than a passing similarity between Joseph McCarthy and Ted Cruz, between McCarthyism and the Tea Party movement.

* Watching the Republican Party use the full faith and credit of the United States to try to roll back Obamacare, watching its members threaten not to raise the debt limit — which Warren Buffett rightly called a “political weapon of mass destruction” — to repeal a tax on medical devices, I so wanted to ask a similar question: “Have you no sense of responsibility? At long last, have you left no sense of responsibility?” [A paraphrase of what was asked of Senator McCarthy.]

So, we now wait until February 7, the next "deadline" for the debt ceiling (it's becoming a Yo-Yo economy with all these kaleidoscopic, Armageddon-like cut-off dates).  It will be fascinating (or perhaps even more frightening) to watch Senator Cruz's machinations as that fateful day approaches.

Wednesday, November 7, 2012

The People Have Spoken: Compromise!



It is amazing how close the anecdotal survey mentioned at the end of my last post came to predicting the 2.2% popular vote plurality for Obama (only a tenth of a percent off).  I wonder how many professional polling pontificators were as accurate!  Assume Florida is finally called for Obama, and that seems most likely at this point, the final Electoral College tabulation will be 332 for Obama vs. Romney's 206.  Here the survey of 289 vs. 249 was too pessimistic, although calling the winner.

This was no mandate for Obama, nor should it be. His political campaign of 2008 underestimated the depths of the economic crisis and the ability of a mere President to affect meaningful economic change.  Too many promises were made, indeed. Perhaps he has a more sober view of reality with the onset of his second term. 

Looking at the results vs. 2008 clearly shows that the American public is dissatisfied with the status quo.  Obama's popular plurality in 2008 was 52.93% or 2.63% more than 2012.  That doesn't sound like much except when you look at the absolute vote itself, with Obama getting 9.6 million less votes than in 2008.  Less people voted, showing the disenfranchisement of the country as a whole.  We are all sick of the shenanigans of both parties.

But if Obama is listening, hopefully they are across the aisle as well.  Senate's Minority Leader Mitch McConnell's gave an ominous post election speech saying, "They [the American public] gave President Obama a second chance to fix the problems that even he admits he failed to solve during his first four years in office, and they preserved Republican control of the House of Representatives...Now it's time for the president to propose solutions that actually have a chance of passing the Republican-controlled House of Representatives and a closely divided Senate, step up to the plate on the challenges of the moment, and deliver in a way that he did not in his first four years in office...To the extent he wants to move to the political center, which is where the work gets done in a divided government, we'll be there to meet him half way."

It sounds like more of the same.  Will Senator McConnell and Representative Boehner get the message as well?  Boehner said "The American people also made clear there's no mandate for raising tax rates." Doesn't sound encouraging that Boehner is still drawing a line in the sand that there can be no tax increases in any compromise. Another game of chicken with the fiscal cliff and the debt ceiling?  Any sane person knows this cannot be merely addressed with spending cuts.  There will have to be some tax increases, a more progressive tax scale such as in the Clinton era.  Our economy did fine then, why not now?  Ok, guys, time to compromise.  The election results seem to be shouting that message. 

Antidote du jour...


Friday, June 8, 2012

Some Good News?


To offset the abundant  "bad news" of the last entry, here is an interesting article from Marketwatch on the deleveraging progress: U.S. debt load falling at fastest pace since1950s; Despite surge in federal deficit, America is deleveraging

Some salient points:

* Little by little, our economy is reducing its debt burden, slowly repairing the damage caused by 10, 20 or 30 years of excess.

* Total domestic — public and private — debt as a share of the economy has declined for 12 quarters in a row after surging over the previous decade.

* The level of public debt is indeed worrisome, but it’s not as big a worry as the economy’s total level of debt — public and private.

* As much as we hear politicians, pundits, tea-party patriots and the Congressional Budget Office obsessing about government debt, it was excessive private debt — not public debt — that caused the 2008 financial meltdown. And it was private debt — some of it since transferred to the public — that lies behind the current European debt crisis. (

* The U.S. is actually doing much better than you’d think if you just listened to the conventional fears about how we’re rushing headlong into a debt Armageddon.

* In fact, since the recession ended in June 2009, total U.S. debt has risen at the slowest pace since they began keeping records in the early 1950s. While Washington has taken on a lot of debt since then, the private sector has paid off, written off or dumped on the government almost as much.

* Economists who have studied the impact of indebtedness have found that low levels of debt are essential to growth, but that high levels of total outstanding debt can hurt an economy. Beyond a tipping point, adding on more debt will reduce growth over the long run, even if it inflates a bubble in the short run.

*According to a study by McKinsey published earlier this year, U.S. households may have two more years of deleveraging left before their debts are sustainable again. If McKinsey is right, the U.S. economy may have to endure a couple more years of slow growth.

Another little mentioned factor is that while the public debt has surged during the past few years, maturing debt is being replaced by new debt with coupons (interest rate) of one half or even one fifth the maturing ones. For instance, the US Treasury 30 year bond issued in 1982 had coupons of some 15% while the most recently issued US Treasury 30 Year bond was issued at 3.06%.  Ten year yields are now less than two percent, replacing US Treasury Notes in the 4 - 5% range.  Servicing the debt is actually getting cheaper, although these savings are probably offset due to the expansion of borrowing that has been needed to fend off a depression.. The low rates also leave investors with a continuing dilemma.
   

Tuesday, October 4, 2011

Yuan to Wings

Two interesting and related stories in the Wall Street Journal today.

Item #1 The Senate voted Monday to move ahead with a bill that would punish China for keeping the value of its currency low, drawing a harsh response from Beijing, which said the measure would severely hurt trade ties.

Item #2 The biggest chunk of Yum's [owner of restaurant chains including KFC, Taco Bell and Pizza Hut] operating profit now comes from China.

Are we sure we want a trade war with China, a country holding a sizable portion of US debt? Imagine putting a tariff on the Colonel's finger lickin' good wings? Perhaps there should just be a conversion rate of Yuan to wings and bypass the US dollar? Are the Chinese sure they really want to eat that stuff? Maybe a CIA plot?

Seems our major export now is "US Culture" -- our movies, our fast food and soft drinks, our way of life -- while the rest of the world manufactures everything else we need.

















Photo courtesy of Daily Times, Lahore Pakistan

Sunday, July 24, 2011

“A Glide Path to Zero Debt Post 2011”

This “glide path” was forecast in George W. Bush’s Feb. 28th, 2001 budget, A Blueprint for New Beginnings; A Responsible Budget for America’s Priorities.

The centerpiece of the legislation was a $1.35 trillion tax cut over 10 years which was signed into law on June 7, 2001. This cut was supposed to spur growth and thus increase federal revenues in spite of the tax cut (sound familiar?)

The exact wording from Blueprint for New Beginnings:

Over the next 10 years, the Federal Government is projected to collect $28 trillion in revenues from American taxpayers. The President’s Budget devotes roughly $22.4 trillion to extend the Government we have today, including the President’s new initiatives. This leaves a $5.6 trillion surplus. The President’s Budget takes a cautious approach to allocating this staggering sum, starting by saving the entire Social Security surplus—nearly 50 percent of the total surplus—for Social Security and debt retirement. None of the Social Security surplus will be used to fund other spending initiatives or tax relief.

By devoting these revenues to debt retirement, the Nation will be able to pay off all the debt that can be redeemed—an historic $2 trillion reduction in debt over the next 10 years. The only remaining debt will be those securities with maturity dates beyond 2011. In all likelihood, American taxpayers would have to spend an additional $50 to $150 billion in bonus payments to bondholders to accelerate the repayment of those notes, a wasteful and senseless transaction. It makes more sense to allow the securities to mature naturally, leaving the Nation on a glide path to zero debt post 2011.

By 2011, Federal debt will have fallen to only seven percent of GDP—its lowest level in more than 80 years. Net interest payments on this debt will be less than 0.5 percent of GDP, less than one quarter of today’s share and only three percent of the budget. This represents a great national achievement
.

Meanwhile, the threat of recession intervened, and the Federal Reserve ratcheted down interest rates. America went on a borrowing and speculation binge, focused on real estate and the building industry. Government, Wall Street and Main Street were all complicit, greedy investors buying up “investment property,” Wall Street packaging them as “risk-free” CMO’s, and homeowners indulging in the practice of using their homes as a piggy bank, with exotic no money down, no initial interest payment loans, the repayment of which was dependent on future appreciated real estate values. At the same time we continued to outsource our manufacturing capabilities to China and other emerging economies. Why work when Utopia could be achieved by merely borrowing?

So returning to the halcyon Blueprint for New Beginnings, another lesson to be learned from China: "Forecasting is difficult, especially about the future.” This is why the brinksmanship of raising the debt limit is such political grandstanding. Where was the outcry about the buildup of the national debt during the Bush years or holding Congress accountable for the failure of Blueprint for New Beginnings? While the stock market was climbing to new highs by 2007 and real estate prices were soaring, making homeowners and investors feel (not be) wealthy, not one peep about the national debt. We were borrowing against the future.

Depending on how one defines accountability to an administration (which takes control in late January every four years, but really does not have much impact until at least the end of the following Sept. 30 fiscal year), one could argue that Bush administrations were responsible for about a $6 trillion increase in National Debt (9/30/2001 - 9/30/2009) and the Obama administration for about $2.5 trillion thus far. (See this link for historical figures.)

Of course, debt growth has been more dramatic over the last few years (including the final year of the Bush administration) as Keynesian spending of “saving the world” from a depression soared. In spite of that spending, economic growth has been slow, unemployment persistently high, and real estate and associated industries remain in the doldrums.

These are the serious issues, as well as the national debt, which must be addressed. While I am the first to argue for fiscal responsibility, a balanced budget cannot be achieved overnight and cannot be achieved without some revenue increases via taxes. The best argument against pinning hopes that spending cuts, alone, will achieve a balanced budget is simply to reread Blueprint for New Beginnings. Allowing the US to default on its debt is a hopelessly reckless option.

PS: An interesting follow up to the above published by Bloomberg news two days later.

Monday, June 13, 2011

Substance and Talking Points

I try to set aside Sunday mornings for catching up on some newspaper reading and to watch political shows such as Meet the Press, keeping my eyes on the page/computer and my ears on the TV, drifting back and forth depending on what I'm reading or hearing. This week's Barrons', which I've read forever it seems (now online, having forsaken the print version), had a remarkably to the point article by Doug Kass, founder and President of Seabreeze Partners, and well-known "short-seller" which echoes some of what I've written about the subject of the growing abyss between the haves and the have not's and its impact on the misery of the middle class. Kass' term for this misery is "Screwflation" (combing inflation with the screwing of the middle class). Here are some of his bullet points although its best to read the entire article:

* While...corporate profits will soon attain a new peak, median real wages have made little recent progress....Moreover...an unprecedented four years of declining home prices have further weakened the confidence and purchasing power of the middle-class screwees.

* Unemployment has exacerbated screwflation's impact on all but the wealthiest Americans.

* Because there are few areas of the domestic economy that can replace the prerecession strength in real estate, a recovery in jobs will be more difficult than in previous cycles. Work related to real estate accounted for nearly 40% of U.S. job growth in 2001-06–almost all of it middle-class.

* Back in 1980, the richest 1% of Americans captured 9% of national income. Today, the richest 1% receive about a quarter of national income.

* [The] rise [ of commodity prices] falls more heavily on low- and middle-income families, who spend most of their money on the necessities of life. Add rising health care, education and other costs to commodity prices, and the result is a poor foundation for growth.

* Difficult fiscal decision...must be made this summer in Washington. The needs to accelerate job growth and to control the federal deficit seem irreconcilable.

* A shallow and fragile domestic economic recovery may be exposed to and be vulnerable to the need to cut spending–but drastic spending cuts will jeopardize the shallow recovery in jobs. Not moving on deficit reduction holds its own risks, of U.S. dollar weakness, soaring interest rates and higher unemployment....Partisanship already makes a real solution less likely.


Kass concludes with some excellent suggestions, but with Washington in gridlock, even on such major issues of raising the debt ceiling, and in the throes of pre-Presidential election rhetoric (see Meet the Press discussion below), one can't be terribly optimistic about implementing them:

* Policies that could help quickly include: extending the payroll-tax cut initiated by the Obama administration; reducing income taxes for the middle class; providing federal funds for infrastructure spending; creating incentives for businesses to make new capital investments; allowing tax-free repatriation of U.S. corporate earnings made abroad, if they are earmarked for the creation of American jobs; the launch of an energy plan that taps domestic resources; and the use of federal-housing financing to slow foreclosures and distressed sales.

While reading that article of substance, I was watching Meet the Press, particularly David Gregory's interview with Debbie Wasserman Schultz, the Democratic National Committee Chair and Reince Priebus, the Republican National Committee Chair. Talk about talking points galore. Here is the entire transcript.

Gregory immediately baits the debate with so called "facts:"

MR. GREGORY: All right. Well, let's talk more, let's talk more about the economy in some more detail. This is the president's standing in terms of handling the economy in the public's eye, and it's pretty negative right now. Sixty percent almost, 59 percent, disapprove of the president's handling of the economy . And there are facts that back that up that are difficult for this administration and for the Democrats: unemployment's up 25 percent since Inauguration Day for President Obama ; the debt's up 35 percent, over $14 trillion; a gallon of gas up over 100 percent, with gas $3.75, higher than that in certain parts of the country . Why should Americans trust Democratic governance right now on the economy , and particularly the president's?

The numbers might be correct but one has to wonder about the "cause" of the "effect." Naturally, both Schultz and Priebus jump on their talking points:

REP. SCHULTZ: ...when President Obama took office, the month before he was inaugurated, the economy was bleeding 750,000 jobs a month, David , and we were not headed in the right direction. Now, I know we -- and President Obama has said we have a long way to go . We'd like the pace of recovery to, to, to be picked up. But we have definitely begun to turn the economy around. You, you fast-forward two and a half years later now, and the economy has created 2.1 million private sector jobs, a million of those jobs just in the last six months. We've had 15 straight months of job growth .

Priebus has his talking points:

MR. PRIEBUS: David , the chairwoman's living in fantasyland. We know that the facts are the facts, and we can't get away from that. And Barack Obama is defenseless to the truth on what's going on in the American economy . We have lost as -- two and a half million jobs since Barack Obama 's been president. And of that two and half million jobs, almost 45 percent of those people have been out of work for six months. That number, that number rivals the Great Depression .

Back and forth, your talking points vs. mine. It is a sign of the silly season of an impending election, with the danger that the increasing polarity will result in a stalemate that leaves our economy on the edge of a cliff once again.

But, can they both be "right?" The Bureau of Labor Statistics' Employment, Hours, and Earnings from the Current Employment Statistics survey (National) 2001 -- 2011 confirm that, indeed, we've lost about 2.5 million jobs since Obama was inaugurated, and we've gained almost 1 million jobs in the last six months. But the BLS also shows about 4.4 million non-farm jobs lost in the 12 months before Obama took office. How's that for a talking point?

One can play with all these statistics any which way to "prove" a point of view. The fact of the matter is we had tremendous job growth in the three plus years before the collapse of the economy (and almost the collapse of our entire economic system) in 2008, but those jobs "created" were heavily real estate and construction related during a housing run-up which we now know was merely a chimera. These are jobs that would not have come into existence without the frothy, nothing-down, exotic mortgage real estate market and the complicity of the investment banks and Washington to get those deals done. We simply "borrowed" from the future. Now, those jobs our out of the system with no prospects of returning soon. It is going to be very difficult to have robust job creation if, as Doug Kass suggests, real estate represents 40% job growth without solving our foreclosure and distressed sales issues which is now on such an enormous scale.

And how fair is it to "mark" a President's starting point for job creation as the date of his inauguration? The economy is a leviathan which cannot be turned on a dime. And, by the time Obama was making some headway, he lost control of Congress. Now we have such a polarized government, it is a wonder that any jobs are being created.

And, really, what control does the President have on world oil prices? We could have an army of rigs in the Gulf of Mexico and it wouldn't make much difference in prices as it is a world market for oil. The US cannot effect prices much by creating marginally more supply. Now, controlling the speculative aspect of prices may be a different matter, but financial regulation is habitually resisted by Obama's adversaries.

Agreed, we should have a national energy policy, but for it to have any teeth it will mean some hardship. In Europe, gas is twice the price as it is here. People learn to drive smaller cars, take mass transit, etc. No one would agree to that here so a national energy policy is simply kicked down the road, by both parties.

Finally, the deficit. Does anyone really think that if McCain was elected it would be much different today? President George Bush's 2001 and 2003 tax cuts have been big contributors as well as funding for the wars in Afghanistan and Iraq. Granted, President Obama's 2009 stimulus bill is also in the mix. But that was enacted when the Federal Reserve no longer could cut interest rates (they were already effectively at zero) and there was general agreement that the economy was still in crisis and without a stimulus, it would slip off the cliff again. And one one argues the bill failed to create jobs as intended. No Republicans voted for the act and now that they control Congress, one has to wonder what they will vote for or block. We know the talking points, and Kass makes substantive suggestions, but can Congress even function any longer?


Sunday, May 15, 2011

Peacocks Preening

The bird moved forward a little. Then it turned its head to the side and braced itself. It kept its bright, wild eye right on us. Its tail was raised, and it was like a big fan folding in and out. There was every color in the rainbow shining from that tail....The bird made this strange wailing sound once more. 'May-awe, may-awe!' it went. If it'd been something I was hearing late at night and for the first time, I'd have thought it was somebody dying, or else something wild and dangerous. --- Raymond Carver, Feathers

It has been that kind of "wild and dangerous" week in Washington, the showing of the feathers -- May-awe, may-awe! -- the Democrats crucifying the oil industry in Congressional Hearings, with the irony of Jay Rockefeller, a great-grandson of Standard Oil Company's John D. Rockefeller, grilling oil executives over tax breaks, even though the "mere" few billion yearly in such breaks wouldn't even move the needle on the national debt. And, of the $4 dollars being paid at the pump, those tax breaks are negligible. Not that I understand their need for those tax breaks: let the politicians battle that one out. But what I do understand is grandstanding when I see it. May-awe, may-awe!

What our Congressional leaders should be addressing is the need for a national energy policy, but we've been talking, talking, about that ever since the gas lines of the early 1970's. We have the technology but not the will to do what is necessary and every administration has kicked that can down the road.

It shows the dysfunctional nature of our government and we are paying for it, literally, in our national debt, at the pump, and at the supermarket, etc. Senator Rockefeller, when you made your political accusation to the oil executives, " I think you're out of touch, deeply profoundly out of touch," you should have been addressing Congress instead.

Speaking about being out of touch, we also had the preening of the Republicans, best represented by House Speaker John Boehner's remarks at the New York Economic club: "It's true that allowing America to default would be irresponsible...but it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process." May-awe, may-awe! As Congress would like to raise the debt limit by $2 trillion, that means $2 trillion in cuts which sounds idyllic, just like ending oil tax incentives. But we are supposed to hit the debt ceiling within days or weeks. Can one imagine Congress being capable of engineering $2 trillion in cuts in such a short time? Impossible. So there it is, an implied ultimatum to the President: no tax increases and show me the $2 trillion or we don't care whether there is a default by the US on its debt. Catastrophic for our country, but that's the Rambo image our "leaders" like to project, no matter what the consequences to our economy and jobs. May-awe, may-awe!

Sunday, April 24, 2011

Natty Bumppo Economics

The recently completed $38 billion battle of brinksmanship over next year's federal budget is going to look like child's play in comparison to the upcoming showdown over the need to increase the debt ceiling. So, so much more is at stake, including the dollar's status as a reserve currency. And yet, our congressional "leaders" have declared a recess until sometime in early May, only a couple of weeks before the Treasury hits the debt ceiling. No doubt the recent move in gold and dollar weakness reflect an increasing anxiety that the United States Government could actually default. S&P has put the US on credit watch. Without Congressional action we will simply greatly increase the cost of inevitably having to borrow anyhow when Armageddon comes knocking at our fiscal door, and who will want to lend to a deadbeat government? Why would our politicians even play such a game? Is it a form of political conspiracy to bring the government to its knees?

Agreed, carrying unsustainable debt is a sure death knell as well. But debt on the balance sheet comes not only from making poor judgments and being profligate, it also comes from failing to raise revenue. Both sides of the income statement --- expenses AND revenue ---need to be examined by our absentee representatives.

It is wishful thinking, particularly as the economy has been on life support through the Federal Reserve since the 2008 financial crisis, that we can grow enough to offset the tax cuts that have been implemented since the Clinton years. US taxpayers with the highest adjusted gross income have watched their federal tax rates fall from about 30 percent in 1995 to 17 percent by 2007. No argument that we need to simplify the tax code, but tax revenues need to be higher, simple as that. We need to revisit those Clinton rates again, a graduated tax rate without the loopholes. Close as many doors as possible to the underground economy. Eviscerate tax avoidance strategies.

We also need to shore up Social Security by increasing the wage limits for SS taxes -- or how about a similar "donut hole" we give to seniors for their drug needs, taxing wages for social security to a certain limit, then no tax until another higher limit is reached, and then resume taxing for social security revenue. On the expense side of the income statement, means testing will have to be instituted and the retirement age slowly moved back.

The ideas put forth for privatizing Medicare will slowly kill the program, so desperately needed by the middle class. Cost containment measures have to take first priority. A voucher program is smoke and mirrors. Can you imagine the average senior having to make such decisions with insurance companies pulling the strings?

And Medicare being entirely turned over to the States, many of which can hardly make their own budgets balance? Disaster for the poor.

These are huge issues and I don't mean to simplify any of them, but defaulting on our debt is NOT the first step in resolving any of these problems. It will be our last.

The amazing thing about this "movement"-- if it is fair to call it that -- is some of the people who would be hurt the most just say "bring it on, let the government fail." Perhaps this notion harkens back to the idealized Natty Bumppo from James Fenimore Cooper's Leatherstocking Tales. But this is not a mythical tale of American rugged individualism and "one shot, one kill." It is about cooperation and compromise. We need our representatives to do the hard, serious work they were hired to do without all the political posturing and partisanship, and without the brinksmanship of the twelfth hour.

Friday, December 10, 2010

She's Quick on the Trigger

With targets not much bigger than the president's deficit commission. I don't think I've ever actually READ anything by Sarah Palin, although I've seen her paraded before TV cameras, so it was with some interest that I noted "her" opinion column in the Wall Street Journal, Why I Support the Ryan Roadmap; Let's not settle for the big-government status quo, which is what the president's deficit commission offers.


I had expected a folksy take on the topic in keeping with her TV persona, perhaps sprinkled with homey references to Alaska wildlife, or more aptly the disappearing wildlife when Sarah Oakley has her high-powered rifle with telescopic sight at her side, but instead was greeted by a more or less professionally written piece of journalism, quite possibly with the help of the people at News Corp which owns the WSJ and also owns Fox which in turn employs Ms. Palin. She or her ghost writer is "disappointed" in the deficit commission's recommendations but commends the commission for exposing "the large and unsustainable deficits that the Obama administration has created through its reckless 'spend now, tax later' policies." I go speechless when reading such an accusation, feeling like Melville's Billy Budd confronting the evil Claggett. Sarah, do you really believe what "you" wrote? Not only are the deficits at least partially shared by your Party (not to mention the National Debt most of which could be pinned on the Bush era), but Congress now has the opportunity to roll back some of the tax forgiveness for the super wealthy, both in terms of incremental tax rates and the inheritance tax, and your Party is stonewalling that prospect. However, pardon my impertinence, "a man never trifles / with gals who carry rifles...Annie Get Your Gun.

Friday, September 17, 2010

The More Things Change....

Welcome to the twilight zone. When I read stories such as Microsoft possibly borrowing to increase its dividend and stock buybacks, I see it as just another sign of the American economic system gone wild. There was once a day when companies borrowed money to finance expansion for the production of goods. Now we borrow to pay shareholders or make titanic bonuses to executives. Or we finance our deficit by borrowing from China to keep the American consumer, AKA Hamster on a Wheel, buying at the local official distributor of goods made in China (and other emerging countries), Wal-Mart. But even with interest rates at all time lows, we cannot create borrowing demand in housing, or small business so unemployment remains intolerably high.

In the past I’ve written about many of the pieces of the economic conundrum we’ve created for ourselves, the problem of job creation, the local government crisis, the underfunded pension guarantees, entitlements, banking bailouts, the inflation/deflation tug of war, and in general our consumption oriented society. In fact, while everyone feels a little better as we have thrown so much $$ at the economy to keep it afloat, repair some damage to everyone’s 401Ks, the really major challenges lie ahead, and in one of the more divisive political environments as the midterm elections loom. The more things change, the more they stay the same…. Alphonse Karr
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