Alan Simpson is about as old guard as you get. Sure, I could be snarky and say, "You were in the Senate when this lie was kept going - you were part of the problem ... " but I won't do that. I actually increased my respect in the old Senator. He is telling the truth.
But here is what I find most interesting. When you listen to Simpson - all he says is exactly right. When you listen to the guy behind the camera, you have a view into the mind of the economicaly ignorant that we will be fighting with for the next few decades who just will not get the fact that it was all a house of cards.
All of it. Watch the video.
Now read Laffer's latest;
On or about Jan. 1, 2011, federal, state and local tax rates are scheduled to rise quite sharply. President George W. Bush's tax cuts expire on that date, meaning that the highest federal personal income tax rate will go 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to 55% from zero. Lots and lots of other changes will also occur as a result of the sunset provision in the Bush tax cuts.Joy.
Tax rates have been and will be raised on income earned from off-shore investments. Payroll taxes are already scheduled to rise in 2013 and the Alternative Minimum Tax (AMT) will be digging deeper and deeper into middle-income taxpayers. And there's always the celebrated tax increase on Cadillac health care plans. State and local tax rates are also going up in 2011 as they did in 2010. Tax rate increases next year are everywhere.
Now, if people know tax rates will be higher next year than they are this year, what will those people do this year? They will shift production and income out of next year into this year to the extent possible. As a result, income this year has already been inflated above where it otherwise should be and next year, 2011, income will be lower than it otherwise should be.
Also, the prospect of rising prices, higher interest rates and more regulations next year will further entice demand and supply to be shifted from 2011 into 2010. In my view, this shift of income and demand is a major reason that the economy in 2010 has appeared as strong as it has. When we pass the tax boundary of Jan. 1, 2011, my best guess is that the train goes off the tracks and we get our worst nightmare of a severe "double dip" recession.
...
In 2010, without any prepayment penalties, people can cash in their Individual Retirement Accounts (IRAs), Keough deferred income accounts and 401(k) deferred income accounts. After paying their taxes, these deferred income accounts can be rolled into Roth IRAs that provide after-tax income to their owners into the future. Given what's going to happen to tax rates, this conversion seems like a no-brainer.
The result will be a crash in tax receipts once the surge is past. If you thought deficits and unemployment have been bad lately, you ain't seen nothing yet.
Ignore economics at your own peril.
36 comments:
All across Europe, governments are slashing the social spending - even the maligned Greek riots were attempt to stop cutbacks. It took the currency crisis to get politicians moving, I am afraid in the US only a dollar collapse threat will move the DC...
Did someone say dollar collapse?
Now that's how to engage one of those "ambush journalists." Far better tactic to just talk, and be forthright in making sure facts are treated as facts and bs as bs. Or, you can just beat them up....not such a good idea, eh?
Certainly gives me a tiny bit more respect for Congress.
Gloom and doom and over hype. What you should be saying is that taxes are not increasing-they are being restored to what they were-even during the Reagan years. That's what happens when you start a stupid war that you then refuse to make your own people pay for. I've done the math, the net effect on me is relatively minor. Probably because I'm not a moneybags like Phib. :-)
Furthermore-I don't follow your idea about the rollover of IRA's. Move them from traditional to Roth is going to be based on individual circumstances. For me a traditional IRA still serves me better since I will be in a much lower tax bracket when I retire, than I am now. And so long as the money remains invested, which it will have to be, then its still capital available for large corporations to invest.
The worse thing to fear is the fact that so many products are not produced in the US anymore. A direct result of making shareholder price the only thing of value to companies anymore.
Of course. And Germany did not invade Poland and Czechoslovakia - it was only "restoring" borders.
I understand now.
Also - look at the deficit over the last 18 months (-) the defense budget ... that has nothing to do with Bush. It also has nothing to do with war.
Sure. What would Arthur Laffer know?
Funny how the "Doom & Gloomers" from a few years ago were proven right but now the left wants to ignore them again. Everything must be really great with the world, after all, Obama's in the White House and the Democrats are running congress. How could anything go wrong.
These are the same bozos who will raise taxes on tobacco and gas to drive down consumption but don't think raising taxes taxes on profits and economic activity will have the same effect on the economy. They increase the costs of employing people but are surprised when businesses don't hire people. They threaten huge increases in the cost of doing business and are shocked when those with money to invest just wait to see what actually happens first. In other words, when the most economically ignorant president in history follows the advice of socialists who are more interested in transforming America into another failing European style state than they are in providing stability in the marketplace, people are hunkering down, waiting for the storm to pass, and sanity to return.
If Obama's policies were forced on us by another country we'd consider it an act of war. Which of course, it is. We (meaning the country) asked for it though.
And, now, for something completely different, 66 years ago today, the USN held a Turkey Shoot. Just so you remember. " Turn on the lights," as a famous Badger once said. ( He was from Hillsboro, WI )
US subs had a good hunting too... IJN was left practically without air arm after that battle, leaving the empty carriers to be used as bait in Leyte. (which ALMOST worked - if not for spanner in the works known as Taffy... cue Scooby Doo villain grumbling about meddling kids)
Medvedev aside just watch the gold prices....
Doin' more than watching. Currency and inflation hedges.
I thought we were also supposed to see the cost of health care paid by an employer added to our W-2s as part of our "earned income" on which to be taxed....
What would John Galt do?
I gotta hand it to those boyscouts at the gold places. They are really sticking their necks out for our welfare. Imagine! They're willing to trade all our soon to be worthless green paper money for gold ingots and such so that when there's rioting in the streets, we'll be able to buy bread with bullion! What will they do with their warehouses full of that green worthless paper then!? (Burn it for fuel?) It brings a tear to my eye that they are willing to make that tremendous sacrifice for us. I see the commercials on tv and how they want us to send that increasingly worthless paper to them in exchange for something of real value... There are still good, noble people in the world! ;)
I loved the part where the guy tried to rebut his assertion that SSA was in the red by saying something about how it was still in the black *if you count interest earned on the Treasury notes*.
Where does the money to pay for the interest on a Treasury note come from? Well, the same place that the money to pay for the principal comes from...
Love the economic analyses. Had the opportunity to hear industry economists in the past few weeks, so here's one more piece to the puzzle, beyond the SSA strap on, declining demographics, and lack of a "lock box" plus elected votebuyers currently making things worse.
This team was saying 2011 would likely get better in general, with stubborn unemployment inching down to hitsorical levels of 5-6-6.5 by maybe - repeat maybe - 2015. The concern was reasonable probability of housing defaults dragging us down into double dip land. The number is approx 11-15 million homes - and homeowners - in some level of distress, in all cities and towns, but of course concentrated in some states like FL. With crafty 0 down mortgages (require minimal payment), used by folks looking for an always up real estate swings, now a large percentage are coming due in 2010, here's the effect.... some of the current spending uptick may be attributed to homeowners 'strategically defaulting' meaning they're gonna walk away and leave keys and a mess. Eventually. In the meantime, their incremental spending is what would have been their mortgage payment of $1,000-$2000 monthly average. They'll still have to live somewhere, and costs will increase.
Keep the truth coming, even if it includes gasbag Senators. History, economics, are all repeated and lost periodically. And it still remains, of course, "allGeorgeBush'sfault".
unless you fall victim to another Rossevelt gold grab
Now *that* is the definition of voodoo economics, aka perpetual motion, gummint style...
But even Simpson buys into part of one of the many myths about SS when he agrees with the interviewer that it is a form of "Social insurance," From a technical/legal aspect SS is NEITHER an insurance NOR a retirement plan. It is neither fish nor fowl. It is a chimera--a giant ponzi scheme now rapidly unwinding despite the fact that unlike other ponzi-scheme authors, Congress can go back to the early original "investors" i.e., marks, and demand further contributions in the form of higher taxes.
That it is not an insurance plan may be seen by the fact that a) no medical underwriting is done for the "ins" portion of the "premiums" b) the so-called "death benefit" is a taxable event on the survivors 1040, c) most people on SSI disability have never paid a penny into the system, and d) there is no contractual obligation enforceable by the courts for Congress to pay out a dime, and, e) individuals do not own contractual policy ownership.
That it is not a true retirement system, but instead an income redistribution system may be seen by the fact of, a) no contractual rights/ownership by individuals, b) no contractual obligations by Congress, c) neither accrued nor even imputed "rate of return" on plan contributions as there are no plan assets and d) an internal transfer of monies from the highest wage earners who are only allowed to retire at 40% of pre-retirement income to the lowest wage earners who are allowed to retire at 70% of pre-retirement wages. ("from each according to his ability to each according to his need")
SS was a socialist band-aid to stop the country from going Communist and/or prevent the election of Huey Long, who would have given FDR a run for his money in 1936 with his even more expansive "Every Man a King!" "share the wealth" program. Long, a tremendous stump speaker, smart as a whip, and with a program designed to appeal to a depression-weary America, might well have beaten FDR. SS was designed to counter that as a POLITICAL devise--NOT a sound financial one--as FDR himself is on record admitting.
Just makes you proud to be an American, huh? Invest in ammunition, gas, and non-perishable food.
Just makes you proud to be an American, huh? Invest in ammunition, gas, and non-perishable food.
so I'm confused, GW Bush did not turn a surplus into a massive deficit?
you say the deficit has nothing to do with war, so does it have anything to do with Bush running the economy into the ground? (maybe because of the massive sinkhole in Iraq)
and the Germany analogy is just b.s. Whenever someone had to invoke the Germany/Nazi reference, they really have nothing to say.
<span>another view from crooks and liars</span>
<span>you'll see that Alex Lawson, Simpson's questioner, is well-informed, unfailingly polite, and a nice guy. Simpson, on the other hand, is raving like your drunken right-wing uncle at a Thanksgiving dinner gone wrong. What's he really saying here?</span>
<span>SIMPSON: Listen. Listen. It's 2.5 trillion bucks in IOUs which have been used to build the interstate highway system and all of the things people have enjoyed since it has been setup.</span>
<span>LAWSON: Two wars, tax cuts for the wealthy.</span>
<span>SIMPSON: Whatever, whatever. You pick your crap and I'll pick the real stuff. It has to do with the highway system, it was to run America. And those are IOUs in there. And now there is not enough coming in every month </span>
<span>LAWSON: ---(I)t's my understanding from actually looking at the 1983 commission (which revamped Social Security), they actually started prefunding the retirement of the baby boom by building up that huge surplus. </span>
<span>SIMPSON: They never knew there was a baby boom in '83.</span>
<span>Really? They didn't there was a baby boom ... in 1983?? They didn't know how many babies had been born in the years 1948-1964? Here's the real reason Alan Simpson says outrageously false things like that:</span>
<span>Here's the bottom line. Simpson doesn't want to force the government to pay those bonds back, because it will probably require new taxes to pay for them.</span><span>you get the idea. </span>
<span>Alan Simpson isn't just a cranky old man ... he's a cranky old man gunning for the financial security of older Americans.</span>
... nice, well informed people can also be wrong.
You also demonstrate a lack of understanding about what those bonds are and the nature of unfunded mandates. Additionally, I don't know how old you are - but it is the post Baby Boom that is going to be screwed if we don't change anything. The Boomers will not be the ones paying off the debt.
The Economics is clear - and this isn't a Dem Rep battle either. It is trying to get an understanding among the public that just because a duck floats on water doesn't mean a witch does too.
Who said anything about Nazis?
<span>schumpeter,
When is the Obama administration going to take responsibility for ANYTHING it does? Next year? 2012? Never?
Entitlement spending is roughly 3.5 time that of defense spending. Obama forced through a "stimulus package" of nearly $800 billion, that didn't create employee one, but DID increase government intrusion into the private sector business world in a very damaging way. The Obama budget deficit is $1.75-1.9 TRILLION, depending on whose estimates you use, more in 17 months than the GW Bush administration had in EIGHT YEARS.
How much of that is due to Iraq and AFG? A very small portion. Eliminating the figure entirely would still leave the most massive budget deficit in history. How much of it is GW Bush's doing? ZERO. It is Obama's signature on that budget. Though he may claim Bush made him sign it.
So can the "Bush and his wars" crap. This guy is an economic train wreck because he is employing the same socialist-communist crap that turned Europe into the debt-ridden and impotent economies you see today.</span>
Very little as it turns out.
"How much of that is due to Iraq and AFG? A very small portion."
Actually a lot. The total cost of the wars since 2001 has cost 1.7 trillion dollars. By the time you add in the additional costs on the defense budget, the money we'll have to spend to help future veterans, and money to refurbish a military whose equipment and materiel have been greatly depleted, the total tab to the federal government will almost surely exceed $1.5 trillion.more. So all told the wars-assuming we get out before 2012 will have cost us 3 trillion dollars.
Don't tell me the war did not have anything to do with out current debt. Furthermore-the wars could have been fully funded by a 1.00 a gallon surges on gasoline(this still makes the presumption that it was necessary-which Iraq was not) to make all Americans feel the pain of the war.
Or move to Thailand-I'll take that option.
Skippy,
Look at the FY10 budget. That is all Democrat. Take out the war cost beyond the avg defense budget for the last 20 years. Come back after that.
You gotta be kidding me, Skippy. So I am now to believe a neo-pinko from UNH spewing his class warfare crap about the "rich finally paying their fair share"? Please.
Laffer is right. And the smart money knows it.
current budget all democrat but what about the accumulated debt? a lot of the already borne war costs buried in there, interest on that debt is in the current budget and ongoing war costs in the current budget. coming- bill to reset the miltary equipment and veterans benefits.
we didnt need to have a surcharge on gas to fund the war because 'iraqs oil revenues will fund the costs of the war' -remember that whopper?
is it not a fact that bush inherited a surplus and we were actually starting to pay down the long term debt of the u.s. during clinton's last years?
So you missed the whole thing about unemployment didn't you? Laffer also never came up with a satisfactory explanation as to why revenue decreased during the early years of the Bush Presidency. What really happened was that revenue plunged, as a percent of GDP, in the early Bush years, then staged a partial, but only partial, recovery. And that recovery seems to have ran its course and then the market fell out totally. Now the Party orthodxy blames Fannie Mae and Freddie Mac. However, that's just not true, which even Bloomberg pointed out, "most subprime mortgages did not meet Fannie or Freddie’s strict lending standards. All those no money down, no interest for a year, low teaser rate loans? All the loans made without checking a borrower’s income or employment history? All made in the private sector, without any support from Fannie and Freddie.”
Plus no matter how you slice-1.7 trillion could have bought a lot of things for ourselves, including new ships, public services, and things that would have benefited us in the long run.
Skippy, as I recall, there was a whole lotta shaking up going on in the economy after the dot-com bubble burst. All those no bricks and mortars businesses that made nothing, built nothing, but had huge IPOs fell like a house of cards in the late '90s and early aughts. That had a ripple effect as a lot of employees in the tech sector lost their jobs and their lofts and their beemers. Had a ripple effect on real estate in many tech-heavy areas. Oh... and very early in the Bush administration... a little event... 9-11. Had far-reaching impacts on the travel industry, the insurance industry and spawned uncertainty that was felt across the board in the economy. I find it hard to believe none of these well-publicized events aren't included in the economic picture you paint.
As for $1.7 trillion... well, a lot of it does get plowed back into our economy in the form of salaries that are spent on everything from automobiles to toothpaste and housing, government contracts, and stuff made in America. As I recall reading, that "free healthcare" for America is going to cost us more than $1.7 trillion in the long run. And I bet my money it will be shoddy healthcare at that.
Bush inherited a surplus that was gained largely at the expense of the military. The "peace dividend" and the cut in our intel budgets had a lot to do with the catch-up game we had to play after 9-11. When we went to war "with the military we had, not the military we wanted."
As for Iraqi oil paying for the war... gee, we can't win, can we? That's a "whopper." But if we had taken their oil as repayment, then it would have been "blood for oil."
wasnt it Secretary Wolfowitz who made the 'oil revenues' statement?
Revenue "plunging" as a percentage of GDP is a red herring and a favorite of the far left to justify taxing the hell out of those who produce the majority of our economic growth.
DB is exactly right. These marvelous surpluses of the Clinton Admin were gained at the expense of the US Military. Les Aspin and Levin et. al. proceeded to cut force strength well past the point of good judgment, yet those who stood and applauded the transfer of those dollars to entitlements were the first to scream that the military was "broken" because we no longer had 18 or 14 divisions to deploy, but only ten. And 2.25 instead of 3 Marine Divisions. What would sixeen brigades and three Marine regiments have meant to the deployment cycles? Gee, a hell of a lot. But they were cannibalized to increase social spending.
$1.7 trillion? That could buy a lot? Interesting figure. Misleading, but interesting. It roughly coincides with ONE YEAR of budget deficit under B Hussein Obama.
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