Senator Tom Coburn, a conservative Republican from Oklahoma, has had the good sense to demand an end to the $5 billion annual tax credit to makers of corn ethanol, a wasteful subsidy to farm states that is also dubious environmental policy. For his outspokenness, Senator Coburn was pilloried by anti-government activists of his own party who cannot stand the idea of more revenues flowing into the federal Treasury. But he and a few others in the Senate are holding fast, suggesting that at least some Republicans are willing to break with party orthodoxy to reduce the long-term budget deficit.
The loudest criticism came from Grover Norquist, whose group, Americans for Tax Reform, is the author of the Taxpayer Protection Pledge that has become a sacred covenant for virtually anyone wishing to run as a Republican. More than 95 percent of the Republicans in Congress have signed it (including Senator Coburn), as have many Republican governors and state lawmakers.
The pledge is often thought of as an agreement never to vote for raising taxes for any reason, but it goes even further than that. Those who sign it also vow never to eliminate any tax deductions or credits (like the handout to ethanol makers), unless the resulting increase in revenues is offset, dollar for dollar, by further tax cuts.
The pledge is really less about keeping taxes low than it is about holding down government revenues, which prevent the growth of government services. Mr. Norquist has famously said his goal is to shrink government “down to the size where we can drown it in the bathtub.”
Mr. Norquist can afford to be candid about his fierce aversion to government services, since he does not have to run for office with the votes of people who like those services. The Republican lawmakers who have joined his congregation, however, are less forthright about the effect of their policies. They go around lulling constituents with phony mantras like “Washington doesn’t have a revenue problem; it has a spending problem,” as if cutting spending is the only conceivable solution to lowering the deficit.
This purity finally ran into a tough-minded pragmatist in Senator Coburn. Though his zeal to eliminate many worthy government programs is still excessive, he is right to see the wastefulness in the ethanol giveaway — and the extremism of Mr. Norquist’s position. Senator Coburn’s spokesman has even described Mr. Norquist as “the chief cleric of Sharia tax law.”
Senator Coburn is also a member of the “gang of six” senators that has been trying to find a bipartisan way to reduce the nation’s debt. He and the two other Republicans in the group, Saxby Chambliss of Georgia and Michael Crapo of Idaho, say they are opposed to raising tax rates but hope to rewrite the tax code in a way that brings in more revenue by eliminating many unnecessary tax breaks and broadening the tax base.
That, at least, represents the beginning of a useful conversation. It could very well mean that the rich would pay more in taxes. Which is why Mr. Norquist, in full grand-inquisitor style, has demanded that Senator Coburn drop out of the gang.
His influence, happily, seems to be on the wane. The three senators have reminded Mr. Norquist that their highest oath is not to him or some abstract pledge, but to support and defend the Constitution of the United States.
By: The New York Times, Editorial, April 21, 2011
April 22, 2011
Posted by raemd95 |
Congress, Conservatives, Constitution, Deficits, Democracy, Economy, GOP, Government, Governors, Ideology, Lawmakers, Politics, Republicans, Right Wing, States, Tax Credits, Taxes | Americans For Tax Reform, Bush Tax Cuts, Environment, Gang Of Six, Grover Norquist, Oklahoma, Revenues, Sen Michael Crapo, Sen Saxby Chambliss, Sen Tom Coburn, Sharia Law, Spending Cuts, Taxpayer Protection Pledge, Treasury |
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What does Standard & Poor’s action lowering the U.S. outlook to “negative” mean? What are the likely ramifications of the U.S. deficit and debt? I do not want to conflate two completely different issues, so let’s take each in turn.
First, I have stopped paying any attention to anything that S&P says or does. Its performance over the past decade has revealed it to be incompetent and corrupt – it sold its AAA ratings to the highest bidder. It is the broker who lost all your money, the girlfriend who cheated on you, the partner who stole from you. Since the portfolios we run never rely on its judgment or analysis, we simply do not care what it says about credit ratings.
But big bond managers like Bill Gross of Pimco do matter – he invests hundreds of billions of dollars. We pay close attention when smart managers like him announce they are out of the Treasury market, which he did last month.
Many people misunderstand the U.S. deficit. First, it is stimulative to both the economy and the markets. Look at what happened under Reagan and Obama and most of Bush II – the economy recovered from recession and the markets rose along with the deficit.
Second, Social Security is fine. Sure, the retirement age will go higher, there will be means testing, and the income cutoff for contributions ($106,000) will likely double. But it will remain solvent. Medicare is much trickier, as the United States pays two times what most countries pay for health care but gets lesser care.
The current debate about deficits looks like more politics. Look at the voting records of those posturing about the debt. The “deficit peacocks” voted for new entitlements (the prescription drug benefit — Medicare Part D), went along with a trillion-dollar war of choice in Iraq, and supported (for the first time in U.S. history) a major tax cut during wartime. I find it hard to take their deficit noise as a bona fide fiscal concern.
After Standard & Poor’s missed the greatest collapse in history – indeed, they helped create it by rating junk mortgage backed securities Triple AAA – they are now over-compensating. As I mentioned on The Big Picture, there is an old Wall Street joke about analysts: “You don’t need them in a Bull Market, and you don’t want them in a Bear Market.” That especially seems apt with regard to S&P.
The deficit has been with us for a long time. Since investors are continuing to lend money to Uncle Sam at exceedingly low rates, there does not appear to be any real fear of a default. That is what matters most to bond buyers — and it’s why I never care what S&P thinks on this.
By: Barry Ritholtz, The New York Times, April 18, 2011
April 19, 2011
Posted by raemd95 |
Congress, Consumers, Debt Ceiling, Debt Crisis, Economic Recovery, Economy, Federal Budget, Financial Institutions, Financial Reform, Government, Government Shut Down, Lawmakers, Medicare, Politics, Social Security, Standard and Poor's, Wall Street | Bonds, Contributions, Deficit Hawks, Entitlements, Financial Crisis, Financial Ratings, Investors, Markets, Mortgages, Retirement, Treasury |
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The United States is simply not at risk of default. Default is impossible for a sovereign currency issuer.
The Standard & Poor’s rating firm should be embarrassed. If there is any political judgment at work here, it is S&P. falling for politically motivated scare mongering. But given its track record with mortgage securities and collateralized debt obligations, why should we be surprised to see a rating agency relying on conventional wisdom rather than analysis?
The whole premise of the rating is incorrect. The U.S. may eventually experience unacceptable levels of inflation, but the experience of Japan shows that stop-and-start fiscal stimulus is more likely to result in protracted near-term deflation.
Every time Japan tried to lower its public-debt-to-gross-domestic-product ratio by cutting spending, the resulting drop in economic activity actually made that ratio worse. We are seeing the same results in Ireland and Latvia. The United Kingdom tried the same experiment 10 times in the last 100 years, and every time it got the same results: cutting spending to reduce budget deficits results in a fall in G.D.P. that makes the debt burden worse, not better.
The remedy should be to get private sector debt loads down via encouraging debt restructuring and write-offs, and using well targeted fiscal stimulus to offset the impact of those efforts. But S&P instead would have us do the economic equivalent of trying to cure an infection by using leeches.
Misguided cures killed a lot of patients and are killing a lot of economies.
By: Yves Smith, Writer for Naked Capitalism. Original article appeared in The New York Times, April 18, 2011
April 19, 2011
Posted by raemd95 |
Capitalism, Congress, Conservatives, Corporations, Debt Ceiling, Debt Crisis, Economic Recovery, Economy, Federal Budget, Financial Institutions, Financial Reform, Government, Government Shut Down, Ideology, Lawmakers, Lobbyists, Media, Mortgages, Politics, Pundits, Standard and Poor's | Debt, Debt Default, Financial Institutions, Financial Ratings, GDP, Inflation, Japan, Markets, Private Sector Debt, Securities, United Kingdom |
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OK, this is the day everyone hates. You have to pay your taxes. Who wants to write that check? Nobody, probably.
The truth, however, is that Rep. Paul Ryan, the Tea Party, and most politicians are not being honest when they tell us there is no revenue problem, only a spending problem.
The Associated Press reports today that an IRS analysis tells us that 45 percent of Americans will pay no federal income taxes for 2010. Plus, the 400 Americans with the highest adjusted gross incomes averaged $345 million for the year. Their average federal income tax rate was 17 percent, down from 26 percent in 1992. Wow, and they need another tax break?!
This confirms the Warren Buffett line that his secretary pays a higher percentage of her income in taxes than he does.
But here is our problem: We cannot come close to dealing with this deficit unless we both cut spending and raise revenue. We certainly won’t accomplish anything unless we deal with the tax problem and reform our tax code.
I firmly believe that every American who works or gets income should pay something in federal taxes. Even if it is a small amount. This by itself won’t do much to dent the deficit, but it would be important as a symbol that everyone is in this together. Second, and most important, the gap between rich and poor and the middle class is widening in this country. Those who earn over a million dollars did not deserve an average tax cut of $120,000 under George Bush; they certainly don’t need that raised to $200,000 under the Ryan plan.
We need to recognize that the richest 2 percent of Americans should pay more, but we also need to make this tax system make sense. How can you have a society where nearly half the income earners pay no income taxes, due to deductions, loopholes, and special deals?
I am not arguing that struggling families should be hit with a whooping tax bill, but, rather, that our politicians should be honest with the American people. If you are fighting two wars, you have to pay for them. If you have to save the car companies and our financial institutions, you have to pay, at least initially. If you are going to provide Medicare, Medicaid, Social Security, education, bridges, roads, and air traffic controllers, for that matter, you have to have the revenue.
It is just plain dishonest to put forth a budget and a plan that says “we have no revenue problem.” That is modern snake oil. It is time that we dealt with our tax problem, otherwise we won’t really be dealing with our deficit at all.
By: Peter Fenn, U.S. News and World Report, April 18, 2011
April 18, 2011
Posted by raemd95 |
Budget, Congress, Deficits, Democracy, Economy, Government, Ideology, Income Gap, IRS, Lawmakers, Middle Class, Politics, Rep Paul Ryan, Right Wing, States, Tax Loopholes, Taxes, Tea Party, War, Wealthy | Adjusted Gross Income, Bush Tax Cuts, Low Income, Medicaid, Medicare, Politicians, Social Security, Spending, Tax Breaks, Tax Code, Tax Day, Tax Reform, Tax Revenues, Warren Buffett |
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Last week saw the layoff of every public school teacher in Detroit, and the initial fruition of the highly-contested bill that allows emergency financial managers to have unconditional control over a city in a financial emergency. The city of Benton Harbor, Michigan, declared to be in a financial emergency by Governor Rick Snyder, now knows that, according to Snyder, the voter’s voice doesn’t really matter anymore.
Joseph Harris, the city’s new Emergency Financial Manager (EFM), dismantled the entire government, only allowing city boards and commissions to call a meeting to order, approve of meeting minutes and adjourn a meeting.
The law that allows Harris to “exercise any power or authority of any office, employee, department, board, commission, or similar entity of the City, whether elected or appointed,” was passed in March after the urging of Gov. Snyder, and despite thousands of protesters who came to the Lansing capitol throughout February and March.
Michigan AFL-CIO released a press release in response to Benton Harbor: “This is sad news for democracy in Michigan. It comes after the announcement of Robert Bobb in Detroit ordering layoff of every single public school teacher in the Detroit Public School system,” says Mark Gaffney, President of Michigan AFL-CIO. “With the stripping of all power of duly elected officials in Benton harbor and the attack on Detroit school teachers, we can now see the true nature of the Emergency Manager system.”
Earlier in the week, TMP Muckraker reported that the Detroit Public Schools’ EFM, Robert Bobb, sent 5,466 unionized teachers layoff notices “in anticipation of a workforce reduction to match the district’s declining student enrollment.” The notices are a part of the Detroit Teachers Federation collective-bargaining contract. TPM also reported that “Non-Renewal notices have also been sent to 248 administrators, and the layoffs would go into effect by July 29.”
By: Jennifer Page, Center for Media and Democracy, April 18, 2011
April 18, 2011
Posted by raemd95 |
Collective Bargaining, Conservatives, Democracy, Education, Elections, GOP, Government, Governors, Ideology, Jobs, Lawmakers, Middle Class, Politics, Public Employees, Republicans, Right Wing, State Legislatures, States, Union Busting, Unions, Voters | AFL-CIO, Benton Harbor, City Commissions, City Managers, Detroit, Detroit Teachers Federation, Elected Officials, Financial Emergencies, Gov Rick Snyder, Layoffs, Local Governments, Michigan, Public Schools |
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