Reaganomics (tax cuts for rich, deregulation, globalization) has increased government debt 10 fold during 1/10 of our nation's existence, despite two world wars and several other wars during the other 9/10 of our existence. Thus, Reaganomics has increased the rate of debt accumulation to almost 100 times the previous average, with little to show for it.
I wonder who celebrates the economic trajectory that we are on, a vortex in which debt service is a large, growing and self-augmenting line item of the federal budget--this accompanied by the largest redistribution of wealth in history, from workers to wealthy.
Now we see that Reagan's deregulation and globalization were bad not only for Main Street but also for Wall Street. Record-breaking bankruptcies and bailouts are now commonplace. Business-friendly governance kills businesses.
We are flirting with bankruptcy, selling production assets, property and debt paper to sovereign wealth funds etc to finance ongoing operations of both government and business.
We may have already drunk too much Republican Cool Aid; but, with Sarah Palin in the race, chances are we'll elect to drink some more. We wouldn't be in this shape if a rag-tag bunch of Iranian students hadn't held our embassy personnel hostage back in the late 70s, thereby weakening Carter's image. Chaos theory is not just for butterflies any more.
Friday, September 19, 2008
Sunday, September 7, 2008
Election 2008
Concerning Thomas Sowell's Sept 3 column, "Obama's idea of change is recycling FDR's disastrous policies", I wonder what kind of America he wishes for.
Without presenting evidence, he claims that FDR's recovery programs extended the Great Depression. Americans should be thankful for Social Security, the Securities Exchange Commission, the Tennessee Valley Authority, as well as infrastructure produced by the CCC and WPA, all of which benefit Americans to this day.
The effectiveness of the New Deal must be judged in relation to available alternatives. The Great Depression was a child of three consecutive Republican administrations. What does Sowell know that a fourth Republican administration would have done to shorten their Great Depression more effectively than did the New Deal?
To characterize Obama's campaign as class war is a cynical lie, and Sowell should be ashamed of repeating it. America is hemorrhaging, headed for bankruptcy, owing to neglect of our true interests over 28 years of Reaganism. We (rich, poor, business, labor, black, white, all in it together) are facing an existential fiscal threat. Republican think tanks whose doctrines steered us toward this shoal are still intact, so it is unlikely that another Republican administration will make the needed course correction.
Obama will incentivize infrastructure transformations to employ people quickly and stop the bleeding, resulting in century-long benefits for all Americans.
Without presenting evidence, he claims that FDR's recovery programs extended the Great Depression. Americans should be thankful for Social Security, the Securities Exchange Commission, the Tennessee Valley Authority, as well as infrastructure produced by the CCC and WPA, all of which benefit Americans to this day.
The effectiveness of the New Deal must be judged in relation to available alternatives. The Great Depression was a child of three consecutive Republican administrations. What does Sowell know that a fourth Republican administration would have done to shorten their Great Depression more effectively than did the New Deal?
To characterize Obama's campaign as class war is a cynical lie, and Sowell should be ashamed of repeating it. America is hemorrhaging, headed for bankruptcy, owing to neglect of our true interests over 28 years of Reaganism. We (rich, poor, business, labor, black, white, all in it together) are facing an existential fiscal threat. Republican think tanks whose doctrines steered us toward this shoal are still intact, so it is unlikely that another Republican administration will make the needed course correction.
Obama will incentivize infrastructure transformations to employ people quickly and stop the bleeding, resulting in century-long benefits for all Americans.
Wednesday, September 3, 2008
Tax Cuts
The promise of tax cuts contributed significantly to Reagan's victory in 1980 and Bush II's victory in 2000. I opposed most initiatives of these two administrations because they eroded opportunities for many Americans and planted seeds of America's eventual decline, so I bristle at the tax-cut mantra now adopted also by Democrats.
Moreover, I was suspicious of the intellectual underpinnings of the tax cuts, the Laffer Curve (google: Laffer Curve past present future). According to Laffer, taxing an economic activity steers people away from that activity, so reducing the tax rate will increase the activity; and, if the tax rate is above optimal, then the increased economic activity will outweigh the reduced tax rate, so tax revenue will increase. Reductions of tax rate below optimal will reduce revenue as expected. This implies an arch-shaped dependence of revenue on rate.
While this theory is unimpeachable, I doubt that tax cuts of Reagan and Bush II were justified by Laffer's theory, and I suspect that those cuts were harmful. The dependence of economic activity on tax rate is inherently insensitive, since ordinary workers and most entrepreneurs do not avoid or diminish their efforts because their earnings are taxed. Investor choices may be more sensitive to tax environment but still constrained by market realities. On the other hand, globalization makes investor choice more sensitive to taxes.
Some of the modern examples cited by Laffer, as demonstrating effects of tax cuts to increase tax revenues, seem questionable. First, increases of revenue following tax cuts were similar regardless of starting point, not as expected of an arch-shaped dependence. Second, the increases of revenue might be attributed to concomitant increases of federal spending, some of which would bounce back directly as income tax on recipients, some of which would come from economic activity initiated by the recipients. How else could the deficit rise when revenue increased? Ninety percent of the federal debt has accumulated since Reagan cut taxes. Also, economic activity following tax cuts may have been influenced by Federal Reserve actions, new technologies, new business strategies and new investment vehicles.
I wonder whether the changes of economic activity following tax cuts have been subjected to sensitivity analysis based on a model that includes factors mentioned above and others not mentioned. I also wonder whether Laffer approves of the economic trajectory that we are on, essentially a Reaganomic trajectory.
Moreover, I was suspicious of the intellectual underpinnings of the tax cuts, the Laffer Curve (google: Laffer Curve past present future). According to Laffer, taxing an economic activity steers people away from that activity, so reducing the tax rate will increase the activity; and, if the tax rate is above optimal, then the increased economic activity will outweigh the reduced tax rate, so tax revenue will increase. Reductions of tax rate below optimal will reduce revenue as expected. This implies an arch-shaped dependence of revenue on rate.
While this theory is unimpeachable, I doubt that tax cuts of Reagan and Bush II were justified by Laffer's theory, and I suspect that those cuts were harmful. The dependence of economic activity on tax rate is inherently insensitive, since ordinary workers and most entrepreneurs do not avoid or diminish their efforts because their earnings are taxed. Investor choices may be more sensitive to tax environment but still constrained by market realities. On the other hand, globalization makes investor choice more sensitive to taxes.
Some of the modern examples cited by Laffer, as demonstrating effects of tax cuts to increase tax revenues, seem questionable. First, increases of revenue following tax cuts were similar regardless of starting point, not as expected of an arch-shaped dependence. Second, the increases of revenue might be attributed to concomitant increases of federal spending, some of which would bounce back directly as income tax on recipients, some of which would come from economic activity initiated by the recipients. How else could the deficit rise when revenue increased? Ninety percent of the federal debt has accumulated since Reagan cut taxes. Also, economic activity following tax cuts may have been influenced by Federal Reserve actions, new technologies, new business strategies and new investment vehicles.
I wonder whether the changes of economic activity following tax cuts have been subjected to sensitivity analysis based on a model that includes factors mentioned above and others not mentioned. I also wonder whether Laffer approves of the economic trajectory that we are on, essentially a Reaganomic trajectory.
Talk Radio
Almost from its beginning and especially since 9/11, AM1430 Public Radio has been the sound track of my retirement (that punctuated by episodes of recreational music making). I like its objective, almost academic, presentation of current events, history, ideas, science, policy implications, etc. Public Radio helps with my inner debate about what policies might enable the US and the world to be happier and more peaceful for a longer time.
Occasionally Public Radio addresses a pop-culture topic, so I dial AM1510 Fox News, to see what's eating them. Its hosts and callers praise Republicans obsequiously and vilify Democrats hatefully--this despite growing prosperity under Clinton and deterioration under Bush. Their attacks on Barack Obama seem libelous. Fox News behaves as an arm of the Republican party, tasked with distracting listeners with trivia so they will vote against their own interests.
A few more years of unbridled budget deficits, labor outsourcing, offshore banking, offshore incorporation, deregulation, unnecessary wars, profligate lifestyles, neglect of family planning and neglect of renewable energy will bankrupt the nation. That's a high price to pay for the agendas of Fox News, George Will, Cal Thomas & Phil Valentine. An influential Republican thinktanker, Grover Norquist, desires national bankruptcy. Do you?
Occasionally Public Radio addresses a pop-culture topic, so I dial AM1510 Fox News, to see what's eating them. Its hosts and callers praise Republicans obsequiously and vilify Democrats hatefully--this despite growing prosperity under Clinton and deterioration under Bush. Their attacks on Barack Obama seem libelous. Fox News behaves as an arm of the Republican party, tasked with distracting listeners with trivia so they will vote against their own interests.
A few more years of unbridled budget deficits, labor outsourcing, offshore banking, offshore incorporation, deregulation, unnecessary wars, profligate lifestyles, neglect of family planning and neglect of renewable energy will bankrupt the nation. That's a high price to pay for the agendas of Fox News, George Will, Cal Thomas & Phil Valentine. An influential Republican thinktanker, Grover Norquist, desires national bankruptcy. Do you?
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