Democrats & Liberals Archives

Stephen,

The free market system works. Period. It is not all about “ruthlessness and pure profit.” Companies and their managers do have incentives to do the right things. You heavily rely on Enron, but it is for the wrong reasons. Is Enron still operating at all? If so, is it worth even a fraction of what it had been? Are the people who committed fraud still in power there? The company and its fraudulent managers have been and are being punished.

The incentives are in place for managers and, by extension, companies to do what is right. If they do not do what is right, then their profits, and even their jobs, suffer as a result. If you and I do not like what a company does, we can simply buy from the competition instead.

By the way, the biggest factor in California’s energy crisis was not Enron, but the heavily over-regulated energy industry in California which prevents real competition. You had better sit down for what I am about to say next: FDR did not get us out of the Great Depression; he prolonged it with his interventionist policies. The very things that Hoover did wrong, FDR did on an even greater scale. Because of FDR’s policies, companies had incentives to destroy crops while people were starving. That is deplorable.

For further reading, I highly recommend FDR’s Folly by Jim Powell and How Capitalism Saved America by Thomas DiLorenzo.

Troy-
Read the post closely. yes, the Free Market system works, but does it work justly, does it work morally, and does it work without the guidance of the law? No.

California was not lacking for power. In fact, to drive the prices up, Enron traders actually shut generators down, for even the flimsiest of excuses. You complain about FDR’s creation of an artificial shortage (one that allowed farmers to stay in business), but here is Enron exploiting the deregulation of energy prices to push the price far above fair market value. Since electricity is a necessity, people were forced to pay.

You act as if I haven’t heard all of this free market fundamentalism before. Frankly, I am distrustful of any system that says it’s got all the answers.

Especially when the folks telling me these things are not admitting everything they should. In case you haven’t noticed, your president is not doing away with those terrible subsidies, he’s deficit spending, and saying its for the sake of the economy, and he’s pushing a whole agenda of public programs.

Are you sure you should be having a word with us, before you have a word with your own congress? Can you really stand their vindicated while your party practices such hypocrisy?

The truth is, your people set the stage for these events to go so awry. None of this could happen if it weren’t for the rules your party remeoved from the books: rules that prohibiited banks from selling stock, especially that of companies they also financed with loans, rules that prohibited certain kinds of transactions and energy price manipulation, rules that required more honest and transparent accounting. These erasures of the rules allowed Enron to abuse the system, and to become a black box that stockholders and investors could not penetrate to discover the losses the company was running until it was too late. The market did eventually do its job, but the lack of regulations made it impossible for that job to be done in time to both keep Enron a going concern for its investors, and to punish Enron at the time they made the mistakes, not after the rot had spread so far.

Capitalism cannot function in the midst of anarchy. There must be accountability, there must be transparency, there must be some things that are forbidden to these people, if we want law and order in the halls of corporate America the same as we want it in our own streets.

Stephen,

I agree completely with your final paragraph. Other than that, however,…

I did not say that the market does not need rules. Without rules, we will have anarchy, which would be disastrous for us all.

The Republican Party is not my party; I am an Independent. I agree with you that we are witnessing great hypocrisy these days, but I see it on both sides of the aisle.

I do not like the way the politcal game is played these days. That applies to both the Republicans and the Democrats. They should be our servants; we should not be here to line their pockets and those of their cronies. We need to return, if we ever had it, to letting government do what government can do best: protect the nation and allow equal opportunities for all citizens. Unfortunately, both parties have gotten away from that.

Stephen

A good and thoughtful post.

The free market does not work without the rule of law and conservatives know that too. What Enron did was illegal. The market and the law punished Enron and that is how it should be. I wrote a post a while back that talked about this very thing. The first line is “Democracy, freedom, rule of law and free markets. They complement each other and work best when all four are abundantly present.”

I always use the term free market rather than capitalism because capitalism is a pejorative term usually used by detractors to describe excesses of business people. Americans who are neither ideological leftists nor right wing nuts believes broadly. We enjoy that broad consensus.

We should all agree that government doesn’t have the capacity to manage firms.

I think that conservatives and thoughtful liberals part company when it comes to redistribution and how much there should be and how much regulation we can tolerate.

The government is a player in the economy, but it is not always an altruistic player and almost never the most intelligent. In the U.S. we have enjoyed a relatively light and decent government for so long that we forget that the really nasty activities require government support.

To paraphrase the computer maxim: To be cruel is human, but if you really want to oppress people, you need government support.

As for lawsuits, they are also part of the system - within reason. Laws need to be predictable if they are just. Punishments need to be commensurate with the crime and it should require some actual culpability. Oh yeah, the people most responsible for a problem should be those who clean it up. We would probably agree on the principles, but disagree on details. Between the extremes of the woman who is awarded millions because she burned her legs with hot coffee from McDonalds to poor child who is hurt by an obviously defective product, there is a lot of room for compromises.

Stephen,
Excellent article, one of the best that I’ve read.
“We did not fight to get out from under a bunch of nobles, just to reestablish a similar class system under another bunch of self appointed important people who are a law to themselves.”

I think this is the issue and where this administration is leading us. Are we hard enough on white collar criminals. If some punk off the street robs a 7-11 and gets away with $50, it seems that when he is prosecuted his sentence is much stiffer then the white collar criminal who has stolen millions from investors. There seems to be a big power struggle and I think that a “noble” class is emerging.

Take the so called death tax that has been repealed. Mr. Bill Gates disagrees with the tax. He says that America has been great to him, and that the good old USA deserves a chunk of his fortune. Warren Buffet has also stated similar opinions on the matter. With the lack of the death tax, which is only enforced on those who are worth over 7 million, will ensure that there will be a ruling class in the U.S. for years to come.
Ivan

Wow, really well written post! I think you have hit upon one of the key ideas that us left-wingers have been missing out on - the idea that a completely free market ideology is exactly that - an ideology. As dogmatic as communism in its own way, and as destructive if left to its own ends. We just need to find a balance between left and right.

This post has really got me thinking, I’ll leave it there in case I end up writing my own essay!

Very well written article, Stephen.
I couldn’t agree more.

Ivan,

If Bill Gates or anyone else wishes to leave his millions/billions to the government, he don’t need the death tax to do that.

Charity is exactly that! Given freely, not extracted or forced.

I respect Gates for all the good things he donates to, but I dought his will says that the gov. gets everything he has upon his death?

Don’t fall into the trap that politicians love
to see. Don’t succumb to the petty partisan
politics and bickering. Dems this, GOP that,
blah, blah, blah….the politicians love it.
All politicians need a wake up call.
There’s a simple way to do that that doesn’t
cost any money, and will lead to a more transparent
and accountable government …

Stephen:

The truth is, your people set the stage for these events to go so awry. None of this could happen if it weren’t for the rules your party remeoved from the books: rules that prohibiited banks from selling stock, especially that of companies they also financed with loans, rules that prohibited certain kinds of transactions and energy price manipulation, rules that required more honest and transparent accounting. These erasures of the rules allowed Enron to abuse the system, and to become a black box that stockholders and investors could not penetrate to discover the losses the company was running until it was too late. The market did eventually do its job, but the lack of regulations made it impossible for that job to be done in time to both keep Enron a going concern for its investors, and to punish Enron at the time they made the mistakes, not after the rot had spread so far.

Your people??

Nice article but I think you are trying to have it both ways. Was the legislation passed by the Democratic congress and signed by George the first? Or by the Republican congress and signed by Bill Clinton? Is it Democratic “your people” or Repubican “your people”. Both were involved.

Also, since Enron the securities business has seen the greatest increase in regulation since the 1930s. Since this happened after 2000, whose “people” do we give credit for the new regulations?

Every phone order now has to be logged in at the time taken via the phone. In addition, investments firms have to keep endless logs to supervise routine and even tiny investments. New software has to be purchased by each firm to monitor thousands of transations. The burden of documentation has increased for each and every broker exponentially.

Brokers are eliminating smaller clients as they cannot keep up with the burden of compliance unless there is a certain size of account. Some larger firms are moving away from any client with less than $100,000 to invest. The investment world of pre Enron is gone forever. In the end, fees will go up and returns will go down as investors pay for the new regulatory burden. Of couse the smaller investor will pay the greatest as the burden of compliance is the same for a $1,000 account or a $100,000 account.

I am not sure whose “people” get credit for this!!
If Republicans get the blame for Enron, then the must get credit for trying clean it up!!

Craig

Craig-
The legislation for this was mostly passed under the Republican congress, especially the Glass-Steagall repeal that allowed the combination of corporate finance and stockbrokering.

Time and again, the Republicans have supported this kind of legislation knowing that their friends in business would exploit the loopholes. So tell me, in what way is this business environment not the Responsibility of the Republicans. This is what happens when the Republicans and independents get the laissez faire government they want. Of course, when the scatological material hits the bladed air circulator, they (and unfortunately we) act to seize control by piling on these arbitrary rules.

I know the stereotype is that people like me want to bury business under tons of documentation and regulation, but the truth is, I’d just as soon keep things simple and workable, because I believe in regulation that works, and when regulation becomes a labyrinth of arbitrary codes and codicils, and compliance a paperwork nightmare, people will turn from formal adherence to the law to informal disregard of it.

Regulation can be complex, but your nightmare picture of things need not be the route taken, and in fact should not be it. We should be regulating smarter, not harder. Regardless, we need to bring law and order to business. We cannot afford an economy where business number are untrustworthy, and the loyalties of our financial institutions are conflicted between investors and their finance of the company A balance needs to be sought in relation to business interests, not a surrender of either side to the tyrrany of the other.

Beagle,

The point that I am trying to convey, is that the removal of the death tax will decrease charitable donations. With that tax in place, most people with that type of money have their own charities that they want to fund. Because of that tax, it increased charitable giving because they didn’t want to turn most of their money over to the government. What Stephen and I are hitting on is that there are policies in place, that are going to keep a so called “ruling class” in power for a long time.

I live in Utah, and we have a governer here that really resembles the President. His father is a very rich person and because of that, they have the means to obtain a position like this much easier then those who don’t have a family with a fortune. The other issue is that most of those first generation people, those who have struggled to amass their fortunes, have an idea of what it is like to struggle. Many of them had to take great risks to get to where they are now. Many had to pinch pennies to get through school. The second generation really didn’t have these worries. I’m not saying that the life of the second generation is easy, I’m just saying that it is hard for them to understand what someone is going through when they leave a job with health insurance and take a risk. I doubt that many of these people have had to work full time while going to college. If people like Pres. Bush did not have a piece of the fortune his family has, he would have been bankrupt with the poor business decisions he made in his life.

What we are getting at, is that the U.S. will not benefit from a ruling class, those who are in power because of who they are related to, or because of their monetary status.
Ivan

Stephen

The legislation for this was mostly passed under the Republican congress, especially the Glass-Steagall repeal that allowed the combination of corporate finance and stockbrokering.

Are you referring to the Gramm-Leach-Bliley Bill? It was passed in the US Senate by a vote of 90 to 8, and signed by President Clinton in the fall of 1999. The market collapse started only a few months following. This bill wasn’t even impimented before Enron collapsed. Help me!! I don’t see how one relates to the other.

The Enron collapse was created long before Glass-Steagall was removed, and was created during a Democratic administration.

Craig

The way the world works, there will always be folks who get richer, more powerful. It’s inevitable once a system gorws past a certain point. Some societies will let power become more permanently invested in one group of people and their heirs, others won’t.

The key thing to acknowledge here is that this is not a question of deserving things. Nobody deserves power over another person. They get it one of three ways: extortion, deception, and informed consent, however attained.

I’m sure the rich don’t like parting with money when its not their choice. Nobody does. But if they’re going to part ways with it, they’re going to do it on equal terms with us.

The Estate tax is an income tax for folks who get large sums of unearned money. If you or I were to be handed a bunch of money in a lottery, we would have to pay out a big amount in income taxes. So what sense would it be to unfairly exampe those who, to paraprhase Eddie Vedder, won the lotter by being born?

I think trickled down economics only makes practical sense to those in control of how money trickles down. The likelihood is, the money will get saved or invested, but it mos likely will not go into somebody’s new paycheck.

Truth is, the folks who have been given the task of trickling down their wealth have raised their own salaries at an astronomical rate, and have kept real wages for most Americans fairly stagnant for the last thirty years. executive salaries have gone up over a thousand percent. Worker salaries have only risen seventy-five percent. what we have here are people who don’t share, and who have been hoarding wealth among their ranks while stripping bare all the old ideals of business.

The point of the market is that some power resides in the hands of the consumer, and in the hands of others who must face the consequences of bad business decisions. If problematic behavior becomes industry wide, though, and one can make more money in the short term by not fixing the problem, people are going to do that.

I believe that the market must have rules built into to help keep things fair, and to discourage the unheeding accumulation of wealth into one class. We need to make our market one where fortunes and dollars flow, not one where the backwaters of convention and privilege accumulate in one place. Let there be rich folk. Let’s just make them work to keep on top, not get guaranteed it by their friend in government.

Craig-
I recall in the beginning of Star Wars: Episode One, The Villain Darth Sidious tells the Trade Federation to invade a planet. They ask whether such a thing is legal.

Sidious’s answer is: I will make it legal.

The people involved with Enron and Worldcom Made it legal after the fact:

In a brazen deal, Sanford I. Weill, chairman of the Travelers Group and John S. Reed, chairman of Citicorp, announce a merger of their giant financial empires in a $70 billion stock swap that dwarfs the WorldCom-MCI merger. The 1998 merger, which was engineered by Weill, brings together such brand names as Citibank, Travelers, Salomon Smith Barney, and Primerica. Because this deal goes beyond the limits of existing laws, Weill, joined by Reed, privately obtains temporary approval of the deal from Alan Greenspan, chairman of the Federal Reserve Board, and then helps mobilize the financial services industry to lobby Congress to repeal restrictive banking laws. Reed and Weill announce they will jointly run the new superbank, but Reed eventually resigns in early 2000 after losing a power struggle to Weill.

You should watch the accompanying Frontline report It should illuminate the failing of a system with such deep conflicts of interest.

If you think you can scare me off by saying Democrats voted for it, then you miss the point of my posting. These are mistakes, and I don’t wnat my party repeating them. Say what you like, I feel that the Republicans have lead this charge, and the old guard of the Demorcratic party has unfortunately followed. I think we should renew our sense that our domestic policy should maintain it’s loyalty to the public’s best interest above all else.

I keep seeing this pattern of deregulation followed by massive scandal. When I was a kid, we saw insider trading followed by the scandals regarding Ivan Boesky and Michael Milken, the deregulation of the Housing and Loans leading to the S+L crisis. We deregulate accounting in 1993, and guess what we get? A decade of misrepresented numbers.

Time and again, congress and the president do favors for big business, and big business pays us back with economic cataclysms. Maybe its time we stopped cutting rules from the rulebook and start treating these people as if the law should apply to them. Bush is especially bad about this. I think you should watch this Frontline Report about all the accounting scandals. I think the fact that the guy who pushed for accounting deregulation gets hired to be Bush’s head of the SEC should tell you something about his priorities.

Business has done much to protect its interests. It’s time to protect ours, as investors, customers and employees by making sure our government officials know that we want our economy built on honest principles, and purposed to the good of the many as much as the few.

Stephen Daugherty,

The Death Tax is the leading cause of the
termination of small businesses passed down to
children and relatives. They usually have to liquidate the corporation to pay the Death Tax.

Also, what gives the government the right to
tax inherited property everytime it’s passed
down a generation (i.e. being taxed again and
again and again) ? It’s already been taxed when
it was earned. Sounds like double and triple and
quadruple taxation to me.

It really worries me when I see people argue
for such taxes. Especially those holding office. To me, it seems so wrong for
the government to tax inherited property.

But, I’m not surprised at all. It’s hard to name something the scum bag
parasitic politicians have not yet put a tax on.

That mind-set is truly worrisome.
Sure, some fair taxation is necessary for things
such as national defense, and welfare for the
truly needy…but we shouldn’t be taxing every
thing from A to Z. It’s getting so ridiculous,
I can no longer remember all of the different
taxes. I look at a telephone bill these days,
and it’s amazing how many taxes and fees are
lumped into the bill.

One of these days, people are going to get fed
up with it and put an end to it. I doubt it
will happen in my life time, but I’d love to
see the whole bunch of corrupt tax-and-tax-and-spend parasites in the
government get thrown out on their fat lazy do-nothing lard asses.

Excellent post.

I just wanted to plug the website BuyBlue.org, because it is a good example of the kind of evolving counter-institutions we are going to need if we are to survive this current period of corporate excess.

It is a website that tracks the political donations of corporations, so that customers can choose where to spend their money accordingly.

The free market system works efficiently under conditions of competition. That means it produces the greatest satisfaction for the greatest number of its participants, GIVEN THEIR INITIAL ENDOWMENTS OF RESOURCES. It also leads to new distribution of resources in the following period.

What the free market does not do is bring about an ideal or even acceptable distribution of resources in the first place — unless one assumes that the historical process of resource accumulation was by and large a fair and voluntary process, with a minimum of fraud, violence, and deception.

The evidence would suggest a very mixed picture in that regard: not all good, not all bad.

Conclusion: a case can be made for a moderate redistribution of resources in society in every generation.

What is the ideal? That which will result in the greatest happiness of the greatest number period, and not just for some arbitrary or historically established distribution.

Is this a reasonable and responsible position for liberals to take, a middle ground between marxism and libertarianism?

OneSimpleIdea-
Inherited property comes to an individual without their effort. You just have to be born into the right family, and you get a fortune tax-free except for this. I say its only equality at work: if you get a marginal income over years of working, or a fortune in the single moment of a relatives or friend’s death, you get taxed. Nobody is given special status as untaxable.

Small businesses can have their ownership shifted, their finances transitioned before the owner’s death, usually. All it takes to get out from under the “death” tax is a little planning.

As for multiples of taxation, you should realize that taxes only divert money in the economy, not destroy it. First of all, Government employees tend to shop at the same stores, dine at the same restaurants. Second, contractors employ workers at factories and at construction sites to build what the government requests. Third, taxes support public schools, both grade level and college level which educate workers and increase their earning power. Entitlements cycle back into the economy as their recipients spend the money on food and other items

The reality is, it takes a pretty narrow view of things to see the moderate tax system we enjoy (as compared to Europe and other places) as a degrading force on the economy

What is degrading our economy is the outrageous debt-load. This not only damages our currency, but funnels huge amounts of assets towards those who buy up our debt: China and Japan. We’ve been funding our competion, while hamstringing our own domestic industries. We would have an easier time of things if we just made our peace with our rather relaxed tax system and did our best to live within our means.

Stephen Dauhgherty,

You’ll get no argument with me about the debt.
The $8 trillion (about) in national debt could
very well be one of the leading causes of the
demise of the United States.

The Death Tax is “Equality at Work” ?
More like “Socialism at Work” , or “Envy” perhaps ?
Redistribution of Wealth is “Legal Plunder”.
Fair and reasonable taxation is OK, but we’re far far from that being the case.

We’ll have to agree to disagree on the
nature of taxes, which are a nightmare, waste
billions alone for the book keeping required,
tax professionals, etc., waste a lot time, and
allow tax loop-holes for the wealthy.
Since the IRS likes to make things complicated, I always mail (snail mail)
a printed paper tax return (all 32 pages of it) each year (versus electronic filing). They want paperwork…fine, I’ll bury them in paperwork.

Also, our education system isn’t very good,
the government shouldn’t employ more people than
all manufacturing in the U.S., many government employees are dead weight, and much of the taxes
are not diverted back to those that pay the taxes…only a fraction of what’s left after the
crooked politicians and their cohorts have got their hands on it (e.g. pork-barrel).

Stephen -
Well presented argument. I don’t agree with you (see below), but I thought you did a good job presenting the problem as your perceive it in the broader light of our social complexity.

However, you said:

The economy is an artificial system. We have the ability to shape what is permitted and what is forbidden.

As an economist, I totally disagree. The economy is a very natural, organic system. We can forbid activity that would otherwise occur (e.g. inescapable debt), but we cannot force people to do what they would not otherwise do. Graphically speaking, we can exclude regions of rational economic conduct, but we cannot create new regions. The belief that the economy is artificial is the foundation of such follies as North Korea and Maoist China. One reason economists tend to lean to the right is that we have a healthy respect for what the economy can and cannot do.

As for multiples of taxation, you should realize that taxes only divert money in the economy, not destroy it.

This is also not true. The money supply is, in general terms, the amount of money in existence multiplied by the number of times it changes hands in a given period. Taxes remove some of the incentive to work harder (whether it’s a cop doing overtime or a billionaire starting a new venture) and thus slow money down, effectively shrinking our money supply as well as our productivity. If you don’t believe me, imagine an economy with 100% taxes.

Lastly, I agree with the commenters above that Enron is a poor example for you to use. Enron is much like the common criminal: they did things wrong, they got caught, they’re being punished. That can’t restore the damage they caused any more than a murderer’s prosecution can restore a victim’s life, but Enron’s collapse has been ample warning to other investors, CEO’s, and accountants. A better example of the complexities of our modern economy would be Microsoft, which poses the most difficult market-power questions to today’s regulators.

Stephen,

Though I’m not able to post very often on I read just about everything written on Watchblog (within the last few months as I’m new to this site) I normally feel like you have very interesting and well thought out points. I disagree with most of them but I generally respect them. That said I offer the following:

Inherited property comes to an individual without their effort. You just have to be born into the right family, and you get a fortune tax-free except for this. I say its only equality at work: if you get a marginal income over years of working, or a fortune in the single moment of a relatives or friend’s death, you get taxed. Nobody is given special status as untaxable.

Unless the money was obtained illegally somehow that “tax-free fortune” you speak of has already been taxed (possibly several times) by the government. Not to mention that unless that inheritor is keeping it in a vault in the basement they are being taxed on all the interest that they make off of that fortune. Calling it “tax-free” seems to be way off base.

As for multiples of taxation, you should realize that taxes only divert money in the economy, not destroy it. First of all, Government employees tend to shop at the same stores, dine at the same restaurants. Second, contractors employ workers at factories and at construction sites to build what the government requests. Third, taxes support public schools, both grade level and college level which educate workers and increase their earning power. Entitlements cycle back into the economy as their recipients spend the money on food and other items

Unless I’m misinterpreting your meaning this is downright frightening to me. This would seem to suggest that our “earnings” are never really ours. They are just loans from the government that we are allowed to use to live our lives with, and whatever is left over should go back to the government control. I don’t mind paying my fair share of taxes to support the fiscal needs (not wants) of the government, but you seem to be saying that once I make more than what I need to live my life it is just fine for the government to come up with any way possible to take as much of that money back from me as possible… Frankly that scares the hell out of me.

I will agree with you 100% on the debt issue. There is no doubt in my mind that this is quickly becoming the biggest problem that we face as a nation.

Stephen Daughterty wrote:

|
|The reality is, it takes a pretty narrow view
|of things to see the moderate tax system we
|enjoy (as compared to Europe and other places)
|as a degrading force on the economy
|

Stephen,

It takes a very narrow and socialistic
view to want to take something away from someone
else, and redistribute that wealth merely
because someone doesn’t feel like they deserve it.

And just because other countries have ridiculously
high taxes, is not a good reason to have them here also.
Government is huge and growing larger all the time.
And while it meddles in everything (usually messing it
up thoroughly), it is also responsible for nothing.

Most people can see the wisdom of reasonable
taxation, but it ALWAYS gets out of hand.

The scum bag politicians ALWAYS find ways to tax
everything from A to Z. Thus, government is
like a virus. Like a parasite, it feeds on its
host, and sometimes, kills the host. That’s seems to be an
absolute, since history shows us that scenario
repeats itself over and over, until people
eventually revolt. People in government ALWAYS
become arrogant and think they know what’s best
to do with other people’s money.
That’s another absolute.
Absolute power corrupts absolutely.
There are laws that are supposed to prevent such things,
but the law has been perverted to make
legal the very thing it supposed to prevent.

You would not let someone you don’t know walk
into your home and take your property would you?
Thus, the government had to pervert the law to
make legal what should not be…thus, legal plunder…and
all the while rationalizing and justifying the crime by claiming
it is for the good of the many. But, the truth is, if
we allow one of us to be damaged, we’re all damaged.
How is violating the rights of citizens helping the many?

If you believe in freedom, what gives ANYONE the
right to take from one and give to another?
Just because someone thinks they don’t deserve it?
Wow. If you start down that slippery slope,
where does it all end? With that logic, practically
anything legal plunder can be justified.
If you believe in freedom, what gives ANYONE the
right to prevent ANYONE from doing what they please
as long as it does not harm anyone else?
What happened to “live and let live” and
“do unto others as you would have them do unto you” ?

Thus, using that logic, it must following that
it is a crime to forcibly redistribute wealth to

the less wealthy. It is false philanthropy.

Also, forcibly redistributing wealth (i.e. take from the
rich and give to the poor) fails a basic requirement:

| Anyone can do anything they want, as long as
| they do not violate the inalienable rights of another.

All other laws must be derived from that simple law.

Therefore, when anyone demands government or
society to do give them something (other than the
things they’re supposed to do such as provide for the
national defense, enforce laws to protect citizens,

or provide for the truly needy, etc.), they are in error,
they harm those that are truly needy, and their motives are questionable,
because they attempt to disguise
their ENVY as demands for EQUALITY.

I recall in the beginning of Star Wars: Episode One, The Villain Darth Sidious tells the Trade Federation to invade a planet. They ask whether such a thing is legal.

Sidious’s answer is: I will make it legal.

But you also said:

The legislation for this was mostly passed under the Republican congress, especially the Glass-Steagall repeal that allowed the combination of corporate finance and stockbrokering.

This legislation was passed AFTER the issue you bring up with STRONG support from the Democratic party.

You also bring up this:

I keep seeing this pattern of deregulation followed by massive scandal. When I was a kid, we saw insider trading followed by the scandals regarding Ivan Boesky and Michael Milken, the deregulation of the Housing and Loans leading to the S+L crisis. We deregulate accounting in 1993, and guess what we get? A decade of misrepresented numbers.

Which Republican Congress caused this???

I see Democrats wanting it both ways. I hear “The economy was better in the Nineties when we were in charge”, and “D@mn those Repubicans in the nineties when all this scandal happened when they were in charge!! Look what the Republican Congress passed!!”

So what I am hearing is basically, if it was good in the nineties the Democratic party gets credit for it. Anything bad in the nineties we will blame on the Republicans.

I think you need to take the good with the bad. There is a phrase in the financial world that is called the “cockroaches leaving the ship”. In a bubble markets investments rise irrationally. Everything is going up. Analysists look the other way because they have predicted stocks to go down because of fundamentals and have been wrong. The “rising tide is floating all boats”, and so those who look at the detail and say “the emperor has no close” aren’t rewarded. After all, stocks without fundamentals are going up as well as those with fundamentals. This gives way to sloppy bookkeeping and scandal.

The phrase “cockroaches leaving the ship” is a financial sign (admitedly seen in hindsight) that shows that the bubble is colapsing because fraud hidden in the upwave is visable in the downwave. This happened in the early nineties with Savings and Loans and Real Estate investments.

I think your premise is wrong. I don’t think what you discribe has much to do with Repubicans or Democrats, but the incredible investment “bubble” of the late nineties.

What Greenspan has been so successful at is returning the “bubble” back to real estate. So watch for the “cockroaches” leaving the ship when the housing market collapses again. Watch economic trends instead of who is in or out of office, and it makes more sense.

Remember the laws that created the scandal of 93 were ALL written by Democrats!!

Craig

The market and the law punished Enron and that is how it should be.

So when does California get it’s money back?

So what I am hearing is basically, if it was good in the nineties the Democratic party gets credit for it. Anything bad in the nineties we will blame on the Republicans.

Consider for a moment that might be true. What then?

I don’t think what you discribe has much to do with Repubicans or Democrats, but the incredible investment “bubble” of the late nineties.

And who’s economic environment set the stage for that? Robert Rubin, Clinton’s Treasury, describes it,

In important ways, the deficit had become a symbol of the government’s inability to manage it’s own affairs - and of our society’s ability to cope with economic challenges more generally, such as our global competitiveness, then much in question. The view that fiscal discipline was being restored contributed to lower interest rates and increased confidence, and that led to more spending and investment, which in turn led to job creation, lower unemployment rates, and increased productivity. Some have argued that the productivity surge of the 1990s was merely a delayed reaction to the new digital technologies that arrived in the 1980s. But that view overlooks what happened in Europe and Japan, where the same access to new technology failed to result in a similar sustained productivity surge, probably because businesses didn’t invest in technology to the same degree. That paucity of investment may well have been due to the structural rigidities in the labor and capitol markets of Europe and Japan, but even with the flexible economy of the United States, investment, and therefore productivity, probably would not have surged as they did without that increased confidence as well as lower interest rates.

The restoration of business and consumer confidence, combined with lower interest rates, created a virtuous circle, a positive feedback loop. Deficit reduction contributed to economic growth, which, through increased government revenues, contributed to further deficit reduction, which in turn led to more growth, and so on. The fiscal effect of our plan was thus a function of both our policy measures and of the growth those policies fed. We didn’t design the plan around the potential effect on the stock market, as we had with the bond market, but in fact a similar phenomenon occurred as improved fiscal and economic conditions contributed to a rising stock market, which in turn fed back into deficit reduction and the economy.

The decision the President made in this process marked a dramatic change in fiscal policy. The opponents of that change - especially supply-side advocates who vehemently objected to including tax increases in our deficit reduction program - predicted that our program would lead to increased unemployment, higher deficits, and economic stagnation, recession, or worse. Republican Representative Dick Armey of Texas, chairman of the House Republican Conference, said the plan would be “a disaster for the performance of the economy” and warned that “no deficit reduction, no good can come of it.” His colleague from Texas, Republican Senator Phil Gramm, called it “a one way ticket to a recession.” Instead, the country had the longest period of growth in it’s history, massive new private-sector job creation, low inflation, higher incomes across all income groups, increased investment and productivity growth, and lower deficits, eventually followed by surpluses. That has been a great and enduring frustration to supply-side advocates, who first predicted that our policies would cause great economic injury and then, when the opposite happened, argued that sound fiscal policy had nothing to do with economic conditions they had predicted would not occur.

AP:

I have heard this argument several times. And much of the arguement holds water. The counter arguement is simpy that Stephens logic on this thread is full of baloney. If Rubin and the President Clinton were that good at ecnomics then pardon me if I also attribute to them Enron etc etc.

I remember the vote in 1994 to raise taxes and what Repubicans said about it at that time. Clinton was able to push his plan through Congress. It is fine to give credit where credit is due.

Just do not fault me if I ascribe to Clinton and Rubin the same blame for Enron, as you ascribe credit for the economy. They BOTH happened on Clinton’s watch. Legislation takes time to develop. The legislation that was in force in the 90’s was the result of Democratic Congress of the eighties and early nineties.

Now, you wouldn’t want it both ways would you??

Craig

Haha! OK, Craig. No doubt Clinton could have pushed Congress to buff up the SEC. But you would have heard Republicans howl! I doubt it would have happened.

I mean, Clinton couldn’t even get Republican support for counter-terrorism legislation: “Wag the dog!” they cried. It’s a “phony issue” distracting us from the real threat - hanky panky in the Oval Office. :)

Much is made of the of the prosecution of the mega-criminals at Enron, Adelphi, etc.

Will these men get prosecuted to the full extent of the law? I doubt it.
When sentenced, will these criminalas be serving their time at a hard core prison or a “country club”?

Those that “have money” make their own rules. The rest of us serve at their leisure.

One Simple Idea-
What bothers me is this absolute phobia of taxation that goes with your disgust at the deficit. If there is any point to my article above, it’s that our economy is a system, and simplistic think yields results that go awry.

The Estate Tax is not the Death Tax. The real death tax is 100%: you can’t take it with you when you go. The true targets are the few who earn enough from their parent, relative or other benefactor to cross the threshold into being covered by this tax.

Many of these folks need never work again in their lives, once they get this huge sum. They will live lives of luxury, and if they are prudent enough, they will have a fortune to pass on to their children.

These people will take in this income, never having had to pay the taxes on them that their benefactor did. If you recognize each individual’s taxes as distinct to them, then there is only one obvious conclusion: The Estate tax may be the only tax they ever have to pay on that income.

With the size of the fortunes involved, there really isn’t an argument that we’re making paupers of these people. With sufficient planning, which these people can pay accountants to do, they really never have to face the tax head on, unless they want to.

What I find disgusting is the lack of any sense of civic duty in today’s econmic elites. I don’t mind that there are people who earn more than I do, who are richer. What I mind is this arrogant attitude that they are somehow superior individuals in some respect or another because they managed to amass these fortunes. I mean, isn’t that the implicit message of tax cuts and breaks being targeted at the rich, that they somehow know better how to spend this money than the rest of us? I have lived long enough to learn that the race doesn’t necessarily go to the swiftest runner or the best person.

I think you should ask those nice people in Washington why they haven’t simplified the tax code. the answer will likely be who foots their bills when it comes time to get re-elected.

Chops-
We do a lot of things with our economy that aren’t natural. What’s natural about contracts? Why not just do things, and not go through the trouble? Why? Because if we did things that way, there would be confusion and suspicion when people cheated other folks. So, we came up with contract laws to ensure that people stuck to their agreements. Nothing natural about it, but there is something quite useful about it, especially when we get to the fine details of how things get enforced and how the process is worked out.

The economy is an emergent system, which means the way you set up the rules can create an non-obvious outcome. What I would advocate is that people study the situation, see what needs to be done, work out some solution, and the observe the consequences, revise- well, to make a long story short, we need a vigilant kind of regulation that takes heed of its results rather than removing or piling on laws and hoping for the best.

It is not the belief that the economy is artificial that makes communism ultimately unworkable, it is the belief that it is rational and deterministic. When one takes that route the responses to the problems that come up are either too much or not enough, or worse not even targeted to the right end of the problem.

As for taxation, I think in practice what I say is truer than what you theorize. Ask yourself: what happens to that money? It gets spent by the federal employees, contractors, military folks, and the coffers of those to whom we have sold our debt. It would be much less the case if we didn’t deficits spend so much to finance the tax breaks.

Taxes do not remove the incentive to work. Isn’t scarcity what drives the market? Scarcity, in moderate amounts, encourages one to work to earn more. Now, excessive taxes, though can be a liquidity problem, and can remove usable money from the system. but the same can be said for the T-bonds that finance the debt. Somebody sinks their cash into that T-Bill, and it’s no use to us. Also, if it’s a foreigner buying the debt, then we have cash flowing out of the country and resources going to our rivals in Japan and China.

For these reasons, I consider the Republican phobia of taxation a barrier to sensible fiscal policy and a danger to our economic prosperity.

Enron was not a poor example. It was the example to imitate for many, and a shining light to your side of the aisle of the benefits of siding with the energy companies. Your highest officials and leaders were in bed with them, only distancing themselves from these “common criminals” when it became politically incovenient to remain allied to them.

When the energy crisis struck California, who did you blame, the state, or Enron? Did you go looking into the lapses in power generation that had nothing to do with a failing infrastructure? No, you pronounced it a failure of regulation, as per the dogma of the Republican party. Deregulation can never go awry, can it? Well, here, it did.

This was the artificial raising of prices by speculation that had no limits placed on it. This was an economically important state with abundant energy forced to beg for its power. As much as your side would like to think that Deregulation is some kind of panacea, it’s not. It is an approach that sometimes has merits, but it must be applied not as a principle of government, but as an approach taken after due care and study.

Brad-
You misinterpret me badly. What I’m saying is that the money we pay in taxes is never really the government’s any more than it is ours. We can keep money in a vault for a time, but the reality is, money is made to be spent. It’s meant to circulate. Now excessive taxation can slow an economy down, sure enough, but we are nowhere near that level under our current system. We have one of the lightest tax burdents in the industrialized world

In the end, interest and things like that are just payments other people give to the investor or client for the use of their money. As such, it is income. As is the massive disbursement of money that constitutes the inheritance. Now most of us never get the chance to make that much money off of interest and investment. It’s our paychecks that get taxed.

It’s not what I’d like, peronally, but as a citizen I must remember that freedom isn’t free, and neither are the programs I like. The Republicans have not absorbed this lesson, and consequently are spending like they’re no tommorrow. What we need is a sober look at the system, divorced from these focus group driven irrationalities of Rhetoric.

Craig-
There is a psychological component to the economy you cannot remove. You have millions of people out there wondering whether it is safe to invest, and whether the next big thing is all that it is cracked up to be. The trouble with Enron is the arch of its character: success story riding high to catastrophic collapse, and all in a very preventable way.

The Stock bubble (Itself the subject of a Frontline Report) was one aspect of the failure, but not the most important one.

You can blame Clinton and the the other Democrats for heading this way, but it should be obvious to you by now, that no matter how spread out the blame is, theire is a problem with the way things were deregulated (the question you avoid by spreading the blame), and your party were the leading advocates for many of these proposals. I mean, how else does the accounting industry lobbyist who helped push through the deregulation of the accounting industry become the head of the SEC in response to Enron and the other accounting frauds? We may have had our affairs with these fellows, but you folks have been the ones consistently in bed with them.

Stephen Daugherty wrote:
| What bothers me is this absolute phobia of
| taxation that goes with your disgust at the
| deficit. If there is any point to my article
| above, it’s that our economy is a system, and
| simplistic think yields results that go awry.

Stephen, I don’t have absolute phobia of taxation. I said reasonable taxation is OK.
Most people don’t mind reasonable taxation for
the things we need (such as National Defense, and helping the truly needy).

And, dislike of unfair taxation has nothing to do
with disgust of a huge deficit. And just because
other countries have higher taxes, is not a
logical reason to have even higher taxes here.

Yes, tax loop holes for the wealthy need to be
eliminated, but the tax system (as are most
other things in government) are too complicated,
which makes it hard to know what is really going
on. The politicians like it that way.

So, when did simplicity become a bad thing ?

Why say “simplistic think yields results that go awry” ?

That’s exactly what politicians want…
make things more complicated so no one
can tell what’s going on. Over-complication
breeds corruption (e.g. pork-barrel, less
transparency, less accountability). So, no
wonder people get wary when government over-
complicates everything. Take Social Security
for instance. There have been many years when
more S.S. tax was collected, than S.S. benefits
paid out. Thus, S.S. should be easy to fix.

Just quit plundering the surpluses (starting
now). In fact, S.S. wouldn’t be in trouble had
they never been able to plunder those funds to
begin with. But that’s too simple. So,
politicians figured a way to steal from S.S.
S.S. wouldn’t be in trouble now, if they weren’t
stealing the surpluses from it. And regardless
of where the money went, it was stolen from
those that paid into the system, and won’t get
much (if anything) back when the system fails. It’s that simple.
But, if you’re a politician, there’s a
problem with such a simple idea. That prevents
them from plundering the money without someone
noticing it. So some over-complication was
devised to plunder S.S. And the scum bag
theiving politicians will never voluntarily stop
spending the surpluses, and building huge debt
on future generations. The politicians are
totally irresponsible and will do anything
(pander, lie, steal, cheat, plunder social programs,
redistribute wealth, etc.) to stay in power.

And if you think the government has mismaganged
S.S., just wait until Wall Street gets a hold of
all that money. Sure, grandpa…your money will
be safe here and it will grow and grow !
Yeah, right. Hence, another unnecessary over-complication. How much money have middle income
families lost in the markets in the last 6 years?
The most accurate way to characterize the stock
market is that it is GAMBLING.

So, what is needed is not more complication.
What is needed is simplification.
Such as One Simple Idea …

Stephen,

From your posts could I assume that you are for a flat tax on everyone?

If you exclude class warfare and envy, isn’t everyone equal?

You are correct in your point that the death tax is 100%, rich or poor, nobody gets to take it with them.
If there is no class envy, shouldn’t the Gov. get everything anyone has upon their death? Rich or poor?

Sure, if I had Bill Gates’s money, and he had feathers in he ass, we would both be tickeled.
I just wouldn’t try to steal/extort/extract/tax his cash from him unwillingly.
Whether he was smart/lucky/worked his ass off, Its his and I’m happy for him.
I may not agree with everything he donates money to, but I’ll defend to the death his right to deside where it goes.

I think that some TAX is necessary for
the common goals of civilization.
It’s illogical to expect government to function
without ANY funding.

However, I’d prefer a national sales tax
rather than any kind of income tax.

And that national sales tax should have
a maximum that can never be exceeded
(e.g. 8%). And a state sales tax that
can never exceed a set maximum (e.g. 9%).
Thus, a potential maximum tax of 17% of all
spending (excluding FOOD and MEDICAL
expenses…the only two things that would NOT
be subject to a national sales tax is FOOD
and MEDICAL expenses).

Perhaps we should ignore how much money people
have…some will always have more than others.
So what? Why try to dream up ways to
make the wealthier pay more? Is there really
any justifiable logic in that reasoning?

Keep that up, and the wealthy will keep moving
their homes, businesses, and operations to other
cities, states, or countries, where they can get
a break.

For example:

Five friends meet every Friday for lunch.
Rather than each pay his own lunch bill,
each paid according to their net worth.

One friend (Richard) was wealthy and paid 66% of the bill.

One friend (Pete) was poor, and paid only 1%.

The others (Mat, Mark, and Mike) were in the
middle-income bracket and they each paid
the remaining 33% split three ways (i.e.
11%). All was fine and dandy for a while,
until one day, Richard didn’t show up for lunch.
Now, the poor friend (Pete) had to pay 4% and
the remaining three friends suddenly had to
pay the remaining 96% split three ways (i.e.
32%). Mark, Mat, and Mike complained…
that’s not fair! We had to pay more than
what we ate cost! And what about Pete.
He only had to pay 4%!
Well, Mark, Mat, and Mike stopped going to
lunch with Pete. And, Pete, being the
poorest, could no longer afford to go out to
lunch. So, Pete prepared his lunch each
morning and took his lunch to work.
Pete thought to himself, well it was great
while it lasted, but I can’t force my friends
to always buy my lunch.

So, you see…if we keep punishing the
wealthy (due to ENVY disguised as claims
for EQUALITY), they’ll stop coming to meet
for lunch…that is, they’ll just move
somewhere else where the cost of living is
cheaper, the cost of labor is cheaper, and
their profits are higher.

And if you still think the wealthy should pay
more, ask yourself this:
(1) Why don’t the wealthy then pay more for food ?
(2) Shouldn’t the wealthy pay more to get a
ticket to a movie, a coke, a popcorn ?
(3) Shouldn’t the wealthy pay more for a gallon
of gas too ? Especially, since they drive the
big gas guzzling Mercedes ?
(4) Shouldn’t restaurants, and stores, and
merchants all charge the wealthy more ?

So if you believe the wealthy must pay more
tax, they should also pay more for everything
else? Right? So, perhaps you now see the
falacy in the premise. Once you start down that
slippery slope, no one is safe. To damage the
rights of one citizen actually damages us all.

People should not be taxed differently based
on income or net worth, as if they’re being
punished for being wealthier. And if we keep
doing it, they’ll simply stop coming to lunch,
and take their business elsewhere.

Also, get rid of ALL tax deductions,
and get rid of property tax, and
estate tax, and a million other taxes.
Just think how simple it could be without
all of the paperwork to track deductible
expenses such as mortgage interest,
unreimbursed employee expenses,
cost of tax software, state sales tax,
state income tax, fuel tax, business expenses,
fuel tax, telephone tax, 911 tax, home office
deduction tax based on square feet and value of
home and land, etc. Just think of the billions
that would be saved without all of the record
keeping and paperwork and storage to support the
current tax system.

And the federal government should quit meddling
in everything from A to Z, and get back to doing
ONLY the very few things they’re supposed
to do, such as:

(1) National Defense
(2) Law Enforcement,
and protection of Civil Rights
(3) Welfare for the truly needy

Let the states do the rest, which they’ll
probably do much better and at much less cost.
The Federal government can only meddle in state
affairs where states are violating the rights of
citizens of the nation.

And be wary of those who say “it’s not that simple”, because a favorite tactic of
scheming parasitic politicians is to
over-complicate everything so no one can know
what’s happening, making it easy to abuse, and
allowing the parasites to profit from the chaos.

One Simple Idea-
I think it was Einstein who said, Make things as simple as possible, but no simpler.

For me, it’s been my experience that the world tends to complexity. Even if we eliminate its formal manifestation in laws and regulations, it will come back in informal behaviors on all sides. While I do believe that we should be willing to punish members of our own party, I believe this should be done on a case by case basis. Many others have tried to purify their governments like this. The standard result has not only been failure, but many times an ironic turn of event that left things worse off.

Some parts of government need streamlining, but more than that, they need to keep the complexity and the legislation necessary to do their jobs, because when a government agency is given insufficient funds or powers to do what it needs to do, the result is more chaos in the system rather than less.

Beagle-
I’ve told you before: no flat tax. Flat taxes are a child’s way of thinking of fairness: everything the same But not everybody has the same standard of living, so a flat tax hits different people differently.

Class warfare is your way of saying sticking up for the economic concerns of the poor and middle class constitute a call to bring down the rich. Nothing of the sort. I’d just as soon have their cooperation in society, rather than their resistance. Unfortunately, though they and many others in this country have been taught to fear being taxed, the way a fat kid fears having the thin one next to him steal a french fry. I don’t hate the rich, but I sure get annoyed with them when they suggest that they’re victims. To steal your phrasing, if I could exchange my money worries for theirs and they could have feathers up their ass, we’d both be tickled.

Seriously, I think the Republicans have taught people to fear things they should see as part of their patriotic duty. Supporting the government is part of what we do to support our nationwide community. If we want something from our government bad enough to run deficits, it’s obviously worth enough to pay for it up front and avoid the interest charges. I’m not saying we tax people into the ground, I’m saying we should stop running up huge deficits paying for things we know we’re going to continue to pay for.

Stephen,

We may agree on some things, taxation likely isn’t one of them.

I’m not rich, never have been, never will be.
You’re a smart guy, seemingly with a good education, use that to try to get ahead in the world. Making money is the easy part, what you do with it is much harder.
Provide for your wife and children, pass down what you can to them, if someone is hungry don’t wait for them to steal/beg for a “freedom fry”, give them the whole damn sack and help them with the information that will allow them to purchase their own next time.

Why is it that people always feel better about charity than they do about giving money to the IRS?

Stephen:

There is a psychological component to the economy you cannot remove. You have millions of people out there wondering whether it is safe to invest, and whether the next big thing is all that it is cracked up to be. The trouble with Enron is the arch of its character: success story riding high to catastrophic collapse, and all in a very preventable way.

I think that is part of it. Add in a little 9/11, a war, oil prices, non Enron losses. (The Nasdaq fell in half the last year of Clinton’s administration). In additon money has not “disappeared” but is now in Real Estate. Americans are more prosperous now than at any time in history.

My contention is simply that you can’t give Clinton all the credit for the 90’s and assign all the blame on the Republicans. The Republicans were very important in passing legislation to limit government spending. Actually, if you want to give credit, I would credit gridlock. Neither side could get is programs passed. Democrats couldn’t spend money, and Republicans couldn’t cut taxes. The country prospered because Washington couldn’t get anything done. If you go to google and search for “gridlock” and pick a year in the latter 90’s it’s really interesting. A strong case could be made that the 90’s happened because neither party could get anything done.

Craig

What if that’s what many of us already do? What then? I don’t want a socialist economy. It’s too rigid. But rigidity comes in many shapes and sizes. Bush’s tax policy has left us with little ability to manuever in terms of revenue, at a time when the cost of our war and his new spending are greater than ever.

Bush may attribute much to the power of his will, but he’s taken us in conflicting directions, economically speaking. Where’s the policy here? We are not paying less taxes for our expenditures here. We will have to pay off this with interest later. If you look in the tresasury budget every year, we spend about as much paying off our past debts as we spend on Defense or Social Security. We would we be much closer to even if we weren’t paying for Reagan’s legacy. What will Bush’s legacy deny us in the future? I think that’s the question you should ask, and that’s part of my central thesis here: things like tax cuts are not as simple as the Republican Party has been posing them. A rigid anti-tax stance may make for power politics, but it is a stance that weakens policy. Even Reagan raised taxes three times, because it was necessary to maintain the economy. What Bush seems to fail to realize is that the rigidity of his posture does not necessarily reflect the strength that the policy would bring to our economy. The GOP has let the folks running the campaigns run the policy. The results may end up being disastrous.

“Why is it that people always feel better about charity than they do about giving money to the IRS?”

Well, psychologically it’s because the IRS is “taking” your money whereas charity is your own “benevolence.” In the logical view of it, the government is more liable to waste your money than the charity anyways.

Craig,

“My contention is simply that you can’t give Clinton all the credit for the 90’s and assign all the blame on the Republicans.”

You can’t give Clinton any credit other than his tax cuts geared towards the average American. The economy boom was not of his doing, and therefore you can’t really attribute the surplus to him either.

“A strong case could be made that the 90’s happened because neither party could get anything done.”

That’s total bull-shit. The internet-bubble would have happened with or without government progress.

Stephen,

“What Bush seems to fail to realize is that the rigidity of his posture does not necessarily reflect the strength that the policy would bring to our economy.”

No, I think he realizes that. It’s probably more of him wanting to please his constituents and support base by “staying the course,” a.k.a: “not flip-flopping.” :)

The internet-bubble would have happened with or without government progress.

Then how come it didn’t happen anywhere else to the extent it did here? No, you have to give credit to the economic environment created by Clinton and Rubin.

Stephen:

What if that’s what many of us already do? What then? I don’t want a socialist economy. It’s too rigid. But rigidity comes in many shapes and sizes. Bush’s tax policy has left us with little ability to manuever in terms of revenue, at a time when the cost of our war and his new spending are greater than ever.

I think we are reliving 1993-4 again. I would argue that the deficits WERE necessary to make sure the 2001 recession was a shallow one. Expecially with 9/11. I would also argue that the spending increases were important for the same reason.

That was then and now is now. Just like in 1993-4 when Clinton narrowed the deficit gap, (closed it) with tax increases, I think Republicans will do the same with spending cuts. I saw some polling data that indicates that is exactly when the American people want. They want fiscal responsibility through spending cuts.

I think you will see some pretty substancial cuts this year and for a while until Bush keeps his promise of cutting the deficit in two before his term ends. I also think you will see the veto pen come out.

I also expect a moderate approach to reform Social Security to pass. The one that makes the most sense to me right now is one being sponsored by a Democrat. (At least as a starting point). What is passed will probably look very different from what is talked about right now with all this manuevering going on.

Craig

The solution to deficits and debt is not
raising taxes. It’s cut spending (e.g. pork,
cut fraud, cut government employees, etc.).
The government is too big and spends too much.
It tries to meddle in everything and be
accountable for nothing. It gives away billions
to other countries. It’s way out of control.

We can’t just pick away at the fringes of the
problem. We have to get to the core problem,
and take action.

But, that would make too much sense, and some
will say…it’s not that simple (especially
politicians), and insist on overcomplication of
everything, making new laws that already resemble
or duplcate existing laws, while doing a very
bad job of enforcing the laws.

But, there’s a peaceful way to bring about reform
with nothing more than a vote…the people don’t
know what to do, and feel there’s nothing they
can do, and nothing seems to be working.
What they need is “One Simple Idea” that will
give them the peaceful force required to make
politicians straighten up and fly right.
And if the politicians don’t clean up their act,
and implement a few changes to allow people to
see what’s going on, to increase Transparency and
Accountability, and reduce corruption, then those
politicians won’t have their job long enough to
collect a pen$ion. The games and petty partisan
politics, filabustering, obstructionism, and
other assinine crap going on in the government
is absolutely ridiculous, and all politicians
need a wake-up-call to get their attention.

We should just start voting out all incumbents
every election (regardless of a few good
politicians … if there is such a thing),
until some changes are made (e.g. only allow ONE
item per bill, so we know what’s being voted on,
and make all votes widely available so we can
all see who voted for what, and start reducing
government drastically, and implement an
Approval Voting System).

Don’t vote for any incumbents, and don’t vote for
any major party candidates.
Put some ordinary people on the ballots.
Treat Congress as a single entity and fire the
whole bunch every election until
they realize they’d better start acting
responsibly.

I would argue that the deficits WERE necessary to make sure the 2001 recession was a shallow one.

I’d argue that Bush’s record-setting deficit spending made the 2001 recession longer and deeper than it should have been.

I think Republicans will do the same with spending cuts.

Dream on.

“You cannot manufacture a consensus for statutory controls when the consensus for budget discipline is not strong enough,” said Representative Jim Nussle, Republican of Iowa and chairman of the House Budget Committee. “I do not believe, unfortunately, there is a broad enough consensus necessary to enact budget controls into law.”

And there are no significant cuts in this year’s budget. In fact, it’s bigger than even last years record setting spend-fest.

I saw some polling data…

You should know by now that Bush doesn’t look at polling data. :)

AP,

“Then how come [the internet bubble] didn’t happen anywhere else to the extent it did here? No, you have to give credit to the economic environment created by Clinton and Rubin.”

Actually, no I don’t. I could go into a lengthy discussion of this, but I’ll just leave it at two things: one, in the early 1990’s (before Clinton took office) Harry Dent & Co. were already predicting the internet bubble (and quite accurately at that), and two, all of the internet innovations that fueled the internet-bubble had no government help (except with Gore campaigning for ARPANET, the internet in its infancy).

Craig-
We will be reliving the early nineties, perhaps the seventies if we don’t get our spending in line. Both economic problems came to be when we traded short term prosperity for long term debt.

As for spending cuts, I really doubt the Republicans are going to do that. When have they shown that kind of discipline and willingness to take risks?

The bulk of the new spending that’s sent us into recession is war spending and medicare drug benefits. While we could carve a whole cut of pork off the budget, the other spending is not going away. So, we can’t solve this problem entirely by spending cuts. The dreaded T-Word will have to come into play, or we will suffer worse recessions so Bush doesn’t get politically tarnished by this one.

As for the Veto pen, Bush has never used it. He won’t say no to his fellow Republicans.

Stephen:

The bulk of the new spending that’s sent us into recession is war spending and medicare drug benefits.

According to NBER the recession began in March 2001 and ended in November 2001.

http://www.nber.org/cycles/july2003.html

All of the spending you speak of happened after the recession was over.

Craig

Stephen:

No one “sent us into a recession.” Recessions have been around since statisticians bagan keeping records. As a people we are getting better at managing the economy. Reagen had the record for the longest economic expansion, only to be bettered by Clinton in the next decade.

It is true that the stock market predicted the last recession during Clinton’s time in office. Stock market declines of the magnitude of 2000 definitely point to a slowdown. Even if Clinton “caused” the recession, that language is only to score political points. If I as a Republican blame Clinton for the recession of 01, then obviously I have to give him credit for authoring the longest expansion in American history. But even that in inaccurate. The trend as I showed above is for longer expansions in general. Clinton and team had the luxury of learning from the previous team (Republican) in order to make the next expansion work even better.

There really is no data out there that shows that one approach if better than the other. It all depends on what part of the market cycle one begins in. Clinton had the fortune of having the recession in his rear view mirror when he took office. Bush had the struggle of having the recession start two months after he took office.

If you line expansions up side by side, you will see that this expansion is not all that different than the previous one. It is unique in a few ways, but it was the end of the decade that produced the “boom” not the beginning. Unemployment is very close to what it was in Clinton’s first term.

We live in a hyper partison time. But in reality much of economics works outside of partisonship.

It is fun to argue about it though.

Craig

Craig, here’s the funny thing, according the the neo-cons and the right-wing media, the 1990’s bull market was a result of the REAGAN administration. The 2000-2002 crash, however, was Clinton’s fault. What a load eh?

Zeek:

Craig, here’s the funny thing, according the the neo-cons and the right-wing media, the 1990’s bull market was a result of the REAGAN administration. The 2000-2002 crash, however, was Clinton’s fault. What a load eh?

Some people on the wacko left or the wacko right have their minds made up so they don’t like to be confuse by facts.

Anyone who is awake can see that Clinton did great by the economy.

Craig

Craig-
I meant deficit where I said recession. But I would stick to my point that Republican looseness on the tax policy has created problem in our economy before, and by all indications is doing so again.

Read the book The Price of Loyalty and you’ll see Paul O’Neill and Alan Greenspan talking together about how tax cuts generally have poor to moderate benefits for the economy, while deficits have a profound and unequivocal effect towards the negative.

Whatever economic effects we see from the tax cuts, they are a short term gain for a lot of long term pain. They will hinder our economy, and by extension, our ability to pay for our military adventurism. This is why no president has ever cut taxes during a war- it’s a strategical defeat waiting to happen.

That’s my worry, really: that this president, in seeking to feather his political nest, has set the policies of our government in a collision course that is going to require some very unpleasant choices down the line, choices we would have never had to have considered had we been blessed with a wiser, less ideological leader.

Stephen:

Whatever economic effects we see from the tax cuts, they are a short term gain for a lot of long term pain. They will hinder our economy, and by extension, our ability to pay for our military adventurism. This is why no president has ever cut taxes during a war- it’s a strategical defeat waiting to happen.

That’s my worry, really: that this president, in seeking to feather his political nest, has set the policies of our government in a collision course that is going to require some very unpleasant choices down the line, choices we would have never had to have considered had we been blessed with a wiser, less ideological leader.

You are certainly correct if the current situation continues unchecked. I would argue that it will not. I support Bush’s fiscal policy TO THE PRESENT because it stimulated the economy when it needed stimulating. Now the ship needs to be turned just as it did in 93-4 when Clinton raised taxes when the economy strengthened.

Now the budget deficit needs to be controled/eliminated. The polling data shows that most people prefer budget cuts. In otherwords, Bush put the economy on the right path, but now needs to turn the ship because the economy has changed. (Negative growth calls for different action than good growth (3% or better).

As for taxes and war time, I am not as concerned as you. This is a new type of war. It looks to me more like the cold war than WWII or Korea or even Viet Nam. This is going to be with us for a while. Besides, the government certainly has borrowed in times of war as in WWII.

With or without the tax cuts there would have been a budget deficit.

Craig

Craig, I’m unclear on whether or not you think the president has his economic affairs in order. You give the standard rhetorical line about Bush tax policy having encouraged growth in a time of recession, yet you say his policies unchecked will lead to disaster. Two questions, then:

1) What evidence confirms the role of tax cuts in encouraging the economy?

2)and Given Bush’s insistence on his tax cuts, what hope is there of appropriate actions being taken in his term to check his disastrous fiscal policy?

It seems like wishful thinking to me. One thing I don’t doubt is Bush’s wish not to repeat his father’s mistake. He’s intent on making one’s all his own.

Stephen:

In a Recession, borrowing money is useful because it stimulates the economy. This can be done either through spending, (Rosevelt used Social Spending for this purpose in the thirties), or through tax cuts like Reagan and Bush. When you borrow money and spend it, the economy is stimulated, because it puts money in taxpayers hands who use it for their personal enjoyment. There should be some direct links to consumer spending after tax cuts. With tax cuts it is individual spending that provides the boost.

Democrats have traditionally done the same thing in reverse with “jobs programs”, or extending unemployment benefits, without a tax increase. The net effect is to spend some money to “stimulate” the economy. This is appropriate when there is negative growth.

Also, small deficits of 1% or 2% of GDP are not a big deal. We can run those forever because they are under the growth rate of the economy. As evidence, we did that from WWII until Reagan and even though the total debt increased, as a % of GDP it decreased because the economy grew faster than the debt.

In times when the growth rate is at historical averages, deficits are harmful because they “stimulate” the ecnomomy when it doesn’t need to be stimulated. Just as the fed is currently removing their stimulus of lower interest rates, Greenspan is telling Congress to do the same thing by lowering the deficit.

If left unchecked deficits can lead to high inflation and high interest rates and choke off the recovery and cause a deep recession and massive layoffs, because too much growth creates bottle necks and shortages in the economy.

The reverse is also true. Surpluses can be harmful because they are disinflationary, and a drag on the economy. For instance, if Clinton and Congress would have either returned the surplus to the taxpayers or spend the surplus, it might, (notice the word “might”) have delayed or prevented the recession of 2001.

Manipulating tax rates and interest rates is an art and science, and eventually the economy will “fall off the beam”, and we will struggle for a while.

I do not believe that economics can be absolutely understood through politics. Both Republicans and Democrats are wrong in their view that tax cuts are “God’s plan” for economic growth, or “the devil himself”. They are a tool that in their time can help the economy when the economy is experiencing negative growth. They are just one of many tools that we should look at as our country manages it’s economy.

My believe is that right now the right choice is either a tax increase or a spending cut. As a moderate Republican, and since Congress just recently was spending money like drunken sailors, I would prefer spending cuts first. In any case now it is very very important to reduce our federal deficit. I would be happy if we reduced it to the average our country experienced between WWII and 1980. (whatever that was!!)

You asked for the time and I built you a clock. Sorry!!

Craig

My believe is that right now the right choice is either a tax increase or a spending cut.

That’s a big ‘duh’, Craig. The reason Democrats, Greenspan, and the financial community are screaming so loud is because this big a deficit is a killer in the long run - and even in the short term it’s acting as a drag on the economy. I actually heard someone use the word “stagflation” on MSNBC yesterday after the disappointing GDP numbers came out.

I’m glad you’re keeping flexible, though. I remember a while back you were arguing that Bush’s deficit was really a good thing. ;)

AP:

I’m glad you’re keeping flexible, though. I remember a while back you were arguing that Bush’s deficit was really a good thing. ;)

It was, now it isn’t.

Craig

AP:

Actually it is more than that. I have done some reading on demographics that shows the problem of Social Security on a broader that includes issues like medicare and investments. Just as SS is going to struggle as more money is going out of trust funds than into trust funds, the exact same principle works for ALL RETIRMENT ACCOUNTS, meaning the US stockmarket etc.

The difference in my thinking is that we have to reduce the federal debt as a % of GDP, so that if our children need to borrow for our old age there will be room to do so.

Before I was simply concerned that we stay in place on a % basis. (about 3% GDP). Now I think the deficit should average less than that. (1 to 2 % of GDP).

Craig

Craig