$5.7 Trillion Timebomb

The Republicans have sworn to never raise taxes, the Democrats believe in a balanced approach and asking the rich a little bit more. What is a compromise that finally makes both sides buckle? The very one that they already passed into law.

Nobody Wins...

Nobody wanted it, most people agree it could bring our already sluggish economy to a screeching halt, yet there is little in the way of stopping it from taking full effect. Picture this, a double barreled shotgun, in the right chamber you have a bill that was passed in August that concentrates cuts on the Pentagon while exempting Social Security, Medicaid, Medicare beneficiaries. It was considered a victory by republicans at the time, putting additional pressure on the Democrats to bend to demands made for more across the board budget cuts, while still preserving the wide spread pledge made to Grover Norquist of no tax increases.

But, 12 years earlier, the left chamber of this proverbial shotgun was loaded by George W. Bush by a republican congress. In order to pass his tax cuts using the 51-vote budget reconciliation process, he had agreed to let them sunset in 2010. At the time, a victory by Democrats who declared these tax cuts a payout to the rich that would ultimately hurt the lower classes  A last-minute deal extended them until the end of 2012 as part of a deal to avoid tax hicks so early in a recession recovery.

Let's fast forward to the far off time of January 1st, 2013. The elections are over, a decent chunk of congress is already packing up their bags having lost their seats, the White House lease may be up and an eviction notice on the door at a time when Congress would have to act to avoid both of these barrels from being fired at the same time. Resulting in a recoil of both a $3.8 Trillion dollar tax increase, and a $1.9 Trillion dollar defense spending cut. Most of that will effect the contract defense industry.

Some have speculated that this has backfired and is playing right into the Presidents hand, that now Republicans will have to agree to a deal, less they have to explain why there are both tax hikes and defense cuts occurring as they stand by, two staple issues for conservatives. While playing into a narrative that the right is doing nothing but obstructing and delaying.

What's at stakes for the Democrats  Well, as in 2010, they don't want to he seen as allowing taxes to go up on the working and middle class during a recovery that most people are laying at the feet of the donkies. Which could change dramatically should republicans win big next month. They may feel that there is a window that they could successfully pass the buck to the right.

Sens. Orrin Hatch (Utah) and Jeff Sessions (Ala.), possible feeling this scenario playing out, pressed  Treasury Secretary Timothy Geithner on Monday to lay out a precise timeline for when the government expects to near the debt ceiling and what "extraordinary measures" can be taken to prolong the deadline. But, even this action is little more then an attempt to understand how bad of a situation the government is finding itself in.

You may be asking; Almost $6 Trillion in revenues and tax cuts over the next 10 years? Wouldn't that make a huge impact on the deficit and debt, couldn't this be a welcome reform? Prehaps, if it didn't spiral us into another recession, how much debt would we eliminate of our current $16 trillion. A trillion? Two trillion? maybe five Trillion? Well, the CBO projects we will still add almost $4 Trillion of debt even if all these things occur in the wake of a healthy recovery. I can think of no better case that we need reform, not more taxation.

Then why is this gut check being avoiding during our election cycle? Why is nothing trying to be done to avoid this time-bomb before it's too late? We are expected to hit our $16.4 Trillion dollar debt limit right about the same time as these 'triggers', all these factors together could be devastating to the economy and our defense. Where are the republicans? Well, wouldn't it be interesting that the party that has cried foul at excessive debt and running with the mantra "Government Doesn't Create Jobs!" would be the ones fighting for jobs paid for with government contracts and against triggers that are specifically designed to eat away at the deficit. Or perhaps our friends on the left. Allowing a raise on taxes to the 98% that they caved in to save two years ago, and having to be held accountable for the tens of thousands of people getting blindsided by layoffs after Obama's administration tried so hard to postpone the news until after the election. Would more be gained from saving jobs and tax rates, or by letting the right look all the worse for letting these events happening.


It's the worst of the game of politics we've seen in some time. Nobody truly want's these cuts and hikes.

Mark my words, something will be done, a deal will be struck. It will cut billions in new spending that will be labeled as cuts, the tax cuts will be extended for a year or two, that will not benefit any new growth. Let me ask you, if you knew you where getting a pay cut next year would you spend spend spend, or save save save? Temporary tax cuts don't work. And now ten years into this tax cut, people would have to go through a transition that would impact the economy negatively if these cuts expired. These rates or the old higher rates, we need to remove this storm cloud hanging over us.

These looming landmines and these conditions are not conducive to a growing economy, and these types of issues probably aren't going to be solved on day one of any new administration or congress. I am disappointed that these questions are not being brought up at the Presidential debates and wish the media would make up for this fact by asking what the respective plans would be to stop pushing these issues down to the next election and to the next generation. 

The Case for Mitt Romney - Part 2

Readers of this blog are probably figuring out that I am waiting in great anticipation for a certain sitting president to present his vision for the next 4 years in something other then grandiose terms. Thus far we have been told that if Romney wins, women will no longer have bridges to drive to Planned Parent because Romney spent all the money exporting paper mills to the Cayman Islands, or something like that. There is no plan for the next four years. We can’t even seem to agree on a tax plan for next year. But, I said early on that this series would be a Pro Romney chain and not a dump on our President, I’ve got plenty of other posts that do that. I do, however, want to help paint the picture of what the next four years may look like under a Romney Presidency.

The Case for Mitt Romney – Part 2: The Romney Plan

First I have to lower some expectations. Day 1: Pulled straight from his television commercial. Romney has stated that he plans to fast track approval for the Keystone XL Pipeline. The sad truth, this is all but impossible now, it’s too late, we missed the boat, and guess who was right there for the rebound, a company by the name CNOOC, a Chinese state owned conglomerate, now has a roughly $15 Billion dollar investment in the Canadian Sands project by buying Nexen. Just another stepping stone is China’s buildup of owning and controlling a disproportionate share of the Worlds high dollar natural resources. What this means is that if it comes down to running pipelines from Canada to the Gulf coast vs. the Pacific coast of Canada, CNOOC is who will be making the decision. We had our window, and we blew it.

His other major task for ‘Day 1’ is repealing Obama Care, or at the least grant executive waivers to all the states. I have spent hours upon hours trying to glean some insight as to what a likely scenario will be in the coming years when it comes to this legislation. All I know for certain is that the process in which we got to this point makes no true sense to me, and I’m sure between now and November I, and a few million other people in the blogosphere, will have plenty to say about the feasibility of any action against Obama Care. It sounds simple enough, but without 60 votes in the senate, which I would declare unlikely, this is probably going to get messier well before it gets better. If some states use waivers and others don’t, if some states opt out of the Medicaid expansions and others don’t, then this law could end up being a cluster of ever changing parts which usually means an even bigger bureaucracy to manage all the different aspects that change state by state.

Wow, convinced yet? Me neither, but here is the good news…

Mitt Romney’s Tax Policy: We are told again, and again, and again, that the US is sitting on a huge pile of cash. Why? In a word, uncertainty. How many times has a fight broken out on capitol hill over taxes? Does Obama Care have taxes? Are we extending the Bush era tax cuts? For who? Payroll tax holidays? New taxes on the wealthy? What about capital gains tax rates? There are so many variables playing into what we will be paying on taxes anywhere from 5 months to 5 years from now. If you are preparing a family budget and are told your paychecks may be shrinking by 0%, 5%, 10%, 15% next year, would you go out and spend money now? Or start making sure your savings account was in good shape. (Hint: The smart answer is the latter one, and I hope most of you are doing this regardless).

So, what is the Romney plan? To stop the insanity! To throw out all these stupid temporary tax plans and put in a new low rate, broad based plan that removes many exemptions and simplifies the code. Without indulging in too many details, people have been comparing this approach to the Reagan Tax plan of cutting rates in 1981, then revamping the entire system in 1986. We could go into ideals of the Laffer curve or the law of diminishing returns, people will say that this will hurt the lower class, but from 1981 to 1987, the era of Reagen Tax cuts, the lowest Quintile (that is to say the bottom 20% of wage earners) effective tax rate went from 0.5% <drum roll please> to -0.6%. That’s negative point six percent, and then continued down to -1.6% by the time Reagan left office in 1989. And under the Bush Tax cuts for the wealthy from 2001 at -5.6%, it continued down to -6.2% by the time 2004 rolled around (Bush tax cuts from 01 and 03 fully implemented). Yet from ’81 to ’89 (Reagan era) total income tax receipts rose 56%, GDP rose prior to the ’09 collapse Bush saw a 15% increase, and that was not tax reform, simply a reduction in the tax rates. Romney’s plan speaks much more to the principals of the former.

A common part of Romney’s Fiscal plan is deficit reduction. Romney speaks very highly of the Paul Ryan budget plan. Although most people openly admit getting that bill passed through congress as is will be daunting, even if major Republican shift occurs this fall. The Romney plan calls for a day one <eek, I put this in the wrong spot!> reduction of discretionary spending of 5%. If you do not believe our current Debt ot GDP ratio is alarming then you probably also believe that denial is just a river in Egypt. Here is a short list of developed countries with more debt than their annual GDP; Greece, Italy, Portugal, Ireland, and as of 2011, the US of A has a Debt to GDP ratio of 103%. Not exactly a list of countries reaping the benefits of state investment. The Romney Plan is geared to stop this trend with no cost growth strategy (elimination of ‘Red Tape’), cuts to government spending, and gradual implementation of austerity measures.

Speaking of red tape, that is a line used far too often in politics today. If you have not hear Gov. Romney’s speech to the VFW, I would recommend watching the video, it’s less then 20 minutes and has some good insight to the Romney approach when it comes to cutting the bureaucracy, he tells a tale of navel ship building over the years;

“And while our output has declined, the bureaucracy has increased. There is enormous waste. Let me give you an example: During World War Two, we built 1,000 ships per year with 1,000 people in the Bureau of Ships – the purchasing department, if you will. In the 1980’s we built 17 ships per year, with 4,000 people in purchasing. Today, for 9 ships a year, it takes 25,000 people!

Let me tell you, as a conservative businessman who has spent most of his life in the private sector, I look at that kind of inefficiency and bloat and say, “Let me at it.”

The devil may lie in the details, but this makes sense to me, it has been too long since we have had an honest administrator leading this country. Too many items are passed down the political hierarchy and not enough simple questions asked to justify these figures.

I have spent an unhealthy amount of time looking at the numbers, reading into everyone from Paul Krugman to Thomas Sowell in an attempt to interpret the mountains of data. My personal conclusion, most economists are not stupid, but, you can spin numbers any way you want to support any theory. The real question at hand is not does a plan work on its merits, it is in how well it will be received. Having a fair, simple, low rate set in place for a long term, I believe, would be the best thing for the economy right now. Tax rates skyrocketed in the wake of World War II with little negative impact, why? People wanted to win a war, in the decades that followed, the US has conceded a good sum of it’s share of the global wealth, not necessarily a bad thing at its face, but we cannot count on exclusivity of our economic power to carry up forward, we have to attract business here from other countries and retain and grow our businesses here so they can compete with these global companies. This is a significant shift from our thinking of the 50’s, 60’s, and 70’s when logistics and communication capacities simply didn’t allow for the level of competition we see today. The Romney tax and regulatory plans acts upon these ideals and creates a business environment that can compete with other developed countries. We took similar steps in the 80’s when Japan emerged as a global competitor and when the USSR was our main competition, now it’s China and the EU. America can compete with the best of them, we have wealth, resources, and ingenuity, we need a set of rules that allows us to utilize these safely, cleanly, and last but not least, practically so that our wealth is not invested else wear, our resources are not exploited, and our ingenuity is not usurped as a result of an uneven playing field.

Next in this Series, Either “The Wisdom in his VP Choice”, or some other topic if he chooses someone stupid like Jan Brewer, or "Nevermind, I'm moving to Canada" if it's Sarah Palin.

Case for Mitt Romney Part 1: His Resume

DRAT! I thought for a moment the President had a plan...

I crave hearing about what this President is going to do to tackle the debt. You hear me, CRAVE IT! I want this President to lay out what he would do in the next 4 years so that we don’t eclipse the $20 Trillion dollar mark by the time he’d be out of office. But that is a horrible story, here is my set up. While I was going around the web, I happened upon an add that made my heart leap! Could it be true?!? An add that is called “Obama’s Deficit Plan”. Not only that, but the link actually takes you to BarrackObama.com, the official website of the President’s re-election campaign.

Go Here;

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=104x560709#560737 (went there on 7/18, my apologies, the ad appears to have been replaced since)

See an add for Barrack Obama’s Website here;

Which links you to www.barrackobama.com/our-vote , containing a beautiful banner of Obama, Michelle, and one of their daughters, and displaying the following text; The President’s Deficit Plan in his own words.

FULL DISCLOSER, the text is ripped right off the website, but you may notice some liberties with the image

WHAT THE 2012 ELECTION MEANS FOR WOMEN

Since taking office, President Obama has turned around an economy that was losing hundreds of thousands of jobs each month, ended the war in Iraq, signed the Lilly Ledbetter Fair Pay Act into law, and cut taxes for every working family.

So this November, the choice for women is clear: We can keep moving forward and build on the progress we've made—or we can go backward to more tax cuts for the wealthy, the same policies that led to massive job losses and punished the middle class, and an era when women didn't have control over our own health choices.

Will we re-elect the candidate who has our backs and is fighting for our families? Or will we turn back?

“REGARDLESS OF WHO WE ARE, WE SHARE THIS VISION: HARD WORK SHOULD PAY OFF, RESPONSIBILITY SHOULD BE REWARDED, AND EVERYONE IN THIS COUNTRY SHOULD GET A FAIR SHOT BUT PLAY BY THE SAME RULES.”—MICHELLE OBAMA

WHAT'S AT STAKE FOR WOMEN THIS NOVEMBER:

So this is the Obama BUDGET DEFICIT PLAN, let’s do quick breakdown of the key points;

Number of mentions of Budget: 0

Number of mentions of Deficit: 0

Number of mentions of Plan: 0

Number of mentions of Women: 4

I guess that’s it. The plan to get the country out of this crippling spiral of debt is to get more woman better and fairer paying jobs. This in itself isn’t a bad thing by any means. The sad part is if I proceed to say that this plan doesn’t address the debt problem I’ll probably be deemed a sexist by a loud minority of people. Some of those same people may even take offense to me, a middle aged white male from the Midwest, using the word ‘minority’ in the last sentence. There is a blip about tax policy in this statement, but Reserve Chairman Ben Bernanke stated just this week to congress higher taxes could do more harm than good in these economic conditions.