James Pethokoukis

Politics and policy from inside Washington

Debt ceiling battle could turn into trench warfare

Feb 2, 2011 16:09 UTC

Republicans aren’t scared to toy with the U.S. debt limit. Both parties now seem to agree that failing to raise the country’s borrowing cap would be a disaster. But brinkmanship looks likely as Republicans hold out for cuts far deeper than Democrats will easily accept. Pushed far enough, the tactic could still rattle Treasury markets.

Leaders inside the GOP certainly know their recent political history. And they have no intention of allowing their party to suffer a repeat of what happened in 1995. When Republicans took control of Congress that year, they squandered public confidence by being seen as responsible for shutting down the government in a budget dispute with President Bill Clinton.

The political damage would be far worse today if Republicans took the fall for making Uncle Sam look as though he might default on his obligations. But the GOP also must contend with its new Tea Party colleagues. The newcomers say they want to radically shrink the federal government in exchange for acceding to raising the debt ceiling. At $14.3 trillion currently, the limit could be reached in two months. One faction says it wants to cut non-security spending by 50 percent — also excluding Social Security and Medicare — by $2.5 trillion over 10 years. Sen. Rand Paul of Kentucky is prepared to go even further.

By contrast, President Barack Obama is looking to trim just $40 billion a year by freezing current spending at current levels. Reconciling what GOP spending hawks want and what Obama would conceivably accept will be difficult. Republican leaders are already planning for temporary gridlock. One option is to explicitly prioritize paying the interest on public debt. All other spending would need to be cut by $125 billion for each month the stalemate continues. Another path would be to raise the ceiling, adopt the Obama freeze but also include strict spending caps. Sen. Bob Corker of Tennessee and Sen. Claire McCaskill of Missouris have cooked up a bill that would do the following: “Put in place a 10-year glide path to cap all spending – discretionary and mandatory – to a declining percentage of the country’s gross domestic product, eventually bringing spending down from the current level, 24.7 percent of GDP, to the 40-year historical level of 20.6 percent.”

The release of Obama’s budget in two weeks will give a better sense of the gap between the two sides. Until it is closed, investors in U.S. bonds need to steel themselves for rhetoric that sounds more alarming than the consensus on the debt ceiling suggests.

COMMENT

No way! Keep printing new money, keep devaluating the dollar!

Love to see the figures of our interest payments on the national debt: Much of the budget is getting sent to bolster the holders of our bonds economies of China and the middle east.

Our tax dollars hard at work. Fix this and more ambitious social will be more realistic.

The pain is too great though, and the politicians will keep kicking the can down the road; they care more about their jobs than America.

Freeze the deficit? How about balancing the budget? Better yet, how about paying down the debt?

Posted by Myopian | Report as abusive

Obamacare court ruling gives a shoutout to Tea Party movement

Jan 31, 2011 20:43 UTC

From page 42 of the ruling by Judge  Roger Vinson:

It would be a radical departure from existing case law to hold that Congress can regulate inactivity under the Commerce Clause. If it has the power to compelan otherwise passive individual into a commercial transaction with a third party merely by asserting — as was done in the Act — that compelling the actual transaction is itself “commercial and economic in nature, and substantially affects interstate commerce” [see Act § 1501(a)(1)], it is not hyperbolizing to suggest that Congress could do almost anything it wanted. It is difficult to imagine that a nation which began, at least in part, as the result of opposition to a British mandate giving the East India Company a monopoly and imposing a nominal tax on all tea sold in America would have set out to create a government with the power to force people to buy tea in the first place. If Congress can penalize a passive individual for failing to engage in commerce, the enumeration of powers in the Constitution would have been in vain for it would be “difficult to perceive any limitation on federal power”[Lopez, supra, 514 U.S. at 564], and we would have a Constitution in name only.

COMMENT

“Obamacare court ruling gives a shoutout to Tea Party movement”-

Which is exactly why Judge Vinson’s hyper-political and confusing misjudgments produced a ruling that’s not only flawed, but hard to respect as a work of legal scholarship.

The outcome of this case was a foregone conclusion. This particular case was brought by conservative state officials from 26 states, who carefully chose the venue. Vinson had already telegraphed the outcome, so the ruling just makes official what everyone expected anyway. Republicans are thrilled, of course, because activist court rulings are to be celebrated, just so long as it’s activism the right can agree with.

So two Republican-appointed federal district court judges have found that the individual mandate, an idea Republicans came up with, is unconstitutional. And two other federal district court judges, appointed by Democratic presidents, came to the opposite conclusion. About a dozen other federal courts have dismissed challenges to the health care law.

In other words, when you hear Pethokoukis say that “courts” have a problem with the Affordable Care Act, remember that it’s actually a minority of the judges who’ve heard cases related to the law.

Posted by GetpIaning | Report as abusive

The tough job of cutting corporate taxes

Jan 28, 2011 18:07 UTC

President Barack Obama’s State of the Union speech delivered on an idea he’s been telegraphing for weeks: corporate tax reform. And there are hints the changes he will seek could be major. But some companies will lobby hard against losing tax breaks to pay for a rate cut. Turning even sensible proposals into law is no sure thing.

For the most part, Obama has kept his distance from the long list of recommendations put forward by the debt commission he created last year. Tackling business taxes is turning out to be the exception. The panel suggested lowering the top U.S. corporate rate to 26 percent from 35 percent today and taxing only domestic income as a way of promoting economic growth. Yet it also called for eliminating all business tax breaks to fund the reductions and reduce the budget deficit.

Obama echoed the basic thrust of the panel’s proposal in his national address, though not the specific numbers. But his call for “fundamental reform” that was “revenue neutral,” implies that he wants to do more than just tinker with the existing tax code. Those goals can only be met by sharply lowering the overall rate and dramatically reducing loopholes.  Importantly: Obama did not hint that some of the money from simplifying the tax code be used for lowering the deficit, as the panel suggested. Republicans would likely view that as a tax hike and firmly oppose.

Not all companies will be pleased with the prospect. Some multinational companies, such as Pfizer, Hewlett Packard and Qualcomm, have successfully worked around the current system to have consistently managed effective tax rates closer to 20 percent or lower.

And lobbyists from a host of industries, including venture capital, private equity, and the oil patch, where tax-advantaged master limited partnerships are all the rage, will flood Capitol Hill and claim ending this or that tax subsidy will hurt competitiveness. Just look at this chart (from the NYTimes):

corptax

It’s been 25 years since the tax code was meaningfully reformed. That argues for Obama to slice indiscriminately through the Gordian Knot of corporate welfare by doing away with all business tax favors. Put everyone in the same boat and let markets choose winners. Yet as common-sensible as that sounds, it may be every bit as challenging as passing health and financial reform. This good idea will take some heavy lifting.

But it needs to be done correctly. Americans for Tax reform has some solid suggestions:

1. The rate needs to come down — way down. Our 40 percent rate is much higher than the average European rate of 25 percent. Ideally, we’d want to be under that in order to attract jobs and capital from the rest of the world

2. Don’t raise taxes. The President has argued this should be a tax revenue-neutral exercise. While we would prefer a net tax cut (at least on paper in a static score), revenue-neutrality should be the worst revenue case. This should not be an excuse to raise net taxes (like the President’s Debt Commission did).

3. Move from “worldwide” to “territorial” taxation. As part of reform, the corporate tax system should migrate away from “worldwide” taxation (where all income of U.S. companies from all around the world is liable to be taxed by the IRS) to “territorial” taxation (where only U.S.-source income is taxed). This is what the rest of the world by and large does, and would make all the international deferrals and credits unnecessary.

4. Resist the temptation to lengthen depreciation lives. The proper tax treatment of business purchases is immediate expensing (as was contained in the December tax deal). Going in the other direction by lengthening depreciation lives will only bias toward consumption and away from productive investment. It’s the government picking winners and losers, and hurting economic growth in the process.

5. Remember that the corporate income tax is only the first act of a two-act play. After-tax corporate profits distributed to shareholders are double-taxed as dividends. After-tax corporate profits retained by firms eventually come out in the wash as taxable capital gains to shareholders. An integration of both bites at the apple would truly be a pro-growth and comprehensive tax reform effort on the corporate side.

6. Don’t forget about corporate capital gains and dividends received. Unlike individuals, corporations don’t have a preferential rate on capital gains, and cannot exclude all the dividends received from other corporations. Dealing with the capital stock and portfolio income of corporations is a necessary component to reform.

7. Don’t pick winners and losers. President Obama seems to have a particular vitriol reserved for energy companies, as exemplified (again) in his SOTU speech. This hatred should not cause this sector to suffer more base-broadening than other sectors. Conversely, favored companies should not get light treatment. Rather, the goal of a revenue-neutral corporate tax reform (as opposed to a simple rate cut, which remains ATR’s preference) should be to broaden the base as much as possible in order to lower the rates as much as possible. How individual companies or sectors do is not particularly relevant.

COMMENT

Since human beings are really virtual corporations, to turn the tables a bit, then citizens of all sorts, flesh and blood as well as virtual, should only be taxed on US source income. After all, Europe does that too. No global octopus headquartered in D.C.

A good idea.

Posted by txgadfly | Report as abusive

As U.S. debt goes up, Obama’s concern goes down

Jan 26, 2011 17:34 UTC

In the space of less than 24 hours, the Congressional Budget Office managed to stomp all over President Barack Obama’s dovish debt speech. That Obama failed to use the State of the Union address to explicitly endorse any of his own debt panel’s major budget-cutting recommendations was, shall we say, a glaring omission. Now that failure appears absolutely blinding. Give us the bad news CBO bean counters:

For 2011, the Congressional Budget Office (CBO) projects that if current laws remain unchanged, the federal budget will show a deficit of close to $1.5 trillion, or 9.8 percent of GDP. The deficits in CBO’s baseline projections drop markedly over the next few years as a share of output and average 3.1 percent of GDP from 2014 to 2021.

The deficits that will accumulate under current law will push federal debt held by the public to significantly higher levels. Just two years ago, debt held by the public was less than $6 trillion, or about 40 percent of GDP; at the end of fiscal year 2010, such debt was roughly $9 trillion, or 62 percent of GDP, and by the end of 2021, it is projected to climb to $18 trillion, or 77 percent of GDP.

Those projections, however, are based on the assumption that tax and spending policies unfold as specified in current law. Consequently, they understate the budget deficits that would occur if many policies currently in place were continued, rather than allowed to expire as scheduled under current law.

If Medicare’s payment rates for physicians’ services were held constant as well, then deficits from 2012 through 2021 would average about 6 percent of GDP, compared with 3.6 percent in the baseline. By 2021, the budget deficit would be about double the baseline projection, and with cumulative deficits totaling nearly $12 trillion over the 2012–2021 period, debt held by the public would reach 97 percent of GDP, the highest level since 1946.

Well, at least Obama didn’t ignore the debt issue completely. Deficit reduction was included as one of his five economic “pillars,” along with innovation, education, infrastructure and government reform. And he did call for a temporary freeze on some spending categories. But his narrow formulation exempts sixth-sevenths of federal outlays for savings of less than $400 billion over ten years (only a quarter of the $1.6  trillion his commission called for) vs. perhaps $12  trillion in total new debt. Last week, a group of influential Republicans called for $2.5 trillion in cuts over a decade.

There had been hope Obama would at least suggest trimming Social Security, as his bipartisan debt commission suggested last December. But the idea was dropped after much howling from liberal interest groups. Yet, strangely, Obama said it was necessary to “find a bipartisan solution to strengthen Social Security for future generations.” He should check his in-box because it’s been sitting in there for more than a month.

The White House has clearly decided that a “pro-growth” message will serve Obama well in his 2012 reelection bid, with the space race reference meant to evoke the can-do 1960s.To hammer home the point, Obama emphasized the need to keep investing in the “Apollo projects” of today. In other words, let the GOP be the Party of Austerity and root-canal economics.

The speech isn’t necessarily Obama’s final take on the matter, of course. Progress can be made outside the media spotlight. In 1997, secret talks between the Clinton White House and congressional Republicans almost led a bold deal to fix Social Security.

Obama might want to try a similar tactic and quietly meet with the guy who gave the Republican TV response, Rep. Paul Ryan. The rising GOP star and debt panel member has created a plan with a former Clinton economist to sharply cut future health costs, the primary driver of America’s long-term debt woes. Otherwise, U.S. debt may just keep rocketing higher.

COMMENT

What do you people not understand about the fact that the Social Security budget is handled separately and has a savings built up.

Even if you doubled the retirement age you are not allowed to touch the money social security has collected.

Further Social Security is more and more often the only income for the retired and disabled. Without it people die. Do you want to be held responsible for a large number of deaths and blatant theft for what people have themselves paid for? You see whats happening in the middle east?

Posted by toyotabedzrock | Report as abusive

Thoughts on Obama’s SOTU speech

Jan 26, 2011 06:44 UTC

Whenever I would ask folks at the White House about how they planned on dealing with America’s long-term debt problem, they would more or less tell me the same thing: “Wait for the deficit commission.” Well, Obama’s panel has come and gone. And in his speech last night, he failed to explicitly endorse any of its budget-cutting recommendations. This part particularly frosted my pumpkin:

The bipartisan Fiscal Commission I created last year made this crystal clear. I don’t agree with all their proposals, but they made important progress. And their conclusion is that the only way to tackle our deficit is to cut excessive spending wherever we find it – in domestic spending, defense spending, health care spending and spending through tax breaks and loopholes.  … To put us on solid ground, we should also find a bipartisan solution to strengthen Social Security for future generations.

What, did Obama not check his in-box? His bipartisan commission gave him a Social Security fix, not to mention a host of other ideas. Now perhaps this is all about some grand negotiating strategy. But it sure seems like the White House has clearly decided that a “pro-growth” message will serve Obama well in his 2012 reelection bid, with the Sputnik space race reference meant to evoke the can-do 1960s. To hammer home the point, Obama emphasized the need to keep investing in the “Apollo projects” of today. In other words, let the GOP be the Party of Austerity and root-canal economics. Except, sunny and smiling Paul Ryan refused to play the role. He gave a common-sense perspective on the budget deficit, an issue which the 2010 midterm results suggest is a big one with many Americans.

Yes, the corporate tax cut stuff was pretty good. But nothing in the speech hinted at any sweeping tax and spending reforms on the horizon. Maybe with Obama’s approval ratings back over 50 percent, the White House thinks it can afford a cut-and-paste agenda and squeeze out a 51-48 victory in 2012. A nod to tort reform here, more R&D investment there.  More to come later …

COMMENT

We are all aware that, re the change in corporate taxes, that almost no major corporation actually pays taxes at the 35% rate. If there is a change, it would certainly help the smaller corporation but it would also allow for more crony capitalism as those “preferred”, ie solar and wind companies, will get special offsets. Not sure what the final result will look like but it’s doubtful that our corrupt Congress will bite any hand that feeds them.

Posted by apberusdisvet | Report as abusive

Did Wall Street nix GOP push to let states go bankrupt?

Jan 25, 2011 17:49 UTC

As they used to say in the Soviet Union, “It’s no coincidence.” At least, I suspect is isn’t. Yesterday, House Republican Majority Leader Eric Cantor came  out strongly against the idea of changing the federal bankruptcy code to let states declare bankruptcy, an idea being pushed by some Republicans, including Newt Gingrich:

“I don’t think that that is necessary because state governments have at their disposal the requisite tools to address their fiscal ills,” Cantor said. ”They’ve got the ability to enter into new negotiations if there are any collective bargaining agreements in place. They’ve got the ability to adjust levels of spending as well as revenues at the state level.”

Yes, but filing for bankruptcy would allow states to restructure government union contracts. Even the threat of doing so could make negotiations easier. That’s arguably how it worked for U.S. automakers. Despite incremental concessions over the years due to the vague threat of bankruptcy, only the reality of an actual bankruptcy, instigated by Washington, achieved sweeping change — whether at General Motors and Chrysler, which filed, or Ford, which avoided doing so. States don’t have that ability right now.

But let’s speculate a bit, let’s try and connect a few dots:

1. In 2010 election cycle,  Wall Street campaign contributions shifted to Republicans from Democrats. For instance, Goldman Sachs, via its PAC and employees, allocated 59 percent of political contributions to Republicans in 2010 against just 26 percent in 2008.

2.  Wall Street does not like the idea of states being given the power to file for bankruptcy. Such a move might spook markets, or spook them even more:

The municipal bond market, which has recently been rocked by fears of possible defaults, could suffer another blow, driving up borrowing costs further, if the legislation gained traction. The idea is “clearly not beneficial to an already fragile municipal market,” said Chris Mauro, municipal strategist for RBC Capital Markets, in a statement.

It might hurt their holdings of state bonds. Overall, banks own some quarter-trillion bucks worth of state and local debt.

3. Also, some Wall Street firms make a lot of money off the public pension system and don’t want to get on the wrong political side of the issue. Take the Blackstone Group, a private equity firm.  More than a third of its investors are public pensions. Here is the text of  a press release it put out last week:

Blackstone’s view on public employee pensions is clear and unambiguous: We believe a pension is a promise. Working men and women should not have to worry about their retirement security after years of service to their communities. We oppose scapegoating public employees by blaming them for the structural budget deficits that cities and states face. We at Blackstone are committed to helping public employees retire with confidence in the strength and reliability of their pensions.

4. Billionaire Blackstone CEO Steve Schwarzman is a big Republican moneyman who famously likened Democratic efforts to impose higher taxes on private equity firms to Adolf Hitler’s invasion of Poland. “It’s a war. It’s like when Hitler invaded Poland in 1939.”

5. Many Republicans would love to cement their rekindled financial relationship with Wall Street heading into 2012 when they have a good chance of retaking the Senate.

Now there is a reasonable argument against giving state’s this new power. But the anti-bankruptcy GOPers have yet to supply it. Perhaps other forces are at play. If not, more explanation is needed.

COMMENT

For those of you citing the Contracts clause and arguing that this would be unconstitutional:

“No state shall . . . pass any law . . . impairing the obligation of contracts.”

This would be a federal law–as bankruptcy courts are arms of the federal judiciary. When you hear about “Chapter 7 bankruptcies,” for example, we are talking about Chapter 7 of Title 11 of the United States Code. The Contracts Clause does not restrict the ability of the federal government to interfere with existing contracts.

Posted by Johnny_Lawrence | Report as abusive

On the GOP, bankrupt states and government unions

Jan 21, 2011 12:58 UTC

The NYTimes finally picked up on a story I had six weeks ago:

Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers. … For now, the fear of destabilizing the municipal bond market with the words “state bankruptcy” has proponents in Congress going about their work on tiptoe. No draft bill is in circulation yet, and no member of Congress has come forward as a sponsor, although Senator John Cornyn, a Texas Republican, asked the Federal Reserve chairman, Ben S. Bernanke, about the possiblity in a hearing this month.

And from my post on Dec. 7:

Congressional Republicans appear to be quietly but methodically executing a plan that would a) avoid a federal bailout of spendthrift states and b) cripple public employee unions by pushing cash-strapped states such as California and Illinois to declare bankruptcy. This may be the biggest political battle in Washington, my Capitol Hill sources tell me, of 2011.

That’s why the most intriguing aspect of President Barack Obama’s tax deal with Republicans is what the compromise fails to include — a provision to continue the Build America Bonds. Republicans in the House of Representatives already want to stop state and local governments from issuing tax-exempt bonds unless they are more forthright about these future obligations.

But it’s about more than just openness. Some Republicans hope the shock of the newly revealed debt totals will grease the way towards explicitly permitting states to declare bankruptcy. Indeed, legislation  amending federal bankruptcy law is currently being prepared by congressional Republicans.

A few additional thoughts:

1) The NYT article raises the specter that states would be shut out of credit markets if allowed to declare bankruptcy, or if one should actually take that step if federal law is changed. That seems unlikely, although  some may have to pay higher interest rates. Municipalities and even countries repudiate debt and yet continue to borrow. And even investor apprehension would be balanced by states getting their finances in order, which should appeal to potential lenders.

2) Republicans aren’t afraid of bankruptcies — though not on the national level — believing they restore market discipline and reduce moral hazard. Lehman is a good example. While the common narrative is that its failure caused a market panic and financial crisis in 2008, many conservative GOPers think the real problem was that Bear Stearns was bailed out, distorting investor expectations. They also believe it was Hank Paulson’s rushed TARP proposal that sent markets reeling, a hypothesis  pushed by economist John “Taylor Rule” Taylor of Stanford.

3)  Republicans have seen the debt problems in places such as Greece and New Jersey and believe government unions undermine long-term fiscal soundness. They want to spread the Chris Christie’s battle against them nationwide. And of course it also doesn’t hurt that unions are a key Democrat constituency. But Rs think it is possible to pit public and private unions against each other by making the case that plumbers and construction workers are paying higher taxes to support cushy benefits and jobs security for teachers and bureaucrats.

4) Don’t be surprised to next hear some Republicans question whether state and local bonds should remain tax exempt, arguing it only encourages fiscal profligacy.

COMMENT

All levels of government in the USA have more money than the rhetoric from both sides of the isle would have us believe; no theory here folks, just hard facts. Read on:

Dear Reader, please consider what Walter Burien is doing over at http://www.cafr1.com .He traded in derivatives for 30 years, has a gift for comprehending the big numbers in government financial statements, and is educating people about the fact that collective “government” now literally owns controlling interests in all the Fortune 500 companies and more through thousands of investment accounts held at the municipal, county, state and federal levels.

The proof is revealed in the “Comprehensive Annual Financial Reports” in the public domain. Thus when government bails out various corporate entities, taxpayers are unknowingly simply rescuing government investment portfolios. Naturally, no one explains this to the public; they only get the usual half-truths, lies and obfuscation from New York and Washington D.C.. The profits from these government investments are not shared with the very taxpayers whose money was used to create them.

Fascism, American style.

According to Walter, “taxes” account for a mere third of the money collective government takes in; the rest is obscene levels of profit from investments, carefully not talked about in the mainstream media. All the talk of “budget deficits” does not take into account the “profits from investment” revealed only in the CAFRs that every level of government issues as required by law, and are in the public domain for anyone to look at.

States “going broke” is only partly true; yes, they are usually spending more than their budget funds. However, the profits outlined above are carefully not mentioned to the public. The purpose? To scare the public into putting up with their present tax burden, and to prepare for more because, after all, “the government is going broke and needs our money”.

It is identical to me pulling my empty pocket inside-out and saying to you “See? I’m broke! Please give me money!” while every other pocket is stuffed full with one hundred dollar bills.

Walter Burien explains what I’ve stated here in a new 1 hour 14 minute online documentary he created called “The Only Game In Town”. A 48-hour pass costs $3.00 available here:

http://cafr1.com/ViewNow.html

I watched it twice. Walter ends his video proposing a smart simple way to address the issue of taxes: create “Tax Retirement Funds” (“TRFs”) that are financed by a small percentage of the profit that every level of government is already making.

Example: Wisconsin’s Real Financial Situation taking into account the above facts:

http://realitybloger.wordpress.com/2011/ 03/01/wisconsins-real-financial-situatio n-explained/

May truth and compassion prevail….

Posted by Bhaktidev | Report as abusive

Does America need a “tiger mother” economy?

Jan 20, 2011 14:41 UTC

Chinese President Hu Jintao’s visit to Washington has triggered debate about whether the United States should copy his country’s hands-on, interventionist economic model. But the Middle Kingdom’s feisty “tiger mothers” may provide a better guide for Washington policymakers than turning to Big Government, Chinese style. A new book extolling their tough-love approach could help America escape its debt trap and boost growth.

America is in a funk, beset by deep fear of decline and widespread worry that the economy is hopeless offtrack. This new Age of Anxiety started with the 2007-2009 financial meltdown. The crisis and subsequent government bailouts prompted some in the U.S. to wonder if their steadfast belief in minimal state intervention had run its course. To make matters worse, while America plunged into its worse downturn since the Great Depression, China kept right on growing and adding to its massive dollar hoard.

But the solutions to America’s long-term economic woes won’t be found by aping the mercantilist industrial policy coming out of Beijing. That’s how poor countries play catch-up, not the way rich countries lead and innovate. Even China understands at some point it will need to export less, consume more and loosen its financial system to more efficiently allocate capital.  Indeed, the U.S needs to push China much harder to open up its markets and dismantle its “Great Protectionist Wall.”

So rather than turn to Hu for answers, ask author Amy Chua. The child of ethnic Chinese immigrants, Chua is critical of the lax parenting style of many American parents. In “Battle Hymn of the Tiger Mother,” she says they’re too quick to praise mediocrity and too reluctant to enforce sacrifice for better academics. In short, Americans are not preparing their kids as well as the Chinese are to compete and succeed as adults.

Whether the thesis is true or not, Chua’s critique still manages inadvertently to capture the essence of what’s wrong with U.S. economic policy. Too much spending and consumption today, too little savings for investment tomorrow. A dysfunctional education system. A tax code that rewards lobbying over productivity.

Americans need to demand more of themselves and of government, even if that means some days of unpleasant sacrifice. Chinese mothers, according to Chua, set high expectations of their children because nothing helps confidence like achieving what didn’t seem possible. That spirit would serve the United States well about now.

COMMENT

neahkahnie, the only ones addicted to entitlements in the US are inner city blacks and corporations who think they need tax breaks to hire. Corporations are addicted to tax breaks, and when they don’t get their way, they leave the country. In fact, the US has the lowest corporate taxes in the developed world when you take into account the loopholes. People fail to realize this. Everyone else is still working their butts off, and considering the rise in US efficiency, they are working more than they have ever worked. People like you are buying into the corporate rhetoric that dominates news sources like reuters, fox, and CNN.

And if you think America’s youth are the McDonalds generation who wants everything now, i suggest you come and visit me in China. The youth here are so spoiled that I can’t see a good future for China at all. QQ anyone?

Posted by hujintaosson | Report as abusive

Obama finally discovers that bad rules kill jobs

Jan 19, 2011 14:29 UTC

U.S. federal regulations impose nearly $2 trillion in annual costs on American business, according to the Small Business Administration. President Barack Obama thinks that’s probably too much and now wants regulators to strike out needless red tape. Better late than never. Even better, Congress should have more power to do the cleanup itself.

At the very least, Obama’s executive order is another hint to corporate America that the president is eager to mend fences after a fractious 2010. And no doubt business groups will applaud, just as they did last month’s deal on tax rates and Obama’s reconstitution of much of President Bill Clinton’s economic team. Congressional Republicans are likely to approve as well, though some may grumble that the initiative should have preceded last year’s regulatory overhauls of Wall Street and the healthcare industry.

Yet Obama’s timing actually matches up with the onslaught of rule-writing stemming from those reform bills. Financial regulators, for instance, may spend two years or more adding meat to the bones of the Dodd-Frank law that was intended to prevent a repeat of the banking crisis. The president’s move is a reminder to keep an eye on the costs of old rules as well as new ones, even though the directive is more geared toward the former than the latter.

But here is the problem: Expecting regulators to whittle down their own responsibilities much is incredibly optimistic. They are hired to regulate, and broadly speaking the more they perform that function, the more funding and influence come their way. So there’s a case for giving lawmakers greater ability to make changes if regulators can’t bring themselves to do it — presidential order or not.

One idea is a bill introduced last year, and likely to be resubmitted, that would require Congress and the president to sign off on any new rule proposed by federal agencies that would have an annual economic impact of $100 million or more. Some 80 or more rules a year might qualify for such a review. Though it might not always make perfect sense, there’s also some merit behind efforts to force regulators to eliminate one old rule with similar cost for each new one they wish to impose. Initiatives like these would help ensure the ever-encroaching regulatory tangle was regularly pruned.

COMMENT

Congress overseeing the regulators. Sounds good. Just add another level of review. That’s the sort of oversight used in the military to replace a $300 hammer with a $600 hammer.

Posted by notme3832 | Report as abusive
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