Money Matters

“I’m doing the right thing, and it’s not good for me. Believe me.”

Rule of thumb: every time Tr*mp says, "Believe me," he's lying.  The Republican tax plan, whatever it turns out to be, will be great for him.

At the moment, the tax and budget proposals are too vague for fiscal analysis — a big plus from the Republican perspective because that makes it impossible for the CBO or anybody else to estimate their real impact.  What is clear is that they depend on the same supply-side fairy tale that has failed to produce a happy ending since Arthur Laffer first drew his magical Laffer Curve back in 1974.

Despite the threat of immense budget deficits, the "deficit hawks" are silent — predictable, since they never really cared about deficits.  What really bothers them is the thought of government spending on anybody not already a multimillionaire.

Some proposals, like ending the inheritance tax, probably are included as "giveaways" to be "sacrificed" in order to get the big-ticket items, like the hyper-expensive tax cut for "pass-through" income.  Hopefully, though, there will be ample fractiousness among mega-rich factions to ensure that nothing at all gets done.  Fingers crossed.

Briefly

Middle East
Islamophobic?  Not Tr*mp!  The biggest difference between Sunni and Shi'a, it seems, is $110 billion in military contracts.  Okay, absolute despots who quietly finance radical jihad may not be the nicest people in the world, but why let a few little human rights get in the way of a sweet deal? Meanwhile, the Iranians were putting unprecedented pressure on their own religious radicals in a exercise of something that looked a hell of a lot like democracy.
     (Breaking fake news!!! The "prayer note" Tr*mp slipped into the Wailing Wall said, "No politician in history, and I say this with great surety, has been treated worse or more unfairly.")

Budget
The President's budget proposal is understood as an opening bid in a negotiation, designed to lower the adversary's expectations and leave room for expected "giveaways." The Tr*mp document is so extreme that a "compromise" could wind up looking like Paul Ryan's wet dream. The objective of every Republican since Reagan has been to further fatten the fat cats while thoroughly screwing everybody else.  Tr*mp, the alleged "populist," continues the tradition — in spades.

Turkey
Even Erdogan's goons attacking Kurdish and Albanian protesters in downtown DC failed to draw press attention to the extension of "emergency powers" in Turkey in the service of political repression. One can only hope that a criminal investigation into Michael Flynn's employment by Turkey will draw a little more attention to the ongoing decimation of Turkish democracy.  Erdogan paid Flynn a lot more than the Russians did.

Briefly

Health Care
Tr*mp says, "I have to tell you, it's an unbelievably complex subject.  Nobody knew that health care could be so complicated."  Nobody?  Well, duh!

Voter Suppression
Our President had to stock his Cabinet with plutocrats, presumably because he just couldn't find enough wingnut ideologues — but he does have unreconstructed Confederate warrior Jeff Sessions, who has dropped the government's argument that the Texas voter ID law was designed to suppress minority voting.  Can the other plaintiffs win without the backing of the Justice Department?  We'll see.

Federal Budget
Congress never pays much attention to presidential budget proposals, so we can ignore Tr*mp's speech and just wait for Paul Ryan.  We are most likely to see yet another attempt at implementing supply-side economics, and need only look to Kansas to see how well that works.

Military Spending
It is obvious to the simple-minded that more military spending will "make America stronger" — except that it won't.  Fortunately, this particularly dumb idea would have to be funded with cuts to enough programs popular in the various states to ensure it won't happen.

Antisemitism
The cemetery vandalism will turn out to be the work of drunken young men, possibly wearing red caps; and the bomb threats not part of any organized plot, but individual acts inspired on 4chan or by the Daily Stormer.  This doesn't make the problem any less serious: antisemitism is an inevitable accompaniment to any kind of xenophobia, and enough empty threats might inspire some demented individual to attempt a real bombing.

* * *

Update (11PM): Well, he gave the campaign speech again.

The Omnibus Budget Bill

Needless to say, I'm not happy.  I'm not terribly concerned about the enormous increases in permissible contributions to party committees, etc., because the system already is owned by the fat cats.  How much difference can the extra millions make?

The weakening of Dodd-Frank ("the Citigroup amendment"), on the other hand, concerns me a lot.  Inevitably, somewhere down the road, we'll end up bailing out banks gone wild via unsafe, speculative derivatives trading.

.  .  .

As an aside, I'm wondering when the current stock market bubble will burst.  All the profits major corporations are earning are not going into increasing productivity, but into mergers and acquisitions, and buying back their own stock.

When the loud and world resounding "POP" comes, of course, everybody not on Wall Street will regret the weakening of Dodd-Frank.

.  .  .

(The next day)
Okay, the Senate passed the Omnibus last night — passed it on the right, to be exact — and I've had a little more time to think about those contributions to party committees.  What really comes of that, it seems to me, is that the billionaire plutocrats gain a slight advantage over the multimillionaire plutocrats.  On the bright side, that may make them less inclined to give quite so much to the 501(c)3 and 501(c)4 groups.

Yank the Trigger

Even though it's lots of fun to make up stories about what might have happened in Abbotabad earlier this week, and how Pakistan may or may not have been involved, this post involves a very different kind of trigger — one a lot more dangerous than the one that helped blow a hole in Osama bin Laden's head. This trigger comes in the form of the Corker-McCaskill CAP Act, a bipartisan (if you count McCaskill) bill that would tie combined discretionary and non-discretionary spending to a specific (and sharply reduced) percentage of GDP, and "trigger" automatic across-the-board cuts should that limit be exceeded.

(I still can't find a reference to one of my favorite quotations, "Bipartisan means everybody gets screwed," so I can't attribute it properly. Maybe I made it up myself, but I don't think so.)

Bills that "trigger" automatic spending cuts or tax increases are favorites of cowardly, self-serving "Congress critters" (RIP Molly Ivins), because nobody has to take personal responsibility for whatever shit happens as a result. Bob Corker calls his bill "a legislative straitjacket, a way of forcing Congress to dramatically cut spending over 10 years."
A straight jacket is a comfortable fit for a legislator who wants to serve the corporate agenda without attracting too much public disdain. Corker-McCaskill, which could have been written by Grover Norquist himself, naturally makes no provision for automatically raising taxes. It is designed to "starve the beast," more efficiently and effectively than would be possible were Congress required to vote for specific cuts. Even more distressing, it would outlaw Keynesian economics, making it impossible for government to respond to recession with economic stimulus.

Another "advantage" (from Corker's perspective) is that the bill would "eliminate the deceptive 'off-budget' distinction for Social Security." What this means is that Social Security payments could be cut automatically, well before the Social Security trust fund is exhausted. Social Security, because of the trust fund, is not a government expenditure — it is government debt, because the money collected for the trust fund over many years is invested in Treasury securities. What the Corker-McCaskill bill requires is that the United States default on the debt it owes current and future retirees. To default on that debt is no different than to default on the debt owed to banks, foreign governments, or private investors — and nobody is suggesting that we default on that debt.

Corker-McCaskill is the kind of bill one expects of Republican toadies to the plutocrats. If Claire McCaskill really is a Democrat, however, she is a particularly stupid and/or cowardly Democrat — and so is any other Democrat, in either house of Congress, who signs on to this particularly repellent proposal.

The Ryan Budget

The 2012 budget proposed by Paul Ryan has received a good deal of press attention for its audacity, with many comments on how "politically risky" it is. Well, it ought to be risky — in point of fact, it ought to bring the Republican party crashing down in the 2012 elections — but Republicans don't seem all that concerned. Once again, they are counting on the overwhelming economic ignorance and the pathetic intellectual laziness of the American people.

Yes, they want to bring the top tax rate for the rich all the way down to 25%, and the deductions they plan to eliminate are those most beneficial to the middle class. The cuts they propose have an inordinate impact on the poor, children, and the elderly. Don't even bother to ask about the estate tax. As usual, their policy advances the further transfer of wealth to the very rich from everybody else.

Are Americans really stupid and lazy enough to buy into it?

Maybe. Well, probably, especially since the Democrats are not likely to make significant efforts to educate and motivate them. The president wants to amass a billion dollars for his 2012 campaign, and given his penchant for pissing off his base over the past two years, he'll have to get almost all of it from Wall Street and other big donors. Watch for some of his signature "compromises," and be ready to put your fingers down your throat.

Well, we lefties lose again

So what else is new?

Working people, to be sure, will average about a thousand bucks in reduced payroll taxes. It will be more than twice that for those up near the top of the income cap — or above — and it seems inevitable that the new Republican majority in the incoming House will try to extend the 2% discount next year. That will leave Democrats with a choice of stopping it in the Senate and looking like the Grinch who stole Christmas 2011, or helping the Republicans defund Social Security. Great compromise, Barack. Great politics. Brilliant.

Then there are the Bush tax cuts, which the Republicans will want to renew or, more likely, make permanent, just about when you come up for re-election. Why defund just Social Security when they can defund the entire "evil" government? Maybe you were too young to be paying attention in the days of "starve the beast," but I hope you have the guts to let all the cuts expire then, even if it means you won't be Our President anymore. If you honestly think you can redo the whole tax system, even if you have the full six years, you're crazy.

Anyway, the Reagan tax restructuring of 1985 — "simplification," we were told — just accelerated the transfer of wealth from the poor and middle classes to the rich. I don't think you'd do any better, even if you really want to do better.

Since there's so much underutilized productive capacity these days, there's only one sensible way for businesses to use the tax incentives they're getting for new capital equipment — buying automated tools to replace workers. Isn't that exactly what we need at the moment?

Frankly, I don't give a damn about the change in the inheritance tax, but it's likely to leave a sour taste in a lot of middle class mouths. Now, of course, you're sucking up to business interests even more than before. What happened? Did a smidgen of populist rhetoric hurt their feelings?

You make me sick.

Debt and Taxes

Now is not the time to begin deficit and debt reduction — the economy remains in precarious condition, and unemployment and underemployment remain terribly high — but it certainly is time to start thinking about working towards a more "pay-as-you-go" system of taxation and spending. Sorry, Democrats, but spending cuts are needed; and sorry, Republicans, taxes will have to go up.

A good place to start cutting is military expenditures. The Cold War is over, and America's current adversaries are incapable of launching the kinds of attacks that require more complex and more expensive weapons systems to repel. Military contracting, by the way, is not labor intensive, so job losses would be manageable.

The Bush wars in Iraq and Afghanistan created far more enemies than they eliminated, and the Obama "surge" in Afghanistan is getting nowhere because there is no legitimate government to take over an area once it has been "liberated" from the Taliban. Let's just cut our losses, and get out with all deliberate speed. While we're at it, we can also remove our bases from Japan, Europe, and the Middle East. We can deal with terrorist strongholds with small, highly mobile forces and Predator drones.

Another cost savings could come from eliminating farm price supports. Not subsidizing corn, for example, would not only save money, but enhance public health — reducing the cost of medical care.

Yes, both the savings ideas offered above would arouse bipartisan opposition. You always can count on bipartisanship when it comes to protecting sacred cows.

As for tax increases, it makes sense to look for the money where the money is — that is, look to the individuals and corporations that have the most of it. There should be no cap on Social Security deductions, and the tax should be applied to all income, not just salary. On the other hand, there should be a cap on deductions for mortgage interest — and that cap should be gradually lowered.

There has been plenty of talk lately about a value added tax, or VAT. The good thing about a VAT is that it is hard to notice, and hence does not draw as much public anger as its first cousin, the sales tax. The bad thing about a VAT is that it is a form of sales tax, and so is regressive.

A better approach, I believe, is to stick with the income tax, but to make it much more progressive by adding more tax brackets, especially at the top end. There also must be much stricter limits on deductions and credits — taxes should not be used to create social policy. Interestingly, half of all deductions for charitable contributions are for donations to churches. I cannot imagine what social goods churches provide that make them so valuable to the American people.

None of these ideas will balance the budget, of course — much more sacrifice will be required, and supply-side nostrums about rising tides lifting all boats are just dead-out wrong. Yes, a stronger economy will help, but even in full recovery, we still will have to figure out what to do with all those people in their forties and fifties who will remain structurally unemployed. The welfare state is here to stay.

Dereaganizing America

Can they do it? Can Obama & Co. actually manage to undo close to three decades of damage? Can they they, at long last, end the Age of Reagan?

Needless to say, I'm hoping the answer is "yes." I have especially high hopes for tax restructuring, bringing back some of the progressivity lost over the years. If it were my call, the restructuring would be considerably more aggressive, with a top marginal rate somewhere around 45%, but just getting back to Clinton era taxation is a step in the right direction.

Frankly, however, I think the middle class cuts may be a mistake. It's always a lot easier to cut taxes than to raise them, and one of the main reasons we have the deficit problems we do today is because every politician is a Keynesian in rough times, happy to slice taxes and increase spending. The real problem comes in periods of rapid growth, when Keynes would have us increase taxes and cut government spending. There's no real incentive to do it, because tax collections are going up with increased incomes and business activity. Government is flush with cash -- so why would a politician even consider raising taxes or bringing home a bit less pork?

As a matter of fact, in good times politicians are inclined to cut taxes even more than in bad times -- because government seems to be able to afford it -- but that's always a really bad idea. The Keynesian model is to build a surplus in the good times, to offset the deficits incurred when growth is off and stimulus is needed. Putting on the brakes when growth is accelerating also reduces the likelihood of bubbles -- and we've all come to know what those can do.

As for aspects of tax policy other than income tax, where all Obama really has to do is wait for the Bush tax cuts to expire, some real effort will be required. The problem is not the Republicans, who are so closely identified as lackeys of the rich that they have virtually no legitimacy at this time. The problem will be Democrats with obligations to various special interests. If direct payments to agribusiness are substantially reduced, I'll be pleasantly surprised. There's a better chance, I think, of eliminating the subsidies for insurance companies providing Medicare Advantage, but it's certainly not a done deal.

The "experts" are finally coming around to the point of view that most Americans have held all along -- that the economy is in worse shape than government and business leaders have been willing to admit. I find it very hard to believe that the unemployment rate will stay below 10% for the remainder of this year, and I wouldn't be at all surprised if it went higher still. Consider that employment levels are very slow to recover even when the economy starts expanding again, and you have to admit that America's problems are likely to be around longer than the Obama administration might like -- and possibly longer than the Obama administration.

I'm trying to look for the silver lining. The egalitarian economic opportunities of the 1950s and 1960s, a generation of real advances for average workers, were made possible by the vicissitudes or the Great Depression. If it takes hard times to re-establish social and economic justice, than hard times are just what we need.

Human memory is short, of course, and history (as my former students insisted) is "boring," so eventually the locusts will descend again. In the meanwhile, though, we should be spreading as much economic insecticide as possible.

The Speech

The president's pre-budget speech last night, and all its accompanying pomp and ceremony, was one of the most brilliant pieces of political theater I've ever seen, and I imagine it effectively reassured a great majority of those who watched. He paid no more attention to detail than Tim Geithner did in his speech last week, but Obama's delivery is so much better. Significant change already is happening, he told us, and there is more to come -- soon.

Most of it was a rehash of his standard proposals, sometimes with fewer details than in previous policy speeches: reform health care, cap and trade carbon, alternative energy, education reform etc. He chastised Wall Street bankers, of course. He criticized the inaction of government in the past, particularly in the field of regulation -- and although he made a point of noting that there were failures by both parties, most people, I'm sure, heard "Bush administration."

So now we'll wait and see what actually happens.

(By the way, if Bobby Jindal had any hope of using his delivery of the "Republican response" as a springboard to the presidential nomination in 2011, I think his hopes were misplaced. Jindal's smiley presentation reminded me of a happy marionette in a poorly scripted puppet show, his repudiation of Bush-era policies and non-threatening ethnic charm notwithstanding.)

Did the Obama speech bring us a little closer to nationalizing some banks? I thought I heard a hint or two. Citi, apparently, has concluded its time is near. Rather than submit to a "stress test," it's just admitting it's as good as dead and waiting to see what the administration's response will be.

It occurs to me that Vikram Pandit decided to get Citigroup out ahead of the herd, hoping to force government action before the political momentum for full nationalization gathers more strength. If that's the case, Obama and Co. may have to be a bit ballsier that they've been to date.