Friday Post: Simpson-Bowles Report

The Simpson-Bowles report: I don't know what to make of it. Would it be better used for toilet paper or for firewood kindling?

Alan Simpson and Erskine Bowles are co-heads of a bipartisan commission set up by President Barack Obama to find some unpopular ideas to reduce the federal deficit, and the draft report they released is actually intended for debate with the other members of the commission; in other words, the report isn't yet a policy idea. The reason for convening this fiscal commission, if I recall, was so that the commission would develop a plan to deal with an unpopular problem, and so that legislators could then merely "sign on" to the plan, rather than having to "debate the merits" of action or, even worse, be forced to "grow a pair" and make a plan themselves. In order for the Simpson-Bowles plan to have worked, it would have had to make cuts in spending AND raise tax rates in roughly equal proportions in order to be bipartisan. But bipartisan it most certainly is not.

The draft report makes a lot of cuts in spending, and even tinkers with social security. But it fails to make tax increases. In fact, as Paul Krugman points out, the goals of tax reform according to the report are primarily to lower tax rates across the board. Deficit reduction, what I thought was the whole purpose of this commission, is relegated to an afterthought. While it lowers the tax rate for the poor from 10% to 8%, it lowers the tax rate for the rich from 35% to 23%. That's two percent for the poor and 12% for the rich.

The commission, ostensibly all about deficit reduction, also fails to talk seriously about the rise in the cost of health care, which is the reason that Medicare and Medicaid expenditures will rise sharply in the future. Kevin Drum of Mother Jones makes the point that any deficit reducing commission without a proposal to deal with Medicare and Medicaid cannot be taken seriously, becuase it isn't federal employee salaries or admission prices to the National Zoo that's causing our future debt problem.

I would like the full commission to keep one key tax increase in the proposal: the gas tax. It is a tax that is badly in need of not only an increase, but also to be indexed to the actual price of gas so that it can do what it was intended to do: pay for highways without an expenditure from the general treasury. It's an idea whose time, I hope, has finally come, for more than just personal reasons.

The Failed Policies of George W. Bush

According to almost every news source in America, the Democratic Party will win big on November 4. Presidential candidate Barack Obama is far from the only Democrat who will ride into Washington on the coattails of bad feelings for President George W. Bush. Almost every Democratic candidate for office in America, fairly or not, has enjoyed a bounce in popularity by campaigning on a platform of being anti-Bush, or by linking his/her opponent to the "failed policies of the Bush administration". Indeed, George W. Bush has never had a lower approval rating than right now, partly because of the recent financial crisis. But what these Democratic candidates are not doing is reminding people what it is that is so bad about the "failed policies of George W. Bush" in the first place. If the American public remembers that it can't stand that Bush guy but can't remember why, then the "failed policies" will surely be repeated by elected members of the Government. So to serve as a reminder mostly to myself, I've jotted down 33 "failed policies" that I think have made our country worse off thanks to the 43rd President of the United States of America.

1) "The United States doesn't torture." Except when it does. George W. Bush vetoed anti-torture bills, watered down water-boarding by referring to it as an interrogation technique (like how rape is just a sexual technique), and flauted the Geneva Conventions time after time when confronted in interviews or press conferences.

2) Unfounded wars on sovereign nations. Bad intelligence that should have been ignored about WMD and yellow cake fissile material led to a war against Iraq. The previous sentence was the best-case, most P.C. explanations for George W. Bush's intentions in the Middle East. Speculation abounds as to his real reasons for war with Iraq, most of which would be inconceivable if you told it to anyone eight years ago.

3) Secrecy. Over-classification of classified documents.

4) The Patriot Act

5) Bullying. Bullying of foreign nations for support for the above unjust Iraq war. Bullying of congressional leaders for support. Bullying of the U.N. to pass the war resolution, or else. It's called negotiating when there's a give and a take, and it's called persuasion when there's a well-explained and well-grounded rationale for action. It's called bullying if threats are made and fear is induced in entities that should be our allies.

6) Over-simplification of foreign viewpoints. You don't have to be either "for us or against us".

7) "Axis of evil". Well so much for negotiation.

8) Isolating North Korea to the point that they needed to build an atomic weapon to get any bilateral negotiation with the U.S.

9) War on terror. How does one win a war against extremism? You can't kill 'em all. There are always fringe elements in even the most tightly regulated societies, like gay people in Iran, bloggers in China, and terrorists in America.

10) Pre-emptive wars. The "Bush Doctrine", I think. Even police *should* have to wait until a crime is committed to detain people. And speaking of detaining people...

11) Guantanamo Bay. And more importantly, the lack of trials for prisoners there. (I hesitate to call them "detainees".)

12) Oh wait, not "prisoners" or "detainees". "Unlawful Combatants".

13) "Extraordinary renditions". They lead to "erroneous renditions" in the absence of the law.

14) Over-reaching of executive power to facilitate illegal wiretapping. FISA courts are just not necessary anymore.

15) The Alberto Gonzales Department of Justice. Attorney firings for partisan reasons, mealymouthed testimony by most Department of Justice officials including the Attorney General himself on several occasions, the approval of warrantless wiretapping, and the attempted repeal of Habeas Corpus.

16) Incompetent "loyal Bushies" like "heckuva job" Brownie.

17) Highly competent yet highly evil "loyal Bushies" like Dick "Overlord" Cheney.

18) Anti-choice-ism

19) Anti-intellectualism

20) Anti-Europeanism.

21) Right-wing judicial nominees. I'm not talking about Roberts or Alito, which almost any other Republican president would have nominated. I mean all the other judicial appointments to lower courts that add unfounded legitimacy to an extreme right-wing judicial viewpoint by giving high-level careers to cronies. This will lead to future right-wing judicial nominees to the Supreme Court who should have gotten rejected long ago for their lack of objectivity being seen as legitimate. These juditial nominees also nearly tore up the rules of the Senate.

22) Federal Marriage Amendment. So glad that one didn't get anywhere.

23) Stem cell research. Not so much for the position (federal funds only for "existing" stem cell lines) but for the process of letting the church's viewpoint into a science decision.

24) Not signing the Kyoto protocol for anti-UN reasons.

25) While we're at it, John Bolton.

26) Sabotaging the EPA to the point where entities are now suing the EPA because it's not strict enough in regulating emissions.

27) Trying to privatize social security. How's that stock market idea looking now?

28) Increasing the national debt from about $5 trillion to about $10 trillion. This riles me up so much, I'm going to need some more bullet points about the budget.

29) Tax cuts benefitting the wealthiest of our society at a time when we were finally getting Reagan's debt under control.

30) Massive non-mandatory spending increases primarily benefitting the military industrial complex. We've got loads of money for super advanced fighter jets, but we're losing wars against people who make explosives out of pvc pipe and wire.

31) Making war spending separate from the budget. This would make sense only if the expenses were unforseeable.

32) Not addressing health care at all. Seriously, during a decade in which health care spending rose faster than any other industry, how was health care almost completely ignored by the Bush administration?

33) Well, he did address one thing. He vetoed SCHIP.

I'm sure there are plenty more policies I dislike, and I know there are plenty more policies that others dislike (No Child Left Behind, immigration). But none of this stuff gets specifically talked about by any of the Democratic candidates. We need to remember this so that we can hold future administrations accountable.

Let's Not Bailout Capitalism!

Wow, and just when I was coming around on the whole bailout plan, the House of Representatives defeated Bailout, plan B, just a couple days after minority leader John Boehner torched Bailout, plan A. I think I've finally got my head around the whole short-term credit market and the commercial paper market enough to where I can see the banks' need for lots of capital. But I really love that invisible hand stuff! If the banks need money, some private entity should be able to pony up some money to buy the so-called "toxic debt" that may be worth only 50% of face value, but at a price lower than what the federal government would guarantee in order to make a profit, of course. However, if the "toxic debt" is truly worthless, the holders of said debt should completely write it off their books and see where the chips fall after that. Because, as we've seen this week, the markets hate unknowns.

But the reason I was warming to the Bailout, plan B, was because of the following three provisions:

1) The taxpayers would have gotten something in return; stock, warrants, some say in the companies they'd be helping. The potential to make some money back was there.
2) A provision to at some point pay for Bailout, plan B, if not in the rising future value of the "toxic debt" itself, then in the raising of taxes to cover the expenses. Plan B was not very specific about how not to leave a big gaping hole in the federal budget, but at least it required someone else 5 years in the future to have to deal with it.
3) The money would have been apportioned into three slices with some Congressional control over future dispensations. I'm more comfortable with taxpayer money being spent only if needed.

I hope all three of those provisions make it into Bailout, plan C.

But too bad. All moot. With Main Street's failure to give Wall Street a huge amount of money, Wall Street will be singing the blues on Beale Street because no one's partying on Bourbon Street or going to Broadway, and no one's shopping on Michigan Avenue, which reduces the number of advertising contracts from Madison Avenue. I'm glad I don't live on any of those metaphoric streets.

Let's Bailout Capitalism!

Over the weekend the treasury department put forth a bill now winding its way through the U.S. Congress that would allow the U.S. government to buy bad debt from several Wall Street firms in order to allow those Wall Street firms to continue to function. The number put out by the treasury department is "$700 billion". This is a huge sum the magnitude of which probably eludes most people.

$700 billion. That's $2,295 if every single American contributed. If $700 billion of debt was a GDP, it would be ranked 17th in the world behind the Netherlands and ahead of Turkey. We would need at least 12 Bill Gates's selling off their entire holdings to make it up. $700 billion is equivalent to 1,750 bridges to nowhere. If you laid 700 billion dollar bills end to end, the chain would stretch from the earth to the sun. On the plus side, it only adds 7% to our astronomically high national debt.

And this goliath of a sum of money is going from the taxpayers' pockets directly to the vaults of huge banks who are now seeing the downside of risky lending. In other words, not to the people who defaulted on mortgages and were foreclosed upon, but to banks which transfer more money every hour than you and I make in a lifetime and which practically define capitalism. I'm all for socialism of some things, but socialism of capitalism is a little too red for me. Our constitution guarantees lots of things to lots of individuals, but the right not to go bankrupt is not one of them. I mean, these banks took on these bad mortgage-backed securities knowing that they would be worthless unless enough homeowners were able to make payments: in other words, they took on risk, an essential part of capitalism.

Which brings up two good points from the NY Times:

"How is it that the administration and Congress, which have not tried to find huge amounts of money to, say, improve the nation’s health insurance system or repair bridges and tunnels, can now be ready to come up with $700 billion to rescue the financial system?"

Yeah! About health care: banks made poor decisions that could have been avoided. Lots (not all) of medical bills stem from conditions that cannot be avoided (breast cancer, lupus, fractured arm, sinus infections, autism, etc.). But we're supposed to pony up for banks and not for patients? And the other quote:

“Treasury’s 840-word legislative bailout proposal comes to more than $830 million per word,” Stephen Ellis, the vice president of Taxpayers for Common Sense, a fiscal watchdog group, said in a statement on Monday, adding that “when they come up with a title, that will drive the average dollar per word down.”

13 Brief Points on Why the Fair Tax Sucks

If he were to become president, Mike Huckabee has proposed a national sales tax of 23% on all items. This flat sales tax would come with a fixed rebate said to cover "essential goods and services" that everyone would be allowed to have as a sort of way to rig some progressiveness into the tax. Huckabee also proposes to eliminate the IRS, and repeal the 16th Amendment, which states that Congress shall have the power to collect taxes from any source of income without the tax revenue having to be proportional to the population of the state from which it is derived. I think this is a terrible idea, and here's why:

1) Any sales tax is a regressive tax. Rich guy Gallant and middle class guy Goofus eat the same amount of food, drive the same amount of miles per day and use the same amount of medical care. The difference is after Goofus gets home for the week, he's got a couple hundred dollars of spending money, while Gallant has a couple tens of thousands. A sales tax on that food, gas and medical care means a much higher proportion of Goofus's money goes to taxes than does Gallant's money, which imposes a higher burden on Goofus than on Gallant. A progressive income tax attempts to impose a more equivalent financial burden on both Goofus and Gallant.

2) The figure "23%" is awfully misleading. The way our state and local sales taxes are described is a tax on top of the price of the good; i.e., if an item costs $100 and there's a 6% sales tax, the amount of money coming out of your wallet is $106. The 6% is a tax-exclusive description. So if an item costs $100, and you pay $129.87 for it, wouldn't it seem like you were having a 29.87% sales tax imposed upon you? Not according to Mike Huckabee and the proponents of the Fair Tax. The 23% sales tax described by www.fairtax.org is a tax-inclusive description as an attempt to compare it with an income tax. In reality, it's a 29.87% sales tax. But 30% sounds effing huge, so they play with the math in order to fool a bunch of people.

3) Most of us would end up paying higher taxes. For people living in poverty, the rebate would just about eliminate any of their tax burden thanks to the fixed rebate jiggered into the plan. For people making more than $200,000 a year, their personal tax burden would fall anywhere from 45% to 53%, while for people who earn between $15,000 and $50,000, the tax burden would increase as much as 7%, as I found out when I used www.fairtax.org 's own tax calculator. (Numbers from President's Advisory Panel for Federal Tax Reform)

4) The IRS couldn't possibly be eliminated. The government runs on revenue. It has to have an agency to collect it! You can call that agency whatever you'd like, but it would still be a massive government bureaucracy. In the case of the Fair Tax, you'd need two bureaucracies: one tax-collecting agency to collect sales taxes from businesses, and another tax-distributing agency to dole out those monthly rebates.

5) A President can set an agenda, but a President cannot change the Constitution alone. As we all recall from Government class, it takes 2/3rds of Congress plus 3/4ths of the states to ratify a new constitutional amendment. So in the years that it would take to officially eliminate Congresses ability to collect individual income taxes, we'd get all kinds of new sales taxes, resulting in potential double taxation. Yippee!

Okay, I'm running out of time, so the next points will be short.

6) Don't you notice taxes a lot more when you see a price and you have to pay an amount that is substantially higher than that price, rather than when you see a check with your name on it?

7) There are doubts as to whether or not the Fair Tax will even be revenue neutral at 30%, especially whether or not it will be in the future.

8) Oh yeah, all those state sales and income taxes that we currently have would of course still be on the books. So for states with income taxes, you'd still have to file a return every year, and you'd still have to pay an additional 5-8% for any goods and services purchased. And this is supposed to be a tax reduction?

9) The rebates do vary by number of children, but a single mother would have to have three children to equal the rebate given to a childless couple. Awesome for me, but seems anything but Fair.

10) Retirees have had their income taxed all their lives, and now that they've developed a nest egg, it will now be taxed when they try to spend it. Seems a little unFair, no?

11) High income earners are able to save much more than low income earners. According to the Bureau of Labor Statistics, the lowest quintile of earners spends 198% of their income, while the highest quintile spends only 61%. Therefore, any sales tax would penalize low incomes much more than high incomes. While the Fair Tax would encourage saving money and not going beyond one's limits (something this country apparently needs), it's just not possible for a lot of people to save money, especially when you're just starting out in life.

12) Fair Tax people promise that the price of goods and services will fall once the income tax is eliminated. I'm not an economist, but don't wages also have to fall in order for that to happen?

13) In order for it to be revenue-neutral, the 23% rate assumes that no fraud, evasion, or EBaying exists.

The Bushie School of Positive Thinking and Economics

In a busy news week last week, what with the impending Ahmadinejad visit, the ongoing Jeffs and Spector trials, the reemergence of O.J., and Britney’s “adorable mistakes” that aren’t related to lack of underwear, a commonplace occurrence like George W. Bush saying something stupid can easily be glossed over.

President Bush was awkwardly holding a press conference involving the nation’s economy. When asked if there was a risk of a recession in the U.S. economy, the President replied, “You know, you need to talk to economists. Uh, I think I got a B in Econ 101, heh heh.” Well he obviously wasn’t talking about his college classes at Yale. It has already been shown that at Yale, Bush got a 71 and a 72 in two semesters of economics. But he wasn’t done yet! He goes on to say, “I got an A, however, in Keepin'-Taxes-Low, and Bein'-Fisky-Fiscally-Responsible-with-the-People’s-Money.” I don’t think Yale even offers classes with those titles. What school did Bush think he had attended?

Well, through some internet research, QP has found that apparently President Bush has an associates’s degree from the Bushie School of Positive Thinking and Economics, a 2-year community "internets-only" college located just outside Waco, Texas (he’s also head groundskeeper for his alma mater). But clearly, at the Bushie School, they participate in rampant grade inflation. Therefore, QP will try to correlate the grades given by the Fightin’ Tax Slashers of the Bushie School with more real-world grades.

Econ 101: The Basics

Anyone who got a C- in Economics should be able to tell you that when you increase spending (Iraq War, $600 billion since September 11, 2001) and you decrease revenue from taxes, you’re going to be in trouble financially speaking. Since Bush is not able to tell us this, it must be assumed that he would have done no better than a D in the real world.

BUSHIE GRADE: B
QP GRADE: D

Econ 201: Keepin’ Taxes Low

Well, he certainly did slash taxes, and this year the richest 1% will pay 3.1% less in income taxes than they did in 2000. The poorest 99% of us will only pay on average 1.4% less than we did in 2000. (Source: CBO) That’s $600 savings for the median income earner, and at least $10,850 in savings for the top 1%. Not to mention all the capital gains taxes and dividend taxes that President Bush cut, which benefit only people who invest money (not the poor). But it seems Bush studied hard for this class

BUSHIE GRADE: A
QP GRADE: A

Upper division course
Econ 301: Bein’ Fisky Fiscally Responsible with the People’s Money

His Bein’-Fisky-Fiscally-Responsible-with-the-People’s-Money course must have been a total blowoff, because he has certainly not demonstrated his capability to lessen government spending. The day Bill Clinton took office in January of 1993, the total outstanding public debt was about $4.1 trillion. Due to prior administration decisions, the debt grew in 1993 and 1994, but an economic boom and wiser money management kept the debt at about $4.9 trillion for most of 1995. The public debt lurched over $5 trillion for the first time on February 23, 1996. From then until September 11, 2001, a period of 67 months, the debt only grew by about $700 billion. Since that infamous day, the total public debt has skyrocketed. $6 trillion was reached for the first time seven months later, on March 14, 2002. $7 trillion was passed 22 months later on January 15, 2004, and $8 trillion was reached 21 months after that on October 18, 2005. Another 22 months went by before $9 trillion was reached for the first time last month. (Source: Treasury Dept.) It will take at least four more years to achieve surpluses again, according to the CBO, and that’s assuming that Bush cuts troops in Iraq substantially and doesn’t push for making his tax cuts permanent, which is unlikely.

BUSHIE GRADE: A
QP GRADE: F

BUSHIE GPA: 3.67
REAL-WORLD GPA: 1.67

Conclusions:

That degree's worthless.

- QP