By Ethel S.

November 29, 2008 4:30 PM | Link to this

Two wrongs do not make a right and where is President Obama going to get the money for his financial package? If there is any lesson to be gotten from GWB, it is for the next President and Congress to be financially responsible. It is my understanding that PE Obama does not want to borrow the funds for his spending package, but wants to “print” the money. Great! So former Fed Chair Paul V fits perfectly into the Obama Administration as an advisor. You forgot to mention that Paul V helped Jimmy Carter bring about almost a 16% inflation rate before Carter left office to continue in the Reagan Administration. And all of this wild spending is guess work and we the taxpayers deserve a much more thorough, detailed, and complete discussion on all this spending plans including the goals, transparency, who sets the budgets and who is responsible, timetables, and most of all how it gets paid back. If PE Obama goes down the same path as GWB with throwing money on our troubles, that is not the change I hoped for.

By Rob

November 26, 2008 8:39 PM | Link to this

I’ll bet TRS is right wrt a Fannie/Freddie/GSE approach to defusing some of the explosives. If I remember my banking experience from the Reagan/Bush the elder period - we had the Resolution Trust Corporation (RTC) to help clean up the S&L debacle - at least as a “parking lot” for the real problems. For a period of time they were one of the ten largest US financial institutions until the crisis was resolved. Now the RTC is a distant memory. I also feel pretty good about Volker. Obama could do a lot worse than Reagan’s Fed Chairman to act as his lead economic advisor. Now about that complete turd of his pick at Treasury…..

By TRS

November 26, 2008 5:36 PM | Link to this

Rob - I don’t take your comments so much as class warfare as some of the others. These are interesting times. From what we read and hear, no one seems to know its effect. Most seem to believe it saved a free fall into an economic collapse and for that I guess we can be glad. I agree that that throwing money around isn’t going to solve the problem and it looks like we will be experimenting to see what works and what doesn’t (at least thats what’s happening now). I always remember my economics teacher saying perception is reality so part of the equation is attitude. With the good will the President Elect currently has, hopefully that will help; however, this problem is going to be around for awhile and patience may wear thin. My other concern - assume we get our economic house back in order again. What will happen - will the firemen leave the fire so to speak? For some in Congress it will be very tempting to want to keep their fingers in the pot. Then we are talking socialistic concepts. Hopefully they can resist that temptation or at some point in the future, we’ll have another Fanny/Freddie. Once things are headed in the right direction, the private sector needs to become the private sector again. Obviously it will need 21st Century oversight and regulation - not to much, not to little. Even Soros agreed with that. Obama has brought together some bright guys - I guess we’ll see if they can put things “together again.”

By Rob

November 26, 2008 4:54 PM | Link to this

Ethel, that’s fine. How about we do it this way. If it works like a charm, and the economy rebounds and everybody is talking about what a great program it was - then President Bush and Hank Paulson and the Republicans can take all the credit. And if it fails miserable, blame it all on Sen. Reid and Speaker Pelosi and the Democrats. Don’t worry about getting the credit - you can have it all if it comes to that. But so far, the only additional programs President-elect Obama has suggested is a $700 billion package. Just this week, Secretary Paulson authorized the Fed to purchase $800 billion in underperforming assets. Add that to the TARP at $750 billion, which was supposed to be used for asset acquisition but is instead now being used for “capital injection”, and you get $1.55 TRILLION of new spending literally authored by the Bush White House. I don’t know where you get $700 billion being bigger than just the last sixty days of Bush’s spending.

By Ethel S.

November 26, 2008 3:57 PM | Link to this

And Rob, it was passed by the Dem Congress too. It is still frightening to think about an even bigger spending package by the Obama Administration.

By Rob

November 26, 2008 3:46 PM | Link to this

Ethel - you can be as frightened as you want of all the “Obama” and “Dems” spending plans come January 21 - but your bigger concern for big spending and no real plan is right now, today, with the Bush Administration. If you add up ALL the stimulus and rescue packages up to and including the $700 billion TARP and the $600-$800 billion Fed asset acquisition requests, you have spending RIGHT NOW in the trillions, and Hank Paulson hits the tube every day with a new story on what he is spending it on. Let’s be clear - the biggest experimentation in authorized spending in the last 60 days comes to you courtesy of President Bush, Treasury Secretary Paulson, and Federal Reserve Chairman Bernanke.

By Rob

November 26, 2008 3:45 PM | Link to this

Ethel - you can be as frightened as you want of all the “Obama” and “Dems” spending plans come January 21 - but your bigger concern for big spending and no real plan is right now, today, with the Bush Administration. If you add up ALL the stimulus and rescue packages up to and including the $700 billion TARP and the $600-$800 billion Fed asset acquisition requests, you have spending RIGHT NOW in the trillions, and Hank Paulson hits the tube every day with a new story on what he is spending it on. Let’s be clear - the biggest experimentation in authorized spending in the last 60 days comes to you courtesy of President Bush, Treasury Secretary Paulson, and Federal Reserve Chairman Bernanke.

By Ethel S.

November 26, 2008 3:30 PM | Link to this

This is a lively discussion about tax cuts. I agree that when President Reagan and his brillant blue ribbon commission reformed Social Security in 1983, it was balanced by spending cuts. For example, all those federal employees who got Medicare and did not pay for it had to pay for it and even prisoners’s benefits like Son of Sam stopped getting Social Security while the Feds and State “housed” prisoners. So any tax cuts need to be in the same discussion of spending cuts. GWB’s biggest blunder is not reigning in the out-of-control borrowing and spending. And the success of the Clinton administration’s balanced budget came from the help of Newt Gingrich and the GOP Congress, all working in bipartisan way. This enornous economic spending package that the Dems are proposing at the beginning of the Obama Administration, is frightening. First of all, there has not been a thorough analysis of what works and what does not work. Throwing money for government work projects and any private industry appears to be only a temporary fix There needs to be a better design and leadership refining and explaining each part so the taxpayers seems to it that it really is working. So far, the economic proposals all seem to be guess work. I just hope the leaders of both parties guess right. Leslie, where are you?

By Rob

November 26, 2008 10:46 AM | Link to this

TRS - Call it class warfare if you want, all I’m suggesting is that we need two things - a budget closer to balance (at least current accounts) and a functioning market economy. I don’t think that’s class warfare, it just kind of makes sense. You make a great point on Reagan - with the top marginal income tax rate of 70%. But don’t confuse raising taxes with lowering marginal rates. In the same package where the top marginal rate went down, the bottom rate got raised from like 8 to 11 percent. All the Obama plan suggests is that just as rates going too high is an issue, they can (and have) go too low to the point of getting out of hand. Good catch on the investment point. I have only anectdotal data - like today’s Wall Street Journal or any economic news you like - kind of like your point on Katrina rebuilding. It’s antecdotal, but I’d point to the current condition. The Bush tax program has handed over literally billions of dollars to the hyper wealthy over the past four years who evidently have been investing it in art, gold, oil, or credit risk swaps - or God knows what other than production in the general economy. If the case had been otherwise, I think we’d have a crisis of different scope and scale, and we be talking about recovery in terms besides “bailouts” and the current administration’s socialism of everything from insurance to banks to auto manufacturers.

By TRS

November 26, 2008 12:30 AM | Link to this

Rob - you state that Keynesian only increases spending in times of recession to prime the pump. What government programs have been reduced after “stimulus” kicked in? That is the falacy of government spending - it just never goes away. As to Reagan, he entered office with the top tax rate at 70% and left with it being 28%. I don’t disagree that he was pragmatic and along the way had to make some choices he did not like (as his personal diary attests to); but, it doesn’t change his central premise which was that high taxes get in the way of creativity and low taxes spurs growth and increases revenue. What data do you have which supports your contention that the rich don’t invest? Never heard that before. Certainly it isn’t the bottom 40% who don’t pay taxes who “prime the pump” is it? No one object to anyone getting a tax cut - the objection was to increasing taxes on anyone. With the top 2% kicking in about 39% of the revenues now and the remaining 21% kicking in the rest (again 40% pay no taxes), how far do you want to take this class warfare?

By Rob

November 25, 2008 4:42 PM | Link to this

Look - if Reagan were half the believer in the modern redefinition of Reaganomics as he’s been made out to be - he just would’ve vetoed most of that stuff, a la (although in reverse) the Speaker Gingrich “train wreck” on the couple of Clinton budgets. President Reagan was not drug into those increases kicking and screaming like a petulant baby. He was if nothing else a pragmatist who understood reality. I’d modify your view of Keynesian theory to suggest that in pure practice governments fiscal policy should be counter-cyclical. A Keynesian model would only seek to stimulate growth through government spending when the economy is in recession. When the economy is expanding would be the appropriate time to apply tax increases in a Keynesian model. Come to mention that specifically, what the Bush Administration gave us was a tax reduction during expansion - and then added increased government spending. I don’t hear the Obama plan suggesting that the government can do the job better than the market. But what facts have proven out (even Greenspan admits this, for goodness sake), is that the market opearting on its own totally unfettered is a disaster waiting to happen. Would the Obama plan be the biggest Keynesian experiment in history? I doubt it - for starters it’s not pure Keynes economics, there’s enough “monetarism” in it to make Volker and Reagan proud. But it’s hard to imagine as big a leap as say FDR into the Fed model, Social Security, the WPA, etc. What gives everybody heartburn (as far as I can tell) in the Obama plan is the notion that tax cuts ought to be to the people most likely to spend and invest in the real economy (vs. the hyper wealthy who are not likely - and in fact have not been - to spend and invest in the real economy). But to my original point - the Bush Administration fiscal policies have been stupid on stilts. Lowering taxes while increasing spending is just irresponsible. Obama’s projected $700 billion in domestic spend - about what Bush has spent bombing Iraq back to the Stone Ages. Frankly, if we’re going to spend the money I’d rather have some new schools and hospitals and bridges that don’t fall in rivers.

By david

November 25, 2008 3:28 PM | Link to this

Obama, like Clinton, is not really a keynsian. The difference is that keynsian economics tries to give breaks to those on the bottom and middle, while suppy side gives handouts to those at the top. For example keynsian econmics would give payments to those who work at Citi, GM, etc., not to the owners, as we’re doing now.

By TRS

November 25, 2008 2:56 PM | Link to this

Rob - not to belabor the point but revenues did increase; however, spending increased subtaintially more. Reagan always supported spending reductions but with the Congress of that day, it was impossible and he had to do what he had to do. I believe the reality is that Congress increased taxes and Reagan had to go along with it. Seems to me mixing Keynesian economics with supply side and trying to get results hasn’t worked. Its my understanding that Keynesians seek to stimulate growth through government spending whereas supply siders do it through tax cuts, leaving money in investor hands and allowing the market to work. Each theory has goals which seem counterproductive one to the other. We are about to embark on the biggest Keynesian experiment known to mankind. The flaws in the theory are numerous including large deficits, bureaucracies which are hugely inefficienct, and politicians becoming the “king maker” rather than the market, putting the power into the hands of 535 politicians and the President and his cabinet. In essence, it could be said we are counting on less than 1000 or so people, whose self interest is getting reelected, to run the national economy. Thats great if their right, but when they are wrong - well just look at the results when a few politicians used Fannie/Freddie to promote their political agenda vs following good business practices. As flawed as the free market is, it is by far more efficient than government. By example, recently a news story recounts how a government funding mechanism for small landlords in New Orleans was created so they could repair their properties damaged by Katrina. Seems these smaller landlords kept the rent low and keep housing affordable. Due to bureaucratic hoops, very few of these landlords have received any money and as a result their are fewer places to rent and a few landlords now control many properties and the rents are high - so high that the people are now getting a government subsidy to help them pay their rent! In sum, considering Obama’s tax increase for the rich was not going to offset the 175B additional spending he proposed in the campaign, now that the real spending will be 700B (which history tells us will be more than that), what useful purpose will any tax increase serve when viewed through the prism of history and the damaged they caused after the ‘29 crash?

By david

November 25, 2008 10:35 AM | Link to this

It’s time to put an end to supply-side reaganomics once and for all. It’s just been an excuse to give more breaks to those who need it least, and I don’t see it trickling down. As Geroge HW Bush said “voodo econonmics”

By david

November 25, 2008 10:34 AM | Link to this

It’s time to put an end to supply-side reaganomics once and for all. It’s just been an excuse to give more breaks to those who need it least, and I don’t see it trickling down. As Geroge HW Bush said “voodo econonmics”

By Rob

November 25, 2008 9:57 AM | Link to this

Partisanship? Dude, I’m a registered Republican who worked as a Reagan volunteer during his second campaign. You can try to reinvent history all you want about Reagan, but the fact is that President Regan RAISED taxes where necessary. 1981 was the only “cut” he ever instituted, and as you recall it was followed by a sharp recession in 1982. After his first year, the notion that “Reagan cut taxes” is historically inaccurate. In 1982 he signed into law two major tax increases. The Tax Equity and Fiscal Responsibility raised taxes by $37.5 billion per year and the Highway Revenue Act of 1982 raised gasoline tax by another $3.3 billion. TEFRA raised taxes by almost 1 percent of the gross domestic product, making it the largest peacetime tax increase in American history. In 1983, President Reagan signed legislation raising the Social Security tax rate. This is a tax increase that lives with us still, as it initiated automatic increases in the taxable wage base. Consequently, if you have with moderately high earnings - you see your payroll taxes rise every single year. In 1984, President Reagan got through another big tax increase in the Deficit Reduction Act of 1984. This raised taxes by $18 billion per year or 0.4 percent of GDP. Finally the Tax Reform Act of 1986, which was designed to be revenue neutral, contained a net tax increase in its first 2 years. In the present day, the Bush tax policies coupled with President Bush’s profligrate spending have been nothing short of disasterous for the real economy. These are the facts - it has nothing to do with partisanship and everything to do with reality. We can’t afford his cuts while fighting two wars and keeping Social Security and Medicare. If you want the cuts - tell me which programs and wars you can do without.

By TRS

November 25, 2008 12:08 AM | Link to this

Now Rob - your partisanship is showing. Under normal conditions stimulus packages jump start an economy which is what the 1st one did. Then the tax cuts feed the economy with growth as it did pretty much up to this past September. To blame Bush for this collapse is not only pure partisanship but disingenuous. With the Fannie Mae and Freddie Mac we had Cronie capitalism at its worst, with politicians, primarily Democrats, seeking to micromanage the subprime market by imposing requirements that so many loans need to be made. This fueled the fire of greed on Wall Street. The record shows that whenever anyone, particularly Republicans, tried to do anything about it, they were blocked and demagoged as not wanting to help the poor. History shows that when Kennedy, Reagan and Bush lowered taxes, revenues grew; but, spending grew at an even greater rate. The problem has always been on the spending side. It is probably a moot point for the moment because as it looks like Obama won’t do anything until 2010 when the Bush tax cuts expire. Again, we look at history - after the fall of Wall Street, the government lost revenues and raised taxes and that is what drove the country from a recession into a depression. The increase revenue that would be received would be a pitance - the only thing it would do is make folks feel better that the “rich” were getting theirs.

By Rob

November 24, 2008 5:20 PM | Link to this

Please, Jeff - don’t let facts get in the way of a good story. President Bush lowered taxes across every bracket and instituted two stimulus payments - not just cuts. He reduced capital gains taxes by over 50%, and what do you have at the end of all that? The biggest economic collapse in nearly a century. On the other hand, when President Clinton presided over balanced budgets and effective tax rates about 4% or so HIGHER across every bracket, we had one of the longest peace time expansions of the economy in the history of the republic. And if I’m not mistaken, the greatest consumer market speaks Madarin, not English.

By Middle Class

November 24, 2008 4:59 PM | Link to this

With the revelations of the misuse of funds from the banking, insurance, and auto industry executives, it’s clear the super rich have more money than is good for them or the country. Repeal the tax cuts for the rich and put more money into the national budget!

By Jeff

November 24, 2008 4:57 PM | Link to this

Tax cuts return money to the economy which in turn stimulates growth and job creation. Growth and job creation result in increased employment and higher wages thus increasing the number of tax payers. The increased number of tax payers results in higher tax revenue. This economic truth has been proven time after time. The opposite is also true. Increased taxes on investment and corporations result in higher prices, reduced growth and incentive to expand. In order to avoid increased taxes, corporations move money and operations off shore to locations that are more tax friendly. If corporate taxes were reduced or eliminated, the USA would be the most attractive country in the world to invest and build companies because we are also the greatest consumer market. Unfortunately, socialist government policies, class warfare, and an ignorant electorate continue to slowly destroy the greatest potential economic engine in the history of the world.

By Rob

November 24, 2008 4:44 PM | Link to this

It would be irresponsible to do anything besides let them expire. Some quick numbers at the Brookings Institution forecast that making the tax cuts permanent would reduce government revenues by $1.7 trillion through 2014. They also project that when we add interest payments on the debt, the total increase in budget deficits would be $2.0 trillion. We already have no idea how we’re going to make up the actuarial deficits in Social Security and Medicare, and we’re fighting two extremely expensive wars. Why were these jokers cutting taxes in the first place?