perfidy

Yahoo is showing a report that the economy is surprising the economic powers that be with its health.

US economic growth shot to an annual pace of 2.4 percent in the second quarter, shattering sluggish expectations.

Defying forecasts for growth closer to 1.5 percent, the US economy gave the clearest sign yet it is shaking off Iraq (news - web sites) war-inspired shock and gathering speed, with business investment finally back.

The return in business investment, a 52-year record surge in defense spending, robust consumer spending, and a red-hot housing market powered growth, early Commerce Department (news - web sites) estimates showed.

Other good news included:

Gross domestic product, which had grown at a sickly 1.4-percent pace in the first quarter, appeared to be responding to a double dose of tax cuts and 45-year record low interest rates.

Businesses, long cowed by the Iraq war uncertainties, lifted non-residential fixed investment by 6.9 percent, with spending on structures such as factories up by a 43-year high of 4.8 percent and equipment/software expenditure up 7.5 percent. "The economy truly does look to be on the mend," said Naroff Economic Advisors president Joel Naroff, noting that investment in buildings had climbed for the first time since 2001.

Consumers stepped up spending 3.3 percent despite lingering agony in the labor market.

On the jobless front, although the jobless rate is still high, at 6.4% (still far lower than most of Europe) new jobless benefits claims dropped by 5,000.

Good news all around. 
 

Reason has a good piece up on how old people are determined to loot the store before they die.

"We have been hearing for years about economic fallout that will surely result from the coming social security binge, but few could have anticipated the real threat baby boomers represent. Not content to suck resources from a dying system, the Me Generation has formed a massive voting bloc willing to grant itself one-size-fits all benefits. Last month, in an orgy of self-love, the 108th congress (average age: 55) helped itself to the one resource younger generations will always be good for: future earnings. Every great legislative push needs its welfare queen, and this time around the subject is a hypothetical elderly widow, forced to decide between food and pharmaceuticals. She exists, surely; the small segment of the population too wealthy for Medicaid yet too poor to make ends meet is more than a trick of rhetoric. Unfortunately, she is being used to extort benefits for everyone over 65, the vast majority of whom don't need them, many of whom are active voters. The elderly are easily the wealthiest segment of society, with a poverty rate little more than half that of the under 18-set who will help foot the bill."

This is deeply troubling, and totally outrageous. I'm beginning to think that the greatest legacy of the 'boomer generation was not social revolution, not civil rights, not orchestral Album Oriented Rock, but rather an overweening, nasty, vicious, grasping, deeply rooted sense of entitlement. 

The Baby Boom generation is the last generation of American citizens who can reliably claim that they have it better than their parents. They were raised in a time of unprecendented growth and plenty, and feel themselves to be both the heirs of greatness and the architects of the good aspects of today's America. 

Partly this circumstance can be attributed to the boomers' placement at the natural endings of a great number of intiatives, social changes, and economic successes. The greatness they think they chose was rather handed to them on a silver platter. That is beyond their control. What is not beyond their control, however, is the conscious choice to be generous, to leave a crumb for future generations. To, in short, live up to the rhetoric they invented. 

The exact same crowd that forty years ago wasn't trusting anyone over 30, who planned breakfast in bed for 400,000, and who wished to bring an Aquarian age of equality and love, are now a mass of bitter greedy Croesuses determined to have everything regardless of the consequences. They were the last generation to grow up in the true boom years, and they can't seem to let go of the idea that there will always be more, more, more. 

Has the hippie ethos-- always a minority view, though vocal-- permeated the 'boomers so thoroughly that they no longer care about consequences? It sure must feel good to have the power to pass laws! It sure must feel good to vote your way to comfort! 

The party ended thirty years ago, the money has run out, yet they don't seem to have noticed. Or maybe they just don't give a crap.

The National Bureau of Economic Research have declared that our once-and-current national recession actually ended back in November 2001 (Coverage in the Boston Globe here).

Ohhh, that's why unemployment is up and everyone from AOL to the state of Massachusetts is broke.

Interestingly, the NBER had a hard time with this decision, and according to the piece acted now mainly to set the 2001 downturn apart from any future downturns. "The main reason that the committee's decision in this episode was particularly difficult was the divergent behavior of employment,'' the NBER said. ''The committee felt that it was important to wait until real GDP was substantially above its pre-recession peak before determining that a trough had occurred.''

The NBER also qualified its claim, saying "In determining that a trough occurred in November 2001, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month. A recession is a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. The trough marks the end of the declining phase and the start of the rising phase of the business cycle. Economic activity is typically below normal in the early stages of an expansion, and it sometimes remains so well into the expansion"

Possible Translation 1: "The bleeding has stopped, sir, but may I suggest you not try boxing a tiger again for a while?"

Possible Translation 2: "We are as baffled as the rest of you. Can I borrow a fiver?"

Last week, I came across a story in the Wall Street Journal which referred to those very poor people who don't pay federal income tax as "Very Lucky Duckies." After windexing my monitor and calming myself down from a red rage, I was left to wonder if the author of said article found it painful to sit, seeing as his head seems permanently lodged in the intragluteal position. I mean, wow. You know what would be real great? To be homeless! Think about it... no job, no income, no obligations, no mortgage, no rent, no car payments, damn! No taxes at all! Now THAT'S a lucky ducky!! Yeeeeah!!! 

As an opinion, the Journal's assertion is monumentally retarded, and as a joke, it's not funny.

The New Republic reprints a letter to the WSJ which sums up the counter-argument better than my feeble gutter ranting ever could.

'LUCKY DUCKIE' INVITES EDITORS INTO HIS POND 

I am one of those lucky duckies, referred to in your June 3 editorial "Even Luckier Duckies" who pay little or nothing in federal income tax (at least by the standards of Wall Street Journal editors; $800 is more than a chunk of change to me). I am not, however, a stingy ducky, and I am willing to share my good fortune with others. 

In this spirit, I propose a trade. I will spend a year as a Wall Street Journal editor, while one lucky editor will spend a year in my underpaid shoes. I will receive an editor's salary, and suffer the outrage of paying federal income tax on that salary. The fortunate editor, on the other hand, will enjoy a relatively small federal income tax burden, as well as these other perks of near poverty: the gustatory delights of a diet rich in black beans, pinto beans, navy beans, chickpeas and, for a little variety, lentils; the thrill of scrambling to pay the rent or make the mortgage; the salutary effects of having no paid sick days; the slow satisfaction of saving up for months for a trip to the dentist; and the civic pride of knowing that, even as a lucky ducky, you still pay a third or more of your gross income in income taxes, payroll taxes, sales taxes and property taxes. 

I could go on and on, but I am sure your editors are already keen to jump at this opportunity to join the ranks of the undertaxed. I look forward to hearing from you. 

Pier Petersen Chicago

If I ever meet Pier Petersen, the (cheap) beer's on me! Although, I would point out that the occasional trip to the day-old-produce store does wonders to stave off the rickets.

Alright. We'll start with this electronic philosophy journal article. I found it to be highly politicized, though politics and economy are strongly related to one another. So let's look at a few statements from the article: 

The thinking seems to be that the profits of business should either be given directly to workers through pay raises or be taken by the government to be given to workers indirectly.

Wow! What a great idea! I'm all for it. Oh wait there's more:

Producing greater profits is thought of as useless and immoral.

Right again! What a great article! Oh, hang on: “

However, if Say's Law is correct, life improves through greater production, not through higher nominal wages. Greater production requires greater capitalization -- money invested in machinery and training -- and the capital for that must come out of profits.

Well, you lost me there. Okay, so to simplify, fuck the poor. Yeah. I've seen this movie. I'll quote myself from at least two lectures last spring, "Profits for the wealthy come with the exploitation of labor." 

Perhaps I shouldn't quote myself. I could go blind. Back to the subject at hand, so to speak (*ahem*), supply side economics, or free market capitalism, benefit ownership and management over labor. This will not change so long as the system is maintained. Tax cuts, especially capital gains, invariably benefit those with the most money. They do not benefit wage-workers (or adjunct profs) who have no investments, no savings, and literally hang by their fingernails in a free market capitalist system. 

Steve will undoubtedly launch a thousand counter-arguments, if history is any guide. I will only deal with ones that I make up, here and now. Counter: tax cuts make a good economy. A good economy means more workers are hired. 

Then exploited. The aforementioned article states that profits have to be reinvested, and not in the workers. To stay afloat, businesses have to maintain a healthy bottom line in the free market system. To do that, they pay their workers as little as possible. If they make lots of money, they keep it, or invest it, then get tax breaks on their investments. 

I previously asked for quantitative analysis on this subject. That was a trick question. Economic issues are difficult if not impossible to quantify. Why? It's a matter of faith. People believe that when they hand over green pieces of paper or shiny metal round things, they receive goods and services in exchange. If a majority of people changed their beliefs, and decided that the green paper is for the wiping of asses and the shiny round things are fun to eat, the whole deal collapses. Faith cannot be quantified. It cannot be quantitatively proven that God exists; it cannot be quantitatively proven that free market capitalism, or any of the economic systems attempted thus far, work. 

Free market capitalism creates a permanent underclass. The individual members of the underclass might ascend, but ultimately, there is always an underclass. Capitalism requires a large number of people to work for wages beneath a level of comfort. I'll anticipate another counter: the poor in America do better than the poor in other countries. They have material possessions. 

Do they? There are still people in this country who are homeless and hungry. There are people who have not been apportioned according to their need. This is not me. I'm discussing people with families below the poverty level, who try as they might, cannot get their heads above water. As to material possessions, can many people actually afford them, or do they go into debt to acquire them, invariably sinking into bankruptcy? Poverty has not been eliminated anywhere in the world. Free market capitalism will not eliminate poverty, nor have centrally planned economies, because they do not produce a sufficient number of consumer goods or provide decent standards of living. Nothing seems to work perfectly. 

Counter: perfection is unattainable. To quote Matt Groening, from School is Hell, "you'll never get anywhere with that defeatist attitude." 

The solution? I've said it before. I don't have the answers. I have ideas.

This article is a good introduction to the supply side/laffer curve arguments. I'll find some more links and post them. These theories are not vague handwaving. Arthur Laffer, and others in the Chicago School of economists (Friedman, Hayek, etc) have studied and published on these matters. And unlike Keynesian economic theory which was proved incorrect by the stagflation of the 70s, it has been an accurate predictor (on the large scale).

Ross is correct to demand means testing - but the reason that drugs are available for cheap in Canada is because patients in the United States paid for them (and the research that developed them) at much higher prices. Canada is getting a free ride. Ross' solution only spreads out the cost - but does not effect the calculations that drug companies will make on which drugs to develop. (A shorter patent period would mean more expensive drugs for a shorter time.) 

But the problem that he brings up: the older generation passing every law needed for a comfortable retirement - which can only screw our generation - is broader than merely prescription drug plans. It applies to Medicare, Social Security, and all the entitlement plans whose costs will spiral out of control once all the greedy self righteous boomers start retiring in large numbers. 

Who among us, under the age of forty, thinks that there will be any social security waiting for us? The Supreme Court has ruled that the government is not obligated to provide us with SS benefits. They can change the rules at any time. But will they change them before the system goes totally belly up? Probably not. 
 

That tax cuts cause the economy to grow is not tired conservative rhetoric. The economy, over the last fifty years, has boomed after every significant tax cut - after WWII, after Kennedy's tax cuts in the early sixties, after Reagan's twenty years later, and after the capital gains reduction in the mid nineties. The economy in the seventies was in the shitter in every respect. Reagan not only reduced the taxes, but swept away the price controls, wage controls, and excessive regulation of business. The economy took off. With the exception of defense spending, Reagan attempted to reduce or at least stabilize government spending - it was the congress that ran the huge deficits. 

The capital gains tax cut directly affected the amount of money available for investment, and for raising capital. One of the reasons that the tech boom happened was the huge influx in venture capital made possible by the capital gains tax cut.

When you think about it, how does the economy grow? It is not through government action. The economy grows when people develop new businesses, new technologies, new methods. They develop these things with the help of investor money. That money is available because people save and earn. When taxes rise, money is pulled out of the economy, and is unavailable for capital development, and is unavailable for the people who would purchase the new products or services. Thus, higher taxes serve as a break on the economy. 

Granted, money that we give to the government can be useful - roads, defense, courts, etc. But it is more useful when it stays in our hands, collectively. One irony of the situation is that when you lower taxes, revenue rises. The Laffer curve has been proven, most recently with the capital gains cut of the nineties, but also generally over the last century. When taxes go down, the economy grows, and even though the gubmint is getting a smaller piece of pie, the pie as a whole is much larger. Capital gains were cut by I think 33%, and over two years revenue from the lower tax rate increased by 50% or so. (I can't remember the exact numbers.) 

While the deficits that were run in the eighties were enormous and frightening, they are gone. That was not an intergenerational burden of any kind - but only because the economy was able to grow. 

Ross points out that drug programs and military budgets are intergenerational warfare - which is the point I made in my first post. Tax cutting is the only way that we can restrain spending. People freak over high deficits much more than over high taxes. (Strange, if you ask me.) If we were to freeze spending, then the government would have a decreasing share of the economy over time. And tax cuts are necessary every so often if for no other reason than inflation - as people creep into higher tax brackets, the taxes are being raised, if stealthily. (Of course, a flat tax would solve that problem.) 

Of course, there are other factors affecting the economy. There are various business cycles. The education of the populace, the world economy, money supply, labor laws, productivity, cultural attitudes to work, the general legal structure for commerce, patent law, etc. But these things remain relatively constant. Other variable factors can have a big impact as well. Oil price spikes can have effects similar to a tax hike - increasing everyone's cost of doing business, but that is out of politician's control. The Justice Department prosecution of Bill Gates was the proximate cause of the recent tech crash. When Bill Gates lost thirty billion dollars, the rest of the economy reacted to the sudden disappearance of all that money. Tax levels and Fed control of the money supply are two of the biggest levers in the economy - and the ones that our elected officials control. When these levers are set in a pro-economy position, things are good, the government is out of the way of our collective business. 

Tax cuts are good for the economy. They are good, because they keep money out of the hands of politicians, and restrain the growth of government. (PJ O'Rourke said that giving money to government was like giving whiskey and car keys to a teenager.) They are good, because it is right that people keep the money that they earn, and not deliver half of it over to thumb fingered nozzleheads in DC. Links in a minute.

The reckless tax cuts of Kennedy and Reagan certainly shifted enormous burdens to us, the next generation. No, wait, what they did was allow the economy to grow faster, so that we could afford to pay for all the reckless services instituted by Johnson, Carter and others. What would be a burden for our children would be to create more programs that blow through taxpayer money like something that blows through money really, really fast. Because with rare exceptions, those programs never go away, even if it turns out that they weren't that great an idea in the first place. Like farm subsidies. Lowering taxes is the only way to prevent the government from hoovering up the whole economy. I think a better legacy for our children (because everything must be for the childen) would be to leave them a world where they could have a job and keep more than half the money they earn from it.

Ps, I think Krugman's slogan is a great idea. We should use it.

Equality of outcome does not mean that everyone gets the same deal. A cornerstone of Socialist thought is each according to his need. Steve the technical writer has a family to provide for, Mike the adjunct prof, though he would like one very much, does not. Regardless, Mike the adjunct prof, without a family, does not need as much as Steve. 

Granted, Mike the adjunct prof could have chosen a more lucrative career path, but the world would be a better place if people were able to apply their best talents and skills in a way that helps society. It's not the way things are, but it's a goal that can be achieved. Educating people helps society. No one wants a society full of ignorant people. All I ask is a living wage. 
 

Mike, I could let it go at an agree to disagree, but I won't. Consider this thought experiment. Equality of outcome has been magically decreed. One guy, we'll call him Mike, is a hard working teacher at a city college somewhere in the midwest. His income is relatively low, even though he has five advanced degrees in anthropology, history, paleontology, particle physics and basket weaving. He has spent a great deal of effort to gain this knowledge, because all he has ever wanted to do is teach. Another guy, we'll call him Steve, is a technical writer in our nation's capital. Though he has not earned a degree, since he got married and realized he needed a career, has worked very hard to develop one that will provide a decent income for his family. He has no particular attachment to technical writing, though he doesn't mind it. His interests lie outside his career - money has been the primary driver for career. His income is now substantially above the national average.

These two people have made different choices, because, well, they had the freedom to do so. Now the magical income leveler is voted in, and now everyone has the same income, same medical care, same everything. Mike's income jumps dramatically. Steve's is cut in half. 

Is it fair because it balances out? Because one person benefitted and one did not? While Mike did not personally come to suburban northern Virginia, and put a gun to Steve's head to get the extra money, his agent the government did. Mike could have chosen a different career path. A man of his clear ability and intelligence could have devoted himself to a career track that resulted in money. He did not. That is not a reason to steal money from someone who did. Do not take this to mean that I believe their should be no government administered social safety net, for those who run into truly bad times. But freedom means you make your bed, and then you sleep in it.

Investors 

So I guess you're an equality of opportunity guy, I'm more an equality of outcome guy. I'm willing to leave it at that on an agree to disagree. 

India 

I'm of the opinion that imperialism is never benign. It always involves subjugating another people and reducing them to a sub-human status. That one form of imperialism appears more benign than another, to draw an analogy, is like saying "Well I shot this guy in the face, but I only knee-capped this other guy." But beyond that, the Amritsar Massacre alone indicates that British conduct on the Indian subcontinent, despite attempts by the Viceroy's office to distance themselves from the event, carried negative consequences for the indigenous population. 

Americanism 

I'm not responding to Judson because he can sit and spin. I'm responding to Steve. I don't believe in the freedom to bear arms. Yet I do believe in the freedom to arm bears. What happens to my citizenship? 

Teacher's Unions 

Well we're kind of on different pages on this one, since I'm in post-secondary education. Things are probably a bit different there, as are the unions. My first concern is always my students. I will gladly continue to teach at sub-minimum wage levels without a raise. When I worked at a certain Jesuit University that shall remain nameless, I personally opposed a TA walkout to protest budget cuts because I didn't want to leave students hanging, even a little bit. I honestly don't know what's going on with secondary education teacher's unions. But here in the city colleges, they're just trying to get a few more dollars for adjuncts, if possible. If not, I won't strike, I won't quit, I'll continue to give my best possible effort as a professor. It's all I know how to do (aside from playing the fiddle, I'm nearly competent with it these days) and it's all I've ever wanted to do.

Buckethead wrote that, "In our country, the federal workers' and teacher's unions are far more powerful than they should be." 

A teacher's union is currently attempting to secure better wages for me and other adjunct professors. A powerful teacher's union can help me and others.
 

Johno, $4.50 x 280,000,000 = 1.26 billion dollars. That is a lot. The thing is, when you leave the money in the pockets of the people that earned it, instead of giving it to Ted Kennedy, they will use it for many different things. Some will buy beer and pizza. Some will collect stamps. Some will go out for cheap hookers. Others will save it, and invest it. Still other people will take the money that was invested, and give it to some yahoo with a too-clever idea for vacuum-powered hair cutting devices. That guy will hire people to manufacture and sell it. If some money is left over from beer and pizza, stamps or hookers, they will buy it. The economy has just grown. There is more wealth in the system. The new company will pay taxes. So will the formerly unemployed welfare mothers making the doohickeys, and the sleazeballs hawking them on infomercials at three in the morning. So revenue goes up. And as long as we maintain a sound fiscal policy, a low rate of inflation will be the result. This is a good thing. If some people aren't as rich as the new Vacuum Hair Cutter magnate, that's because they didn't go out and found their own company, which anybody with sufficient gumption can do. It's all about liberty. 

This kind of thinking is generally associated with the Chicago school - Hayek, Friedman, and that crowd. Historically, when taxes go down, revenue and the economy go up. Post WWII, post Kennedy, Reagan. When taxes went up in the sixties, by the seventies, the economy was a wreck. (Of course it is more complicated than that. But measures that limit the economy generally go hand in hand with higher taxes. So it evens out.) 

And the real problem with deficit spending is not the military - which is a legitimate function of government constitutionally, but entitlement programs that inexorably spiral upwards in cost. There is no conceivable tax increase that would pay for what's going to happen to Social Security and Medicare. If the economy grows fast enough, we'll have more money for warm fuzzy programs, and for things that kill little brown people. Liberals and Conservatives will live together. Mass hysteria. 

(Considering the vast expansion of the investor class, ironically one of Marx' dearest hope - that the proletariat would own the means of production, has kind of happened.)

To go a little further on the tax issue, here it is: 

• Axiom A: The current tax code is a kafkian horror.
• Axiom Two: People should be treated equally and fairly under the law.
• Axiom III: a taxation scheme should have only two objects, to provide reasonable revenue for government functions, and not to impede the functioning of the economy or for social engineering.
• Axiom N: a foolish consistency is the hobgoblin of small minds. 

The current tax system runs to seventeen thousand pages of regulations. It is, literally, impossible for anyone to understand it. With even a moderately complex financial situation, there is no way to be assured that you are in compliance with the law. Every year, journalists will create a fictional family of four, with a reasonable spread of investments and assets, and earning something in the comfortable middle of the income spectrum. They will send this hypothetical tax picture to several IRS functionaries, tax accountants, and HR Block type tax preparers. No return will match any of the others. Better to spend your time figuring how many conflicted, compulsive centrists can agonize on the head of a pin. 

On general principle, the current scheme should be completely scrapped. Vague and conflicting regulations make enforcement arbitrary and predatory. When you speak of fear of the government, most people don't think Big Brother, they think the IRS. There is absolutely no need for a tax system this Byzantine, this elephantine, this cruel; especially in a republic with pretensions to liberty and justice. And beyond the costs of shoveling an average of a third of our income onto the IRS fire, there is the cost of preparing the tax returns themselves. Millions of man hours for the general public, billions spent by businesses and individuals to tax accountants and tax preparers that could be spent more profitably elsewhere. Further, there is the uncalculated effect of tax law on how businesses change practices to avoid punitive tax liabilities, like delaying replacement of aging capital equipment (a factor in the industrial decline in the Midwest), avoiding investment, delaying capitalization and a hundred other things to obscure for me to comprehend. 

But what to replace it with? Conceivably, we could replace the current nightmare with something simpler that worked in largely the same way - tax brackets, deductions, credits - but easier to cope with. But if we are going to go to the effort to replace it, it ought to be something better. 

I feel that the current tax system makes a mockery of our commitment to justice and equality before the law. If it is illegal to discriminate against someone for reasons of creed, color or gender, why is it kosher that a one set of tax laws applies to Mike, completely different set of laws applies to Mr. and Mrs. Two-Cents, and yet a third and even harsher set of laws applies to the Buckethead clan? If Mike were white, and Johnny Hispanic and me black, legions of the unwashed would rise up in protest. Yet, there is not a murmur of discontent when it is shown that these three have different incomes. 

We should always be treated the same before the law. If I kill someone, the same law should apply to me as when Johno kills someone. Even if I did because they deserved it and Johno kills merely because they have bad taste in music. Similarly, the same tax laws should apply to everyone, even if one of us makes more money than the other. This is the primary moral argument for a flat tax. 

If we assume that the current level of revenue is adequate for government needs (sharp internal wrenching pain) we could structure a new tax system that would generate that much money. One of the reasons that our tax system is so complicated is that all the many special interests, over decades, slowly weaved a web of exemptions, shelters, credits and what-have-you into the tax code. Most of these complications have no positive effect on the economy as a whole, and many are probably very negative. One way to eliminate unfairness is to completely eliminate all the complications. If every person, and every corporation, paid 10% of income to the government everyone would be on the same level. No industry would have special sanctions, or considerations. It would limit the government's meddling in the economy. (Tax law is a great sub rosa way to meddle, because it is less obvious.) 

The thing is, if I pay 10%, and Mike pays 10%, that's fair - even though I will pay more in absolute terms. If it's that simple, I can compute my tax return in seconds. Even corporations would have a simpler time of it. In the wake of the fall of the Soviet Union, the Russian Federation had high taxes. But almost no revenue, because the government was largely incapable of collecting it. When they switched to a flat tax, their revenue skyrocketed. One, because the lower tax rate was fair enough that many who had not paid taxes now paid them, and two, because it stimulated the economy. And if I know every corporation and rich person is paying ten percent, I'm much less likely to think that the fat cats are getting away with murder, because there would be no loopholes or tax shelters. 

While I said earlier that the government shouldn't use the tax system to meddle with the economy, or use it for social engineering, that is only generally true. While staying within the flat tax format - so that the same laws apply to everyone, we can fudge it a bit to have beneficent effects. For example, a certain standard set of deductions would apply to everyone's income. A personal deduction, child deductions, mortgage interest, marriage deduction are all good candidates. These deductions would be set amounts, so the effect on someone with a low income would be proportionally much larger than for someone with a large income. You could finagle these deductions so that someone or a family at the poverty level would pay no tax. Then, as income increases, taxes would increase. By the time income got to a couple hundred thousand, it would look more and more like 10% as the deductions became a smaller and smaller proportion of the total income. This would help the poor, encourage marriage and children - but the same law would still apply to everyone. A similar situation could be imagined for businesses. 

A flat tax of 15 to 17 percent would probably generate about the same revenue as the current system. And the rich would pay more taxes than they do now (though Democrats would still claim that it's a tax cut for the rich.) But everyone would have the same, understandable law.

Johno, I agree that the sending rebate checks is fairly ridiculous. But probably not for the same reason. While a rebate check sent to every tax payer might provide a transitory boost to the economy, it is at best a short term solution. The way to effect the economy with tax cuts is to, well, cut taxes. When people know that their taxes are lower, then they will change their behavior in a way that could effect the economy. This applies to regular income taxes, which might affect consumer confidence, consumer spending, housing starts and the like. Lowering, permanently, dividend taxes and capital gains taxes would increase investment and capital development. It has been shown that lowering taxes increases revenue - because the larger economy that is spurred by lower taxes yields more money in absolute terms, even though percentage of the government's take of the total economy is smaller. These rebates will not have this effect, because people - individuals and businesses - have no confidence that taxes will remain low. The economic picture is indeed muddled. Lowering tax rates would be a solid thing that people could count on.

While even full production from the Iraqi oil fields would remain a relatively small part of the total oil production (even the Saudi's immense reserves are only a quarter of total proven reserves) the effect of that production would be to drive down oil prices. And oil prices are one of the key factors in the world economy, because in some way or other, almost every business and industry is affected by oil prices. Shipping, energy, heating, plastics - the costs of all of these are all directly dependent on oil. Every other industry uses these services. When oil prices went up by 50%, it had the effect of a tax increase, because it increased the cost of doing business, or the cost of living. When they go down, it will act like a tax cut. And it won't effect the government's budget. 

As the effects of this percolate through the economy, eventually the job market will catch up with the growing economy. Jobless rates are always a trailing indicator. If the economy is already recovering, great. The lowered oil prices will be a shot in the arm, revving up the recovery.

Buckethead, I think you may be mischaracterizing matters somewhat. Many people (who are not all Democrats) are rather cynically expecting the economy to tank once again, which would result in a very welcome Presidential pie-in-face moment. While not devoid of schadenfreude, it's a long way from hoping the economy stays torpid. I'd LOVE the economy to improve, but if it doesn't, I'll find my silver lining somehow. 

Funny thing is, the experts say the economy has recovered. The Wall Street Journal ran an article today (no link...subscription only) on the muddled signals the economy is sending. Some economists point to the slow but definite expansion of production, productivity, consumer spending, and GDP as a sign that the economy has entered a healthy phase. But others point to the continued downturn in the job market (the Journal cites 525,000 nonfarm jobs disappearing in the last three months) as a sign that we're instead in a difficult transitional stage*. Even though productivity is rising, corporations are using the higher productivity rates as an excuse to cut jobs and thereby reduce operating budgets-- not the behavior of corporations in the midst of a growth cycle. As a consequence, regardless of the state of the economy, times remain hard for those workers who either aren't working or who are just getting by. Raises don't happen, wages don't rise, savings don't accumulate, and people don't feel secure.

Am I speaking partially autobiographically? Um... perhaps. I can definitely tell you that in Massachusetts, the worst-hit state in the recent recession, times are still bad for everyone. Although the economy as a whole may still be healthy, budgets at the places my friends work-- libraries, higher ed, museums, nonprofits, entertainment-- are still cut beyond tolerance, and professional jobs are just not appearing in any field except nursing. When they do appear, a scrum develops as two hundred people compete for the same one opening. I could go tomorrow and get a gig at Dunkin Donuts, but I know some seasoned professionals who have been out of steady work for more than a year while still looking, all in an economy which the signs say is recovering. 

What I'm getting at is, even if Iraqi oil surges into the world market in two weeks, that won't have much of an effect on the job market as long as corporations don't feel like they should expand their payrolls. Also, Iraq has just one slice of the world oil-producing capacity, and unlike you I'm not confident it will come anywhere near full capacity soon. 

And the tax cut? While I'm overjoyed to have an extra three damn dollars in my paycheck each pay period, I'd rather see the money go toward the unfunded education mandates the President has handed down. Or the insultingly underfunded AIDS initative he heralded back in January. Or perhaps to train and retain the airport security screeners who are being laid off. This is the SECOND time this President has written checks to Americans, and it's starting to come across like a parent who doesn't know any way besides money to keep the kids quiet. 

*Source: Wall Street Journal, May 29, 2003. A1, A14

Many Democrats seem to be hoping that the economy tanks, or at the very least fails to improve, in order that they may regain power. That hope may be misplaced, in addition to being reprehensible. When the Iraqi oil fields come back on line in the next couple weeks, I think that they will be running full tilt. All the money will go into the Iraqi college fund, or whatever they're calling it. But the real benefit will be plummeting oil prices, and sticking a knife in OPEC. If Iraqi oil production maxes out, oil prices will be sub $20/barrel in a matter or weeks. This will be a massive shot in the arm for the American (and world) economy, equivalent to a tax cut much bigger than the one we actually got. Between the low oil prices, and the tax cut, I think we will see real improvement.

Folks, even Warren Buffett thinks the tax cut is a bad idea. Warren Buffett!! To wit:

Overall, it's hard to conceive of anything sillier than the schedule the Senate has laid out. Indeed, the first President Bush had a name for such activities: "voodoo economics." The manipulation of enactment and sunset dates of tax changes is Enron-style accounting, and a Congress that has recently demanded honest corporate numbers should now look hard at its own practices. 

Proponents of cutting tax rates on dividends argue that the move will stimulate the economy. A large amount of stimulus, of course, should already be on the way from the huge and growing deficit the government is now running. I have no strong views on whether more action on this front is warranted. But if it is, don't cut the taxes of people with huge portfolios of stocks held directly. (Small investors owning stock held through 401(k)s are already tax-favored.) Instead, give reductions to those who both need and will spend the money gained. Enact a Social Security tax "holiday" or give a flat-sum rebate to people with low incomes. Putting $1,000 in the pockets of 310,000 families with urgent needs is going to provide far more stimulus to the economy than putting the same $310 million in my pockets. 

When you listen to tax-cut rhetoric, remember that giving one class of taxpayer a "break" requires -- now or down the line -- that an equivalent burden be imposed on other parties. In other words, if I get a break, someone else pays. Government can't deliver a free lunch to the country as a whole. It can, however, determine who pays for lunch. And last week the Senate handed the bill to the wrong party.

Zing! 

Y' know? Bush The Younger's presidency will in retrospect be defined for a few main issues. That's usually a good thing, unless you are Jimmy "Stagflation" Carter or Bill "Itchy-Pants" Clinton. In the sense that he sticks to his main themes of war and taxes, Bush has an astoundingly coherent and straightforward plan for the nation. They are, in fact, very important issues that deserve attention. However, overall coherence does not imply internal consistency. 

Just insisting that "this tax cut is for the good of all" over and over won't make it so, if at the end of the day it's going to benefit the country-club set while leaving Joe Sixpack watching Judge Judy because the day-labor center was full up again. After all, I'm not yet Wolverine, no matter how many "snickety-snick" sounds I make while dancing around the apartment. Platitudes may sound nice, but only results matter. And what happened to his "Education Plan?" Unfunded mandates are even worse than empty platitudes. 
 

The Treasury Department has unveiled the design for the new $US 20. What a piece of poo! Not that I have any specific problems with a re-design, but I'm gonna go out on a limb here and assert that PEACH and LEMONY-FRESH YELLOW are two colors that should never be associated with the United States of America. Green, yes. Silver, oh sure oh sure. Bloody-red? Why not, hey! But peach? Peach? Peach is for handbags, not what goes in 'em.

Have a problem with the gendered speech inherent in the above? You can bite my shiny metal ass.