Michael Maiello's picture

    Don't Raise Taxes Yet

    The largest single economic problem the U.S. faces is the destruction of the tax base as a result of the financial crisis and subsequent unemployment.  In my column today for The Daily, I cite a 2010 study by the Center On Budget and Policy Priorities as arguing that the costs in unemployment benefits and lost tax revenues topped $400 billion in 2009 and and then again 2010 and haven't abated much since.  I don't actually believe that there's a tax you can raise or a program you can cut that will bring the budget into balance when you have 9% unemployment and stagnant or falling wages.

    I also don't believe one tiny bit that balancing the budget will create any jobs.  The "confidence" argument just doesn't strike me as how people make business decisions.  It rests on the assumption that an unbalanced budget now means higher taxes later, so you should give up the chance to make a dollar now.  That makes no sense.  I think most people assume that they have no idea what taxes will be like in 10 years.  But if you were absolutely convinced that, because of mounting debts, taxes were going to be raised to onerous levels, you should respond by making every dime you can now and then being retired off shore in 10 years.  That would at least be rational.

    The other argument is that government spending "crowds out the private sector."  This can happen when the providers of credit decide to spend all of their capital lending to the government, which has numerous ways to guarantee its debt that private borrowers don't have.  But we know that bond issuances by businesses, including high yield bonds, have been way up.  The corporate bank loan market is also exploding with banks actually loosening standards for making large, syndicated business loans that they can then sell to a growing number of mutual funds and investment funds.  If anything, there's a credit bubble just starting in that sector.  The only place we're seeing tight credit is in small business loans -- the ones that are too small for the banks to sell.  In that case, banks aren't not lending because they want to buy Treasuries, they're not lending because they don't want to keep the loans on their books.  But even that's changing.  In the last Federal Reserve survey of senior loan officers, most large banks admitted they were now loosening standards for credit card loans and the like -- the very types of loans that many small businesses use.  By the way, as a funny aside, conservative commentators and Meredith Whitney assured us that the credit card market would dry up if the government required banks to do things like explicitly state terms and abide my minimal consumer protection disclosures.  Guess the need to, you know, make money trumps that!

    So back to my headline -- I think Obama has it about right on the Bush era tax rates.  He should support their expiration when the extension runs out in 2013.  It would be ideal if they expired not on some random date but when unemployment reaches some acceptable number (say 5%).  But that's not going to happen.

    It'll be interesting to see if, given the apparent Republican cave yesterday, the President still wants to pursue budget cuts.  Were he to pursue cutting unemployment in half at all costs he'd probably do a lot more for the economy in the long run.  But I don't see an about face on the horizon, nor do I see the Republicans acquiescing to that in the slightest.

    I guess now Obama has a choice between pursuing the cuts he put on the table and letting the economy muddle along.  I'll take "muddle along" as the best option if we're down to just that.



    Since it looks like the Republicans plan B might end up being the savior; delivering us from  Obama and Geithners, scary ol boogie man.

    Maybe woman and children were scared, but McConnell the Southern gentleman sure gave a whooping to the boy, crying wolf?

    President Obama; how do you like your crow; boiled or baked, something to go along with those peas?

    Who advises the president so that he seems to always get outflanked?


    I'm not sure what you are talking about, because McConnell and the rest of the Republicans now look like complete fools and total dickheads.  At the start of this process, the White House position was that Congress should just raise the debt ceiling and decouple that step from any sort of negotiations or bargaining or brinksmanship or threats over the budget.

    After several months of Paul Ryan and Eric Cantor and Ron Paul and Michelle Bachman and the other radical Republicans threatening to send the country into default unless the White House approves a conservative austerity budget, McConnell is now throwing in the towel and telling the House loudmouths to sit down, shut up and stop embarrassing the Republican Party and scaring the markets with their kiddie play.

    Distractions sure took peoples minds off of the home foreclosure crisis, didn't it?

    "look over  there, something far more worse is about to happen; you homeowners need to get over the mortgage crisis, you're going to have to fend for yourselves, we have bigger problems"

    We'll keep muddling along, because people lost their wealth, and this President hasn't taken up the cause to help prevent the devaluation of the housing market. 

    Why did we overbuild?

    Is it because this government thought it was given; that the people would accept giving Amnesty to 20 million more immigrants who would have needed homes to live in?  

    Until Obama and the Congress gets focused on the housing crisis were going to continue to muddle along.

    Problem appears to me, they don't want to help homeowners. Hope you can ride out the muddle as well as their rich WALL STREET banker friends will.

    I hope Obama just grabs this McConnell idea and walks away.   McConnell basically admitted defeat.   The whole debt ceiling standoff was one big waste of time.  In the end, they realized they have to raise the debt ceiling.

    They could have done this four or five months ago and saved us all the grief.

    I think he should grab it too.  And when Republicans whine about cuts he needs to very directly and in plain language say, "You asked for that before.  I took you seriously and I even offered you cuts that I didn't want to give and then you all said forget it.  So, it's forgotten, per your wishes."


    I guess I should add that, given the McConnell out, if Obama continues to pursue budgetary cuts and, worse, delivers on them as some sort of deal, that we all have the right to be very indignant.

    A double cup of Yup.


    The party leaders surely realize how it will play out. They could easily wrap up negotiations tomorrow.

    But that would deprive the actors of their stage time. House Speaker John Boehner has to perfect his pantomime of ideological pugnacity in order to seduce angry Tea Party voters. President Obama must develop his portrayal of a serious post-partisan statesman in order to attract independent voters. The media chorus needs high drama in order to sell tickets.


    was just reading more support for your story line on another tab, it's here


    in a comment by a "George C." You may want to look up that George Packer article he cites about the April budget negotiations.

    I found the article that George C quoted: http://www.newyorker.com/talk/comment/2011/04/25/110425taco_talk_packer. The compliment to Obama is more back-handed than George C lets on but definitely on point. Thanks.

    But we know that bond issuances by businesses, including high yield bonds, have been way up.  The corporate bank loan market is also exploding with banks actually loosening standards for making large, syndicated business loans that they can then sell to a growing number of mutual funds and investment funds.

    What are the borrowers doing with all that dough?

    A ton of it is refinancing, either out of opportunity (lower rates!) or necessity (we have a good business but it doesn't support the amount of debt we put on it at the prices we paid...)

    It's interesting to me that the MSNBC commentary shows yesterday were playing a clip of Mitch Daniels (bush's budget director) saying that raising the debt limit was just a housekeeping matter. They went on to say that although raising the debt limit has caused a few little skirmishes in the past, it has never been a battle like this, and in fact has been raised 77 times since JFK, 7 times in Bush's 8 years.

    Yet, because of their hatred for all things Obama, they were willing to create a fake crisis and scare the bejeepers out of seniors just to TRY and make Obama look bad.

    I hope that if the dems get the house back in 2012, the first thing they do is to pass a bill requiring that the debt limit issue be a clean vote up or down and is never able to be used as a weapon like this again. This country has enough REAL problems w/o letting a bunch of crazies push us to the brink of disaster.

    Our debt is a problem, but right now, the gov needs to make up the difference in spending that the private sector isn't doing. When the private sector steps up and takes over, putting the trillions sitting on the sidelines back to work, THEN we can work on the debt. Right now jobs should be the very top priority.

    THEN we can work on the debt.

    As a result of the general lost of trust in government and the general meme of Democrats being for taxing and spending, the challenge is to convince the jaded voters that the Democrats will actually work on the debt once the economy turns around.  A significant reason that certain forces have been able to make the debt situation into a crisis is that many voters look at the behavior of Congress in the 21st Century and see no evidence that they won't keep increasing the debt until there is a real crisis.

    There is certainly some truth to that, but the repubs want to rewrite history, and we shouldn't let them. Clinton left a surplus, Bush a ginormous deficit (on top of a deep, deep, recession) now they've suddenly got fiscal religion. I know people have REALLY short memories, but we need to keep reminding them that we didn't do this. I know there are many who are getting tired of the "it's bush's fault" stuff, but it is!

    I, personally, don't think that being given 8 years to fix what took 8 years to mess up is too much to ask.

    Much as Wall Street & Big Biz won't allow taxes to be raised, they sure as hell won't allow the nation to default.

    How are things over in Murdoch land today?devil

    If Obama wants stimulus money, here’s where he can get it  

    Why can’t he cut some of these programs and redirect some of the money spent?

    Haven’t some of these programs outlived there priority?

    International Fund for Ireland . $17 million annual savings.

    Eliminate duplicative education programs. H.R. 2274 (in last Congress), authored by Rep. McKeon, eliminates 68 at a savings of $1.3 billion annually.

    Cut in half funding for congressional printing and binding. $47 million annual savings

    Trim Federal Vehicle Budget by 20%. $600 million annual savings.

    Presidential Campaign Fund. $775 million savings over ten years.

    Eliminate Mohair Subsidies. $1 million annual savings.

    USDA Sugar Program. $14 million annual savings.

    Eliminate the National Organic Certification Cost-Share Program. $56.2 million annual savings.

    Eliminate death gratuity for Members of Congress.

    This is only a partial list


    On and on it goes, once a government program is initiated, we can’t get rid of it

    We need stimulus money; do we really need Mohair subsidies?

    Sugar producers need subsidies?

    Redirect some of this money to projects we need now; reinstitute them later, if needed

    I am totally flummoxed by your comment. Are you for Federal stimulus or aren't you? Is it that you don't understand government stimulus plans? What do you think they are?

    If you cut the Federal vehicle budget, the employees that maintain it will be laid off. You have some better job you are going to have them do? And actually, buying more energy efficient vehicles for the Federal fleet from American manufacturers was part of the 2009 stimulus. If you cut Congressional printing and binding, the people that do it would get laid off or hours or wages cut. If you cut certification of organic produce, the people that do it would get laid off or hours or wages cut. They in turn will spend less money, and that hurts the economy, ok?

    Likewise, if you cut current government subsidies to certain industries, that may very well end up in people being laid off or having hours or wages cut. Now you may not like the industries being subsidized, but if you are for Federal stimulus, you might not want to rock that boat right at this point. (Unless you have a plan for quick retraining of unemployed mohair goat herders in Texas?)

    This is without going into the ripple effect, i.e., those U.S. workers that make the parts for the cars the Federal government is buying.

    Even the death gratuity for members of Congress creates stimulus if you take that p.o.v-- might get spent to the benefit of employment related to--use your imagination--extra flowers for the funeral, rounds of drinks with big tips at a DC watering hole with benefits to wait staff and Virginia whiskey distilleries and Boston microbreweries, or a new Harley for the deceased Senator's trophy wife.

    Well Lamont, maybe we should bring back the buggy whip manufactures? 

    We need infrastructure repairs, our bridges, our roads, our power grid system is breaking down.

    I don't know where you've been sleeping, Rip Van Winkle, but we have gridlock and the Republicans are not going to vote for tax increases.

    You can scream and stomp your feet, call them names, but the Republicans are not going to allow an increase in Taxes.

    Now I can feel the pain of Mohair ranchers, but all of the aforementioned infrastructure projects; should take precedence. To do this we either have to raise revenue or we have to cut low priority causes.

    Wishing won't work Lamont

    Raising taxes is not going to pass, that leaves only one revenues source left.......Cut other programs so you can do the more important things. 



    Like telling the kids, you took home a paycheck of $70.00. You want to spend $70.00 dollars a week on cigarettes or do you want food on the table, so you can maintain your health? 

    Because I can assure you, no ones going to loan you money, so you can do both.

    (Your a bad credit risk, if you decide in favor of the cigs)

    Quit smoking and  EAT; or smoke and die. Your choice...... hopefully your of sound mind and can make the right choice, the right priority.   

    But I suppose Lamont;  you think that is unfair to the Tobacco executives and their workers?


    OK, there's a Plan B on the table that avoids default. After one last kick at the can (today's White House kabuki-fest), could I suggest it's time for Obama to put the Plan A charade out of its misery?

    One glitch in any resolution of this "crisis" is that it needs both houses to enact it and the president to sign in. We're no longer three weeks away from default; we're two.

    It's peachy that Mitch and Reid and Boehner and Pelosi and Wall Street are all (more or less) on board. Legislation still has to pass, and Tea Party crazies will do all they can to stall and amend and otherwise sabotage Mitch's face-saving move. Likewise, if Obama magically gets some kind of "balanced" deal of the kind he's been pushing (involving real benefit cuts), that won't fly with some Senate Democrats. Remember, Republicans aren't the only ones who can filibuster.

    My guess is that, even if Obama accepts Plan B right now, the haggling and vitriol and tantrum-throwing will still go on, down to the wire. The U.S. credit rating may avoid a formal downgrade, but international trust will be badly shaken. I wouldn't give a damn, except that further collapse of your economy will directly affect the rest of the world's, including mine.

    So get it done, Mr. President. Start now.



    By the way, who ever imagined Mitch McConnell would be the adult in the room? Strange days.

    I would rather see the government close up the tax loop holes. What's the point in raising taxes on those who pay little or none to begin with because of them ?

    Which is exactly why the complaints about raising their marginal tax rates are so monumentally ridiculous. They will immediately have their accountants and congress finding new ways for them to avoid paying them.


    I know, drives me nuts.  We have the highest corporate tax rate in the world!  But, uh... nobody pays it.

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