Category Archives: Economics

Miscellaneous economy stuff

It Isn’t Your Money

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Or, gimme, gimme, gimme.

Treasury Secretary Jack Lew told “Fox News Sunday” that President Obama will neither sign government funding bills that slash domestic spending nor negotiate with Republicans over spending cuts to reduce the federal debt limit.

That’s not all.  He told ABC’s “This Week”

I think the president has made crystal clear, he’s not going to negotiate over the debt limit.

But he’s willing to “work with” all comers.  Sure.

This President, and his cronies in the Senate, are perfectly willing to blow up our credit rating (or what’s left of it after their last fiasco just a couple of years ago) and shut down the government if they’re blocked from taking more of your money away from you (in their demanded higher taxes) or taking more of your children’s money away from them (in their demanded continuing borrowing) and spending ever more of your money (their demanded spending increases).

All because these…politicians…think they know better than you—or your children—what that money should be spent on, and they’re convinced it’s their money and not yours in the first place.

Cynical Goals for our Economy

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Most Democrats want tax-overhaul efforts to fund government programs or contribute to deficit reduction.

Indeed.  In addition, Senate Majority Leader Harry Reid (D, UT) demands that any tax “reform” raise Federal revenues ($975 billion more over 10 years is his minimum bid) for the purpose of supporting increased Federal spending.

“Contribute to deficit reduction.”  How disingenuous.

Here’s a thought: how about tax reform that reduces rates against a backdrop of reduced/eliminated government “programs,” so that the Federal government is out of the way (or at least less in the way) of our economy?  The result would be a robust and growing economy that would both raise revenue for the Feds from that increased activity and that actually would eliminate the deficit instead of cynically perpetuating it.

And from that deficit elimination, facilitate actually paying down a ruinous Federal debt.

A Thought on Global Tax Reform

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UK Chancellor of the Exchequer George Osborne said he hoped the G-20 countries would commit to the [OECD plan to close international tax law loopholes].

And

The plan aims to plug the gaps created by a complex web of bilateral tax treaties that has expanded since the 1920s, and which now allows for “aggressive” tax planning, where companies adopt legal structures designed to shift their profits to the lowest-tax jurisdictions, regardless of where those profits are earned.

“These gaps have facilitated tax planning by globalized players.  The goal of the action plan is to close down the avenues that we have left open,” said Pascal Saint-Amans, director of the OECD’s Center for Tax Policy and Administration.

And

The UK Parliament’s public-affairs committee has held a number of heated public hearings over the past six months examining whether large companies are paying enough tax.

Never mind that of course business executives engage in careful “tax planning”—they have a fiduciary duty to their bosses, the business owners, to minimize costs and maximize profits.

Nor is there any consideration of whether the G-20 nations (other than, say, Ireland) are charging too much in the way of taxes, cynically without justifying governments’ claimed need for OPM.

And this from Ángel Gurria, OECD Secretary-General.

Although of course we do not expect [businesses] to very happily go there and deposit their more substantive check, I think they will understand that this is a way to keep the systems running better and the trains running on time.

Shades of Alexander Hamilton:

There are some who maintain that trade will regulate itself and is not to be benefitted by the encouragements or restraints of government.  Such persons imagine that there is no need of a common directing power.  This is one of those wild speculative paradoxes among us, contrary to the uniform practice and sense of the most enlightened nations.

As Adam Smith and the empirical evidence of the US’ experience until the early 20th century have shown, Hamilton was wrong then, and Gurria is wrong today.

Here’s a thought: standardize on low/no corporate tax rates.  It’s not government’s money, anyway; the money is the property of the companies and the people who own them.

An Implication

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One of the aspects of the Detroit bankruptcy is this:

…shrinking…[Detroit]’s work force to the point where employee contributions can’t keep pace with the needs of current pension recipients.  The city has just 9,700 workers but 21,000 retirees drawing benefits.

That has meant larger and larger payments by the city to keep the funds solvent.

This is the future of Social Security and Medicare, absent privatization of each and serious immigration reform (which the Senate bill is not).  The outcome nationally, since we don’t get to declare bankruptcy (we can only welch on our debts by repudiating them or by repaying with debased money), is higher taxes and more debt.  And national failure.

Economic Performance

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The Wall Street Journal‘s Benn Casselman noted the stagnant condition of our economy.

Note that the graph indicates lowering expectations for our GDP’s performance for the second quarter (just completed): last month, the expectation was for a miserly 1.9% growth; economists’ July forecast is for an even more miserable 1.5% growth.  We’ll know in a few days, when the first official government guess is published.

Casselman also wrote that

There also are signs that consumers—whose spending has helped prop up the economy for much of the past year—are beginning to tighten their belts.  Retail sales grew a paltry 0.4% in June, Commerce Department figures showed, and would have been even worse if higher gasoline prices hadn’t forced drivers to spend more at the pump.

Read that carefully: even this limited consumer spending growth was more about paying higher prices (good for the immediate seller) than it was about buying more stuff (good for actual economic growth).

Things aren’t expected to get any better soon, but, then, neither are this administration’s policies.

Some prognosticators are more optimistic, though, noting for instance that a rebounding housing market remains present.  But I have to ask, against the backdrop of this failed recovery and stagnating economy: a “rebounding housing market” means lots of new mortgages as families buy these expensive assets.  How stable, really, is the families’ income; how certain is their ability to continue paying their mortgages were the present economy, so close to a tipping point into a new recession, actually to tip over?