from Lawrence Summers:
Time nears for an American tax overhaul
However the U.S. presidential election turns out, the trifecta of the Bush tax cut expiration, the debt limit ceiling on the horizon once again, and the Congressionally mandated sequesters – cuts in domestic spending – will force the president and Congress to wrestle with fiscal issues either in a lame duck session after the election or in early 2013. The decisions they make will have profound impacts on America’s fiscal future.
For many observers, the central question on the table is about entitlement programs: What will be done with them? Growth in entitlement spending associated with our aging population and its rising health care costs is the major factor in overall federal spending growth. But the capacity of near-term policy changes to have large impacts on that spending is less than many would suppose. The rising ratio of retirees to workers means that Social Security benefits at current levels will not be sustainable without some kind of tax increase. Sooner or later, revenue will have to rise or else outlays will have to be curtailed. While it is surely better to act sooner, the reality is that, out of necessity, action on entitlements is inevitable.
While almost everyone agrees on the desirability of containing federal health care spending, this is likely to be more difficult than we'd like to believe. Certainly beneficiaries can bear more of the cost of their government insurance than others, and there are steps like malpractice reform and the further encouragement of preventive medicine that should be taken. Yet without intrusions into the private health care system that are unlikely to be politically acceptable, there are severe limits on what can be done. Otherwise the result will be unacceptable cuts in the availability of care for the clients of federal programs. Given all the uncertainties associated with new technologies, changing lifestyles, and ongoing changes in the private system, health care reform will and should be a continuing project.
But let's place health care aside for now. Less discussed in the context of major deficit reduction is tax reform. For a variety of reasons, 2013 should be the year when the tax code is overhauled in a substantial way.
First, the United States will need to mobilize more revenue. This year the federal government will collect less than 16% of GDP in taxes—far below the post World War II average. The combination of an aging society, rising health care costs, debt service costs that will skyrocket whenever interest rates normalize, a still-dangerous world in which our allies’ defense spending is falling even as that of potential adversaries rises rapidly, and a growing fraction of the population unable to hold steady work means that in all likelihood federal spending will need to be larger not smaller relative to GDP in the future.
Raising marginal corporate rates or increasing individual rates beyond their Clinton-era level raises serious issues about incentive effects or encouraging tax shelter activities. Raising rates is, in any event, unlikely to be politically feasible. A much better strategy for raising necessary revenue would start from the premise adopted by the Simpson-Bowles bipartisan commission that tax expenditures are a form of government expenditure and presumptively should be cutback unless they can be justified.
Second, the current tax system is, in certain ways, manifestly unfair at a time of rising inequality. As is well recognized, America’s rich have gotten richer with the top 1 percent’s income share rising from the 10 percent range to the 20 percent range over the last generation, while middle class incomes have stagnated or worse. There is plenty of room for debate about the causes of rising inequality, and the extent to which reducing inequality should be a central objective of government policy and about the possible disincentive effects of excessively progressive taxes.
from Africa News blog:
100 years and going strong; But has the ANC-led government done enough for its people?
By Isaac Esipisu
Although the role of political parties in Africa has changed dramatically since the sweeping reintroduction of multi-party politics in the early 1990s, Africa’s political parties remain deficient in many ways, particularly their organizational capacity, programmatic profiles and inner-party democracy.
The third wave of democratization that hit the shores of Africa 20 years ago has undoubtedly produced mixed results as regards to the democratic quality of the over 48 countries south of the Sahara. However, one finding can hardly be denied: the role of political parties has evidently changed dramatically.
Notwithstanding few exceptions such as Eritrea , Swaziland and Somalia , in almost all sub-Saharan countries, governments legally allow multi-party politics. This is in stark contrast to the single-party regimes and military oligarchies that prevailed before 1990.
After years of marginalization during autocratic rule, many African political parties have regained their key role in democratic politics by mediating between politics and society. Multi-partyism paved the way for genuine parliamentary opposition and the strengthening of parliaments in decision-making. However, several shortcomings still remain: many African political parties suffer from low organizational capacity and a lack of internal democracy.
Dominated by individual leaders, often times lifelong chairpersons and “Big Men”, youth and women remain marginalized within party structures.
The real cost of those Black Friday deals
By Caitlin Kelly The opinions expressed are her own.
Americans shop. It’s what we do. It’s who we are. We’re still an economy powered by consumer spending – 70 percent of it, in fact. It’s an article of faith, for some, that annual Thanksgiving celebrations not only include turkey, stuffing and cranberry sauce, but lining up in the cold and dark at their favorite store to snag a Black Friday bargain.
Maybe not this year.
Spurred perhaps by the growing national strength of the Occupy Wall Street movement, two emboldened Target workers, Anthony Hardwick, of Omaha, NE and Seth Coleman, a dockworker from Northfield, MN have collected 180,000 signatures protesting their employer’s unprecedented decision to open their stores to shoppers at midnight. Coleman delivered a bag of signatures gathered on-line to Target headquarters in Minneapolis earlier this week.
Coleman will be working at the Target store in Northfield on Thanksgiving Day, from 4 a.m. to 10:45 a.m. Then he’ll return 12 hours later, to make sure the shelves are stocked for the company’s first ever midnight opening for the Christmas rush, reported Minnesota Public Radio.
There is also some talk of retail workers taking a sick-out to protest retailers’ demands that they leave their own holiday meals in order to be work by midnight or earlier.
Retailers routinely excuse their escalating demands, such as this year’s ever-earlier Black Friday store openings, because their competitors are doing it. They’ll lose business, they argue, if they don’t follow the herd. Retailers defend all corporate decisions — no matter how detrimental they may be to their indispensible low-wage workers or how unpopular they may be with shoppers newly sensitized to the needs of the 99 percent. Retailers claim it’s alright because they have to protect shareholders’ interests by keeping profits high and hitting their quarterly projections.
yes i want to get up at 1am and be at walmart or target and wade into the fray in order to get spayed with pepper spray. tis the season. BRING IT ON.AHHHHH
The deludedly optimistic youth of America
By Chadwick Matlin The opinions expressed are his own.
Friday was a slightly-better bad day to be a young person in America. The morning’s unemployment said 14 percent of Americans 20-24 years old are now unemployed, down 0.7 points from September. Teenagers’ rate was similarly down, dropping 0.5 points to 24.1 overall.
But still—14 and 24.1 percent! Well above the national average of 9 percent, which isn’t exactly something the Millennials can look forward to.
And yet young people remain stubbornly optimistic. In a comprehensive new survey of 842 young people that Demos, a New York think tank, released this week, almost 69 percent of Americans 18-34 years old “believe the American dream is still achievable.” In other news, the average student debt for new graduates is now $25,250, larger than ever. (To be fair, this isn’t entirely recession-related. My debt was around $100,000 when I graduated, and that was a year and a half before Lehman went belly-up.)
Politicians are as deluded as young people. Rick Perry, in a slurry speech that’s better known for its delivery than its content, said last week that “our obligation is not only to provide children with the best environment to nurture, but to ensure every child inherits a land full of opportunity.” Mitt Romney and Herman Cain, meanwhile, are spending Friday at the “Defending the American Dream” summit. And the Dream dream affects Democrats too. Don’t forget about Barack Obama’s now-abandoned Win the Future campaign, which acknowledged that while things are awful, they could easily get better—if only we tried. A dysfunctional Congress scoffs at such a quaint notion.
A person prone to cynicism—(read: this author)—looks at this wishful thinking and blames it on demographics, which is to say blames it on politics. The perpetuation of the American Dream, despite all evidence suggesting the American Dream has died, is good politics in the way that Good Politics is almost always quite bad. It hijacks the American character while ignoring the American reality.
Our political culture’s pervasive discussion of the mystical American Dream appeals to two main demographics: parents and kids. Which is to say, it appeals to nearly everyone. Parents—the very people who mucked up the earth and refuse to do anything about it—want to believe their wrongs will be absolved. Kids, meanwhile, need some dream to hold on to, else they all take to occupying the streets.
I concur with what the four commenters who precede me had to say but I’d like to add a couple things.
First… No generation is really a collective “us”. “Babyboomer” designate people whose only commonality is that they were born between 1946 and 1964. For example: George Bush, Barack Obama, Ronald Reagan, Bill Gates, Bill Clinton, Marilyn Chambers, Ted Bundy and I are all Babyboomers. Had this group of people ever conferred with each other regarding what would make America a better place, their would have been no consensus.
Second… During those “Babyboomer” years, the “non-Babyboomers” didn’t just step aside to see what the “Babyboomers” could do to improve things. For example, adding Dick Cheney, John Lennon, Lady Gaga and Timothy McVeigh to the above imagined conference would have made a consensus all the more elusive.
Trying to better understand America in the context of generations can do nothing to improve things. If we are alive now, we share in the responsibility for America’s future. For my part, I post on this bulletin board in a modest attempt to have some positive effect to that end. Today, I will suggest that you read, “Ishmael”, a short novel about a gorilla and philosophy.
Washington’s long con
By Maureen Tkacik The opinions expressed are her own.
There’s a scene in Ray Nagin’s Hurricane Katrina memoir from the Monday night after the storm in which twenty or thirty mysterious security guards, toting three guns apiece, suddenly descend upon the bombed out Hyatt city officials are using as a command center and commence measuring perimeters, laying down wires and barking orders. “We’re here to protect the mayor!” their apparent leader proclaims. “Everyone else leave!”
Nagin watches, “hallucination-like”, as his two preposterously outmanned bodyguards give the guards their best “Oh, hell no” glares, then politely asks the guards: “Who are you guys, and who sent you?” He has well-founded suspicions they are Blackwater mercenaries hired by the local business community, but the leader won’t divulge anything, so he and his staffers just keep asking the same questions of every guard they can corner, until the entire team suddenly vanishes en masse, “Ninja-like, as quickly and quietly as they arrived.”
Of the unnervingly frequent Bush Administration flashbacks I suffered reading Ron Suskind’s Confidence Men: Wall Street, Washington and the Education of a President, Nagin’s staredown of the elite hired guns is the one Obama never manages to repeat.
Instead the whole saga plays out like a more articulate slow-motion rehash of a memorable passage from an earlier Suskind book, in which an earlier inexperienced president in the afterglow of a crisis-fueled electoral victory listens to his economic advisers plot the next six months of tax breaks and “incentive package” announcements and finally asks, “What are we doing on compassion?”
(Silence.)
But Bush was a quicker study than his successor. By the end of Bush’s 2002 meeting with his economic advisers he has mastered the narrative they are concocting: the “spin” that the economy is bad is not “credible” enough to warrant compassion, but it is saddled with uncertainty—a malaise he identifies on his very own without cue as resulting from the twin ills of “SEC overreach” and the threat of Saddam Hussein’s continued rule in Iraq. By contrast, it takes 355 pages for Obama to complete a parallel metamorphosis, from compassion-infused campaigner to unprompted producer of his own brand of Beltway antilogic, by which he informs his advisers in the fall of 2009 he has learned to stop worrying about unemployment rate, since its historical magnitude is merely a rosy indicator of “productivity gains in the economy.”
As a first time visitor to hthis site, I am intrigued that a well-written article such as this should be pilloried by people who obviously have a political axe to grind on the basis that they don;t like it’s writing style. It is for ma a facinating insight into how one part of the political spectrum works.
But I should add – well done to the author.
from Reuters Money:
Fury brewing at ratings agencies as markets gyrate
Ratings agencies helped spark the financial meltdown of 2008-9, when they deemed that steaming piles of mortgage junk were brimming with triple-A goodness. They were wrong – and epically so.
Now S&P downgrades the debt of the entire country, further threatens to do so another notch, teams with fellow ratings agencies to bring Europe to its knees with each new appraisal and gets an assist for wiping trillions in wealth from investors’ portfolios in just a few days.
Anyone else think the ratings agencies need a time out?
“If you had asked me a couple of years ago if they could do anything more destructive than the mortgage debacle, I would have said never,” says Roger Kirby, Of Counsel for New York City law firm Kirby McInerney, who is involved in a class action against Moody’s on behalf of shareholders. “But it seems they’re managing to do it again, right now. In order to restore their damaged reputations, they’re interjecting themselves unsolicited into sovereign markets.
“It’s not productive, it’s probably inaccurate, and they’re just going out there on their own with no real purpose to what they’re doing. When future historians are writing about this period, they will probably single out ratings agencies as the single most destructive collection of entities.”
It’s not just an academic exercise. The musings of the ratings agencies are having very real effects on people’s portfolio. In the first day following S&P’s downgrade of U.S. debt from triple-A, another trillion was erased. As a result, some individual investors are starting to do a slow burn about how ratings agencies are stoking financial chaos.
And lets get one thing clear, I was out of the market months ago. And another point. I actually agree with S&P’s decision.
I suspect their motives though. Especially when they were part of the kabal that caused this in the first place.
Answer me this anyone on this board. Would the US have been downgraded if it didn’t bailout the banks and didn’t start a phoney war in Iraq?
My answer: NO. Am I wrong? Do the research and come back at me. That is the big picture. And during this time, S&P was ABSOLUTELY colluding with the banks and giving their fraudulent mortgage vehicles AAA ratings. So forgive me if I question their motives now, its well deserved.
from Reuters Money:
Retirement investors suffer as economy catches up to Wall Street
Retirement investors have struggled with a Jekyll and Hyde economy these past two years, where Dr. Jekyll lives very well on Wall Street while Mr. Hyde runs roughshod over a terrified Main Street.
On Main Street, the jobless rate tops 9 percent and 14 million residential mortgages are underwater – a figure Deutsche Bank thinks will hit 25 million, or 48 percent of all home loans, before the housing bust ends.
On Main Street, the economy hasn't respond to ultra-accommodative monetary policy. Near-zero interest rates don't matter because because there's so little demand for credit to hire people or to buy post-bubble real estate.
Meanwhile, free money has been great for Wall Street. The companies that created Main Street's problems through the reckless behavior that led to the financial crisis barely missed a beat, and they went right back onto the gravy train.
Now, the Jekyll and Hyde economies demand to be reconciled. The markets finally realize what Main Street has known all along: we're stuck in a grinding, recessionary economy with no end in sight. You can't even call what's coming now a double-dip, because the first downturn never ended.
Monetary policy is of limited use. Interest rates already are at rock-bottom; we'll probably see more easing soon, even though QE2 hasn't helped much. Meanwhile, fiscal policy has been focused in exactly the wrong area — deficit reduction rather than job creation and direct stimulation of the economy.
Of course, most Americans have a stake in both the Jekyll and Hyde economies – we live on Main Street, but our retirement money is invested on Wall Street. So the obvious question: what now? I'll be blogging about strategies for retirement investing all week, but here's my opening comment to those of us living in the Mr. Hyde economy, don't create a self-inflicted wound by selling out of panic during this plunge.
from James Saft:
Icelandic mulishness wins the day
Iceland's remarkable return to growth shows once again that in this crisis the best policy is often the one that will make international partners most angry.
Having been reviled and chastised when it refused to make good the outsize debts of its banks, Iceland this week capped a striking turnaround when it announced that its economy expanded by 1.2 percent in real terms in the most recent quarter, its first such rise in two years.
This is in stark contrast to Ireland, whose pliability and inability as a member of the euro zone to act unilaterally leaves it with a still crashing economy which must service ever more debt by making ever deeper cuts to public spending.
Iceland, which sailed into the crisis in 2008 as essentially a small fishing fleet with a massive hedge fund attached, looked its predicament square in the eye and followed a set of policies seemingly designed to tick off both its friends and enemies, doing its small but mighty best to beggar its neighbors by letting its currency crash, imposing capital controls and, crucially, refusing to make whole the global creditors of its three failed international banks.
While an International Monetary Fund and multilateral package was eventually agreed, and a deal with Britain and the Netherlands over debts from Icesave Bank are currently being hammered out, Iceland's leaders, at least the current ones, seem convinced that making bank creditors share its pain was the right course.
"The difference is that in Iceland we allowed the banks to fail. These were private banks and we didn't pump money into them in order to keep them going; the state should not shoulder the responsibility," Iceland's president, Olafur Grimsson, said last month, tweaking the nose of EU officials who are insisting that Ireland make good all senior creditor calls on its own distended banking system.
"Bondholders should not rely on the government stepping in and bailing them out," Iceland Central Bank governor Mar Gudmundsson said last week. "They should do their due diligence."
I doubt the Brits and the Dutch are done with Iceland. What they did is default on their debt, hardly a new thing in the world, but the limitations of what they can do in their home economy is eventually going to have them trying to talk to their neighbors again.
They will never be part of the EU, the U.S. banks won’t deal with them on anything like a favorable condition until they get that fixed, and it won’t be fixed on their terms. I suspect what you are hearing is an attempt to put a bold face on what is and will be a desperate situation.
from James Saft:
Pension savers get the boot
From Dublin to Paris to Budapest to inside those brown UPS trucks delivering holiday packages, it has been a tough few weeks for savers and retirees.
Moves by the Irish, French and Hungarian governments, and by the famous delivery company, showed that in the post-crisis world retirees, present and future, will be paying much of the price and taking on more of the risk.
This goes beyond merely cutting back on pension benefits, rising to actual appropriation of supposedly long-term retirement assets to help fund short term emergencies.
Let's start with Ireland, which is kicking in 10 billion euros from its National Pensions Reserve Fund into an 85 billion euro package of support for its banks.
Trust me, this does not reduce the risk profile of the NPRF, which was set up as a sovereign wealth fund to help pay for state retirement benefits.
Putting aside jokes about sovereignty and wealth, of which there is appreciably less in Ireland than formerly, this is effectively a transfer of wealth from the Irish people to its banks. Or rather, to the institutions, mostly European banks, which hold Irish bank debt, none of whom as senior creditors will share in the pain.
In many jurisdictions if Ireland were a corporation and the NPRF part of the corporation's pension fund, then making such a move would be illegal, and quite rightly so.
Another good column by James Saft.
At the risk of appearing like a wild-eyed conspiracy theorist mumbling “Bilderbergers,” it does seem like a coup has taken place in the USA and the European Union. Nowhere in the bailout zone did we hear the sound of haircuts, though Angela Merkel hopefully has firmly grasped the clippers. Nowhere in the bailout zone did we hear that we could nationalize the banks, quickly reorganize them, and spit them out much smaller. Oh no, we just gave them billions of dollars with no conditions attached, leading to predictable bonuses and whining that they deserve obscene salaries for incompetence. Now we see the second act that Saft described, where the banksters raid pension funds to continue their quest for the holy grail — our grail.
I honestly think there is only one course of action left to the “little people”: a return to the heady days of Marie Antoinette and other characters whose intelligence and integrity were much improved by a skillful application of a heavy, sharpened blade.
http://saucymugwump.blogspot.com/
California voters back weakened climate law
-The opinions are the author’s own-
California voters on Tuesday rejected a measure to suspend the state’s innovative climate change law. But the state’s emission trading scheme has been substantially diluted to buy off opposition from energy-intensive industries and allay fears about job losses.
If it is true that “as California goes, so goes the nation”, the past 10 days have confirmed the lack of political support for tough emissions curbs.
The survival of California’s cap-and-trade scheme has kept alive hopes for enacting a patchwork of state and regional schemes in the absence of a federal program. Supporters hope establishing even a diluted system will lay the groundwork for a program that can be toughened as the economy improves.
But the state government’s last-minute decision to give away most emissions allowances rather than auction them suggests voters and politicians are not ready to embrace the steep increase in energy prices needed to decarbonize the economy.
“NO” ON 23 Proposition 23 would have suspended the 2006 Global Warming Solutions Act (AB 32) until the state unemployment rate fell below 5.5 percent for four consecutive quarters. Proposition 23 would have effectively killed the law because unemployment is currently over 12 percent and has only rarely dipped below 5.5 percent in the last three decades.
Voters rejected it by a wide margin following a heavily funded campaign pitting clean technology companies, environmentalists and moderate lawmakers against parts of the oil refining sector. With 92 percent of precincts reporting, “No” votes led “Yes” votes by 4.2 million to 2.6 million (61 percent to 39 percent), according to the Los Angeles Times.
DaBear is wrong as usual, its the republicans and the Chamber of Commerce that heavily supports off shoring our good paying middle class jobs, the republicans killed any legislation that punishes companies for doing so.For some bizarre reason they think the minimum wage workers that remain can sustain our government and pay off the national debt. Talk about a bunch of loons, and then they attempt to blame their evil ways on the democrats. Shame on you DaBear, get some education or shut up…
Larry, you know as well as we all know that your statement about tax problems, “….will force the president and Congress to wrestle with fiscal issues either in a lame duck session after the election or in early 2013. ” simply has no validity. Congress hasn’t wrestled for so long that it is only a showplace in the Capitol Building. Without political consequences for each member, they’ll continue to do nothing in order to fool the public into thinking that it is the other side whom is ineffective. It is such a charade as to be shameful.