Monday Open Thread
Hillary Clinton for President, 2016:
All kinds of circumstances could intervene between now and 2016 to derail her—politics, health, family matters, a renewed Clinton fatigue—but Hillary’s numbers are enormous, her ambition equal to her capacities, and she was in high political gear.
Nancy Pelosi for Speaker, 2014:
“If Speaker Boehner refuses to schedule this widely-supported [Middle Class Tax Cut] bill for a vote, Democrats will introduce a discharge petition to automatically bring to the floor the Senate-passed middle class tax cuts,” Pelosi said in a statement.
Under a “discharge petition,” a bill can be brought to the floor without going through a committee or without approval of House leadership. The bill would need an absolute majority – 218 votes – to pass.
While there are only 192 Democrats in the House, some Republicans have expressed support for the bill.
Meanwhile, instead of negotiating in good faith like adults, the Republicans are doing what they do best: acting like petulant spoiled brats:
Republicans are seriously considering a Doomsday Plan if fiscal cliff talks collapse entirely. It’s quite simple: House Republicans would allow a vote on extending the Bush middle class tax cuts (the bill passed in August by the Senate) and offer the President nothing more: no extension of the debt ceiling, nothing on unemployment, nothing on closing loopholes. Congress would recess for the holidays and the president would face a big battle early in the year over the debt ceiling.
Two senior Republican elected officials tell me this doomsday plan is becoming the most likely scenario. A top GOP House leadership aide confirms the plan is under consideration, but says Speaker Boehner has made no decision on whether to pursue it.
Under one variation of this Doomsday Plan, House Republicans would allow a vote on extending only the middle class tax cuts and Republicans, to express disapproval at the failure to extend all tax cuts, would vote “present” on the bill, allowing it to pass entirely on Democratic votes.
I do NOT want the House to pass the Senate tax cut bill, which offers considerably less than advertised. Everybody is looking only at the top income tax rate and forgetting to look at investment taxes.
In the Senate bill, dividend tax rates for the rich are not expired to the Clinton rates but are only rolled back to 20%. This is Obama’s 2008 proposal, which I held my nose over at the time.
Full expiration would reset dividends to the Clinton rates of being treated as regular income @39%, which I think is much better policy because it restores the preferential treatment for long-term gains over short-term. (The Clinton capital gains tax was 20%).
Tim Geithner was just quoted as saying the Administration is committed to the Clinton rates. Does he mean that for investments too, or was he just being sloppy?
The Senate bill is a better deal for Republicans. Full expiration is a better deal for Democrats, even if it means we have to fix the middle class tax cuts in January.
Besides, the bill is a Senate-originated tax bill and would likely fall under a court challenge, which leaves plenty of opportunity for Republican procedural mischief.
I will alert the President and the media. 😉
Well, despite DD’s amusement, this is probably the last best chance to restore preferential tax treatment of long-term gains, which is one of our best pro-growth tools in the toolkit.
If we want to get it back in the future we will have to pass a tax increase. This is an example of Democrats snatching defeat from the jaws of victory. Which leaves me rooting against the Senate bill.
No, this is an example of you never being satisfied or pleased.
2010 called, they want their comeback lines back. Next I suppose you will tell me I want an emo pony or some such.
Pushing the Senate bill is an example of pre-compromising on sound tax policy that has already been passed and will take effect in 29 days unless we screw it up.
If the GOP thinks it can regroup and get its obstructionist, economy-tanking mojo back by holding the debt ceiling hostage in January, I say let them.
It is the flimsiest bullshit they’ve got and in view of the last term’s credit downgrade, the President would have the leverage to pull the rug right out from under them.
you’re pushing a rock up a hill, puck.
Who here actually thinks this could possibly turn out well? The GOP has no interest in governing, fixing the economy, or (still) doing anything other than making the Socialist Black Guy look weak or incompetent.
know what is going to happen? the tax rates on everyone will be extended and defense spending will be increased? how do i know that? Because the GOP gets what it wants. They are willing to do more than the Dems are willing to let happen.
that simple.
You cannot reason with a psychopath… much less a whole party of them. They play the Fiscal Policy optics game better, and they like to play dirty. I do not see a way….. unless the dems can somehow convincingly tie social issues into this….. that the GOP loses public support.
“but Ben, you whiney hair-on-fire fake socialist nut-bag…. the Dems won the election! that is the only show of public support they need” You are forgetting, generic name caller, that the attention span and memory of the American public is non-existent. Hell, Kate is pregnant! who even REMEMBERS who won the election? Last night on Fox, they said Obama isnt making a deal. he stinks
You guys are thinking like informed left-leaning bloggers, when you should be thinking like evil spin-doctors who know how dumb Americans can be.
If you don’t understand tax policy, just say so. The preferential treatment of long-term gains was one of the biggest drivers of the 1990s prosperity; now we have it back in hand and are preparing to throw it away. Income inequality and the death of the middle class is driven by income from dividends and capital gains being compounded at 15% since 2001.
Puck is correct. Our economic problem is rooted in a shortage of long term investment. Our tax code punishes long term investment, while rewarding those who for example by futures of gasoline at $3.33 and then use the media to panic the price up to $4.44.. The latter make out well, but those who built a manufacturing plant, get voted off the board for making bad investments.
Puck is not correct. Our economic problem is rooted in a shortage of consumer DEMAND. If consumers were buying at the pace that they were a few years back, the tax treatment of long-term gains wouldn’t be at the top of the list. Gearing up to capture marketshare would be.
Cassandra, it’s a chicken and egg problem. It’s OK for both of us to be correct on this. Demand will naturally pick up when businesses decide they’d rather build or hire than pay taxes on their earnings. Raising investment taxes will help them make that decision.
And stimulus to increase demand will hardly work until we plug the investment tax hole it keeps draining out of.
Cassandra is correct. Even if Puck got the tax outcome on investments he wishes, it would be meaningless unless and until wages increase for the middle class to drive demand. No one invests to expand production or to produce new goods and services unless there is a market to support it. To do otherwise is to fall into one of the classic crises of capitalism: the crisis of overproduction. Investment doesn’t drive demand. Rather, demand drives investment because increased demand creates potential markets that investors will find it opportune to satisfy. Increased demand and their consequent new markets will then create the need for more employment, reducing the unemployment rate. Increasing the wages of the middle class is key to most of the USA’s economic problems.
Demand trumps everything. That’s why we need to re-inflate the housing bubble.
I don’t know any way to increase wages other than to reduce unemployment to the point where employers begin to bid up wages. We can’t pass a stimulus big enough to do that. At any rate, as long as investment taxes are 15%, the stimulus money will go straight to the pockets of the 1%, prolonging the jobless recovery.
Dana and Casssandra, you are fighting the last war. Right now, there simply aren’t enough middle-class consumers left to spark a demand-driven recovery. Our tax policy discourages hiring in favor of short-term profit taking.
To underscore my point, corporations are raining money onto their shareholders before the end of the month:
Walmart did the same thing a few weeks ago.
Just giving people more money to spend on crap made in China is not going to help our economy. Raise everyone’s taxes, and use the revenue to pay for things we are collectively too dumb to buy on our own.
Demand will naturally pick up when businesses decide they’d rather build or hire than pay taxes on their earnings.
No.
No business hires or invests in production if they don’t see a need for it. Demand.
No one will build a plant to build widgets if there is little expectation of actually producing and selling those widgets at the plant capacity. No one is ever going to change the tax policy enough for a new idle plant to be worth more than capital gains.
Costco is borrowing about $3.5B in order to payout an irregular dividend of about $3B, mostly to family shareholders. This is an unusal transaction that deserves to be looked at alot more closely than trying to make a point that can’t be made here about capital gains tax. Certainly they (and other companies) are rushing to send out money before the taxes go up. But there is NO WAY that Costco was going to spend that $3.5B on new stores in the next year.
Cassandra and/or Dana, what is your preferred plan for increasing demand?
The incentive to hire is that you are actually creating new customers.
Decreased unemployment reinforces demand. It’s impossible to decrease unemployment in the private marketplace unless demand is already extant from the vast majority of consumers who are employed. The initial and foremost priority needs to be increasing wages for those who are employed. That can be done through a variety of incentives, regulations, and law changes. The principal solution is to make it easier for workers to organize. But that is only one of a few necessary ways. Passing something like a living wage is another. All of that will create a consumer base with, importantly, the MEANS to demand more, goods and services. That increased demand will in turn make it more lucrative for business persons to invest and expand than return funds as dividends. The climate of investment and expansion, driven by a more lucrative consumer base, will require more hiring, thus reducing unemployment.
I agree we need a good round of wage inflation to counter the commodity inflation we are experiencing. I’m not sure we can make much of a dent without increasing the supply of jobs though and bidding up wages.
I don’t think we are anywhere near passing a living wage law, and I’m not sure I even agree with that anyway. A healthy minimum wage increase would be helpful though, as would anything that helps strengthen unions.
I would like to see something that restricts permatemps and large part-time workforces. Something like basing benefits on FT equivalent, or cutting workweek to 35 hours. I can’t see anything like that passing by today’s Republicans or even Democrats.
Immigration amnesty might help if employers of the newly legal workers are then held to US labor standards. On the other hand the offer of amnesty will draw in new illegal workers to bid down wages, so it might be a wash.
Keep in mind that this was a credit recession and in gross numbers, Americans are still deleveraging. They are also wrapping their budgets around the fact that available credit ≠ increased wages. So that even after americans have paid down their debt to some reasonable level, they won’t be on the same spending binge. At least I hope not. One thing that would help Americans who are still underwater on their homes but able to make payments is to help them with principal reduction.
The other thing that would help increase demand is to increase employment. Going on an infrastructure building/maintenance binge would definitely help.
Forget about repatriating money back to the US, repatriate jobs back to the US.
It is funny to focus on plant investment strategy when employers sitting on a ton of cash could just pay the people they have more. Not like that will happen, but we get why not.
I’m surprised no one jumped on the News Journal article on the Delaware tea party’s latest Quixotic quest: smart growth and other land use initiatives. A group based in rural Kent and Sussex is arguing against limiting the sprawl that plagued New Castle County. Right.
How To Create Demand: sounds like another book title.
The Great Depression ended because of WWII.. Period. I don’t have the links because it’s been months since I saw this, but something very similar happened to labor in both of that and our economic downturns.
The farm economy collapsed and when it came back, mechanization meant far fewer workers were needed. Today’s service economy collapsed, and when it came back, artificial intelligence meant far fewer workers were needed.
A small business that required 7 workers a day, now only needs 5. Computers do the thinking and simply tell a person exactly when and what to do… If you imagine this happening across the nation, you can get an idea why we still have high unemployment.
Inventory every January for all retail used to be a gigantic ordeal. Temporary labor was in high demand the first 3 weeks of the year. Now a skeleton crew scans inventory in one night. Totals are in headquarters by 9:00 am.
If you look at corporate profits being made, their is little incentive to hire more, lower ones efficiency and make less while doing more work and suffering more migraines. …
Reliance on the Federal Government for stimulus is too small a hope to make a difference. Even though we hear of large amounts of money being thrown around and are grateful, it pales when compared to the private sector…. As an example, the entire Federal budget is $1.2 trillion. Just the profits from the corporate sector alone are $2 trillion every single quarter (just 65 working days). $8 trillion each year….
So the big question is how to get corporate money reinvested into the human beings across this nation…. The potential is there; it is huge; it can do a lot of good.
And that example comes from WWII… Fighting two simultaneous wars, we used every penny to throw into the war effort… What that meant to our investors back then, was that if you were building battleships and making tons of profit, you used that money to open a new shipbuilding yard and build more battleships… It also helped you make the proper choice by having a 94% top marginal tax slapped upon you. That high rate creates a high incentive to put every penny back into your business…..
So to pay for that, yes we printed a lot of money, and we carried the debt forward for decades, and…. had top marginal tax rates anchored in the 70 percentiles until finally Ronald Reagan cut them down to 50%….
Right now, private corporations live in the carrot patch. Free carrots anytime they want. And yet, with even more tax cuts (Republican philosophy) we’ve been buying dump trucks of carrots and bringing them in… More carrots are not the answer….
Elmer Fudd with a shotgun is the answer. So, in a rather simple way, making the act of investing one’s corporate profits into America become far cheaper than having all that money just sitting and growing in banks and funds… is the only way you can grow demand enough to pick this nation up and march forward….
And higher taxes are the tools that do just that…
If I have to pay 50% tax on $100 billion dollars, I’m damn well going to put as much money into my business (say $50 billion) leaving me with only $50 billion in cash, allowing me to wind up paying $25 billion in taxes…
Higher taxes are the economy’s best friend.
And, $50 billion being reinvested by every corporation in America, will create a … lot of demand….
No. It won’t. Demand comes from consumers who want stuff. Costco can certainly spend its $3B on building new stores everyplace, but it there are not enough people to buy enough stuff from those stores to keep them profitable and open. You can build a new widget plant in Wilmington and if there are not enough people buying widgets to cover that plant’s costs and make some money, that plant won’t be open for long.
WWII is an interesting case since that may have been the biggest stimulus program in history. For a few years, the entire economy was dictated by the needs of a war-time government. Taxpayers paid good money for all of those battleships — and it was the *demand* for those battleships that drove investment into new shipyards, not marginal tax rates.
http://www.huffingtonpost.com/2012/12/04/elizabeth-warren-banking-committee_n_2236898.html
FTW
Coons’ fiscal cliff whitepaper:
Facing the Fiscal Cliff
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