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Yes, let’s put Goldman back in charge December 4, 2010

Posted by WillardWhyte in Economy, Environment, Justice, Politics, U.S. Budget, Wall Street.
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I’ve been listening very very closely to all the reform talk down in the Swamp, emerging only with confusion.

One group – the bright Red one – rails against an end to what always was limited tax relief for the top 1 percent or 2 percent of earners, now casting any act to not extend this relief as a move that would sap the slow 3 percent recovery we are in the midst of. Can’t take that $80-$100 billion a year out of circulation in what they continue to say is a “recession,” even though the economy stopped receding and started proceeding four quarters ago.

They know that. But they lie because it’s convenient for the narrative.

This group, then, does a wonderful spin with full gainer, and demands an end to extended unemployment benefits and an immediate return to 2008 spending levels, reigning in such stimulus-intended measures as broadened Medicaid coverage, boosted university research grants, various individual tax credits designed to spur household spending on energy efficiency upgrades. This, if put into effect, would take at least $100 billion in spending by individuals out of the economy – spending on doctors, medicines, researcher salaries and equipment purchases and all those things all those people scraping by need to buy. You know, rent, milk, bread, gasoline, spaghetti sauce, mostly from small businesses, if that matters (actually, the Wal-Marts are counting on taking that “market share” pretty soon, so it doesn’t long term).

Somehow, the Red team doesn’t think this will in any way slow down the economic expansion, though study after study show without dispute that the poor and unemployed and even the middle class university research assistant have a much higher propensity to spend than does the individual or couple making $250,000 and up. So if you are going to pull $100 billion out of the economy – and either way you are doing that – and your true intention is to not hurt the recovery, you draw from the top, not the bottom, of the take-home ladder, because the subtraction of spending multiplied down the line is less.

(more…)

Serious business for the infantile November 20, 2010

Posted by WillardWhyte in Economy, Greed, Politics, U.S. Budget, Wall Street.
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Exactly when did these two guys — Simpson in particular — become the ultimate in Wise Men?

And from this piece, there seems to be a whole lot of chortling going on over the potential ruination of the U.S. economy if their particular strategy for reducing the deficit — and radically overhauling the entire tax code with little assessment of impact — is not swallowed pretty much whole. Get this:

“I can’t wait for the bloodbath in April,” Simpson said, relishing the prospect of political turmoil. “When debt limit time comes, they’re going to look around and say, ‘What in the hell do we do now? We’ve got guys who will not approve the debt limit extension unless we give ‘em a piece of meat, real meat” in the form of spending cuts. “And boy, the bloodbath will be extraordinary,” he said.

Extraordinary indeed. It’s all a game to him too — the graying, dottering Fox can’t wait for the Hen House to catch fire.

Shameful.

This is fun, but … November 14, 2010

Posted by WillardWhyte in Economy, Politics, U.S. Budget.
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…after going through it and saving the nation from deficits through 2030 with mouse-clicks that took about 15 minutes, I find myself wondering about all the ramifications.

My ratio of spending cuts to tax increases was 61-39, and it did not seem like I was taking food out of the mouthes of babies, leaving infirm seniors by the side of the road with just a bone to gnaw on, or leaving the nation wide open to attack — now or a quarter-century from now.

Earmarks, farm subsidies, a 10% reduction in federal workforce and a 250,000 whack to government contractors, reducing troop levels ion South Asia and cutting non-combat military compensation and capping Medicare growth and reducing SS benefits to high-income folks all seemed like areas that could take trims.

Workforce/contractor reductions of 10% would about equal what has taken place in the private sector, with productivity expected to absorb workload. It surely would provide ample incentive to managers to find wasted effort, if only by having to prioritize the most productive tasks and workers. This is always artificial, so I would allow a manager to be able to save a position if he/she were able to identify permanent/verifiable savings equal to 110% of the full cost of that position  in salary and benefits.

Capping Medicare growth to GDP+1% also seemed reasonable, if very difficult. As medical costs will go up with sheer volume more than that, it requires a heavy hand, and that hand would need to find the waste and fraud in a hurry. A good whistleblower program is needed here.

On the tax side, I returned estate tax to 2009 level, with $3.5 million exemption; cut cap gains to Clinton-era levels; kept Bush tax cuts for all but those above $250,000; jacked payroll taxes back up to cover 90% of income (level at original enactment); converted mortgage interest deduction to credit); and enacted bank tax as a disincentive for risk.

I opted against a carbon tax (prefer market approach with cap-trade); a sales tax; millionaire’s tax; and complete loophole reduction.

I opted against the Bowles-Simpson complete wipe-out of “loopholes” because I am a believer in using the tax code, as well as the checkbook, to attempt to steer investment toward things deemed in the national interest — like energy independence, reinvestment of profits into R&D, individual incentives for education. Markets today are extremely short-term in their vision and the government needs to “help” money look longer.

That said, the tax code needs to be overhauled with a “zero-based budgeting” approach — each clause amounting to a “tax expenditure” must be justified after an exhaustive, neutral cost-benefit audit fully identifying where the crutch applies and why.

With all this said, I’ll say I have no idea whether this little graphic exercise created by the Times is “neutral” or “spun” to identify things a “progressive” would target, and not highlight as an option things a “conservative” might want as an option.

And I’d also say that it all kind of assumes all else could be ignored, which I don’t agree with as an approach.

Still, it is quite thought-provoking and worth the time I think, if for no other reason than to get familiar with what really might be “saved” by the various options on this list.  Things like the estate tax don’t really help close the huge gap all that much and might very well motivate hardship-sales of  enterprises best left in family hands. Perhaps another method would be better — such as a ceding of a non-voting ownership stake to a blind trust, with repurchase options to owners or their designees. Perhaps Treasury could pool the combined stake and sell slices into the open market, giving Uncle Sam the cash and shifting the risk/gain to global investors.

It would be nice, maybe, if the Wall Street Journal or Bloomberg joined with the Times in this venture to extend the choices (and in a manner of thinking also vetting the entire deal for “bias”). And perhaps each option could link to pro-con essays or more detailed studies of the risk/reward for each, allowing folks to better understand the pain/gain each choice involves.

Sort of a joint venture in education and reason.