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gramps2
106 Comments
Would Trickle-Down Policies Really Help All Americans?
I don't want bother reading all the political blogs anymore, because I am tired of **ALL** politicians lying. None of them have solutions for anything other than taking ever more money and liberty away from everyone.
I resent people like Mr Thoma who try to turn every single forum in the world into their own personal political rant box. How can you possibly be so pompous as to think your political opinion is so important / informed that you need to post it on an investment website?
Mr Thoma: either talk about investing, or keep your comments confined to political blogs (somewhere else). Seeking Alpha is for investment ideas.
On Being Rich
We have tried taxing "the rich" at rather onerous tax rates in the 1970s. The rich got upset, the poor stayed poor, and the government got bigger.
In the 1980s, we cut taxes for almost everyone. The rich were happy, the middle class's income did not keep up with costs, the poor stayed poor, and the government got bigger.
In the 1990s, we re-jiggered taxes a little bit. The rich were a little less well off, the middle class income did not keep up with costs, the poor stayed poor, and the government got bigger.
And from 2001-present, we cut taxes across the board, but a large percentage of the cuts went to the ultra-rich. The middle class's income fell way behind rising costs, the poor stayed poor, and the government got bigger.
Regardless of what happens to tax rates -- the only things that change are the ultra-rich get a little more / less, and the government ALWAYS gets bigger. If having a bloated government makes a country rich, then Venezeula and Cuba would be ruling the world.
While Americans sit around like puppets and argue that taxes should be higher for anyone who is "relatively more rich" -- the government just keeps getting more and more bloated.
I repeat the statistic I gave before: government spending as a percent of GDP is **DOUBLE** what it was when JFK was president. Compared to 100 years ago, government has grown exponentially faster than the economy.
Regardless of who pays what percentage of the total taxes -- the total number is obscene. America cannot afford to maintain such an enormous public sector.
Every other sector of the economy has gone through "right sizing" -- but not government. Democrat / republican, booming economy / recession -- it just keeps growing faster than the economy as a whole.
Americans need to figure out that we cannot tax ourselves into prosperity. It never worked in the past, it hasn't worked in any other country -- and this time will NOT be different.
When I was in school (and dinosaurs roamed the earth), we learned about Lewis and Clark exploring the western frontier. Private industry put down rail tracks and built the Erie Canal. Admittedly, wage workers didn't always get "a fair share", but for a while unions addressed that problem.
Now a days, Americans can't do anything for themselves. It doesn't matter what the issue is, the knee jerk response boils down to "Lets have the government fix it!!!"
I think it is beyond obvious that the government CAN NOT fix it. As in they do not have the ability or the competence.
So go ahead and tax "the rich" (however you define it) all you want. The government will laugh at you all the way to (their) bank. The middle class won't be able to keep up with rising cost of living, and the poor will stay poor. And sooner, rather than later, we will be a second world country.
Tax policy will NEVER be able to make everyone rich. It won't get you a job that pays enough to keep up with the cost of living. It won't pay for college tuition that rises faster than GDP. Nor will it pay for healthcare costs that rise 3x as fast as GDP. Do the math people, any tax rate multiplied by GDP cannot keep up with healthcare rising three times as fast.
Or, we can take a page from our own history. Jefferson said "That government that governs least, governs best" ... he was right then, and he still is.
Neither Obama nor McCain can tax us into prosperity. Its high time Americans figure that out.
Only hard work, achievement, and building/saving for the future can help us. That's what always worked in the past, and I see no reason why it wouldn't work again.
On Being Rich
Why exactly do Americans want to tax "the rich"? However you define it? Isn't the American dream that a poor immigrant can come here, work really hard and become financially successful?
What changed in America that being rich has become socially unacceptable?
Shouldn't America focus on making **more** people rich, instead of taxing the rich out of existence?
4 Money Problems That Obama Can't Fix
Most of the taxes are per barrel or per MMCF -- so they generate revenue based on volumes exported, not based on the market price.
I have no idea if you can run an accounting audit to show a direct line between energy tax/royalty revenue and health care. If Canada's government is anything like the U.S., I doubt you can find out much of anything.
What you can do is look at total revenue the government receives from energy taxes / royalties, and ask what percent of the government's total revenue comes from that. Its hard to get an exact number, but its about half (I am talking about all government: federal, provinces and local). Your taxes would be roughly double if not for the energy subsidies.
Your former PM lost power at least in part because of disagreement of how to share this revenue between the central government and the provinces.
The Canadian government's "surplus" of recent years was caused entirely by increased energy revenues.
Your former PM also dropped support for the Kyoto Accord once he realized that the bitumen produced from tar sands was a huge source of gases that are supposed to cause global warming. Your government quickly realized it would not stand if it lost that revenue.
Alberta started its own wealth fund because they worry about when the energy runs out. Like Norway, they have huge resources -- but it won't last forever and they know it.
At any rate, those of us here in the States don't need to worry about this. We import somewhere around 30-40% of our oil -- there is no revenue generated from non-existent exports.
BTW -- I find your "Canadian system beats the American system hands down on efficiency" comment a little strange? How does one measure "efficiency" in health care? I don't think the US system is efficient under any definition, just wonder how you measure it.
Second, I lived in upstate New York (near Toronto) for many years. It was always amazing to see how many wealthy Canadians crossed the border into the U.S. for care (where obviously they had to pay themselves). If price is less important (and for wealthy Canadians I guess it is) -- they actually travel to the US and pay out of pocket for care rather than accept "free" care in Canada... One hospital in Rochester NY actually advertises for patients in Toronto, and finds it very profitable to do so...
Its also worth mentioning that many Americans are now traveling to Thailand/India to get care. Even factoring the cost of the airplane ticket, its vastly cheaper to have "major" surgery there. The doctors over there are (mostly) trained here in the U.S. -- quality of care is quite comparable.
On Being Rich
Government spending, measured as a percent of GDP, has grown twice as fast as the economy as a whole -- for decades. It grew faster under Republican presidents, it grew faster under Democrat presidents. Faster under republican controlled congress, faster under democrat controlled congress.
And as the government takes up an ever larger piece of the pie, the politicians have foolish Americans arguing with each other over the definition of "rich"!!!!
Divide and conquer is really an old trick. Class warfare conveniently distracts the tiny minded voters away from the real facts: the government is taking a bigger and bigger chunk out of EVERYONE's wallets, every year.
We spend three times as much per student as any other country on Earth -- including the other members of the G-7. Is there anyone crazy enough to argue our schools are 3x better than Japan's or Europe's?
How about the $2 billion airplanes Uncle Sam likes to buy? Or how about Congress spending over $30 BILLION to build the Capital visitor's center, so as to prevent the people from going into their own capital building? Has anyone in the private sector ever spent $30 billion on one building?
Public sector employees supposedly get paid less than the private sector -- but this only holds if you confine your "analysis" to posted salary. Add in an amazing assortment of tax free benefits, much shorter working hours, and the fact that many government employees more than double their posted compensation via over-time scams (conveniently, only the guys near retirement are chosen to work overtime so as to bump up their retirement pay).
Its really embarrassing that the public stands around having these moronic debates about who is rich or poor -- while politicians and government employees laugh at us behind our backs.
Would Trickle-Down Policies Really Help All Americans?
There are loads of blogs and websites where Mr Thoma can babble on and on about his political leanings. If he doesnt have any investment ideas, he should not be writing here.
The Economics of Political Spin
The Economics of Political Spin
Obama has very few concrete plans of what he will do -- its mostly a bunch of hot air and buzz words about "hope". Hope is not a plan. 143 days in Congress is not enough time to establish anything of a track record -- which is why the DNC convention had to be filled with so much fluff. There is no substance to Obama, and very little to argue about pro or con. His energy proposals (windfall taxes, corn ethanol, etc) have been quite thoroughly discussed and discredited by you in earlier posts.
McCain has a few (very few) concrete plans -- most of which don't make sense to me. His nuclear energy proposal is at least a start, but he neglects to explain what the country will do with the nuclear waste produced. Last I checked, Yuccatan Mountain storage in Nevada was still on permanent hold (it was supposed to be ready for use sometime in the early 1980s?). For 30yrs, people have argued whether Yucca will leak radiation or not (I don't know the answer). If McCain wants lots more nuclear power plants, he needs to have a "complete" solution, including what to do with the spent rods. I haven't heard anything. McCain has made a number of statements that suggest (but do not prove) he would like to attack Iran over nuclear weapons -- besides being a foolish idea, its not obvious that the military has the logistical / resource capability to fight a third simultaneous war. They seem pretty stretched with the two they already have. Iraq is likely to take at least 2-3 years to wind down, according to both military leaders and the recent proposal from the Iraqi government. Despite the news media's obsession with Iraq, the situation in Afghanistan appears to be getting worse, not better.
McCain's big "selling point", in my eyes, is that he is from the opposite political party as the one likely to control Congress. Since we can't get a qualified leader, I prefer gridlock. That should NOT be confused with an endorsement of McCain.
Regardless of who wins, medicare becomes cash flow negative sometime in early 2009. The budget deficit is chronic. Higher taxes (on rich or poor) will not help a fragile economy. Housing might bottom depending on which expert you ask, but no one is predicting a rapid recovery. Plans from both candidates to increase spending conflict with the fiscal reality the winner will face on day one. And historically, almost every problem the country has faced has been solved by the private sector -- even if some government bureaucracy later took credit. Big government might work in other countries, but it hasn't worked in the U.S.
Even if you don't agree with my political views on the two candidates (and I am guessing you don't) -- irrational hysteria over Bush's failings is not a reason to vote for either candidate. And since your blog has historically been a discussion of energy issues (that's why I tune in anyways), none of us expected to read a heavily partisan rant
The Economics of Political Spin
1) The Saudi flight took off from Dulles airport outside Washington DC. Florida is the home of Central Command (the military authority that includes the middle east) -- that airspace did not open for several hours. The only aircraft that took off in Florida were airforce jets and Airforce One (Bush was in Tampa/St Pete at the time of the attacks and later flew to a secure bunker in the midwest). No Saudi, or any other civilian planes, took off from Florida. You are dead wrong on this.
Second, if you believe in American values (unlike Bush), you must believe innocent until proven guilty in a court of law (not a witch hunt) and you must believe in probable cause. Bush (like you) does not place any importance in civil liberties.
After years of investigation, by both political parties, no one has found any evidence to link Saudi officials to the 9/11 hijackers. I challenge you to explain why Obama would keep silent on this if there was even a shred of evidence. Unlike you, Obama hasn't shouted his mouth off with irrational conspiracy theories. That's why some people respect Obama, and its why you have received so much criticism on this post.
Every concrete and every half brained lead on the hijackers has been followed. The 9/11 Commission had zero hesitation to say Bush's link between al-qaeda and Iraq was nonsense. They tracked Mohamed Atta all over Germany, France and Spain -- but they never found a link to Saudi Arabia.
Third, yes fire did cause both main WTC towers and #7 to collapse. And yes, you are correct that this is the first time in history a building collapsed from fire. It is also the first time two airplanes loaded with thousands of gallons of jet fuel crashed into buildings.
The study was conducted by the NY city fire department (and other city agencies). I am quite sure the NYFD knows more about fire codes than you.
I work on Wall Street, which is why I lost so many friends in the WTC attacks. There were rumors of people buying lots of puts on airline stocks -- but the rumors were never substantiated. Even if there was some vast conspiracy to keep profits at Carlyle group secret -- you are missing a critical element. Someone else had to sell those puts (DUH!!!). So name the companies that suffered huge losses from selling these puts you imagined?
I really don't want to ask the 9/11 victim's families. I really feel sorry for their loss -- but its a known psychological response FOR THEM to want to deny their loved one's death was nothing but wrong place wrong time. They have a very understandable reason to see conspiracies -- its part of the natural coping process. You, on the other hand, should not be so irrational.
None of your warped conspiracy theories of Bush/CIA and whomever hold together. For one, Washington is terrible at keeping any secrets. We all know way too much about Bill Clinton's sex habits because even the Oval office isn't secure. It didn't keep Clinton's secrets, it didn't keep Nixon's secrets, and it hasn't been able to keep any of Bush's either.
The CIA has both republican AND democrat employees. So does almost every other government agency (except obviously the White House)... So why are all these Democrats helping to keep Bush's secrets? Why are Hilary and Obama and Nancy Pelosi and every other Democratic congress member helping to cover up why building #7 fell? Are the Democrats part of your conspiracy too?
Its a simple answer Fitz: the conspiracies are all in your head. Its not that I think Bush is ethical -- I think the opposite. Its just that he isn't that smart.
As I explained in detail in my last post: it makes no difference if the entire world hates George Bush as much as you do... that is not a logical reason for voting for McCain or Obama.
Your blind hatred for Bush is making you write some really bizarre things
4 Money Problems That Obama Can't Fix
The NHS in the UK has been losing doctors, closing offices, and rationing care for the past 5-10 years -- because spending has gone out of control and revenue from the North Sea oil fields have peaked.
The U.S. is not an oil exporter -- quite the contrary. We don't have loads of government money sitting around waiting to be spent -- we have massive budget deficits, and absolutely overwhelming entitlement deficits.
The problem with healthcare is **NOT** how many people have/don't have insurance. The problem is sky-rocketing costs. When businesses cancel / trim health benefits, they always cite costs that are rising 3-4 times the rate of inflation. Anyone and everyone in the U.S. can **buy** health insurance -- they just can't afford to. Its a cost problem, not an availability problem
There is no credible argument that the U.S. government, an entity known to spend $2 billion on an airplane and $10,000 on coffee makers, is going to control costs. Congress just spent over $36 BILLION (with a "B") to build a visitors center at the US Capital. There are no healthcare companies that spend $36 billion on one building.
Has everyone seen the disastrous care the US government provides for our soldiers?
The U.S. consolidated all its disaster response agencies into the Department of Homeland Security... Ask the folks in New Orleans how well that worked out.
And if the government takes over healthcare -- that means decisions over what procedures are covered / not covered becomes a political issue. Roe V Wade gets overturned by checkbook instead of by law -- remember, the government would control ALL payments to ALL doctors.
Healthcare costs are out of control and need to be addressed. But as the Hippocratic Oath says "First, do no harm". Don't make a bad situation worse by putting spendthrift politicians in charge of our health.
The Economics of Political Spin
The Saudi government agents were on the first flight out **AFTER** the air block was lifted -- literally the first flight, but none the less they were not given permission to take off during the block.
Its true that there were 17 Saudis among the 9/11 terrorists-- but you are rather Bush-like in assuming that this implicates ALL Saudis in the conspiracy. There were two Americans (and no others) involved in the Oklahoma bombings -- so I suppose you (and Bush) think we should suspect all Americans as a result? You are acting as much of a fascist as Bush
Its amazing that you think Bush is such an idiot -- but at the same time you attribute this omnipotence to him in implementing the biggest conspiracy of modern times. If anyone listens to your rants, Bush is responsible for every bad thing that ever happened, and Clinton did absolutely no wrong -- that is not economics, that is you making a fool of yourself.
We haven't had a perfect President that I know of. Bush certainly has an above average level of failings -- but you attributing super-human evil powers to him is ridiculous.
Further, your partisan rants, beyond discrediting you, do nothing to help anyone pick a good next president.
"Bush is an idiot", even if true, is not a reason to vote FOR anyone else, Obama or McCain.
You claim to be some sort of energy "expert". I am not sure you are an expert, but based on the opinions you voiced in earlier (less partisan) posts, you are against windfall profits taxes, you don't think opening the SPR will be anything beyond a short term fix, you don't think corn ethanol is an effective solution -- in short, you have expressed doubt on almost every single point of Obama's energy proposals...
Your foreign policy expertise is... to be polite... lacking. Your suggestion that all Saudis be indicted based on the crimes of 17 people is nothing short of racist. Don't lump all Saudis, or all Muslims, into a terrorist bucket. I have -- sorry had-- several Muslim friends who died in the World Trade Center, right along side Jewish, Christian, and Hindus. They were not terrorists, and shame on you for suggesting such.
The Economics of Political Spin
1) Your statement is absolutely false. The Federal government, both in terms of nominal spending and as a percent of GDP were no where near as low under Clinton as they were under JFK (and it wasn't exactly small then).
2) You say "Clinton's tax policies"??? The tax law is written by Congress, not the President. The President can make whatever proposals he wants, but so can foolish website ranters. Bush has no more authority on tax law than you or I... Congress writes all laws, including the tax code
3) There were no emissions laws passed under Bush -- for better or for worse.
4) So I guess you are saying that Bush 41 did a great job and Clinton did a terrible job? Each President gets the economy that was created by his predecessors policies -- unless you want to complete discredit yourself and claim underlying macro economics change the instant some guy takes an oath.
On Recent Financial Stories
1) It was the CEO and the "profit" centers who got over-levered on mortgage debt they didnt understand
2) It was the CEO's earlier decisions to ignore risk management and not develop proper risk management software... its far from obvious how cutting these areas further will do anything but hurt
3) Exactly how many traders does it take to go out and buy assets they clearly don't understand and on absurd leverage? Any janitor who dropped out of high school could lose billions just as fast -- and a lot cheaper
4) Does Citi need thousands of securitization lawyers and deal makers considering the market is all but shut down? Do any of the banks need this?
5) Why is management overly concerned with approving first class business airline tickets? If there was actual business activity occurring, a multi-billion dollar corporation really shouldn't care between $300 and $3000... the real question is "Why are you flying at all?" Since there is no business going on, don't fly at all. Get rid of the managers who want to fly first class -- and while you are at it, get rid of the manager who does the approving.
6) This one is a no brainer: save millions by getting rid of all the McKinsey people or else all the Citi managers. If the Citi managers don't know what they are doing, why are they there? If they do know what they are doing, why is McKinsey there? Two completely redundant management structures
But even with two redundant management structures, the best plan they can come up with is to make cuts in risk management and IT? How many McKinsey people did it take to conclude that firing people who had nothing to do with the mistakes that caused the bank's collapse won't result in lower staff morale?
The Economics of Political Spin
Yes, I am sure Clinton balanced the "budget", but he did not balance spending. Ken Lay balanced the budget at Enron also. You have to look at total spending (including "off balance sheet" or "off budget") . Clinton was a spendthrift -- just like Bush. You might argue Bush is marginally more honest on spending, but he is so deceitful on everything else it wouldnt hold.
As you argue yourself, follow the money. Greenspan lowered rates way too far under Clinton, and then repeated the mistake under Bush. In one instance, Greenspit (not Clinton) inflated the dot-com bubble. The resulting capital gains taxes "balanced" the budget, but not spending. In the second instance, Greenspit (not Bush) inflated housing. The resulting home price gains allowed for home equity withdrawl -- and government spending still wasn't balanced.
Bernanke is following Greenspan's playbook to the letter. Even if he is not reappointed, he will be running the Fed throughout most of Obama or McCain's term.
Whichever candidate wins, Medicare is projected to go cashflow negative next year. It doesn't appear the mortgage mess will be fixed by January. While they want US troops out, even the Iraqi government thinks a sudden pull-out would cause more problems then it solves. All your arguments about tight oil markets apply no matter which candidate wins.
The facts (if you had bothered to check) are that government spending (not pretend budgets) have climbed twice as fast as GDP since JFK was president. Despite all the moronic rhetoric on the news (and this post of yours), neither political party has shown the slightest hint of spending discipline.
Your commentaries on economics are often quite good and very intelligently argued. You should stick to that, and avoid obviously partisan (and poorly thought out) rants like this
I.O.U.S.A.: Documentary Worth a Peek
While I agree with you in principle that some spending should be reallocated -- the facts remain that government spending has grown twice as fast as the economy (and this doesnt count off balance sheet spending like Fannie Mae and all the turnpike authorities). Even if 100% of it was spent on infrastructure and helping the less fortunate -- it would still be terrible fiscal policy.
Comedians loved to poke fun at Enron's accounting-- but off balance sheet financing vehicles were invented by government accountants: The NY State Turnpike Authority was created to circumvent voter imposed debt limits. Government was committing accounting fraud long before Ken Lay or Bush 43 came on the scene