James Pethokoukis

Politics and policy from inside Washington

A different kind of “second stimulus”

Oct 6, 2009 21:04 UTC

Larry Kudlow speaks or, rather, writes:

As for the second stimulus package, here’s my plan: Go for growth. Reduce tax rates to provide growth incentives, something Team Obama has avoided like the plague. Cut the top corporate tax rate from 35 to 25 percent, and accompany that with a small-business tax cut from 35 to 25 percent. And leave the Bush tax cuts alone. Don’t let them expire in 2011. That’s cap-gains, dividends, and the top personal rate.

Yes, this is a supply-side solution. Reducing tax rates will spur growth incentives. Forget about Keynesian spending multipliers, which Harvard’s Robert Barrow writes are less than one. Instead, borrow from George W. Bush, Bill Clinton, Ronald Reagan, and John F. Kennedy. (And Calvin Coolidge and Andrew Mellon, too.) Forget about Keynesian spending. Forget about class warfare. Forget about income redistribution. Go for growth.

Me:  Of course, what Team Obama is actually considering is more social spending and then a VAT to close the budget gap. Nor, apparently, does it seem to much care about the dollar, despite the ghostly presence of Paul Volcker. Weak dollar, high taxes, big budget deficits — an interesting mix.

Is dollar supremacy a false economic god?

Oct 6, 2009 20:23 UTC

Lots of folks are in a tizzy about this report of an Arab-Russian-French-Chinese plot (sounds like a typical episode of 24) to stop using the dollar in oil trading. Add to this a) the already declining dollar, b) the rise in gold and c) the recent speech by Robert Zoellick where he warned about dollar threats and you have d) visions of a dollar apocalypse and the end of America as we know it.

But so what. The goal of American economic policy should be to produce an economy that is a)  innovative and productive economy, b)  where standards of living are rising, c) where is inflation is low and d) supports a fiscally sound government. Do that, I would think, and your currency will take care of itself, yes? And when you add to that the reality that dollar supremacy has enabled Uncle Sam to run massive budget deficits, a more multipolar currency world doesn’t sound half bad.


Wow, you’re finally saying something that I can fully agree with. I’m a little scared… I bet I’ll feel back to normal once I read your next entry though.

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$10 trillion for clean energy? Maybe a bit overambitious

Oct 6, 2009 17:23 UTC

Working for the International Energy Agency must be hoot. Where else can you recommend a $10 trillion investment and kinda-sorta be taken seriously? From the WSJ:

The IEA, energy adviser to the world’s richest nations, urges more-aggressive reductions in carbon emissions than what many nations are currently planning. In the report, to be released Tuesday, the IEA calls for investment — in clean-energy initiatives such as solar power, new nuclear plants and other measures — of $500 billion a year over the next 20 years.

That is 37% more investment than what the IEA estimated was necessary just a year ago. Some analysts put the current level of investment in clean energy at around $100 billion a year.

And this is my favorite line in the story:

The IEA’s projections, though sometimes seen as overly ambitious, are generally regarded as relevant guideposts for the energy industry.


This is not really a huge deal compared to the size of the energy problem.
Large numbers should always be considered in context.
Let’s see, OECD primary energy consumption is ~5.5 bill tonnes oil equivalent per year. (http://www.iea.org/Textbase/stats/balan cetable.asp?COUNTRY_CODE=28) This corresponds to about 40.4 billion barrels of oil-equivalent. So $500 billion per year is $12.37/bbl oil-equivalent used in OECD per year.
Or, 29 cents/gallon-oil-equivalent. That seems quite reasonable.

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Obama and the VAT: Now it’s Pelosi’s turn

Oct 6, 2009 17:12 UTC

You can add House Speaker Nancy Pelosi to the group of Democrats or Obama allies (John Podesta, Paul Volcker, Roget Altman) calling for a value-added tax. (I predicted all of this days ago.) Here is Pelosi (via The Hill):

Pelosi, appearing on PBS’s “The Charlie Rose Show” asserted that “it’s fair to look at” the VAT as part of an overhaul of the nation’s tax code.

“I would say, Put everything on the table and subject it to the scrutiny that it deserves,” Pelosi told Rose when asked if the VAT has any appeal to her.

The VAT is a tax on manufacturers at each stage of production on the amount of value an additional producer adds to a product.

Pelosi argued that the VAT would level the playing field between U.S. and foreign manufacturers, the latter of which do not have pension and healthcare costs included in the price of their goods because their governments provide those services, financed by similar taxes.

“They get a tax off of that and they use that money to pay the healthcare for their own workers,” Pelosi said, using the example of auto manufacturers. “So their cars coming into our country don’t have a healthcare component cost.

“Somewhere along the way, a value-added tax plays into this. Of course, we want to take down the healthcare cost, that’s one part of it,” the Speaker added. “But in the scheme of things, I think it’s fair look at a value- added tax as well.”


Actually a combination of Soylent Green, Logan’s Run(the old are expendable), Brave New World (social conditioning and population control and 1984 (doublespeak and History if Bunk). I feel like I’m trapped in Room 101.

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