Mon Jun 26, 2006
Billionaire Warren Buffett on Monday called for U.S. lawmakers to retain the estate tax, after announcing plans to leave more than $37 billion of his own fortune to charity, not his children.
Buffett spoke after agreeing to sign over roughly $30.7 billion of his $44 billion fortune to the Bill & Melinda Gates Foundation, run by the Microsoft Corp. chairman and his wife, and another $6.4 billion to foundations on behalf of his late wife Susan and his children.
"I would hate to see the estate tax gutted," Buffett said at a Manhattan news conference with the Gateses about his donation.
"It's a very equitable tax," Buffett said. "It's in keeping with the idea of equality of opportunity in this country, not giving incredible head starts to certain people who were very selective about the womb from which they emerged."
Buffett, the second richest man in the world, after Bill Gates, spoke less than three weeks after the U.S. Senate fell three votes short of advancing a bill backed by President George W. Bush that would permanently repeal estate taxes.
Democratic opponents have argued that a full repeal would cost the U.S. Treasury about $1 trillion over the next decade, and principally benefit the ultra-rich. Permanently repealing estate taxes is a long-sought Republican goal.
Bush's 2001 tax cuts included a phase-out of estate taxes through 2009 and a total repeal in 2010 only. In 2011, the tax would be reimposed on estates valued over $1 million and the top tax rate would revert to 55 percent.
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Poverty is a national crisis
As Hurricane Katrina has dramatically exposed the urban poverty in southern cities, it is important to remember that poverty is a national problem, and a growing one.
37 million - total number of people living in poverty in the U.S.
13 million - number of children living in poverty
1.1 million - number of people who fell below the poverty threshold between 2003 and 2004
4 - number of consecutive years in which the poverty rate has risen in America
Source: The U.S. Census Bureau
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"Republicans are the real 'cut and run' party -- CUT taxes and RUN up the deficit."
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And this is from the belly of the conservative beast, Cato:
“Starve the Beast” Just Does Not Work
by William A. Niskanen
http://www.cato-at-liberty.org/2006/05/11/
starve-the-beast-just-does-not-work/
For nearly 30 years, many Republicans have asserted that the best way to control federal spending is to “Starve the Beast” by reducing federal tax revenue. Moreover, this assertion has been endorsed by two Nobel-laureate economists, Milton Friedman and Gary Becker.
There are at least three problems with this perspective:
It is most implausible that reducing the tax burden of government spending on current voters would reduce the level of government spending that Congress would approve. In private markets, there is a consistent negative relation between the price of a good or service and the amount demanded.
The “Starve the Beast” assertion is inconsistent with the facts, at least since 1980. ... there was a strong negative relation between the federal spending percent of GDP and the federal revenue percent of GDP from 1981 through 2005, even controlling for the unemployment rate.
An increased belief in the “Starve the Beast” assertion has substantially reduced the traditional Republican concern for fiscal responsibility – leading to a pattern of tax cuts, increased spending, and increased deficits. This pattern has been strongest during the current Bush administration, primarily because the Republicans control both the administration and a majority of both houses of Congress.
In 2005, federal revenues were 17.8 percent of GDP. ... (an estimated) increase of federal revenues to about 19 percent of GDP would be necessary to stabilize the federal spending percent of GDP. Control of at least one house of Congress by the Democrats, however, is likely to be necessary to achieve this outcome.
Republicans should not consider this inconsistent with Reaganomics. After the major reduction in marginal tax rates in 1981, Reagan approved tax increases in each of the next three years and a major tax reform that increased federal revenues in the short run.
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Tax Cuts = More Spending?
If this is so, what does it mean for supporters of tax cuts?
By Nick Schulz
May 19, 2006
I want the government both to spend less money and cut taxes.
But if in cutting taxes the government is prompted to spend more money, should I still be in favor of tax cuts?
I ask this question in response to recent opinions taken by a few influential writers, including Jonathan Chait, Sebastian Mallaby, and Jonathan Rauch. Each has pointed to research that claims cutting taxes leads to increased spending. One implication of the research, they aver, is that if conservatives and libertarians are truly interested in cutting spending, they should reconsider their support for tax cuts.
But these writers pay insufficient attention to another implication of the research they cite: Americans don’t want all the government that is thrust upon them. I’ll get to that in a moment, but first let’s look at the claim that tax cuts prompt spending increases.
Many anti-tax advocates have argued that tax cuts are necessary to take away the government’s ability to spend. The idea is that tax cuts will yield deficits, which will prompt voters to want to cut back on spending. This is the “starve the beast” school of tax-cut enthusiasm.
But research from the Cato Institute’s William Niskanen suggests that cutting taxes is not starving the beast. According to Rauch, Niskanen recently analyzed data from 1981 to 2005 and found “no sign that deficits have ever acted as a constraint on spending.”
Rauch continues, looking at 1981 to 2005, Niskanen … asked at what level taxes neither increase nor decrease spending. The answer: about 19 percent of the GDP. In other words, taxation above that level shrinks government, and taxation below it makes government grow. Thanks to the Bush tax cuts, revenues have been well below 19 percent since 2002 (17.8 percent last year). Perhaps not surprisingly, government spending has risen under Bush.
“The implications of [Niskanen’s] findings are discomfiting, and in a sense tragic,” for conservatives, Rauch says. Mallaby says of Niskanen’s research, “for honest believers in tax cuts, it’s devastating.” Chait is particularly gleeful, making fun of “anti-tax nuts” in the Republican party.
Let’s just stipulate for a moment that the reports from Chait, Rauch, and Mallaby are correct in their broad brushstrokes. The first thing we need to figure out is why this is so: Why would tax cuts prompt more spending? The only explanation so far comes from Niskanen himself. According to Rauch, Niskanen was suspicious of Starve the Beast. He thought it more likely that tax cuts, when unmatched with spending cuts, would reduce the apparent cost of government, thus stimulating rather than stunting Washington’s growth. “You make government look cheaper than it would otherwise be,” he said recently.
If this is the reason for the correlation between tax cuts and spending increases, the implications are indeed very ominous — not for conservatives, but for progressives and other advocates of large, activist government. Simply put, Americans view government spending as no bargain.
This is remarkable given just how progressive the tax code is. To give just one helpful metric of its progressivity, the Tax Foundation estimates that this year, “91 million individuals will face a zero or negative tax liability … Adding to this figure the 15 million households and individuals who file no tax return at all, roughly 121 million Americans — or 41 percent of the U.S. population — will be completely outside the federal income tax system.” Despite the tax burden being so slight for so many — over 40 percent! — Americans do not want more than 19 percent of GDP devoted to taxes.
Let’s consider what this finding means for the “party of government” over the next 20 to 40 years. Given the demographic shifts we are facing — many more old people, all living much longer — and the explosive growth in entitlement spending this will prompt, Niskanen’s findings are in fact terrible news for liberals (and “compassionate” conservatives, too).
Economists Jagadeesh Gokhale and Kent Smetters recently updated their assessment of the government’s fiscal imbalances — how much more the government will be spending than what it will take in. Bush and the Republicans in Congress have had their share of spending abuses, it’s true. But forthcoming U.S. auto-pilot entitlement spending makes Bush & Co. look like pikers.
These economists discovered that “the nation’s fiscal imbalance has grown from around $44 trillion dollars as of fiscal year end 2002 to about $63 trillion. The imbalance also grows by more than $1.5 trillion (in inflation adjusted terms) each year that action is not taken to reduce it.”
What would it take to correct this? Gokhale and Smetters say that, Achieving fiscal balance would require either massive tax increases … or massive cuts in government outlays, for example, a 77.8% immediate and permanent reduction in all non-Social Security and non-Medicare outlays.
There you have it. The only solution to our entitlement problem is to massively increase taxes — which Niskanen’s research suggests Americans do not have much stomach for — or radically restructure and slash spending. This puts the party of government — liberals and most Democrats — in an extremely uncomfortable political position for the next generation.
What Rauch, Mallaby, and Chait forgot to tell you about the Niskanen research (I’m confident Rauch looked at the research, but I’m not sure if Mallaby and Chait did) is the finding that “our political system is biased in favor of larger government spending than a majority of the voters prefer.” Remember, the problem is that taxpayers love spending when they don’t feel as if they are paying for it thanks to tax cuts. One solution is to tie government expenditures more closely to taxes. Niskanen proposes an intriguing idea in his analysis, calling for “a constitutional amendment that total federal spending in any fiscal year may not exceed 110 percent of total federal receipts in the second prior fiscal year.” Now that sounds like a fine idea.
How about it, fellas?
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And from
National Review Online:
Federal Pay Outpaces Private-Sector Pay
Federal wages and benefits have been rising quickly, and by 2004 the average compensation of federal workers was almost twice the average in the private sector. In the latest Tax & Budget Bulletin, "Federal Pay Outpaces Private-Sector Pay," Chris Edwards examines the growing gap between federal civilian workers and private sector workers. Edwards argues that "Compensation policies should be examined for possible savings to reduce large federal budget deficits....In the longer term, the coming surge in federal worker retirement as baby boomers enter their sixties offers an opportunity to downsize federal agencies without problematic layoffs or buyouts."
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Bushenomics 102: Reality
by Larry Beinhart
Mon Jun 19, 2006
There were two stories in Saturday's New York Times that reveal the reality of Bushenomics.
One said that Delta Airlines was going to eliminate its pilot pensions. It was in the business section, page C3.
"Where Did the Good Investments Go," was the headline on the other one. It was an editorial. It said, "By and large, American companies are flush with cash," and have been for some time, but they can't find productive places to put the money.
Those of you who are reading this have been living through Bushenomics 101.
The theory is that if you cut taxes for the wealthy they will go out and invest it. That will grow the economy and create jobs.
In the past it's been called trickle down theory and voodoo economics.
The first thing that happened utilizing this theory was a recession. Bushenomicers blamed it on Clinton.
We have had a slow recovery. Bushenomicists blame it on Clinton, on 9/11, and the subsequent wars. What George Bush fondly calls the 'trifecta.'
The first of these is odd because under Clinton the economy grew like gangbusters. It produced jobs, the Dow Jones went up over 350%, the deficit left by Bush the Elder turned into a surplus. So Clinton policies should have been a perfect 'how to." The second was reasonable, but only for a brief period. A month, two months, perhaps a quarter. That's all. The third is absurd. War normally produces growth. All around growth. Including jobs.
The so-called recovery has been treated as very mysterious. First, because it did not produce jobs. Now, because it is not producing business either. Yet it has produced an increase in corporate profits and a great rise in the real estate sector.
If you just take the facts and forget about the fantasy, there's nothing mysterious about any of it.
The great bulk of the tax cuts went to rich people. If someone making a million a year gets to keep an extra hundred thousand, what do they do with it? Go out and start a company? No. They put it in the stock market or real estate. In this case, business has not really been growing. The Dow is still only a few points over where it was when Bush took office. Other factors, like low interest rates, favored real estate. So the money flowed there.
But how can we say that business is somehow bad if corporate profits have risen?
With tax cuts, massive spending and wars, Bushenomics does pump a lot of money into the economy. But what Bushenomics doesn't do is create places for the money to go. It does not enrich the vast mass of working people who are the ultimate consumers, so their spending does not increase.
Actually, as wages are driven down, pension funds are under funded or looted, public services are cut and the public debt is increased, it means that the money Bushenomics is spending is from the general population. In that circumstance, corporate profits are not so much profits, but a transfer of value and productivity into cash. It is a sort of hollowing out of our businesses and indeed of the entire country.
It's a big country with a lot of money, a lot elasticity, a lot of creativity and a lot of variety. So this can go on for a while without a major crash. Plus the world depends on American consumption, so the rest of the world will go along with it. For a while.
But the reality is beginning to appear.
It's like sighting of icebergs. A glimmer here, a shining there. While the band keeps playing in the ship's ballroom.
Part of the problem is the media.
For example, the Delta story, which involves the pensions of 13,000 people, could be considered a major break in the social fabric. As such, it would be an A1 story, a front page story, not a C3, business section story.
Also, the Times headline was "Delta Takes Steps to Avert Mass Retirement of Pilots."
That wasn't false, but it was a hell of a spin on the story. Pilots were entitled to a lump sum payout of half what they were due. The writing on the wall is in very big letters, a lot of them were going to get out while the getting was good, creating something like a run on a bank. But you don't stop a run on the bank by shutting it down forever, and devil take the people with money on deposit.
The enormity of problem also tends to remain hidden because we don't have a counter narrative.
That's a shame. Because the counter narrative is simple, sensible and it works.
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So let's see, this government was elected to be conservative, but they spend like drunken sailors, and on everything except the poor. Good Christians.
Had enough?Stay a moment more and read this, and ask yourself, "Do I really want to be a part of this?" Is America really the greatest country on earth? I think the definition of a country's greatness is the way it treats the least among us.
CENTER FOR ECONOMIC AND POLICY RESEARCH
For Immediate Release: Tuesday, October 18, 2005
75% OF AMERICAN WORKERS DON'T HAVE DECENT WAGES AND BENEFITS
Washington, DC -- Only 25.2 percent of American workers have a job that pays at least $16 per hour and provides health insurance and a pension, according to a new study by the Center for Economic and Policy Research.
The report, "How Good is the Economy at Creating Good Jobs?" found that between 1979 and 2004 the share of American workers in good jobs remained unchanged at about 25 percent, despite strong economic growth over that period. (The report defines a "good job" as one that offers at least $16 per hour or $32,000 annually, employer-paid health insurance and a pension.) In the last quarter century, the U.S. workforce has become older, more experienced and better educated, but 75 percent of workers are still struggling in jobs that do not provide health insurance, a pension and solid middle-class wages.
"The U.S. economy has failed to convert long-term economic growth into better jobs," said John Schmitt, CEPR economist and author of the report. "Despite huge improvements in the average educational level our workforce, most American workers still don't have a job that pays a decent wage and provides health insurance and a pension."
Since 1979, inflation-adjusted GDP per person increased 60 percent, but the percentage of workers in good jobs remained unchanged at about 25 percent. If the workforce had not experienced dramatic improvements, the share of good jobs would have fallen 25 to 30 percent, despite large increases in the capital stock per worker and significant technological progress over the period. Moreover, the decline in the underlying ability of the economy to create good jobs is likely an underestimate since this calculation does not control for the larger capital stock or technological advances, both of which should have made it much easier for the economy to produce good jobs.
The study also found that 26.6 percent of the workforce is in a job that pays poorly and offers neither health insurance or a pension. This is close to the share of Americans in bad jobs in 1979 (27.9 percent).
"How Good is the Economy at Creating Good Jobs?" was based on analysis of data from the March Current Population Survey (CPS). It is the first in a series to explore recent trends in job quality in the U.S. economy.
To read the report, see:
http://www.cepr.net/publications/labor_markets_2005_10.pdf
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