Tax Increases

[Garry]

Jeff,
No president goes to war without the concent of the congressional leaders regardless of how you want to spin it. There is only an emergency act under the Executive Powers Act that allows a president to intercede in emergency operations for the safety of the US. That was created in the Cold War era so that the missles could be launched by the authority of the President in the event we were fired upon by our enemies. That law still stands. I will agree that this law has been expanded by every president since it's creation, but in order for any president to sustain long term war, the congress must approve it. If not by resolution, then by budgetary means. Ultimately, every president has at least gained the consent of congressional leadership before committing long term plans for war. To not do so is political suicide. It may be by a straw vote in private, but these leaders are consulted before he takes action to escalate the conflict.
You could debate the intelligence services short comings which lead leaders to make mistakes or the rubber-stamping of presidential actions in contries like Iraq, but inevitably, the president gets a vote of confidence from the political leadership or his "manifest destiny" will be short lived.
Garry

 

[domtoni]

I am not that interested in what happened in the past, I amore interested in how the economy will be in the future. Who cares about what percentage of GDP was debt in the time of Kennedy, and why that ratio went down. The US economy has structurally changed, the BBC quoted a U ofaryland or Virginia prof of Pol Sci after the inauguration, and he said that BHO wants to made the Dems into the British Labour Party. I have lived here, listen to BBC Radio 4, watch BBC World Service and van see with my own eyes the mess BHO is making.

I am sure that if your business needs a loan, your banker will not ask you for your financial statements from 10 years ago.

 

[domtoni]

Jeff, let me give you another example. I own a sock, a very risky one, and I have too much of my investment portfolio invested.

6 years ago, the Co. Founder managed to boost the price to Usd 18/share. The analysts talked about all the revenue etc. As it turned out, the company had jack sxxt. The surveyed the mkt, hired new people and went forward. In the meantime, everyone bailed out, the price got as low as usd 0.30/share. It seems they have all the right stuff in place to do well.

All the stuff they have said comes to pads, the spin will have done me well. If they can't deliver, I have a write off.

When I look st BHO, I listen to the spin, look at the econ models of which we have many,
I would not invest 1 Usd in such an investment and I doubt Anyone here would do.

 

[Jeff Young]

Garry, that is a valid point. At the end of the day, Congress has to fund conflict. I'll accept that. I will also say that (a) most modern "wars" (Grenada, Panama, Lebanon, Somalia, Gulf I) have been so short that Congressional funding long term has not been an issue; and (b) for Gulf II, President Bush was able to maintain the war despite serious Congressional and public opposition.

We can agree to disagree, but in my view, and I think history proves this, it is the Executive Branch that wages war. Congress may debate, and hold hearings, and threaten to withhold money, but at the end of the day, in the modern world, the President makes the call to go to war.

Domtoni, I'll be honest, I don't see much logic or analysis in your posts other than anecdotal descriptions of things you believe or have seen. Don't you agree that tax and spending policy since 1945 for Democrats and Republicans is at least something of a predictor as to how a party might approach fiscal policy in the future?

For me, recent histor is clear. While the idea of tax cuts sounds great, when Republicans follow through with tax cuts we don't get corresponding spending cuts and the debt goes up.

As to your last post, the US remains one of the largest single targets for foreign investment. They continue to believe in our system. There are some fundamental issues with it, and perhaps that investment is misplaced, but those structural faults existed long before November 2008.

From 2000 to 2008 we created a false prosperity out of sometimes illusory "house wealth," and drove the stock market using new financial products related to it. It wasn't because of productivity or technological invention -- it was market game playing (and there was fault on both sides).

It's time to pay the bill.

 

[domtoni]

OK Jeff, I looked at your link. What happened from 2001 - 2004? Wasn't it:
- the collapse of the .Com bubble
- the attack on the twin towers
As I noted, events influence the budget, whether its:
- war
- peace
- infrastructure programs
- entitlement programs

As you can see, from 2004 and past, things started to flow out.

What would you have done had you been in Mr. Dubya's shoes? What would my old pal BHO would do?

As I stated elsewhere in this post, the deficit blows out your logic.

 

[domtoni]

With a bit of reflection, Jeff is right, unemployment insurance does stimulate the economy, however to a great degree less than when that person was employed. In the UK payments stop at 6 months, yet one gets medical insurance covered and other govt services. One would be better off privately insuring oneself.

Downside for the government,
- uses it's cash reserves
- takes in less in tax revenue
- requires the govt to borrow more, and increases the deficit
- takes away money from other areas

Upside is it puts ltd funds into the economy.

At days end the govt has an obligation to make employment ops available to it's citizens

Under UK insurance plans unemployment insurance thru private providers runs around 5 percent per month, so a 2000 usd plan would cost 100 usd/mo, and in the UK insurance payments are not taxed.

 

[domtoni]

Jeff,

All parties approach spending and taxation with some predetermined policy.

The question is whether one wants big or small government. Once that is defined, then policy will have some cost consequences.

If one looks at deficits, they can be created in a couple of different ways:
- raise the size of government, taxes and corresponding spending
- lower tax revenue and cut government

Right now we have the worst of all worlds.

Government is growing, taxation will be going up, spending is being supported by borrowing, and total tax revenues are going down. So borrowing increases, and cost to service debt goes up.

Rather than discussing what happened in the past, its far better to look at the future. I have usually been criticized in the past for talking too much philosophy with people. My observations much reflect what I think is better for the country. From life, I have learned that one is better to use real life experiences in getting a message across than too much book knowledge.

Just curious, I'd like to check out your company in the web. Can you send me a link to me as a PM?

Thanks

 

[domtoni]

Larry Kudlow's take on where the economy is going.

Business-Power Neglect - Larry Kudlow - National Review Online

 

[Ian K]

Rather than discussing what happened in the past, its far better to look at the future. I have usually been criticized in the past for talking too much philosophy with people. My observations much reflect what I think is better for the country. From life, I have learned that one is better to use real life experiences in getting a message across than too much book knowledge.

The old adage comes to find - "Those who cannot remember the past are condemned to repeat it".

While I agree it is better to look at the future, it is important to survey the past to make sure the same mistakes are not made, and the lessons of the past are learned and put to good use.

Ian

 

[domtoni]

My point was not about discussing small tactical points about an economy that doesn't exist today but looking for real solutions based on similar economies, like the UK. I have drawn your attention to the direction the admin has taken.

 

[Jeff Young]

Here's some interesting history I was not totally aware of:

In fact, much the opposite. In 1982, Reagan agreed to restore a third of the previous year’s massive cut. It was the largest tax increase in U.S. history. In 1983, he raised the gasoline tax by five cents a gallon and instituted a payroll-tax hike that helped fund Medicare and Social Security. In 1984, he eliminated loopholes worth $50 billion over three years. And in 1986, he supported the progressive Tax Reform Act, which hit businesses with a record-breaking $420 billion in new fees. When it came to taxation, there were two Reagans: the pre-1982 version, who did more than any other president to lighten America’s tax burden, and his post-1982 doppelgänger, who was willing (if not always happy) to compensate for gaps in the government’s revenue stream by raising rates. Today, a truly Reaganesque leader would recognize (like Reagan) that the heavy lifting was finished long ago; last year, for instance, taxes fell to their lowest level as a percentage of personal income since 1950. And he would dial back the antitax dogma as a result.

In doing so, a 21st-century Reagan would free himself up to finish a bit of business that his predecessor never got around to: reducing the federal deficit. In the 1980 campaign, Reagan pledged to do three things if elected: lower taxes, win the Cold War, and curb government spending. But in his haste to achieve the first two goals, he abandoned the third. On his watch, federal employment grew by more than 60,000 (in contrast, government payrolls shrank by 373,000 during Clinton’s presidency). The gap between the amount of money the federal government took in and the amount it spent nearly tripled. The national debt soared from $700 billion to $3 trillion. And the United States was transformed from the world’s largest international creditor to its largest debtor.

From here:

What Would Reagan Really Do? - Newsweek

 

[Jack]

I'll chime in with my 2 cents.......

I don't give a rat's ass what anyone has done before! I am, however, very concerned with where we are GOING! We DO have a fiscal problem that must be corrected! PERIOD!

 

[Al Wohlstrom]

I'll chime in with my 2 cents.......

I don't give a rat's ass what anyone has done before! I am, however, very concerned with where we are GOING! We DO have a fiscal problem that must be corrected! PERIOD!

Jack, You should concentrate on getting to the point!
By the way, I agree.

 

[Pete McCluskey.]

Yes, the past is history. The future is of great concern.

 

[domtoni]

Interesting article by Romano, however he seems to be projecting how Reagan would operate from his perspective and I guess by his article on Michelle Bachmann, he is not conservative.

I found this curve very interesting. What I suspect the tax increases will do to bring the curve in line with what is shown, is take the money from our pockets, drop the economy's wealth, and impoverish the nation.

If you look at the tax juggling Reagan did, he substantially:
- lowered personal income tax
- increased business tax (thereby shifting an economic recovery from a business led to consumer led)
- raised gas tax ($0.05/gallon is not worth thinking about by today's standards in Europe)
File:CBO Revenues Outlays Percentage GDP.svg - Wikipedia, the free encyclopedia

As we know, the world is not the same as it was in 1980, and I frankly don't see how the country is going to generate enough revenue to pay its interest bills.

 

[domtoni]

Here is (God help me) a post from the Hannity show. Note what these business people are saying about Mort Zuccerman, Jeff Immelt etc.

U.S. Economy on Pause? - Video - FoxNews.com

 

[Jeff Young]

Some evidences that cuts do not increase revenues. Reagan tax cuts of 1981 cut revenues; tax increase of 82 raised them.

According to a United States Department of the Treasury economic study,[30] the major tax bills enacted under Reagan, in the short-term, significantly reduced (~-1% of GDP) government tax receipts. Separated out, however, it is clear that the Economic Recovery Tax Act of 1981 was a massive (~-3% of GDP) decrease in revenues (the largest tax cuts ever enacted),[31] while other tax bills had neutral or, in the case of the Tax Equity and Fiscal Responsibility Act of 1982, significant (~+1% of GDP) government revenue-enhancing effects. It should be however noted that the study did not examine the longer-term impact of Reagan tax policy, including sunset clauses and "the long-run, fully-phased-in effect of the tax bills".[30] The table below represents only a 4-year average:

Short-term revenue effects of major tax bills enacted under Reagan (as percentage of GDP)[30] Number of years after enactment
Tax bill 1 2 3 4 First 2-yr avg 4-yr avg
Economic Recovery Tax Act of 1981 -1.21 -2.60 -3.58 -4.15 -1.91 -2.89
Tax Equity and Fiscal Responsibility Act of 1982 0.53 1.07 1.08 1.23 0.80 0.98
Highway Revenue Act of 1982 0.05 0.11 0.10 0.09 0.08 0.09
Social Security Amendments of 1983 0.17 0.22 0.22 0.24 0.20 0.21
Interest and Dividend Tax Compliance Act of 1983 -0.07 -0.06 -0.05 -0.04 -0.07 -0.05
Deficit Reduction Act of 1984 0.24 0.37 0.47 0.49 0.30 0.39
Omnibus Budget Reconciliation Act of 1985 0.02 0.06 0.06 0.06 0.04 0.05
Tax Reform Act of 1986[32] 0.41 0.02 -0.23 -0.16 0.22 0.01
Omnibus Budget Reconciliation Act of 1987 0.19 0.28 0.30 0.27 0.24 0.26
Total 0.33 -0.53 -1.63 -1.97 -0.10 -0.95

 

[Dave Wood]

I read the arguments, many seemed misguided or ill informed. If the GDP is false, which the economic downturn indicated it was, then anything based on it is without merit. There, as has been mentioned, NO declaration of WAR since WW2. They shirk their responsibilties under the guise of "The War powers act". That allows a President to use "war powers"
for up to 90 days and then has to be re-voted on. Of course in the 90 day interim, the discussion is altered from whether or not to declare war, but more about letting those that died be "honored" by allowing more to die. If we want to honor them, don't allow them to be used as so much fodder for the elitist ruling class that seems to think they are an aristocracy. Same scenario as Viet Nam except it is now done under the WPA. If the Senate and Congress wasn't so full of treasonists a-holes they would decline a WPA vote and make the Declaration of War the required vote. I looked at it in Viet Nam, the same as I have with vitually every military exercise since, it stimulates the economy. Later we can kiss and make up and they can start importing to our markets, wonderful.
Oh, screw more taxes, make the senators and congressman cut their salaries, benefits and office expenses first, then show me what THEY did and I'll make a judgement. Currently I want all of them in jail and stripped of ALL their subsidies that they feel they are somehow owed for getting us in this mess. Screw em.

 

[Jack]

Good bit there Dave! +1

 

[domtoni]

Unless you can find a way to build our economy, where do we obtain sufficient revenue to pay the $2 Trillion in interest payments as projected for 2002 without putting everyone into poverty.

An old Italian friend from the Emilia and a banker said that his biggest fear for Italy is the children of entrepreneurs no longer wish to take risks in creating businesses and are now studying to become accountants and lawyers. So in other words, no new jobs will be created. Without job creation (ie tax cuts to those who take risks), the USA will no be as it is today.

From the AP.
Debt Commission Leaders Paint Gloomy Picture
Sunday, 11 Jul 2010 06:07 PM Article Font Size
The heads of President Barack Obama's national debt commission painted a gloomy picture Sunday as the United States struggles to get its spending under control.

Republican Alan Simpson and Democrat Erskine Bowles told a meeting of the National Governors Association that everything needs to be considered — including curtailing popular tax breaks, such as the home mortgage deduction, and instituting a financial trigger mechanism for gaining Medicare coverage.

The nation's total federal debt next year is expected to exceed $14 trillion — about $47,000 for every U.S. resident.

"This debt is like a cancer," Bowles said in a sober presentation nonetheless lightened by humorous asides between him and Simpson. "It is truly going to destroy the country from within."

Simpson said the entirety of the nation's current discretionary spending is consumed by the Medicare, Medicaid and Social Security programs.

"The rest of the federal government, including fighting two wars, homeland security, education, art, culture, you name it, veterans, the whole rest of the discretionary budget, is being financed by China and other countries," said Simpson. China alone currently holds $920 billion in U.S. IOUs.

Bowles said if the U.S. makes no changes it will be spending $2 trillion by 2020 just for interest on the national debt.

"Just think about that: All that money, going somewhere else, to create jobs and opportunity somewhere else," he said.

Simpson, the former Republican senator from Wyoming, and Bowles, the former White House chief of staff under Democratic President Bill Clinton, head an 18-member commission. It's charged with coming up with a plan by Dec. 1 to reduce the government's annual deficits to 3 percent of the national economy by 2015.

Bowles led successful 1997 talks with Republicans on a balanced budget bill that produced government surpluses the last three years Clinton was in office and the first year of Republican George W. Bush's presidency. Simpson, as the Senate's GOP whip in 1990, helped round up votes for a budget bill in which President George H.W. Bush broke his "read my lips" pledge not to raise taxes.

Despite their backgrounds, both Simpson and Bowles said they were not 100 percent confident of success this time around.

Simpson labeled the commission members "good people of deep, deep difference, knowing the possibility of the odds of success are rather harrowing to say the least."

Bowles also said Congress had to be ready to accept the commission's findings.

"What we do is not so hard to figure out; it's the political consequences of doing it that makes it really tough," he said.

Arkansas Gov. Mike Beebe was one of those leaders who sat in rapt attention during the presentation, one of the first in public by the commission leaders.

"I don't know that I ever heard a gloomier picture painted that created more hope for me," said Beebe, commending its frankness.

——

Online:

National Commission on Fiscal Responsibility and Reform


© Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

This is from Congress Woman Judy Biggert of Illinois latest news letter.

A Washington Times article this week revealed that “the nation’s debt leapt $166 billion in a single day last week, the third-largest increase in U.S. history…bigger than the annual deficit for fiscal year 2007.” In other news, the deficit in June has surpassed $1 trillion for the second year in a row – and the only reason we have not beat the record-breaking deficit of 2009 is because we have spent slightly less in bailouts this year.

Unfortunately, when the Senate returns to Washington, they are expected to vote on the financial regulatory overhaul package that makes taxpayer-funded bailouts permanent. I will continue to call for an end to bailouts and spending sprees that aren’t only placing great economic burdens on our children and grandchildren – but on us today. This is a problem that must be addressed now.

I'll let you guys go to the links noted.