Glick: "Obama wants to fundamentally transform the US relationship with Israel."
Hagel's record rom the 2nd link:
# In August 2006, Hagel was one of only 12 Senators who refused to write the EU asking them to declare Hezbollah a terrorist organization.
# In October 2000, Hagel was one of only 4 Senators who refused to sign a Senate letter in support of Israel.
# In November 2001, Hagel was one of only 11 Senators who refused to sign a letter urging President Bush not to meet with the late Yassir Arafat until his forces ended the violence against Israel.
# In December 2005, Hagel was one of only 27 who refused to sign a letter to President Bush to pressure the Palestinian Authority to ban terrorist groups from participating in Palestinian legislative elections.
# In June 2004, Hagel refused to sign a letter urging President Bush to highlight Iran's nuclear program at the G-8 summit.
Here's what the National Review wrote about Hagel's stance on Israel in 2002:
"There's nothing Hagel likes less than talking about right and wrong in the context of foreign policy. Pro-Israeli groups view him almost uniformly as a problem. 'He doesn't always cast bad votes, but he always says the wrong thing,' comments an Israel supporter who watches Congress. An April speech is a case in point. 'We will need a wider lens to grasp the complex nature and consequences of terrorism,' said Hagel. He went on to cite a few examples of terrorism: FARC in Colombia, Abu Sayyaf in the Philippines, and the Palestinian suicide bombers. Then he continued, 'Arabs and Palestinians view the civilian casualties resulting from Israeli military occupation as terrorism.' He didn't exactly say he shares this view - but he also failed to reject it."
And here's what the anti-Israel group, CAIR, wrote in praise of Hagel:
"Potential presidential candidates for 2008, like Hillary Clinton, John McCain, Joe Biden and Newt Gingrich, were falling all over themselves to express their support for Israel. The only exception to that rule was Senator Chuck Hagel ?" [Council on American-Islamic Relations, 8/28/06]
A fair point made about tone, but in his own succinct, biting way he entered into the discussion the unmentionable. The article was scary and the mother was crying our for help. Parenting as we know it doesn't work in her situation. Being firm, loving and consistent doesn't address real mental illness.
I had the experience of seeing these warning signs including talk of murder-suicide. I called the woman's doctor who said bring her to the emergency room. I did, partially by tricking, against the will of an adult. The doctor checked out the situation, prescribed a narcotic, decided she was no threat to herself or anyone else and released her. She had one more incident (manic episode) that night resulting in a police call, was driven home by the police, then killed someone the next day. (Not with a gun.) Less than 24 hours after pleading for help and denied I was proven right about the danger and was face to face with the same doctor who had determined otherwise. He operates under an accepted set of laws and guidelines and probably followed them correctly.
Perhaps every family has some connection to mental illness and most (99.9%?) pose no threat. I don't propose any change and I am a big advocate of individual liberty, but for as long as we extend total freedom to the troubled among us, saying things like "never again" or "can't tolerate this anymore" is either sheer ignorance or political duplicity.
Guilty as charged on morphing the conversation - with seamless transitions.
With another morph I take off from a good point Bigdog made on the tax policy discussion: "the effectiveness of the positions you extol [tax rate cuts determine prosperity] is not as cut and dry as you believe". True! Tax rate cutting alone is not supply side economics and does not in itself equal a positive, productive climate.
Mentioned in a previous discussion, I think it was George Will who said:
"George Bush gave Supply Side Economics a bad name - without ever trying it."
Looking at why tax policy isn't the whole answer requires a look at the other factors. George Bush implemented two rounds of tax rate cuts that inspired enormous growth in the economy. That growth included 52 consecutive months of job growth and almost balanced the budget, but it did not sustain itself beyond that. Why not? Bush got everything else wrong:
1) Government spending is in itself a tax on the economy. To the extent that it is excessive, it is taking resources including people away from their most productive use. Spending went way up under Bush. The need for government spending should have been going down in an environment where almost anyone who wants a private sector job could get one. That opportunity was squandered.
2) Programs that last forever and keep growing. Bush made a try at major reform of social security. For better or worse he failed. He also failed to seek or win any minor reforms. Meanwhile he started another major new entitlement and other big programs without ending or curtailing any existing ones. His predecessor said "the era of big government is over." Not so, not even with a Republican President, House and Senate. Programs have value but again the excesses are a load acting to slow the economy.
3) Regulatory climate: Democrats primarily were the builders of the vastly exploding regulatory climate in this country. Republicans were the willing co-conspirators, repealed essentially none of it when given the chance, then kept adding regulations at roughly the same pace. (Obama has been even worse.) Regulations today are perhaps a bigger 'tax' on the economy than all taxes combined.
4) Energy policy, overlaps regulatory climate. Bush Directed Cheney to come up with a comprehensive plan. Criticism of the secretive nature of his hearings probably destroyed all the possible positive perceptions of the plans but essentially none of it got done. We can update the details on the energy threads, but no new nuclear plants, no new refineries, federal lands and offshore not really opened, never won the case for ANWR and no big improvements to the grid (to my knowledge). Energy became a bigger cost and uncertainty holding back growth.
5) Healthcare. Not bringing back any economic freedom or market sense into healthcare set the table for the argument that government should takeover.
6) Housing! There were some Republicans sounding the alarm, but Republicans in congress and Bush in the White House in particular let a runaway train wreck keep rolling with no awareness that what they were doing was fundamentally wrong and dangerous. Allowing federal control to reach 90% is a violation of common sense and all free market, conservative, and supply side principles. Not everyone was financially ready to own a house and subsidized is the opposite of affordable. Screwing up private markets and resource allocation is the opposite of what a growth policy should be.
7) Monetary policy. It was a tightening of money, not easing that accompanied the Reagan years. The easing that grew out of the 2001 recession and the 9/11/2001 aftermath had no business continuing into a multi-decade blunder where we don't even pretend to hold up our currency or allow interest rates to reach equilibrium levels. Not all Bush's fault but they got their way with the Fed and it backfired.
8 ) State and local taxes. Not Bush's fault but as the states and locals ate up the difference on taxes, the tax rate cut advantage slipped away. For one thing, states tax capital gains as ordinary income so the low federal rate is not low in total if you live most of America.
9) Corporate tax rate becoming highest in the world. These embedded taxes don't show in the individual rates and they still have not been reformed.
10) mis-Communications. For the things that Bush was able to do right economically he was always unable or unwilling to communicate them to the people. Since he didn't understand what he was doing right, he was not likely to notice that what he was saying was wrong. Of tax rates cuts, all he could say was that you get to keep more, missing the whole supply side point of improving the incentives to produce and improved competitiveness will increase national income and revenues to the Treasury. Just keeping more money out of a fixed paycheck is what a demand side tax cut will do. A Keynesian stimulus like dropping dollars from the sky does not stimulate production here if the goods are made in China.
Between all these factors, easy money mortgages with equity lines up to zero equity ownership at bubble level housing prices with financial institutions at risk and taxpayers holding the tab, while becoming a nation of zero savings, unable to withstand a downturn, and never having a sense of purpose communicated of how economic freedom makes us more innovative and competitive in a dynamic world and tax incre3ases coming led to bubble and collapse. All these factors except for tax rate cuts were anti-supply-side policies. Failure on the Republican side led to us voting in the policies of decline, setting the stage for the collapse and stagnation that erased of the gains.
After all that failure, we get to hear forever that we tried the Bush tax cuts (the only thing we did right) and look where it got us.
If our proposals and our record included real progress on all of the above, then I would disagree with the point, "the effectiveness of the positions you extol is not as cut and dry as you believe."
Good points already made. Of course costs affect behavior, and when you tax something you get less of it - to varying degrees. With half the country favoring tax increases, the burden is not on one poster to defend the merits of high taxes...
What did this study measure and how did they manage to miss basic truths - finding no link between disincentive and output?? And how is this study being mis-used by people like Paul Krugman, Chris Van Hollen and President Barack Obama to draw conclusions not studies or demonstrated?
First a reply to the Laughing at the Laffer curve series. It is a straw argument, Laffer did not say all tax rate cuts lead to higher revenues. They chart the opinions of 40 economists on a different question than we face today. The question today is tax increases, not tax cuts. But go to the source of the data and see that for 'Question A', only 8% of the same respondents disagree with the statement that tax cuts made today will grow the economy. That is the conclusion purportedly refuted in the Hungerford / CRS study, a pretty big contradiction, assuming the opinions of these economists is of significance.
Paul Krugman (former Economist?) writes a column called Conscious of a [Lying] Liberal where he gloats about the Hungerford revelation. When I read liberals, I look for two things, a lie or deception in the first statement and then a logic string where they build further on the foundation that was false in the first place. Krugman, referring to CRS, begins: "a report showing no connection between tax cuts for the rich and economic growth...". I read the entire study. It did not study tax cuts. It studied output as it correlates to the top, published marginal tax rate over very different times. When you study the most significant tax rate cuts, you get a very different conclusion.
Politico writes: "At the crux of the debate is the question of whether to increase tax rates for the wealthiest 2 percent of Americans." Really the question is whether you can raise taxes on only the wealthiest without hitting the rest of the people and without tanking the economy. Democrats in speeches claim with confidence that you can. Rep. Chris Van Hollen says the CRS report “put a stake in the heart of the Republican argument that small increases in the marginal tax rate for wealthy individuals somehow hurt economic growth. No it didn't say that at all. Another quote: "...a tax ONLY on the wealthiest among us. Folks like me", says Barack Obama who privately employs only his mother in law, implying it won't hurt anyone but the rich who can afford it. Democrats in peer reviewed work argue quite differently, see Romer and Romer (Christina Romer was chief economic adviser to Pres. Obama until this was published): http://elsa.berkeley.edu/~dromer/papers/RomerandRomerAERJune210.pdf"Our results indicate that tax changes have very large effects on output. Our baseline specification implies that an exogenous tax increase of one percent of GDP lowers real GDP by almost three percent."
So what are the flaws in Obama campaign donor, Thomas L. Hungerford's report, released right before the election? Asked more precisely, what exactly did it study? Did it study or demonstrate that if we raise the top tax rate today to 1950s levels, we will experience the growth rates of the 1950s, as inferred by former Enron adviser Paul Krugman? No.
From the report: "Data is analyzed to illustrate the association between the tax rates of the highest income taxpayers and measures of economic growth. ... Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. The real GDP growth rate averaged 4.2% and real per capita GDP increased annually by 2.4% in the 1950s. In the 2000s, the average real GDP growth rate was 1.7% and real per capita GDP increased annually by less than 1%. There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. ... The evidence does not suggest necessarily a relationship between tax policy with regard to the top tax rates and the size of the economic pie, but there may be a relationship to how the economic pie is sliced."
The report does not look at causation whatsoever, the "65-year steady reduction" in tax rates is a falsehood, they did not study tax cuts and they made no study of tax rate increases, the question we face today. Instead they run a series of regression analyses looking for and not finding correlation between top published tax rate at different times and other measures like output.
Another way to do that would to study years that start with 195x and to compare with years that start with 197x. What would be wrong with that comparison? The obvious answer is that the top tax was lower but MANY other things changed. The data would show a better economy in the 1950s (with a higher top tax rate). It would not demonstrate, as Hungerford does not and cannot demonstrate, that output in the 1970s would be the same if top rates were 90% (1950s levels) instead of 70%, or if they were 35% (mid 2000s levels) instead of 70%. Why not? Different times and MANY different factors.
Bigdog acknowledged what Hungerford does not about different times, the 1950s for example: "Of course I can think of differences." But what was different economically about the 1950s that is not true today. My thoughts off the cuff: 1) The top tax rate then applied to almost no one so it is not a good measure of the burden of government. The top rate today hits the owners of the businesses that employ more than 50% of the people who work for small businesses, the sector that in good times creates most new job growth. 2) The overall burden of taxation was a LOT smaller then. 3) Businesses did not face anywhere near the same regulatory burden as today. 4) U.S. manufacturers faced very little foreign competition. 5) There was much less mobility of capital. Your choice was how to invest in America, not where to invest. Today investment is global. 6) Investors did not face the same uncertainty of tax rates, not shown in the numbers. The 1950s were relatively stable times. 7) State tax rates were lower, the combined burden of all taxation was much lower. And 8 ) Workers did not have the same options not to work in the 1950s as they had after the war on poverty began and expanded. If you built a business, workers would come. Today you face the competition of workers not taking work for pretty good pay and workers leaving the workforce in record numbers. Again not shown or measured in the study.
Is the top tax rate today the same as it was in 2003-2004? The Hungerford data says yes, but it's not true. For the rich it is the future tax rate that applies to business and investment decisions. Early in the full implementation of the Bush tax cuts, tax rates would stay at that level for as far as the eye could see and investors could rely on that. With the changeover of congress, then a new President committed to repeal coming, then the expiration date impending every two years for four years, investors and business owners have faced higher future rates for investments not shown in current rate data. For 2003 Hungerford takes the output out of recession in higher tax years, with no context or weight to the fact that investments being made at that time in response to the policy change would lead to revenues growing 44% in 4 years. Instead 2003 was just another dismal year to average out the peak years that followed.
A more useful study would be to isolate similar policy changes the best you can and study their effects.
So, if we say we suspect she is lying, then we are wishing her good health?
Those of us who followed the White Water saga during the Clinton years in the WSJ (which did an OUTSTANDING job of not letting go of it-- a pit bull would have been impressed) will remember how again and again the Clintons moved key witnesses out of reach of investigators by assigning them overseas etc.
If wish her at least 50 years of good health - and hope she invests all her book money in the American private sector, hiring thousands of people under all the new tax and regulatory rules, particularly as they relate to healthcare, employee leave and all the rest.
Hillary in her prime as First Lady came on a local conservative talk show called Garage Logic, set in a fictional town where they believe most good ideas start out in the garage. The banter got a little awkward when it turned out this woman had never owned a car, a house that she lived in, or a garage.
Yes, the WSJ was all over the Whitewater scandal with all its corruption, especially before reelection, and the exposed guilt and shiftiness made no difference at all in their popularity.
Excellent find Doug. Maybe some of our lurkers will put it to good use , , ,
The chart is excellent visually, but the percentages on the 2012 side should be a percentage of the 2001 number, and since the Fed's accommodation of the fiscal mess is the cause of most dollar dilution, the dollars should be in dollars, not 2005 'adjusted' dollars. When time permits, I will take a try at my own chart.
Veronique de Rugy: Let's return to Clinton spending levels, too December 13, 2012 The Washington Examiner
President Obama has been fixated on returning the top marginal income tax rates on higher income earners to their Clinton-era levels. Increasing these rates is troubling because even if the president got his way, it wouldn't make a dent in our deficit, and it would pose negative consequences for our economy in the long term. Moreover, our problem is a spending one, not a revenue one. So how about we return to Clinton-era spending levels?
However, aggregate labor supply data, such as the differences in hours worked among countries with different levels of taxes, suggest a very different conclusion. Nobel laureate Ed Prescott, in his famous 2004 paper "Why Do Americans Work So Much More Than Europeans?" shows that workers spend considerably more hours working when marginal tax rates on their incomes are lower. So basically, over time people will reduce the number of hours of work, economic growth slows down, and less revenue is collected.
And then there's the long run. In recent years, economists have shown that higher taxes may not dissuade current rich people from working, but they will hurt incentives for younger people to invest in education and career choices that would have made them the rich people of tomorrow. That too does not benefit future economic growth and tax revenue.
So overall, increasing taxes on the rich isn't a good idea. Yet, it is true that the Clinton years saw economic growth, increasing median income, vanishing deficits and relative peace. Why doesn't the president try to copy all Clinton-era policies? Because that would mean seriously cutting spending.
On Jan. 27, 1996, President Clinton proclaimed that "the era of big government is over, but we can't go back to a time when our citizens were just left to fend for themselves." He added, "So, again, last Tuesday, I asked Congress to join with me to make the cuts we agree on. Let's give the American people the balanced budget they deserve with a modest tax cut and the lower interest rates and brighter hope for the future it will bring." And they came through on that promise.
During his two terms in office, Clinton reduced spending as a share of gross domestic product from 21 percent in fiscal year 1994 to 18.2 percent of GDP in fiscal year 2001. Today, spending stands at 24.3 of GDP. According to the Office of Management and Budget, Obama's two-term average spending level is projected at 23.4 percent of GDP as opposed to 19.9 percent for Clinton. During his two terms, Clinton grew spending by 12.3 percent in real terms -- a sharp contrast with the Reagan years and the Bush years. When he left office, total spending was close to $2 trillion, and the federal government registered a surplus of $142 billion (all numbers are adjusted for inflation). In fiscal 2012, federal spending was $3.2 trillion, and our deficit was $1.1 trillion.
For all the talk about returning to Clinton-era policies, the president is sadly silent about his predecessor's spending levels. To be fair, the only way that we could go back to these spending levels is if Congress finally reforms Social Security, Medicare and Medicaid. And reforming those programs is also the only way to put this country back on a sustainable financial path. So what are we waiting for?
Dr. de Rugy is a senior research fellow of the Mercatus Center at George Mason University.
I don't wish injury or ill health to anyone - except maybe Hugo Chavez - so this is a sad story and I wish her truly a full and speedy recovery.
That said and no reason to doubt anything, but there is this: they didn't say when it happened, and "Mrs. Clinton's illness appears likely to delay her planned testimony Thursday before a congressional body investigating the September terrorist attack on a U.S. mission in Benghazi..."
LA Times: "The California housing recovery boomed forward in November, with home prices reaching levels high enough to trigger questions about whether speculators are overdoing a spending spree."
Good news, maybe... Deeper in the story: "a big factor in the rising median price is increased sales of high-end homes, which skew the results to the upside. Indexes that track specific home resales show far lower price appreciation."
- Where have we heard that. Median over a short duration tells you which homes are selling, not price appreciation. No comparison to the peak, only to the trough.
"Homes purchased for all cash remained at extremely high levels..."
- Does this mean interest rates are too high, lol? Buying houses, especially at the high end, is a way to keep cash idle and unproductive in hard assets. It is the opposite of building or expanding a business and hire workers. High end cash sales, by nature, are unsustainable - all speculators have finite purchasing power. And sold off other assets (forestalling capital gains?) to buy these.
“It’s a good thing for professionals to be putting a floor under home prices.”
- Yes, get the correction stopped before working people raising families can afford them.
I am surprised calif doesn't pass a law to stop this sort of thing.
Real deficit $11 trillion, real fiscal gap at $222 trillion, and we have a Presidential election based on likeability, and news coverage that the President's daughter got a cell phone, how exciting. Yes it would be nice to get a real auditing firm to look that operation over, top to bottom, and tell us honestly the real cost of every rule and program.
GM, I was surprised to see that story published in the NY Times - front page with big headlines - before the election. Oh, it wasn't?
If "the right of the people to keep and bear Arms shall not be infringed", if that is a good idea - shouldn't that go through the amendment process, instead of congress, city hall or the Holder Justice Dept.??
Pres. Obama said: “We're going to have to come together and take meaningful action to prevent more tragedies like this, regardless of the politics,” - I'm all ears. He's had 4 years. What is the meaningful action - TSA everywhere people gather?
The only answer I see is to put a closer watch and curtail the liberties of a very large number of people who show symptoms of any of a number of mental disorders, people who haven't shot anyone. I don't know how that would work and it isn't what Pres. Obama and Mayor Bloomberg are talking about anyway.
I would like to never see the shooter included in the victim count. I don't want to be put in the situation of blaming the victim.
News coverage I saw bothered me beyond the tragedy. Did we really need real time viewing of parents learning they lost their precious little son or daughter? Is this reality TV?
It seems to me there is some element of copycat to these events, maybe tied to coverage and national obsession to watch, maybe not avoidable.
I wish whoever saw him first was carrying, and quicker than him on the draw.
Crafty wrote on Media Issues: "Well, I was reading in the WSJ today that 70% shocked shocked shocked is financed by the Fed buying the debt with the printing press. I suspect that even Wilson and his Fed did not do that , , ," ----------------------- So a huge part of our spending is not paid for with taxation and the majority of that part is not covered by borrowing.
George Gilder posed as I recall a thought provoking question - what if we didn't tax at all?
Gilder's view (big risk of remembering or stating this wrong) is that spending is the tax. Public spending is where you take the resources out of the private, productive economy, for better or for worse. Our horribly inefficient tax code is an additional tax, taking even more resources away from productive use in compliance and avoidance.
In a bizarre twist of politics, the Gilder view from the far right supply side offered at least half in jest is now the governing philosophy of our leftist President and the world's most powerful banker.
We spend with no limit, far beyond what we even pretend to tax or borrow. Then we watch and see what happens as our economy deteriorates and our currency erodes.
Whatever does happen will likely be worse than if we had spent responsibly, only on legitimate governing functions, and not levied taxes at all.
BBG: As usual, you bring a serious level to this subject with your greatly appreciated posts. I THINK I understand what he is saying, but would you be so kind as to write a summary in layman's English? TIA, Marc
Yes great find and post by BBG. I too am looking forward to knowing the details and learning BBG's take. Enhanced solar forcing means that the group that backed Al Gore's movie and shared his award is now giving some blame or credit to the sun for warming the earth. Solar fluctuations are presumably cyclical while man made greenhouse gas emissions are partly cumulative, so the difference could be the survival of the planet.
The other big deal is that leaking the draft makes it harder to scrub the data and conclusions before the final report.
Seattle Times, Washington Post: " America in 1917 did not fight on a credit card... President Wilson... sold Liberty Bonds to cover costs. [In 2001 George W.] Bush, by contrast... borrowing to pay for the war helped lead to the current fiscal crisis."
- does anyone realize that selling bonds is the way in which the government takes on debt? ------------------------ NY Times on Hurricane Sandy: "Crews from as far away as...Quebec have worked feverishly to repair or replace those [utility] poles..."
- As far away as Quebec? ... a Canadian province that is contiguous with New York.
"... the confirmation would be lengthy, disruptive and costly -- to you and to our pressing...priorities."
Good grief. Sec State is in line of succession to be President. Expect a hard question. You have 55 Dem Senators. There aren't 5 Republicans reasonable enough to make 60 and allow a vote on the President's nominee.
She doesn't have an answer for why she went on 5 programs and lied to the American people. There wasn't a protest about a film that spiraled into launching of rocket-propelled grenades.
Questions about will reveal that the President made the same lies to the American people in the same time frame. This part of it isn't about having sensitive intelligence removed from a report. It is about having a lie inserted to fill in for an inconvenient truth omitted. Americans were killed by terrorists right where he was claiming one of his biggest victories.
I wrote previously that he should appoint Republican Susan Collins for the position. She was asking some of the hard questions of Susan Rice. If he picks Sen. John Kerry (D-Mass), Republican Scott Brown has a campaign staff all set to go. Maybe Jon Huntsman is available.
Wesbury: "Like we have been saying for many months, quantitative easing will simply keep adding to the already enormous excess reserves in the bank system, not deal with the underlying causes of economic weakness, including the growth in government spending, excessive regulation, and expectations of higher future tax rates."
Where do they come up with this stuff? Wesbury would have been a far better Fed Chair than Bernancke.
Wesbury here, just reporting on the Fed: "Other...changes...include... (2) Removing a reference to the housing market coming back “from a depressed level,” suggesting the Fed thinks the housing recession is getting further away in the rear view mirror and is less relevant to the economy today."
Crisis IS the new normal in housing, and it will take another turn for the worse AFTER the Fed begins to return interest rates to market levels. ---------------------
"the Fed has bought more than 70% of new Treasury debt issuance this year"
Bought Treasury?? Bought with WHAT?? Oil? Gold? They are the printer of money. We are borrowing only 30% of the fiscal shortfall of over a trillion a year and printing the rest. What could possibly go wrong? (Almost everything you can imagine.) Forget about China, what if the Fed calls these notes due!
"Sooner or later the bill for open-ended monetary stimulus will arrive..." - Ya think? Not if your only source of information is the Washington Post!
The Fed's Contradiction Easier money hasn't led to more growth, so we need still easier money.
Four years ago this month the Federal Reserve began its epic program of monetary easing to rescue an economy in recession. On Wednesday, Chairman Ben Bernanke declared that this has worked so well that the Fed must keep easing money for as long as anyone can predict in order to save a still-sputtering recovery.
That's the contradiction at the heart of the Fed's latest foray into "unconventional policy," which is a euphemism for finding new ways to print money: The economy needs more monetary stimulus because it is still too weak despite four years of previous and historic amounts of monetary stimulus. In the words of the immortal "Saturday Night Live" skit: We need "more cowbell."
In his press conference Wednesday, Mr. Bernanke was at pains to say this week's decisions were nothing new, merely an implementation of the policy direction that the Fed's Open Market Committee had set in September. This is technically true, but the timing and extent of the implementation are more than details.
The Fed committed Wednesday to purchase an additional $45 billion in long-term Treasury securities each month well into 2013, in addition to the $40 billion in mortgage assets it is already buying each month. At $85 billion a month, the Fed's balance sheet will thus keep growing from its current $2.9 trillion, heading toward $4 trillion by the end of the year. Four years ago it was less than $1 trillion.
The Fed's goal is to push down long-term interest rates even lower than they are, to the extent that's possible when the 10-year Treasury note is trading at 1.7%. The theory goes that this will in turn reduce already very low mortgage rates, which will help spur a housing recovery, which will lead the economy out of its despond. This has also been the theory for the last four years.
In case there was any doubt about its resolve, the Fed statement also issued a new implicit annual inflation target: 2.5%. The official target is still 2%. But the Open Market Committee stated that it will keep interest rates near zero, and by implication keep buying bonds, as long as the jobless rate stays above 6.5% and inflation stays "no more than a half-percentage point above the Committee's 2-percent longer-run goal."
That is a 2.5% inflation target by any other name, and it's striking to see a central bank in the post-Paul Volcker era say overtly that it wants more inflation. This is a victory for the Fed's dovish William Dudley-Janet Yellen faction that echoes economists who think we have to inflate our way out of the debt crisis. Inflation remains quiescent, but central banks that ask for more inflation invariably get it.
These new overt economic targets are part of Mr. Bernanke's campaign for more "transparency" in monetary policy, but they also have the effect of exposing how much the Fed has misjudged the economy. In January 2012, the Board of Governors and regional bank presidents predicted growth this year in the range of 2.2%-2.7%. On Wednesday, they predicted growth of 1.7%-1.8%, which means they are expecting a downbeat fourth quarter.
Which brings up another irony: Mr. Bernanke may be pulling the trigger on more bond purchases now because he fears economic damage from consumer and business concern over the fiscal cliff. Yet no one has done more to promote public and market worry over the fiscal cliff than Mr. Bernanke, notably in his June testimony to Congress.
Meantime, the Fed's near-zero interest rate policy will continue to disguise the real cost of government borrowing. One reason the Obama Administration can keep running trillion-dollar deficits is because it can borrow the money at bargain rates. Stanford economist and Journal contributor John Taylor says the Fed has bought more than 70% of new Treasury debt issuance this year.
All of this will create a fiscal cliff of its own when interest rates start to rise. The Congressional Budget Office says that every 100 basis-point increase in interest rates adds about $100 billion a year to government borrowing costs. Pity the President and Congress who have to refinance $15 trillion in debt at 6%. If Mr. Bernanke really wants to drive the President and Congress to reduce future spending, he shouldn't keep bailing them out with easier money.
The overarching illusion is that ever-easier monetary policy can return the U.S. economy to a durable expansion and broad-based prosperity. The bill for unbridled government spending stimulus is already coming due. Sooner or later the bill for open-ended monetary stimulus will arrive too. ----------------------
I can't remember, was it under Bush or Reagan where our credit rating got downgraded? What will that cost when we need to re-finance $24 trillion at market interest rates?
Is this all they've got in leftist logic? (oxymoron) Washington Post/mainstream media but really this is just a typical leftist straw argument to avoid the real one. No attempt is made at real journalism or trying to understand the the other side of an argument.
"...it’s a sign that the current Fed board is increasingly taking the “dual” part of its dual mandate — to seek stable prices and full employment — a lot more seriously than it seemed to earlier in Barack Obama’s presidency... it’s a consequence of the November 2008 election, members of the Fed Board of Governors; [Pres. Obama] has now appointed six of seven [members of the Fed Board of Governors], all of whom voted for today’s policy."
"Republicans... rejecting entirely the Fed’s responsibility for improving the economy in favor of having it worry only about inflation. In fact, just last week, Marco Rubio implied that he may adopt that as a key position in his possible presidential campaign. Yes, that’s right: ...many Republicans believe that (at least when it comes to monetary policy) the United States has been paying too much attention to jobs and not enough to fighting inflation."
FYI to the leftist wingnut published in the mainstream media: Tight monetary policy at zero percent interest and shortage of quantitative expansion currently close to a trillion a year is NOT what is wrong with investment and employment in this country. Who could possibly think that is what's wrong? Let's say your car engine is seized up but the gas tank is full to the top and spilling over. With their logic, they would keep adding gas and criticize everyone who opposed them as not caring as we watch it spill over into the street - and keep doing it expecting that eventually it will cause the car to start running again. It won't. Adding more gas doesn't address what is wrong, so don't do it. At zero percent interest rates with our money flooding all over the world at a rate of close to a trillion a year, year after year, and diluting the value of all our existing money, we don't have a problem with interest rates being too high or money unavailable. The problem is that no one wants to start, run or expand a business in this current business climate.
People are leaving the workforce by the millions, existing businesses are refusing to expand in this country and startups are occurring at the lowest rate in history because of a combination of taxes, regulations and uncertainty laid on them by our government at all levels on a scale unprecedented in our history. The problem is that our public sector is screwing up our markets in all major industries, taking away resources from private enterprise and making rules and regulations and imposing layers and layers of taxes that are strangulating the life out of private initiative, business expansion and hiring.
Republicans aren't the ones who oppose fixing this; they oppose putting more gas on the fire.
"Prescott and Ohanian: Taxes Are Much Higher Than You Think" Good piece Crafty! People need to combine the taxes and tax rates (and regulations) to accurately measure the damage. ------------------------ 180 Economists oppose further tax increases: "To best foster a strong economy, Congress should ultimately create a simpler system of taxation with a broader base and low rates on income and investment. Simultaneously, it should prioritize government programs and pursue entitlement reforms that bring the budget to sustainable balance." http://www.ntu.org/news-and-issues/budget-spending/no-fiscal-cliff-tax-hikes-economist-letter-12-2012.html ------------------------ Sixteen Democratic senators who voted for the Affordable Care Act are asking that one of its fundraising mechanisms, a 2.3 percent tax on medical devices scheduled to take effect January 1, be delayed. Echoing arguments made by Republicans against Obamacare, the Democratic senators say the levy will cost jobs — in a statement Monday, Sen. Al Franken called it a “job-killing tax” — and also impair American competitiveness...
Newt makes a good point here that the WSJ was making yesterday: "Until they understand the larger strategic fight, they can’t possibly know what to do in the current short-term tactical situation."
If they surrender all the concessions now for nothing, what leverage do they bring to the rest of the negotiations, comprehensive tax reform for example, but also everything else - immigration, regulatory reform, budget process reform, even further healthcare negotiations...
Good counterpoints made by CaptCCS (Denny S), on the scene. The term anti-American to me is mostly a reminder that people around the globe don't love us as much as we think they should. ) To generalize about either Latin Americans or about US Americans sets oneself up to be at least partly wrong. To the extent that there are bad feelings anywhere, I don't know what part is aimed at people with views like mine, at people like Obama with views opposite to mine, at Americans of the past who treated them badly or just resentment aimed at success or arrogance.
My reaction reading the piece was that it isn't about what they think of us, I just hope to see them heading their own countries and economies in a good direction - toward individual freedoms, economic freedoms, free trade and to join us in opposing those who would attack us.
Latin Americans are obviously divided too. In Venezuela, what we see simplistically is that the leader who verbally attacks the US the hardest and buddies up with our enemies like Ahmedinejad wins elections. In the US, the leader who opposed the US policies the strongest, war in Iraq, economic freedom etc., also won.
Stratfor's value is mostly to stimulate thinking since most US media has virtually no coverage of other regions or geopolitical forces. Correcting their errors is important.
Strat: "the importance of Latin America to the United States continues to climb. U.S. trade with Latin America -- both in terms of imports and exports -- has grown from 18.9 percent of America's total worldwide trade to 21.6 percent over the past decade. At the same time, however, the percentage of trade between the largest Latin American economies -- Mexico, Colombia, Venezuela, Brazil and Argentina -- and the United States has decreased dramatically. For example, the United States accounted for nearly a quarter of Brazil's overall trade in 2002, but the figure was only 12.5 percent in 2011 -- a drop in half. And whereas three-quarters of Mexico's overall trade was with the United States in 2002, it went down to 64.2 percent in 2011. In other words, as Latin America becomes more important in economic terms to the United States, the United States becomes relatively less important to Latin America.
Denny S: "when America outsources to China, is it a surprise that Latin American also trades more with China?"
Good point! What we no longer build or build competitively, they will no longer buy from us. They are trading more with many places and that is a good sign. Our problems (U.S.) are internal.
It has been a banner year for Bill Clinton. The former president delivered a galvanizing speech, deemed by many on the left to lay out the best argument for re-electing President Obama, at the Democratic National Convention. During the Republican primary, Newt Gingrich and other GOP hopefuls frequently talked up the Clinton-era economy and the former president's ability to reach across the aisle. The Sunday New York Times ran a front-page story on whether Secretary of State Hillary Clinton will run for the Oval Office in 2016 -- and it didn't even mention Bill's 1998 impeachment.
When former Arkansas employee Paula Jones sued President Clinton for sexual harassment, he told and stuck to a gratuitous lie about his sexual relationship with a White House intern. And Hillary Clinton, despite what reporter Jodi Kantor describes as "her activist feminist roots," was his greatest enabler.
The then-first lady blamed a "vast right-wing conspiracy" for independent counsel Ken Starr's "politically motivated" questioning of Monica Lewinsky, even though her husband was the chief architect of Starr's perjury trap.
"Her status is singular but complicated," the Times reported -- "half an ex-presidential partnership," a woman at the peak of power and likely 2016 front-runner. No mention of the I-word.
"You'll never see a story about (President Richard) Nixon that doesn't say he resigned in disgrace," former Reagan speechwriter Ken Khachigian observed. There's a double standard so it's bad form to mention that Bill Clinton was the second U.S. president to be impeached. ... "...the Gray Lady [ran] 19 stories, columns and blogs that mentioned Mitt Romney's dog Seamus by name this year. (Romney, you see, drove with the dog in a carrier strapped to his station wagon roof during a family vacation in 1983.)"
CNN repeating Justice Scalia's logic that he is entitled to consider gay marriage immoral. Of course the intent and the implication is that he is prejudiced for this opinion or belief.
Yet CNN repeatedly goes after bigamists who are that way for their religious beliefs.
Why do they selectively choose to market that gay is completely ok and just another lifestyle but bigamy is somehow some sort of crime against humanity.
I hold that legislators are entitled to decide whether either is immoral and if they so choose legal.
The logic is sound to me.
CCP is right on this. Recognizing life, liberty and pursuit of happiness is morality. Opposing murder and theft is morality. Sex in a bedroom involves privacy. Enter any question over age or consent and privacy ends and forensics begin. Morality legislated into law supersedes privacy in those cases; any individual right of the rapist or murderer to pursue happiness is gone. Marriage recognition in law is public, not private. We draw lines in law regarding morality all the time, age of consent, bigamy, polygamy, and bestiality are great examples. You can sleep with multiple partners. You can't be married (public recognition) to them all. We legislate morality all the time, just argue about where to draw lines. Recognizing a sexual relationship between two men is moral we are told but a committed threesome wanting holy matrimony is what, unnatural? In the case of sex with animals it is just too difficult to establish consent.
The logical end result is for government to recognize no relationships, no genders, no marriages, no families, just people with addresses and incomes for the Census takers, tax collectors and community organizers.
An additional variable in the case of DOMA is the "full faith" clause of the C. whereby States must give respect to the acts of other states e.g. driver licenses and , , , marriage? Thus arguably this becomes a matter for federal action?
That was exactly the justification used in passing it. But if that is not strong enough to uphold it, what other federal actions should be struck down with it? Will we be moving in the direction of recognizing states' rights, or just selective recognition depending on the issue.
One conservative case for gay marriage is that if you accept that some of the population is homosexual, why not encourage every attempt at committed monogamy as we do with heteros?
My beef expressed previously has to do with parenting, and the removal of meanings of terms like mother and father, and of a man and a woman becoming husband and wife. Everyone including single people should be able to designate legal things like who should make crucial decisions for them when they become unable.
DOMA is a pretty good example often offered of 'conservatives' arguing against states' rights. On the other side of the coin is that after we admit most states' rights have disappeared and have been superseded with federal powers over almost everything (grow wheat on your own property?), why should conservatives have to play the political game under a different set of rules?
If the Supreme Court rules unambiguously in favor of states' rights on gay marriage, what liberal causes with unconstitutional federal powers will then be put at risk?
"China’s economy will likely surpass the United States as the world’s largest by 2030 ", if we don't ______________________________. Fill in the blanks over on 'the way forward' threads.
We keep pursuing anti-growth while China is all about keeping economic growth going. Not to be one-dimensional, but so-called communist China lowered it's corporate income tax presciently in Jan 2008 while the U.S. didn't know it was falling into a spiraling financial and then employment and fiscal crisis. There tax rate was already below ours. Japan lowered theirs this year, delayed a year by tsunami. The US is worst in the world (for this one measure) http://www.reuters.com/article/2012/03/30/usa-tax-japan-idUSL2E8EU5VV20120330, knows better, and does nothing about it.
"Because Krugman is an incoherent idiot and Wesbury, agree or disagree, is not."
Krugman is an award winner. Someday I will read his more serious academic works. As a columnist he is nut from my point of view. Deserves posting only to counter his view or be aware of what the others are reading.
Wesbury's context on the board I think is perfect. He posts good data, better than you find almost anywhere else. PP found defects in his housing sources. Mostly the objection is that he puts positive spin on some pretty dismal numbers, and here he gets called out for that.
Trade deficit is a misnomer and sometimes a contrary indicator. Both imports and exports are good in a free economy and they don't have to be identical. There are many other factors.
"...mystery to me why the market is as strong as it is..." - Likewise for me. But who knows about tomorrow or year end or 2013 unless there is some foundation of economic growth laid that we can't see.
Wesbury calls it the workhorse economy. I used to just say there are people pulling the wagon and people riding in it. Enough forces are still in place to keep trudging forward this far, but everyday we have more people riding and fewer people pulling. What could possibly go wrong?
I think the argument over the Laffer curve is about where we are on the curve and what the elasticity is at that point. Hopefully no one including Reagan's first chief economic adviser believes people produce full speed as tax rates approach 100% or that taxes have no effect on production.
Take one example, the federal capital gains rate max is pretty low at 15% - for 21 more days. If that were the only tax on capital gains (ignoring that state tax, federal corp tax, state corp tax and the inflation tax) lowering the rate might not increase revenues - from that tax. Some Republican candidates wanted capital gains tax rates droped to zero. That may bring in revenue from other taxes by spurring other activities like hiring and plant expansions, but 0% doesn't bring in more revenue - from that tax. My problem isn't the 15% tax or that 20% total would be too high, but that states tax capital gains as ordinary income. As the combined tax rate goes up, the number of people choosing to incur the tax goes down. What the revenues will do depends on the shape of the curve and where you are on it. Does that make sense?
An aside for a story attempting analogy: My old boss in the export business (a less famous former Prof of mine) used to explain to our manufacturers the following regarding product price strategy. He drew his own 'Laffer curve' and said that there is a perfect or optimum price for the product that maximizes revenues and profits and we can't know precisely what that perfect or optimum price is. If we set the price too high, we incur (and waste) all of the same marketing and sales costs but lose sales and miss out on these revenues. If we set the price too low, we have left money on the table, people were willing to pay more, but we bought market share and gained customers with our error. The strategy is to set the price as close as possible to the unknown optimum price without going above it. Same I think applies to taxation, though we have made it enormously and unnecessarily complex. We have all these costs of governing that we need to cover whether people produce or not. Some workers with fixed pay and fixed hours have no elasticity in production - no choice to work more, less, faster or smarter in response to whatever government or their employer throws at them. The rich most certainly do have options, as demonstrated in the UK story. That doesn't mean we should tax the rich lower or the same as paycheck to paycheck working people, but it means we need to be more aware of the likely responses to our policies as we design them. In general, the lower the marginal tax rate, the less incentive one has to change behavior to avoid the tax.
Dems like Obama think (or say) a 36% federal tax rate (plus 9-10% state in some cases) is no hindrance to productive activity and that bumping that up to 44.6% (+12.3 Calif) plus embedded tax, corporate taxes, etc is still no hindrance. Simple arithmetic will calculate the increase or decrease in revenue. They are wrong. (An admittedly close minded statement!) Bush's 1.6 or 3.9 trillion dollar tax cuts claim is a lie or amazingly naive untruth. Federal revenues grew by 44% in 4 years when they were fully implemented. Who knew? (Not the readers of the NYT front page or lead editorials. Not the viewers of CBS network news.) It was a percentage rate cut, but not a tax cut at all. It was a tax increase on the rich if we are measuring taxes in dollars.
The honest question or argument is how much will people in the aggregate, not one author, change their productive behavior, not whether the will make adjustments. If people don't change behavior to different circumstances, what is the point of studying economics?
The amount of change people make seems to always surpass expectations. That means the expectations were wrong, not the change. The change documented in the U.K. is phenomenal, even the part that was from frontloading.
"This discussion began on the media forum with a post about how 6000 millionaires had left the UK."
You mean 10,000 'left' and 6,000 stayed. The data tells a story that is true. 10,000 left that income bracket comparing one year to the previous. Some of the coverage of the data had statements that were false, saying or implying people physically left the U.K.
The so-called forestalling of the income implies the data exaggerates the phenomenon, but it is still part of the evidence that the rich have an amazing ability to make adjustments to their income producing behavior in response to different marginal tax rates. Timing of a taxable event is only one of the adjustments they make. As Crafty noted, we don't know that all those elective tax events, sale of an asset would have just happened later anyway, no matter the tax rate. It doesn't all come back because that wasn't the only thing going on. The UK became a worse place to make a productive investment. Regarding forestall, the velocity of these transactions, moving consumption, investment, hiring, construction and revenues forward (velocity of money) is crucial to revenues and economic well being. High tax rates slow things down. So do excessive regulations. So does uncertainty. When you slow things down, your income, tax revenues (and hiring) are all lower in any given period than they would otherwise be.
To doctors they say do no harm. Taxes do harm; tax something and you get less of it. One point of tax policy is to do as little harm as possible to raise the needed revenues. Our current strategy is the opposite. Do maximum harm and raise no new revenues.
The forestalling phenomenon supports my argument about the financial crash of 2008. People make investment and hiring decisions decisions today based on what they see coming tomorrow. The economy, especially employment, peaked around the Nov 2006 to Jan 2007 timeframe when Pelosi-Reid-Obama-Hillary-Biden-Keith Ellison and company were elected and sworn in to take the majority in congress. George Bush had two years left in office (divided government) and so did the tax rate cuts. By the fall of 2008, triggered by failed government intervention in housing, investors could see it was time to sell and capture any remaining gains and put money on the sidelines in the face of higher tax rates, a slowing economy and rapidly increasing excesses in regulations. The higher tax rates kept getting delayed but were always in plain view as tomorrow's tax rate on today's investment. The onslaught of new regulations with even more on the way (Obamacare!) were taxes in themselves.
Back to the U.K., one question would be - what revenue projections did their CBO (PBO?) make to foster the passing of these failed tax rate increases. Why do these 'experts' keep getting it wrong? How does it help in the US to keep information from the voters just because thoughtful analysis will be required to fully understand the implications. For whatever it means, the number of returns in the top bracket dropped 60% in one year precisely at the time of a significant tax rate hike. Revenues didn't rise less than expected year to year on the top bracket - they fell! Can we use that strategy again, forestall income every year by raising the rates for the next year, again and again? What could possibly go wrong with that? See the Laffer curve for the answer. Revenues approach zero as tax rates percentages approach 100.
Bigdog, my famous Prof name dropping from the big public university starts and ends with Heller, and it was Schlesinger who brought him up. I like to call one Supreme Court Justice Crafty's old Prof, (yours too perhaps). As a hockey player I'll take the assist for setting you up for the ex-President story. If it was ex President Hayes, Garfield or Benjamin Harrison who made the beard comment I will be all the more impressed.
"I too could paste graphs and tables and arguments. These would include many from peer reviewed economics journals that would take your posts to task. We both know, however, that no matter the evidence that I post, minds are not changed."
Of course close mindedness is a problem, but all people here still want to have a better informed minds! Please post as time permits. I did not intend to overwhelm with so many charts telling roughly the same story. Just take the first one for example, re-posted below. What do you have, peer reviewed, that refutes this, that the rich pay more - in dollars or share of dollars of revenues to the Treasury, not percent of a diminished GDP - when the top marginal tax rate is lower? Looking forward to it.
"As for gays a large part of it is financial benefits"
Good point by CCP. I always think it is about acceptance or respect, but notice that the recognition has to in law exactly in the name of marriage, as identified in all contract law, employee benefits etc.
Yes that we quite a smug, gloating piece, witty and entertaining for her market - rich liberals with their lattes enjoying their Sunday NY Times. Celebrating the troubles of their opposition could be taken all in good fun, but it is rooted in the fact that they hate the limited government crowd more than the hate terrorists, even in NYC.
"history will no doubt record that withering Republicans were finally wiped from the earth in 2016 when the relentless (and rested) Conquistadora Hillary marched in, General Bill on a horse behind her, and finished them off"
Good grief. This was a divided election. Romney won a close one on the issues, lost on turnout, likability, popularity, dependency. Dems beat all expectations in the Senate but nowhere close to just a few years ago when they passed Obamacare at 60. They lost the House big time even with the historic turnout operation. That doesn't bode well for them in 2014.
They don't know how to lead, compromise, govern or how to fix any of our problems.
Last time they won this big was 1976, when the Republican Party was FAR weaker. They got so smug that Ted Kennedy almost beat a sitting incumbent to turn us even further left. That election turned late and ended in a Reagan landslide. Dems only swept once since then, when Clinton got 43% of the vote the cycle before Newt and the Republicans took congress.
Smug in the context of all these cycles and shifts and in the face of these economic problems shows a scary level of ignorance. There aren't 3 people in America who love Hillary as much as Maureen Dowd does. I have more fear of Michelle Obama running next. She has all the depth and experience of her husband. (
"In the early stages of the state, taxes are light in their incidence, but fetch in a large revenue...As time passes and kings succeed each other, they lose their tribal habits in favor of more civilized ones. Their needs and exigencies grow...owing to the luxury in which they have been brought up. Hence they impose fresh taxes on their subjects...[and] sharply raise the rate of old taxes to increase their yield...But the effects on business of this rise in taxation make themselves felt. For business men are soon discouraged by the comparison of their profits with the burden of their taxes...Consequently production falls off, and with it the yield of taxation."
Sowell writes: "If everyone in America had read Stephen Moore's new book, "Who's The Fairest of Them All?", Barack Obama would have lost the election in a landslide." ... The title "Who's The Fairest of Them All?" is an obvious response to liberals' claim that their policies are aimed at creating "fairness" by, among other things, making sure that "the rich" pay their "fair share" of taxes. If you want a brief but thorough education on that, just read chapter 4, which by itself is well worth the price of the book.
A couple of graphs on pages 104 and 108 are enough to annihilate the argument about "tax cuts for the rich." These graphs show that, under both Republican President Calvin Coolidge and Democratic President John F. Kennedy, high-income people paid more tax revenues into the federal treasury after tax rates went down than they did before.
There is nothing mysterious about this. At high tax rates, vast sums of money disappear into tax shelters at home or is shipped overseas. At lower tax rates, that money comes out of hiding and goes into the American economy, creating jobs, rising output and rising incomes. Under these conditions, higher tax revenues can be collected by the government, even though tax rates are lower. Indeed, high income people not only end up paying more taxes, but a higher share of all taxes, under these conditions.
This is not just a theory. It is what hard evidence shows happened under both Democratic and Republican administrations, from the days of Calvin Coolidge to John F. Kennedy to Ronald Reagan and George W. Bush. That hard evidence is presented in clear and unmistakable terms... ---- The rich pay more when rates are lower. What today's Dems don't like is that in times of rapid growth the rich are also making more, and growing in numbers.
It would be nice if we could extend all rights, all privileges, recognize all relationships, guarantee respect for life, liberty and pursuit of happiness for all without destroying the meaning of bedrock terms like husband and wife, mother and father.
FAFSA (federal financial aid) has already gone to the Parent One, Parent Two designations. Are the old gender based terms m*ther and f*ther banned by law or removed by bureaucrats for terms terms stripped of half their meaning and all of their uniqueness. Which one are YOU? How will you know or how will you decide?
Family units are fluid. Maybe we need the federal government to quit recognizing these relationships at all as they lose their meanings. How would that promote the general Welfare our nation?
President Obama seems to have a strategy to terminate all of the Bush tax cuts, not just those for “the rich,” as he has been saying since 2008. He is offering the Republicans exactly zero concessions in the “fiscal cliff” negotiations. No spending cuts, no entitlement reform, no compromise on the rates. It is entirely my way or the highway, and if the Republicans refuse to do everything exactly as he demands, he will let the Bush tax cuts expire entirely, for the middle class and working people as well as the upper incomes, and blame the Republicans for refusing to go along with him, and for the economic results.
It is a cynical game worthy of an undeveloped, third world country, not the United States of America. But this is just one more reason, with many more to come, for the American people to regret the mistake they made on Election Day.
Because so many major media institutions, like the New York Times and the Washington Post, have been so duplicitous and dishonest in discussing the Bush tax cuts, most Americans don’t know much about them, even though they have been living with them for 10 years or more now. Indeed, most of what they think they know is not true. But the American people will understand them better, when they see what life is like without them.
President Bush and his Congressional Republican majorities at the time cut taxes for everyone in the 2001 and 2003 tax cuts. Indeed, they cut more for lower and middle income taxpayers than they did for “the rich,” as Obama calls the nation’s job creators, investors, and successful small businesses. The top tax rate was cut by only 13%, while the lowest rate was cut by one-third, 33%.
According to official IRS data, the top 1% of income earners paid $84 billion more in federal income taxes in 2007 than in 2000 before the Bush tax cuts were passed, 23% more. The share of total federal income taxes paid by the top 1% rose from 37% in 2000, before the Bush tax cuts, to 40% in 2007, after the tax cuts.
In contrast, the bottom half of income earners paid $6 billion less in federal income taxes in 2007 than in 2000, a decline of 16%. The share of federal income taxes paid by the bottom 50% declined from 3.9% in 2000 to 2.9% in 2007.
The Bush tax cuts also included a doubling of the child tax credit from $500 per child to $1,000 per child. Because of that, and the 33% cut in the bottom tax rate, nearly 8 million more people dropped off the federal income tax rolls entirely, paying zero federal income taxes. Indeed, under the Bush tax cuts, the bottom 40% of all income earners not only paid no federal income taxes, as a group on net. By 2009, they were being paid cash by the IRS equal to 10% of all federal income taxes.
These Bush tax cuts did not explode the deficit, as Obama and his echo chamber have alleged. By 2007, the deficit was down to $160 billion, less than 15% of Obama’s deficits today. Total federal revenues soared from $793.7 billion in 2003, when the last of the Bush tax cuts were enacted, to $1.16 trillion in 2007, a 47% increase. Capital gains revenues had doubled by 2005, despite the 25% capital gains rate cut adopted in 2003. Federal revenues rose to 18.5% of GDP by 2007, above the long term, postwar, historical average over the prior 60 years. CBO was projecting surpluses to return indefinitely in 2012 through the end of its projection period in 2018.
Bush did increase federal spending as a percent of GDP by one-seventh, erasing the federal spending cuts enacted by the Republican Congressional majorities in the 1990s. But even with that, deficits during the Bush years averaged just 2% of GDP, one-third less than the average over the prior 50 years. President Obama’s deficits have averaged 5 times as much, at 9.1% of GDP.
The proof is in the pudding over the Bush tax cuts. They were followed by a record 52 straight months of job creation, producing 8 million new jobs, with the unemployment rate falling to 4.4%. Business investment spending, which had declined for 9 straight quarters, reversed and increased 6.7% per quarter, producing all those new jobs.
Because of that increased investment, labor productivity soared by 2.5% annually from 2003 to 2007, higher than the averages of the 1970s, 1980s, and 1990s. As a result, real after tax income per capita increased by more than 11%.
Manufacturing output soared to its highest level in 20 years. The stock market revived, creating almost $7 trillion in new shareholder wealth. From 2003 to 2007, the S&P 500 almost doubled. After the Bush tax cuts started in 2001, quickly ending the 2001 recession, the economy continued to grow for another 73 months. From 2000 to 2007, real GDP grew by more than 17%, meaning an additional $2.1 trillion for the American people.
This was mostly the opposite of what President Obama has produced, with his neo-Marxist Obamanomics, particularly unemployment more than twice as high, declining middle class incomes, soaring poverty, weak job growth, stagnant stock market values, collapsing business investment, and negligible growth in GDP.
Of course, the Bush tax cut boom was ended by the 2008 financial crisis. But as discussed in many previous columns, that was caused by the excessive overregulation of President Clinton’s home ownership promotion policies, creating the subprime mortgage market and the housing bubble, and by President Bush’s cheap dollar monetary policies. Obama’s foolish argument that the Bush tax cuts caused the 2008-2009 recession is so dishonest that abusive propaganda alone should disqualify him from office.
Obama’s gleeful termination of the Bush tax cuts will produce just the opposite results of those tax cuts. The combination of all the tax rate increases, along with Obama’s abusive overregulation, and the Fed’s continued mischief, will throw the economy back into recession next year. Unemployment will soar back into double digits, breaking the post depression record of 10.8%. The deficit will soar to over $2 trillion, setting new all time world records. The national debt as a percent of GDP will gallop past Greece.
Middle class incomes will plummet further. Poverty will soar to new all time records.
We can’t afford the Bush tax cuts, as Obama says? We can’t afford to terminate them. Over the past 45 years, every time the capital gains tax rate has been increased, capital gains revenues have declined rather than increased. Obama’s nearly 60% increase in that rate will have the same effect. After the Bush cut in taxes on dividends, dividends paid soared, and so did taxes paid on those dividends. Obama’s near tripling of that tax will have the opposite effect as well. Indeed, if the economy declines back into renewed recession, total federal revenues will decline rather than increase.
Obama’s ploy of blaming all of this on the Republicans will not work this time. The public knows the Bush tax cuts were adopted into law by the Republicans, with complete Republican control of Congress and the White House at the time. It will be too obvious that it took President Obama and his new neo-Marxist Democrat Party to let them expire.
Enjoy the new Obama recession. You and your neighbors voted for it.
Thanks Bigdog for challenging people here. Good points made. That said, I found the US News/Robert Schlesinger piece more muddled and cherry picked than the cherry picking he tries to refute. Yes all these Presidents at different times speak out of different sides of their mouths. As Schlesinger knows, they also speak through different speechwriters and audiences, as well as to different circumstances.
Schlesinger writes, perhaps in jest: "But if ever advocating a tax cut makes someone a supply-sider, then JFK joins the ranks of other conservative economists like Bill Clinton and Barack Obama (the tax cuts in the stimulus package, for example, were arguably the largest in history)".
The first part is a farce, he shows no awareness of a distinction between demand side and supply side thinking or policies. The difference may be subtle, but supply side policies aim at getting people to produce more and demand side policies aim at getting people to consume more. Obama's tax cut was explicitly demand side and he has been anti-production on so many other policies. JFK was eloquent on the supply side. All policies admittedly have an effect on both supply and demand.
Maybe JFK said privately to my old Prof Walter Heller that spending was what JFK wanted and the supply side tax cuts were Heller's, but publicly the supply side view is his, including spending restraint. What he would do in today's circumstance is unknown, but what he said here is not:
Today we don't have marginal rates of 91% that apply to incomes over $30 million, but we have combined rates coming that are over 50, 60, 70% and apply to a wide range of people. The tax burden on the economy is higher today IMO.
It is good that JK Rowling is appreciative of what she received when in need and willing to give back in such large amounts. That does not mean the policy was helpful to the budget or economy of Britain. They repealed half the increase so someone must believe it they went too far.
Bigdog wrote: "I would have zero issue with flat taxes with clearly spelled out rules."
The beer summit, conducted long distance, has resulted in extraordinary agreement!
If a lower rate like a 28% tax rate yields the same amount of revenue as a 90% tax rate, which one resulted in a larger national income?
Think about it - and do the math.
National income times the tax rate equals revenues to the Treasury, if income were really taxed at that rate.
Let's simplify and say a 90% tax rate brought in a trillion in revenues. The national income would only be 1.11 trillion at that level of taxation.
Now assume we lowered the rate to 28% and still were able bring in a trillion in revenues. That could come true only if income grew by three and half times. In this extreme example, take home income grows by 25-fold. Yet that is what the experts say is true. In many cases the lower rate brings in more revenue, but worst case we keep getting roughly the same revenue result no matter whether the tax rates is at 70%, 90% or 28%. If so, lock in the lower rate, and keep the change!
When candidate Obama admitted that dramatically higher capital gains rate won't bring in more revenues, he was admitting that the amount of capital gain income earned in the country would fall precipitously because of his spiteful tax rate hike.
This is roughly what I was going to write to add to Crafty's story but it was already posted by GM in the Peter Schiff piece:
"For instance, a doctor who earned $50,000 through his medical practice could reduce his taxable income to zero with $50,000 in paper losses or depreciation from property he owned through a real-estate investment partnership."
That's right. Rich people knew how to take 'losses' that weren't cash losses and then keep all of what they made. What a sick, unproductive game it was. If the economy was good then, think how much better it could have been with an undistorted playing field.
The smartest guy from my class was a Yale trained lawyer who ended up working in employee benefit law for a utility company. No offense to him and his choice to be able to go home at a good hour and be with his kids growing up but what a loss to America that so many of the best and the brightest are out working in tax code and regulation compliance instead of inventing, innovating, creating, producing curing diseases and all of that. Why is there a law about employee benefits? Shouldn't it be legal to hire with them or without them? Why is it in the tax code? Why are there 18 pages in federal regulations just defining a full time employee? Why is it any of their business if you are full time or not? They should only have a right to tax a dollar of income at the going rate and otherwise let you be. That is not how it is.
The cost of the tax isn't the tax. It is the compliance time and cost too. It is the loss of productive activities from this whole industry set up to comply and to get around it. Worst of all it is the loss of the productive activities that never occur because of the excessive taxes or the excessive regulations. Because these costs are impossible to measure does not mean they don't exist, aren't huge and threatening to our economic survival and well-being. Besides the time the rich spend darting and weaving, 36% of our workforce doesn't even work. How heavy a load is that for the remaining workers to carry? Could there be a less efficient system? Yes. We are working on that right now.
"Intelligence is the amount of time it takes to forget a lesson." Let us remember this day and those who fought and died for us on it.
I wanted to put something today in the Grateful thread, but hear-hear to Crafty and the forum, we have a thread for this.
I am grateful for all who rose up and fought back. I mean all of them, but I am thinking of my Grandpa who served at Pearl Harbor, my Dad who served in Europe and Germany in particular, and my uncle who went from Normandy to command a ship at Iwo Jima. God Bless these wonderful people who saw evil coming, saw the threat to America before it hit the 48 states and gave up their young lives of freedom to go do what was right - and to win.
You don't attack the United States of America, plan attacks, aid, abet, harbor terrorist training camps, none of it. May this date live in infamy and may we remember some of the good things about America and freedom that we were fighting to keep.
And, if I am informed correctly, the US backed England, France, and Israel off from retaking the Suez Canal in 1956 by threatening to dump British war bonds , , ,.
Good point if true. The difference in my opinion is the level of dependency. Their sputtering economic engine is dependent upon continued exports to the US - at these levels. A huge move in the currency would be disruptive to exports, to their economy and perhaps to the regime. A disruption or cost increase in imports from China to the US would hurt consumers but could lead to production, manufacturing and jobs increases at home. A jump in interest rates here would have a mixed effect as well, cause some pain but force some corrections and increase our savings rate.
The roll over and play dead strategy helps us how? Then people will like us? We consent to putting the country down the tubes and blame the Democrats? We did that and it didn't work.
It's easy for Rand Paul to say let it pass if he can't stop it in the Senate. But each House Republican ran on a promise to vote against this sort of thing, and won.
It is the Obama Presidency that has the standoff. House Republicans have a duty to pass what they believe are responsible solutions. If there was a party to negotiate with, they should negotiate, not cave.
The idea that a Republican House should pass exactly what a Democrat House would have passed is repulsive to me - and not the will of the voters.
If tax rates go up for everyone with the expiration of the Bush tax cuts, then they weren't what they were called - tax cuts for the wealthy. A return to Clinton era tax rates is a big hike - across the board. Unfortunately, we are no longer competing in a Clinton era world, with Clinton era spending or Clinton era regulations.
If people don't like Clinton tax rates applying to themselves they can sign on with tax reform retroactive any day that they want. House Republicans can be out front with multiple proposals.
If the Executive Branch can control outcomes in the House on revenue and appropriation bills, will the House of Representatives then choose the next Supreme Court appointee?
What part of constitutionally divided government powers am I missing? ---------------------
"CBO estimates, however, assume no economic change from higher taxes, which is unrealistic."
Really? Not unrealistic from any widely reported story that I have seen...
Great post! I agree with this point: "The likelihood that China would suddenly reduce its holdings of U.S. securities is questionable because doing so could have a significant negative impact on the Chinese economy."
I believe anything they could do to harm the US economy would harm them far worse, economically and politically. Still the artificial nature of the imbalance is unhealthy. We can't control their policies but on our side should make US businesses and US manufacturing more competitive would slow the outflow of dollars invested back. Balancing our budget and end federal borrowing. And end the dual mission of the Fed and allow interest rates to reach normal levels at a balance between savings and borrowing. Right now savers earn zero and people are learning not to save.
"If there are fewer millionaires in the UK because of economic downturn rather than relocation, the story changes a little. "
Yes, higher tax rates, lower revenues and national recession all correlate. Who knew? I still don't see that as valid reason for the cover up. Someone might take the facts wrong?
Clinton's and Eisenhower's economies competed in a different world, I think you know. The point to this discussion would be, how much revenue did the high tax rates raise? Revenues surged when we removed the 90% rate. Revenues surged when we removed the 70% rate and when we removed the 28% capital gains rate. Britain's economyu surged when they removed the highest tax rates. Hiding income and avoiding taxable income becomes less profitable. JFK had it wrong? Robert Mundell had it wrong: "The level of U.S. taxes has become a drag on economic growth in the United States. "The national economy is being choked by taxes — asphyxiated." http://www.polyconomics.com/index.php?option=com_content&view=article&id=1559:its-time-to-cut-taxes&catid=46:1997&Itemid=31
One thing you may be forgetting or omitting is bracket creep. With inflation, the rates that applied to no one were applying to more and more people without any real increase in income. Not to mention the impending challenge of foreign competition. Can we take that back to the 50s?
Laffer Curve postulates that no tax revenue will be raised at the extreme tax rates of 0% and 100% and that there must be at least one rate where tax revenue would be a non-zero maximum. Other than current CBO scoring, who disagrees with that, in principle? Reagan's first chief economic adviser thinks that tax rates going from 90% to 100% would increase revenues?
The point here on Media Issues remains, why hide such a big story? Because there is more to the story? Then put more in the story. It would put the supply side deniers on the defensive? Then include their interviews in the coverage. The story is more than 2 weeks old and this remarkable occurrence BD posted of massive levels of 'forestalled' income as a reaction to impending, punitive tax rates occurred more than a year ago! The majority of people of whom the tax applied changed their economic behavior in response to the policy change we are now demanding. Where was the media? With heads in sand, hoping no one else would report it either. Mediocrity, bias and agenda, not professionalism, is my humble opinion.
Bigdog, I think that piece makes good points; that's how the story could have read if they weren't afraid to open that door. Reports that said the people left the country were irresponsible, not professional journalism, unless they had looked them up and tracked them down. They didn't; the data gives numbers, not names or addresses.
They point out "forestalling" of income, to move it forward like Obama supporter Costco did with dividends ahead of Obama's dividend tax tripling. What excessive capital gains taxes later will do is backstalling. Never sell. Never capture the gain. Never pay the tax. How then do resources move freely to their most productive use? They don't. It's economic malpractice, if you ask me, unreported malfeasance. Ask Charlie Gibson, the revenue goes down.
The reality is that a huge proportion of the rich showed amazing flexibility and mobility of income on a scale that blows the doors off of all static models and all working economic theories at the CBO, OMB, DNC, NYT, LAT, CBS, WP and the White House Council of Economic Advisers who already said it would throw us into recession. People change behavior quickly to different schemes of taxation and the rich have the most flexibility. More efficient, sadly, is Obama's 2% tax hike (FICA) coming to workers who live paycheck to paycheck.
Apologies for the outnumbering, but I would like to revise and extend as well...
Bigdog put a number of arguments back against my original point. The first is perfectly valid - there are many stories that don't get covered. Second, the UK tax increase point is not as clear as Doug says it is, the richest person in the UK did not leave for example. Third would be defects in the coverage of others, such as Fox News.
The Foreign Policy piece is interesting, though they are one more outlet that missed the UK-no-new-revenues-from-taxing-the-rich story, even while they write about missed stories. Tax policy isn't foreign policy directly, but the foundation of a successful foreign policy is economic health and strength at home IMO. Our deficit, our recession/stagnation, our growing culture of dependency and non-productiveness, and our policies at home that result in an anti-business climate yielding a record low rate of new business startups undermine our foreign policy capabilities and influence.
They put forward 10 interesting stories, all of the type that make reading the forum worthwhile; you don't learn these things most other places: 1) Trade between India and Pakistan, 2) Brazil Immigration, 3) Inuit prosperity, 4) Guinea worm disease eradicated, 5) 3D copyrights, 6) Call Centers moving from India to Philippines, 7) Hong Kong - China tensions, 8.)Cyoress-Moscow ties, 9) Oil in Central Africa, 10) Abu Musa islands dispute.
There is no reason to trivialize any of these. The analogy though to me would be if a newspaper like the NY Times, LA Times, or Washington Post were writing and placing stories on the front page day after day about Guinea worm disease, and it was crucial to the survival of our country, but they had neglected to tell us it was cured. The publications are covering the tax increase on the rich story incessantly, but they are not telling us crucial details such as that when it was tried in the UK just one year ago it brought in NO NEW REVENUE.
The J.K. Rowling argument, micro vs. macro, to me is like refuting global warming by pointing out one cold day in Minneapolis. J.K. Rowling may have a host of personal reasons to stay or she may have moved her investments out of the U.K. for all we know. The story says that 6000 people still reported income over a million GBP, not that everyone left or has the ability to leave. This is not a story a wealth tax, where she leads Great Britain; it is a story about an income tax rate that yielded no new revenue. I don't think she released a major title during that year. My income from selling or renting MN properties does not leave the state if I leave; maybe her copyrights are parked in the UK, or maybe the bulk of her income has already left. No facts advanced but a nice shiny object! I know nothing about the inner workings of U.K. tax laws. Her business is rather unique. She employs very few people relative to her income, compared to other gazillionaires. I also would doubt that the majority of her books are printed in the U.K.
More important is that 10,000 million-pound incomes disappeared. That doesn't mean the people left; it means those income levels are gone. In a growing economy (and the only way to grow revenues is to grow the economy), that number should have gone up at least a few thousand, not to have the majority of them disappear. It is a HUGE story.
We can argue the merits further on tax issues, but the falsehood is static scoring. President Obama keeps quoting numbers that don't include the FACT that people change their behavior based on changing policies, incentives and disincentives. The Media Issue I introduced is that the media that we consider mainstream will not cover it.
The last time (only time?) I saw an mainstream co-conspirator question liberal-Democratic failed economic theories was one Charlie Gibson asked of candidate Barack Obama back in April of 2008:
GIBSON: You have...said you would favor an increase in the capital gains tax. As a matter of fact, you said on CNBC, and I quote, "I certainly would not go above what existed under Bill Clinton," which was 28 percent. It's now 15 percent. That's almost a doubling, if you went to 28 percent.
But actually, Bill Clinton, in 1997, signed legislation that dropped the capital gains tax to 20 percent.
GIBSON: And George Bush has taken it down to 15 percent.
GIBSON: And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down.
So why raise it at all...?
http://abcnews.go.com/Politics/DemocraticDebate/Story?id=4670271&page=3#.UMEts1KIiqk ---------------- Or try this, has the front page news section of a major publication mentioned ever reported that revenues to the Treasury doubled in the 1980s, from $517 Billion to $1032 Billion while the top rate went from 70% to 28%, or that revenues surged 44% in 4 years from $1.78 Trillion in 2003 to $2.57 Trillion in 2007 under the Bush tax rate cuts now in question. Tax rate cuts did not cause the deficits, did they ever put forward facts to correct the quotes of people claiming they did. If not, why not? They just didn't get to it - like Brazilian immigration or Guinea worm disease? I don't buy it. They were on the topic and omitted the key points. The reason I put forward is mediocrity, bias, agenda and fact hiding.
I don't watch Fox News except one Sunday show they put on broadcast television. Many here find Hannity to be a blowhard. Shows like that admit they are opinion more than news. No doubt Fox misses a lot of stories; maybe their misses show their bias. I heard they cut back Rove and Morris for being idiots and zealots on election night. A good sign. Fox radio news to me is written with similar liberal bias as the other networks. They miss most stories and repeat the same take on the same lead stories hour after hour.
I believe Foreign Policy has this wrong, (while we are at it):
The U.S. measures oil reserves differently than every other country. The SEC regulates the use of the term. We have much, much more oil than the data from this chart shows.
Kate Middleton... Just goes to show how stories are mostly market driven to whatever draws people in. The analogy I think would be if you covered her every move day after day after day after day, then learned public knowledge she was pregnant and DIDN'T cover it.
On tax policy they hide the facts, poll on what people learned from distorted coverage, and make the poll result the story. 57% say they want ta hikes on the rich? Did they preface the poll question with the fact that tax rate hikes don't bring in more revenue as just shown in a nearly identical example in one of the most similar economies to the U.S. in the world? No. Not with a story, not in the question.
If so-called mainstream media had balance their market size would potentially double (to include conservatives) but the agenda would fail. The number one cable news network by far competitor Fox might never have gotten off the ground if political balance was already achieved. The WSJ is by far number one in the nation with a third more subscribers than the NY Times and more than 4 times the circulation of the Washington Post. Coincidentally their editorial views are the opposite of most of the rest and fill a conspicuous void in the market. http://en.wikipedia.org/wiki/List_of_newspapers_in_the_United_States_by_circulation
Good point on the nuclear facility, (speaking of under-reported stories). Likewise for the Osraik facility in Iraq.
On Chemical weapons: Same people (roughly) who said it was a lie to have said there were chemical weapons in Iraq in 2002, that were (reportedly) trucked to Syria while we were debating the invasion, and not found in Iraq in 2003-2006 are now having to confront the danger they pose in Syria.
Had we bypassed the UN and attacked Saddam sooner instead of with 8 months notice to clean up and clear out, perhaps we wouldn't have falsely called Bush, Cheney, Powell, Condoleeza Rice liars then, saved thousands of Americans lives with a quicker war then, and the Syrian people might not be facing WMD attacks from their own government today.