Thursday, November 17, 2011

Let's Dance No. 52 -- Go, Supercommittee, Go !


So this morning's Washington Post features an op-ed piece by E.J. Dionne suggesting that the Supercommittee's inability to craft a deal for sufficient budget cuts and increases in government revenue {"failure to cut the deficit") might not be such a bad thing: Dionne thinks that the "draconian" cuts would be anything but, and would be the right start and be done in the right way.  He notes that the planned cuts through the sequestration built-in to this summer's debt-ceiling deal would come mostly from tax increases, which he believes is the right starting point.

I'm going to take the plunge, and confess that I think there should be tax increases.  But I couldn't disagree with Dionne more.



Two reasons  -- our country won't easily withstand a public demonstration of Congress's inability, and the supposed tax increases might not take place in any event.

"The markets" -- meaning us -- are increasingly, and alarmingly, doubtful that Congress can in any way navigate and address the reform of our governmental spending.  We believe, rightly or wrongly (rightly; I said it), that we are on an unsustainable path that will cripple the country and eventually break.  There is broad agreement that it should be addressed, albeit with no consensus on how.

But if these cats:



can't reach an agreement on the first step -- the consequential but ultimately minor step -- of reducing the projected deficit by some meaningful amount through the Supercommittee, then these folks:



will yank money out of stocks.  The stock market isn't gonna tumble: it's gonna go down like Linda Lovelace on Sammy Davis, Jr.

If you think the stock market is some place where rich people play games, it ain't: it's the place where investors express confidence in getting a return on their investments through dividends (corporate profitability) and stock sales (expected corporate profitability).  And people will correctly lose all confidence in future economic performance.

No shit -- I'm tellin' ya, if the Supercommittee utterly fails to do a deal and sequestration begins, look out.  It will confirm that the system really is broke



And don't forget that the new Congress really won't be bound by the acts of the earlier Congress, and either side winning an election could fuck with the current "harsh results" intended to stimulate a deal.  Democrats could rally around the poor folks harmed by the "automatic" cuts and change the law.  Republicans could rally around F-39 TomHawkCruiseCats harmed by the "sizeable" cuts to military spending and change the law.

Ron Paul and his semi-Libertarians could abolish the Fed and turn off the electricity in Congress.

It could happen -- and will, if the Supercommittee doesn't hammer something out.

If they don't, the Mule's moving to Shanghai.


Or New York -- Chinese food there is awesomer.








16 comments:

Mister Parker said...

That's exactly right, bub. Only compromise and consensus will save us from eventually trading beaver pelts for food. And while I'm sure each side is figuring it can spin the resulting disaster to its electoral advantage -- or at least to its fund-raising advantage, which is what is driving most of this -- there's not much point in being in charge if there's nothing left to be in charge of.

Satan's assurances to the contrary, I'd rather serve in heaven than reign in hell.

As for chinese food, though, the takeout up the street from my house is as good as anything you're going to find in Shanghai. As long as they'll take animal skins in lieu of money, we'll be fine.

Fred C. Dobbs said...

I blame the Republicans--more precisely, the far-right wing of the GOP.

Obama of course offered a Grand Bargain that featured spending cuts, including cuts to SS and Medicare, more aggressive than even those proposed by the GOP, in combination with tax increases on the wealthiest 2%, which a majority of Americans (you included, I learned today) favor.
I give Boehner credit for trying but this was rejected by the GOP who oppose any tax increases despite the massive gains enjoyed by the top 2% during the past decade.

Not really sure what can be done at this point.

mister muleboy said...

Fred I opposed tax increases for only the top 2% I favor broader tax increases with the highest rate increases on upper percentages

Fred C. Dobbs said...

Thanks for the clarification.

I don't favor broader tax increases. Almost every credible economist I've heard says that the main problem with our economy right now is depressed consumer demand. I fear raising taxes on anyone but the top 2% will further inhibit consumer demand. If anything I'd like to get more money into the hands of the poor and middle class to spur demand. Thos emeasures could be temporary, until businesses start hiring again.

mister muleboy said...

I like the broader shared sacrifice while changing the tax structure. And I think that straight resurgence of consumerism without addressing overly-restrictive credit will enhance Wal-Mart, Target, and Chinese TV/computer manufacturing.

I also think that production really is artificially restrained until resolution of Econ direction, and that

Fred C. Dobbs said...

I support the idea of shared sacrifice.

As the following analysis demonstrates in shockingly vivid terms, the working a middle classes have been sacrificing painfully and with increasing severity over the past four decades, in directly inverse proportion to the top earners whose share of the national wealth has multiplied:

http://www.businessinsider.com/what-wall-street-protesters-are-so-angry-about-2011-10?op=1&fb_source=message

Therefore, the only way I can think of sharing the sacrifice is to raise taxes on the rich (who have never had it so good) while leaving tax rates alone or lowering them for the rest (who will continue to suffer in other ways).

This isn't a call to fairness or social justice or class welfare. I just don't think it's sound national economic policy to have all the wealth concentrated at the top. It stagnates. It doesn't flow through the national economy the way it does when it is pushed downward into the hands of people who will immediately spend it on goods and services.

mister muleboy said...

PART ONE:

Dobbs: I blame the Republicans--more precisely, the far-right wing of the GOP.

Obama of course offered a Grand Bargain that featured spending cuts, including cuts to SS and Medicare, more aggressive than even those proposed by the GOP, in combination with tax increases on the wealthiest 2%, which a majority of Americans (you included, I learned today) favor.


I must respectfully disagree. President Obama floated the idea of a grand bargain, and publicized huge proposed cuts. But I look forward to anyone providing me specific examples, [and this is not a rhetorical device; if I'm wrong and some real details and an actual proposal was ever on the table, I want to change my mind on this]. I know that Obama never took the argument to the people.

Although this took place prior to the final days, I think Obama's performance at the July 15 news conference demonstrates the kind of specific leadership and deal that he was proposing:

Jake Tapper, ABC News: In the interest of transparency, leadership and also showing the American people that you have been negotiating (with Republicans) in good faith, can you tell us one structural reform that you are willing to make to one of these entitlement programs that would have a major effect on the deficit? Would you be willing to raise the retirement age? Would you be willing to means test Social Security or Medicare?

President Obama: We’ve said that we are willing to look at all these approaches. I’ve laid out some criteria in terms of what would be acceptable. So, for example, I’ve said very clearly that we should make sure that current beneficiaries as much as possible are not affected. But we should look at what can we do in the out-years, so that over time some of these programs are more sustainable. I’ve said that means testing on Medicare, meaning people like myself, if — I’m going to be turning 50 in a week. So I’m starting to think a little bit more about Medicare eligibility. (Laughter.) Yes, I’m going to get my AARP card soon — and the discounts. But you can envision a situation where for somebody in my position, me having to pay a little bit more on premiums or co-pays or things like that would be appropriate.

The President continued in this vein, neither responding to the question nor offering any specifics, or even germane response.

Tapper was granted a follow-up question: And the retirement age?

Obama: I’m not going to get into specifics.


A Grand Bargain without specifics, and without any leadership selling anything to the American people, wasn't likely to move the opposition party.


Dobbs: the GOP who oppose any tax increases despite the massive gains enjoyed by the top 2% during the past decade.

Pat Toomey, the most radical of the GOP on the SuperCommittee, and the mind that has to be changed, has compromised to this point: he's proposed across-the-board reductions of most itemized deductions and use the resulting revenue gains to cut all tax rates. He also proposes then adjusting the rates for the top two brackets so that they’d be high enough to produce $250 billion in revenue. All the tax increase would fall on people in the top brackets.

This is admittedly a "reform" that is open to criticism; certainly the loss of itemized deductions will raise the hue and cry from its beneficiaries. So I don't offer it on its merits -- I offer it as a specific compromise and movement by the "far right wing of the GOP."

mister muleboy said...

PART TWO:


On shared burden and tax increases.

You write:
This isn't a call to fairness or social justice or class welfare. I just don't think it's sound national economic policy to have all the wealth concentrated at the top. It stagnates. It doesn't flow through the national economy the way it does when it is pushed downward into the hands of people who will immediately spend it on goods and services.

I don't disagree with you. I don't think so either, and would propose increases on top earners to address this.

But what I fear is the continued pursuit, with blinders on, of the magic bullet that will let Santa Claus continue to deliver services as it always has without systemic disruption or reform. We plainly don't have a system in which a national conversation can change the minds of the electorate. We're not educable, and we don't have teachers in place anyway. But I think there are about 170,000,000 who think that we can avoid any change if we just "raise taxes on the rich." So I can have the luxury of proposing across-the-board increases of some type, knowing all the while it'll never happen. So I don't have to worry about consumer spending of the lowered tax.

And anyway, I want increased federal spending on infrastructure rather than consumer spending.



I don't look to blame "a side" -- I think that both parties take indefensible stances of which they should be ashamed. And I think that there are innumerable candidates for blame that cover the spectrum. The Democrats really introduced the concept of effecting social policy, and affecting conduct, through manipulation of the tax system. I like to blame them for that -- because it should have come as no surprise that the wealthy, who have always exercised massive influence over both parties, would smile and turn it to their advantage. But the Republicans spreading the hoary story that good hard work can raise anyone up to incredible wealth, deserve a slap in the face too.

To paraphrase the Jerkys -- hate. . . . hate everybody!

mister muleboy said...

Somewhere between 1992 and 1993, I largely stopped defending the GOP. By 2000, I was done defending them. By 1998, I became hard-pressed to defend Democrats, and by 2000, I was done.

I do spend a lot of time, though, "defending" each by challenging accusations made against one or t'other, usually the GOP in this blog, or by posing questions about the actions of the the Democrats or Repubs to their advocates or supporters.

Again, this is usually me arguing with Fred C. JestaDobbsolerofoon.

Usually, I'm looking -- I hope -- tothe refine the arguments, chip away, etc.

But make no mistake: any people who make any pledge "never" to vote something -- hell, I can't name something I could support saying you'd "never" vote for -- are beyond redemption. They can never be defended.

Oh, wait. . . .

Well, they're indefensible.

Anyone who would proudly state that an increase of $1 to cut $10 is an impossible bargain to strike is dangerous, and anyone who'd clap for such a statement is a carbuncle on the ass of the body politic.

We got a lotta carbuncles, boys 'n girls.

Fred C. Dobbs said...

From Andrew Rosenthal:

Last week, Democrats offered a $3.2 trillion compromise — proposing cuts to domestic spending and social-insurance programs that were so large as to be imprudent. Their proposal was instantly rejected by Republicans on the panel. Why? Because the Democrats included $1.3 trillion in new tax revenues, which is exactly $1.3 trillion more than Republicans are willing to accept.

In contrast, Republicans say they are willing to cut $2.2 trillion from the deficit, but only about $40 billion of that would be from new revenues. None would be from new taxes. (Republicans are actually proposing to lower overall tax rates, paid for by ending some tax loopholes. They say that that would produce $200 billion in new tax revenues, based on the discredited notion that the government can then count on higher revenues from increased growth. No impartial judge, including the Congressional Budget Office, accepts this kind of estimate.)


http://www.nytimes.com/2011/11/01/opinion/tales-from-the-congressional-supercommittee.html

Fred C. Dobbs said...

As for Toomey, I can't find a source to support your assertion that he proposes a tax increase on the top earners. This from Politico:

Toomey’s 10-year plan would raise roughly $500 billion in new revenue, half of which would come from tax increases by closing some loopholes and capping deductions. But those increases would be part of broader tax reform, including making permanent the Bush-era tax cuts, even for high-income earners.

Read more: http://www.politico.com/news/stories/1111/68644.html#ixzz1eN8cEpFJ

Seems in line with the Rosenthal piece and at odds with what you posted, but if you have a source I'd be interested in seeing it. Everything I've read about Toomey indicates he wants to make the Bush cuts permanent and claims he is hamstrung because he made a no new tax pledge to Grover Norquist.

Fred C. Dobbs said...

Again, this seems at odds with your account, from Mish's Global Economic Trend Analysis:

Obama told reporters at the White House Friday evening that he had offered Boehner more than $1 trillion in cuts to discretionary spending — both domestic and defense — and $650 billion in cuts to entitlement programs such as Medicare, Medicaid and Social Security. He said he had sought revenues that were less than those put forward in a bipartisan plan by the Senate’s “Gang of Six.” He said the $1.2 trillion in revenues could be accomplished without raising tax rates but by eliminating loopholes, tax breaks and deductions.

Now that he has “been left at the altar a couple of times,” Obama said, the question for the Republicans is, “Can they say yes to the anything?”


http://globaleconomicanalysis.blogspot.com/2011/07/boehner-walks-out-on-talks-with-obama.html

I don't feel like I'm looking to blame one side or the other. I feel like I read a lot of different news accounts and I come away with the solid impression that the Democrats are behaving realistically on this issue and the Republicans are not.

mister muleboy said...

Fred:

In your first piece today, you quote the 11/01 op-ed piece, which predated any specific public movement from Toomey or others. No real quarrel.

In your second, yousay that Toomey's move is consistent with Rosenthal and at odds with what I posted. I respectfully think that it is a distinct change from the Rosenthal piece; Rosenthal stressed "no new revenues," and Toomey proposed revenues. I was hopefully clear that I didn't offer it for its merits, and it's lowering of marginal rates across the board while raising $300 B from deduction changes has nearly the effect of locking in the Bush tax cuts. But it was only to illustrate that Toomey hadn't merely uttered "no new taxes" and slammed his door, but had moved from the early Nov. position of Rosenthal piece.

The Obama account in the final post actually reinforces that Obama announced a grand deal, but never went public with any proposed cuts and refused to identifgy them. Refused to move the debate by showing where he had made movement. It certainly was politically calculated to both appear to compromise and be the grown-up in the room, and nevertheless not bargain away any position.

Which were the cuts to Social Security that he proposed. Or to Medicare? He certainly announced that he'd offered a grand bargain. And it's been typed by a number of people. But no specifics were ever annonced, leaked, or argued for. It's not really leadership, nor particularly distinguishing (between him and Boehner) to say "he wouldn't take my deal"; in my opinion, he needed to say "Boehner wouldn't take this deal: x, y, z. America, is this the act of a responsible party?"

mister muleboy said...

Again, let me make clear: I think the appropriate position for Congress and the administration to take is to insist on structural changes to Medicare and SS, and to vote for tax increases, with the progressive [i.e. larger] share to fall on the highest earners.

Fred C. Dobbs said...

Obama offered to cut $650B from Midicare, Medicaid, and SS, far beyond what the Gang of Six offered and far beyond what was palatable for most of his base.

The reason the R's walked away from it was none of the ones you cite, i.e. lack of specifics. The reason was because of the tax increases on the wealthiest Americans - an idea supported by a strong majority of economists and American citizens.

The GOP don't even make the excuses that you are willing to provide for them.

In other words, Obama offered a compromise - one that damaged him significantly with his own base - and the R's refused to meet him halfway. Refused to meet him a quarter of the way. Refused to meet him .01% of the way.

That to me is unreasonable, and bargaining in bad faith. You can go on all you want about lack of specifics, but I think the numbers are the real story here.

It's like me saying to a defense attorney "I'll give your guy ten years" and he counters with "he'll take 5" and I say no and he says "he'll take 8" and I say no and counsel asks me "why not" and I say "because I made a pledge to Grover not to give your client a day less than 10 years."

How is that reasonable bargaining?

anonymous said...

After years of supporting Schallers, I now prefer Klusons to Grovers. Happy Thanksgiving.

Word verification: 'clensubi'. I think that says it all.