James Pethokoukis

Politics and policy from inside Washington

Larry Kudlow and Barack Obama

Jan 27, 2010 19:50 UTC

I will not read a more entertaining column all year. Mr. Kudlow paints a picture:

Now, sir, let’s join hands, you and me, and go for a full-throated spending and debt limitation approach that will last not three years, but many decades to come. It will keep us out of bankruptcy, re-balance our books and promote growth.

And, sir, let’s you and I visit with Sen. Scott Brown, sit down and watch his ad of President John F. Kennedy talking about the need to grow the economy and create new private jobs by slashing marginal tax rates across-the-board for all families and all businesses. No class warfare. Together, we’ll show the stock market what pro-growth really means.

And then sir, let’s you and I visit with beleaguered Ben Bernanke. Let’s tell him to stop covering up bailout nation. Put all that behind us. Instead, Mr. Bernanke should be defending the value of King Dollar to give American families more consumer spending power in their pocketbooks. Now that will get the stock market’s attention.

I want to welcome you sir, with open arms, back to the free market supply-side capitalist camp. It’s just what we talked about at George Will’s house in Washington a year ago when you had dinner with a few of us.

COMMENT

Ditto! No real change until we reach a crisis. Unfortunately, it’s “the people” who will pay the price for what these fools have done to us.

Posted by Johnba | Report as abusive

The Obama base

Jan 27, 2010 19:46 UTC

As explained by Joel Kotkin:

Gentry liberalism combines four basic elements: faith in postindustrial “creative” financial capitalism, cultural liberalism, Gore-ite environmentalism and the backing of the nation’s arguably best-organized political force, public employee unions. Obama rose to power on the back of all these forces and, until now, has governed as their tribune.

Obama’s problems stem primarily from gentry liberalism’s class contradictions. Focused on ultra-affluent greens, the media, Wall Street and the public sector, gentry liberalism generally gives short shrift to upward mobility, the basic aspiration of the middle class.

Now that the ball is in his court, the president and his party must abandon their gentry-liberal game plan. The emphasis on bailing out Wall Street and public employees, supporting social welfare and manufacturing “green” jobs appealed to the core gentry coalition but left many voters, including lifelong Democrats, wondering what was in it for them and their families.

COMMENT

It’s not gentry liberalism. They are Marxist.

Refusing to say it doesn’t halp anybody.

Posted by proreason | Report as abusive

Explaining the Oregon tax hike

Jan 27, 2010 19:36 UTC

What does it mean that voters in the state voted for higher taxes in companies and wealthier residents? Megan McArdle take a crack at explaining it:

My thoughts:

  • The fact that Clinton raised taxes, and then the economy recovered, is not proof that raising taxes has no effect on the economy.  Most people thing that there is at least some dampening effect, which is especially problematic in a downturn.
  • Realistically, income tax response gets more elastic as the tax region gets smaller.  Oregon borders two states with attractive migration possibilities.  California’s taxes are no bargain–but Oregon’s relatively lower tax rates may have attracted wealthy individuals and businesses that will now find it not so attractive.
  • The Tax Foundation says that pre-tax, it was on the top ten list for business tax climate.  That suggests that it has relatively more room to increase taxes than other states.
  • The business tax changes apparently include a gross receipts tax, which is really an awful tax, especially during a downturn.  Companies which are actually losing money may still owe taxes, which could hasten their closure, and the evaporation of any jobs they provide.
  • Trying to close the gap with only taxes on high income makes state revenues very dependent on a very small group of people.  Ask New York and California how that’s going.
  • Since state income taxes are deductible from federal taxes, this doesn’t entirely raise new tax revenue–much of it will be transferred from the Federal government.
  • There aren’t that many attractive revenue-raising measures for state budgets during a downturn, nor is cutting services always optimal, since demand for them rises when the economy tanks.  Ideally, states would run surpluses in the good years.  Practically, it almost never happens.

Hello, they must be going

Jan 27, 2010 19:30 UTC

David Goldman lays it all out:

Drastic steps are required to restore credibility and confidence.

1) Ben Bernanke should withdraw from consideration for a second term as Fed Chairman. President Obama should appoint former Fed Chairman Paul Volcker in his place. If Volcker, who is 82 years old, feels unable to accept the nomination for a full term, he should serve as Interim Chairman and head a search committee including bipartisan Congressional representation to find a permanent successor. If Bernanke insists on pursuing a second term, the Senate should vote him out.

2) Treasury Secretary Geithner should resign. Whether or not he engaged in wrongdoing, his capacity to execute his office is damaged beyond repair.

I took issue with Paul Volcker’s proposal to ban bank proprietary trading, but that is a minor issue. Volcker’s distinguished career and unimpeachable integrity make him the man of the hour. I’ll take Volcker’s worst moments over Bernanke’s best.

This is not a partisan issue. The alleged malfeasance occurred under the previous administration, and Volcker became Fed Chairman under the Carter Administration. America can’t afford to heap onto the present economic crisis yet another crisis – of integrity.

Just how bad is the US debt problem

Jan 27, 2010 19:21 UTC

Some interesting factoids over at Capital Gains and Games:

Point One:  We often hear that the US government debt load is  lower as a share of GDP than those of many other large, wealthy nations, including Japan, Germany, the UK and France. But a more apples-to-apples comparison, which combines federal, state and local government borrowing, suggests that the US is in worse shape than most other AAA-rated countries.

By that measure, the United States general government totalled 78.6 percent of GDP in 2009 and  will hit 90 percent by the end of 2010, Fitch says.  That would make us the the most highly leveraged of all AAA-rated countries — Germany, France, the UK,  as higher than that of almost all other AAA-rated nations.  (Japan’s debt is still much  higher, but it lost AAA status back in the late 90′s.)

Point Two: the  picture is even grimmer if you look at US government borrowing as a share of revenues.   US goverment debt (federal, state and local) was 330 percent of revenues in 2009 — the  highest ratio of any AAA country.   And that 330 percent doesn’t include additional trillions of dollars in new “contingent liabilities” — bank guarantees, federally insured mortgage-backed securities, and so on.

COMMENT

He’s just driving it up and up until he can declare a crisis.

When that happens, what do you think his “recommendation” will be?

Posted by proreason | Report as abusive

Yup, spending is the problem

Jan 27, 2010 19:19 UTC

Great point made by the Heritage Foundaiton:

After building a true budget baseline, the sobering result shows ten-year deficits of $13 trillion. The annual budget deficit never falls below $1 trillion. By 2019, the debt is projected at $22 trillion, or 98 percent of GDP.

These deficits are driven by spending. Even if all the 2001 and 2003 tax cuts were extended and the AMT were patched, 2020 revenues would be just 0.7 percent of GDP below the historical average. Yet 2020 spending would be 5.2 percent of GDP above the historical average. This means that 88 percent of the additional deficits would come from higher spending and only 12 percent would come from lower revenues.

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