StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Is The Tax Deal The Ultimate Irony Or Hypocrisy?

06 Dec 2010
Posted by Stan Collender

After making the budget deficit not just a campaign issue but the campaign issue of 2010, one of the very first legislative things the Republicans in Congress will do after the election is agree to a tax cut and extension of unemployment benefits (and god knows what else) that will...wait for it...increase the deficit.  The two-year increase in the deficit because of the deal will be greater than the stimulus bill the GOP railed against during the election.

This is either one of the most exquisite ironies or extraordinary hypocrisies in the history of American politics.  It ranks right up there with Lyndon Johnson campaigning against Barry Goldwater in 1964 by criticizing his plan to increase military activities in Vietnam and then, after the election, having the Pentagon do many of the things he had criticized Goldwater for suggesting.

 

 

This is either one of the

This is either one of the most exquisite ironies or extraordinary hypocrisies in the history of American politics.

What's even more entertaining is that the Republicans will continue to rail against the deficit and hammer Obama and the Democrats for the massive deficit resulting from the tax cuts they insisted on.


Amen to that

That is the first thing I thought of. What drives me nuts is that Obama, and any fiscally-conscious Dem or Republican should be screaming that right now. At the end of his press conference, the President should have said: "I am conceding this to the GOP in good faith that everyone needs a break for the sake of the economy. HOWEVER, if any of my Republican friends DARES campaign against me about the deficit, I am sending SEAL team 5 to GOP headquarters...."


> ...that will...wait for

> ...that will...wait for it...increase the deficit.
True. But the alternative that the Dems were discussing and proposing (stimulus) would have also increased the deficit. And so did the original stimulus.

If we are to select a stimulus of some kind then tax cut is the best one. No need to believe in the myth of multipliers and shovel ready projects.


The GOP campaigned against deficits

...and criticized the Democrats for them.  Now, faced with option, they support the one that increased the deficit the most.  


Also true. But you are making

Also true. But you are making a mistake in saying that GOP (broadly defined because of the realities of the two party system) is monolithic. It's not.
For example, I am a true fiscal conservative that some progressives claim do not exist. The way I see it - it's not the best bargain, but the best one that was available under the circumstances.
It appears that only a major crisis will force honest accounting and budgeting. Which will probably happen in the next few years...


Republicans may not be

Republicans may not be monolithic, but republican federal elected officials sure are. Their voting record evidences no genuine concern for the deficit, other than as a political issue to attack democrats. Look at their voting record during the Bush years, for example. Compare Clinton's record on deficit spending to Bush's. Or Reagan's for that matter. Why a fiscal conservative would support the party that has the worst record on the subject is a mystery to me.

There no doubt are genuine fiscal conservatives in the republican. They just have no influence in setting policy.


Tell your friends...

"If you want fiscal responsibility, don't vote Republican."

And yet people still think Democrats spend more.


Borrow and Spend

It used to be borrow and spend Republicans vs. tax and spend Democrats. I came out on the side of Democrats because I am socially liberal/permissive/freedom-loving but fiscally conservative, which to me means, you don't spend more than you make and you use good times to save for a rainy day.

Now it seems it is borrow and spend Republicans vs. borrow and spend Democrats. They didn't used to be that way, but it is just a fact that infantilized adults who care more about convenience and immediate gratification are always going to vote for the people who tell them they can buy now and pay later.

Someday the roosters are going to come home to roost and it won't matter a whit if the president is white or black, male or female, christian, mormon, muslim, jew, or atheist. These are all side shows the distract us from the policies these people, white and black, male and female, put in place to enrich themselves and their friends at the expense of the great majority of hard working, tax paying citizens.


If you hire people to do

If you hire people to do work, it reduces unemployment. That's not a myth, it's a fact. The myth is that tax cuts create jobs. They haven't yet and those tax rates have been in place for ten years. 900 billion added to the deficit and absent some miracle unemployment will top 10% by 2012.


Tax cuts and Jobs

Tax cuts for the wealthy create overseas jobs. The wealthy will invest their "leaky" tax cuts in businesses that hire sweat shop workers overseas to replace American jobs. Domestic jobs? The wealthy will probably hire two Mexican gardeners and use the rest to buy US bonds so they can receive interest on their tax cuts.

Trickle Down: "Life under the urinal waiting for those precious drops of moisture."


> If you hire people to do

> If you hire people to do work, it reduces unemployment. That's not a myth, it's a fact.
This seems trivial enough. But let's consider the details: what kind of work? Who is paying for this work? Is the result of this work needed?
What happened with the first stimulus is that relatively small part of it was spent on actual new projects. The largest part was spent on giveaways to favored constituencies.
Given this, **if** we are to have a stimulus then tax cut is the best one - the most transparent, the easiest, with the least amount of corruption.


You appear to concede the

You appear to concede the obvious - hiring people to do work reduces unemployment. This, in itself, is a good thing.

1) Which is more effective stimulus - giving money to people who will likely spend it or giving money to people who will likely save a large portion? The answer should be obvious, and the data backs up the obvious, it is more effective to give money to people who will spend.

There may be a different answer when we are not in a recession and particularly when we are not facing record low interest rates, but for today's world, hiring is a much better answer?

2) The entire giveaways to favorite constituencies meme is ridiculous. In this case, favored constituencies were the unemployed who need a job and, until businesses start hiring, interim cash to tide them over.

Once we leave a world where there are many job seekers for every available job, we can adopt different policies. The last statistics I saw had 5 job seekers for every opening. One or a touch more job seekers for every opening is the norm.


> This, in itself, is a good

> This, in itself, is a good thing.
You are taking my words out of context.
If people are hired to build a bridge to nowhere and yet I have to pay for that through higher taxes (present and future) then I do not consider that to be a good thing.

>...giving money to people who will likely spend it or giving money
> to people who will likely save a large portion?

I am against "giving" money to anyone. I am neither a socialist nor a communist.


giving money

Apparently you are not a philanthropist, either.


The Tax Deal

Probably some of both, tho it can be difficult deciding which one applies to any particular politician. Was FDR's balanced-budget campaign against Hoover a precursor to irony or hypocrisy?
The $5 mil/35% estate tax proposal has some interesting cross-currents. Some clients are poised to make taxable gifts at 35% right at year-end. Why rush? Well, because one may live more than two years, and be subject to higher rates later. Or not. Pity the lawyers trying to sort it out (irony).


Estate Tax

I haven't yet seen all the details about the new Estate Tax proposal. Currently the Estate and Gift Tax rules are not under the same schedule, so while the Estate tax has been diminishing - the gifting limit stayed at $1M lifetime with the same 55% top tax rate on gifts over that amount. If this proposal unifies those rates again, then you're correct - they'll be a lot of irrevocable trusts funded in the next two years. If the taxes stay separated then you won't be able to gift at the 35% rate regardless. Does anybody know how that shakes out in this proposal - and more importantly will this proposal actually be passed by the Democrats in the House and Senate.


Stan, your correct on

Stan, your correct on both... It's sad to say, but we do now live in a "Banana Republic". I have come to the conclusion, there are no serious problem solvers inside the beltway. A bunch of hacks on the take. Happy Holidays


What now for Republicans

While not a fan of the compromise, it actually does put Republicans in a position they did not expect to be in, that is to say their ONLY policy initiative has been accomplished, so what next?

having already won on tax cuts, they will have emptied their chamber of solutions and will now be forced to discuss other public policy for which they have none


I don't think they are now

I don't think they are now forced to discuss anything. They will now rail non-stop against Obama for running huge deficits (and more) and await the next election. These guys are not interested in reducing the budget deficit or solutions to any other problems. They are interested in winning the next election. Nothing more. So far, their strategy is working beautifully.


Importance of moving soon to show fiscal & monetary discipline

I'm a layperson, but it's my sense that it's very important to move quickly to ACTUALLY reduce the deficit. It's a problem that's already almost beyond us, and will get larger with aging population, the enormous gov't health insurance expansion etc. I'm also concerned, because despite hearing the St. Louis Fed Reserve Board on QE2 and targetting real interest rates, I think there's a market place phenomenon. Right now. all eyes are focused on weaker EU economies, but I'm afraid that negative attention will come soon to the US and boost our interest rates substantially (increasing our interest costs, and putting federal deficit reduction even more beyond reach), and the Fed can't do too much about that. George Soros made a lot of money betting against the UK, and Bill Gross made billions for PIMCO shareholders betting that the Federal government would essentially nationalize FM debt


Mistake

I don't think the last election was about the deficit - it was about spending. These issues are neatly split in the electorate. People want less spending. They don't care about higher deficits. In the 1990's, people wanted the same spending but on different things and less deficits so they supported tax increases. If our fiscal situation becomes dire enough, they will want tax increases and spending cuts.

Tax cuts now has the ring of effectiveness, even if there is no proof that it is. The deficit going up or down is a separate matter in the minds of Americans and is due to spending. Taxes and spending are not connected and should not be tied to each other. You are linking them like a logical person which Americans have proved they are not, despite the campy analogies to personal budgets.


What do repulicians believe?

From a foreigners perspective, I can understand the tax cut but propping up Americans too lazy to get a job? That's just crazy.


Dear Stan

You're new to this, aren't you? The GOP has been campaigning on reducing the deficit for 30 years now. And how have they done when in power?
Reagan: net increase of $73 billion
GHW Bush: net increase of $103 billion
GW Bush: net increase of $1527 billion

On the other hand, the Democrats:
Clinton: net decrease of $382 billion
Obama: net decrease of $50 billion

The pattern couldn't be clearer, and you're catching on NOW?
*rolls eyes*




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