Vol 1. No. 25.Baltimore, MD  Sat April 19th 2014GIVING YOU THE NEWS THE MSM IGNORES 
Our Contributors:
Comments:
Categories


O's tie game on challenge, but fall in seventh
A heated seventh-inning exchange that saw both dugouts empty preceded a pair of Red Sox runs that doomed the O's in a 4-2 loss on Saturday at Fenway Park.

Call at first overturned on O's first challenge
After O's outfielder Nelson Cruz was originally called out at first in the sixth inning, the umpires overturned the call following a replay review, which meant Cruz had an RBI single and the game against the Red Sox was tied at 2. Baltimore lost the game, 4-2.

Pearce trying to stay sharp in limited role with O's
Steve Pearce has made just one start for the O's this season, on his 31st birthday (April 13), but he said prior to Friday's game at Fenway Park that he's staying ready for whatever manager Buck Showalter needs.

Machado plays first extended spring game
Orioles third baseman Manny Machado went 2-for-4 over five innings in his first extended spring game on Saturday morning. Manager Buck Showalter said the report on Machado, who also played the field, was good.

O's taking wait-and-see approach on Patton
Orioles lefty reliever Troy Patton, who is scheduled to come off the suspended list on April 30, is ready to start pitching in games. What happens after that could prove challenging for the Orioles, who will have to clear a roster spot or risk losing Patton -- who is out of options -- on waivers.

1st Mariner buyers see value in local brand
Amid sea change in banking, they remain committed to being Baltimore's bank

The founder of 1st Mariner launched the Baltimore bank as an alternative to big, faceless, out-of-state institutions at a time when banks based elsewhere had rapidly gobbled up 30 percent of the Maryland market.








New high-paying jobs in city's DOT questioned
Council members say they weren't briefed about agency shake-up

The city's Department of Transportation disclosed this week they've reorganized the agency, creating five new positions that pay $100,000 or more for upper management.


John Ostrowski, sausage maker who owned Fells Point shop, dies
The son and grandson of a sausage maker, he continued a family tradition at his South Washington Street rowhouse factory

John Ostrowski, a renowned Southeast Baltimore sausage maker who refused to sell his product to supermarkets for a wider distribution, died of Alzheimer's disease complications Wednesday at Somerford Place Assisted Living in Columbia. The Lutherville resident was 72.








Gansler sues BP over alleged spill-related pension loss
Maryland Attorney General Douglas F. Gansler has filed a lawsuit against oil company BP over investment losses following the 2010 Deepwater Horizon explosion, alleging that the state's pension fund lost millions after the company misled the public about its safety protocols.








Two teenagers killed in Baltimore this week
Police identify young victim in one case, still searching for information in another

Police fanned out Friday afternoon to search for clues in the killing of teenager Michael Mayfield in Northwest Baltimore, handing out fliers with the victim's image as they moved door to door along Lyndhurst Avenue.







Comments about Baltimore Reporter:

Perhaps the best part of blogging or the internet in general is the occasional discovery of something unexpected.Over on Baltimore Reporter and Conservative Thoughts is a great and thought provoking article by Robert Farrow.I hope you will follow this link and read this great post.

from conservativecontracts.com


I love your blog

Once again - as happens so often - I have been positioned here on the living room couch, immersed in your blog. You are better than Fox News.

Kevin Dayhoff



Awards and Rankings:

Voted one of the best local blogs:
Baltimore Examiner: 2006



Voted Top 10 most influential blog in Maryland in 2007.
Blog Net News



ElseWhere
Other sites I write for:
Flopping Aces
and Red Maryland

Want to help?
Baltimore Reporter is looking for writers to help counter the biased media. Email us if interested.

My Count Since 10/11/07
~ 64326 ~
Site Meter

.

   

12/13/2010

The Lesson of the Tax Deal and the Deficit: Teach Your Kids Chinese
Filed under: — Robert Farrow @ 10:51 pm

By Richard Baehr

Many Republicans are trumpeting the compromise worked out with the Obama administration this week as a victory — after two years of class warfare, the administration accepted a deal in which all of the 2001 and 2003 Bush tax cuts will be extended for two years. While the estate tax rate will rise from zero in 2010, GOP leaders are also pleased with the $5-million exemption and 35% rate on amounts above that, which will be in effect for two years. Many liberals in Congress are steamed and are threatening to vote against the bill; they hate that the top tax rate on high earners will not be raised, they believe the estate tax compromise is too generous, and they do not want to vote to affirm the Bush tax cuts. The left’s anger also makes the deal look like a victory for the right and the GOP.

On the other hand, Charles Krauthammer thinks the GOP was rolled and that the deal will help Barack Obama in his reelection bid for the one job the president truly has always been concerned about preserving. The deal, according to Krauthammer, makes the president look like the centrist, having had to fend off both the angry left in his own party and the greedy Republicans concerned only with tax cuts for the rich. Obama condemned both groups in his nasty remarks at the press conference defending the deal the other day, and that nastiness may explain why there has been no bump whatsoever in his approval rating so far.

That nastiness may not have been faked. Obama is a true class warrior, and he had to be angered to see his signature tax stance — higher rates for the rich — go down the tubes, along with pretty much the rest of his domestic agenda, given the November election results. Some liberal writers, such as Ezra Klein, have argued that there is enough new stimulus in the compromise bill to have a very positive effect on the economy the next two years — raising the GDP growth rate by a percentage point or more and lowering unemployment by 1%-2%. This, Klein thinks, augurs well for Obama’s reelection effort and for Democratic prospects in general in 2012.

The tax negotiations followed by a week the release of a report by the president’s “Deficit Commission.” That group fell short of the fourteen votes needed to make a formal recommendation of their plan (the vote for the plan was 11-7).

The commission’s plan would have reduced the federal deficit by $4 trillion over the next ten years through a combination of tax increases and spending cuts. A larger share of the proposed deficit reduction would have come from spending reductions than from tax increases, some of which were in the area of defense spending. Regrettably, the commission did not substantively address federal health care costs, the biggest problem of all. Of course, the deficit reduction from the commission’s suggested approach would merely be a reduction in the level of increase in the total federal debt that would otherwise be run up in this ten-year period. It was not a reduction of the total federal debt from its current record-high level of about $14 trillion, $9 trillion of which is owed to others ($5 trillion is owed to ourselves — e.g., the Social Security Trust Fund IOUs). Among the members of the commission who voted against the recommendation were liberal Democrat Congresswoman Jan Schakowsky and conservative Republican Congressman Paul Ryan. Not surprisingly, Schakowsky thought the spending cuts were too harsh and the tax increases insufficient. Ryan thought the spending cuts were insufficient and the tax increases too high.

The compromise tax bill that was agreed to by GOP leaders and the White House has just added one trillion in new federal debt over the next two years. It is amazing, the difference a week makes in Washington.

The lesson of the last two weeks is that Republicans publicly proclaim that they care about the deficit, cutting spending (except for defense), and cutting tax rates for everybody, including corporations. But when a deal is on the table, they will settle for cutting tax rates and agreeing to more spending and higher deficits. Democrats publicly proclaim that they care about increasing spending (except for defense, and especially in a weak economy), raising tax rates on the rich, and reducing the deficit (though not now). But when a deal is on the table, they will settle for increasing social spending, lowering tax rates, and increasing the deficit.

The net effect is obvious: the Deficit Commission called for each side of the political debate to accept some pain — for the right to accept higher taxes, and for the left to accept cuts in spending. Neither side would agree to that. The tax extension compromise shows that each side is willing to do what its members believe matters most for their side and causes no pain — higher spending on social programs for the left, lower tax rates for the right. The net effect of this compromise is a substantial increase in annual deficits and a much more rapidly accumulating federal debt.

Of course, federal budget accounting is odd, to say the least. An extension of existing tax rates is not any new stimulus, but it counts as new deficit, since the current rates were supposed to expire at the end of 2010 and then rise to levels in effect before the 2001 and 2003 cuts. Since the federal government is now borrowing about forty cents to support every dollar of federal spending, the failure to raise tax rates (or cut spending) does lead to additional deficit spending in the future. Both Republicans and Democrats were quick to say that what they did this week was necessary because the economy is so weak, and in the end, the deal will help fix that. Since both Republicans and Democrats routinely vote to increase spending and cut taxes when the economy is strong, the only common denominator is that in good times or bad, the deficit increases.

Republicans have been arguing that they have won the ideological battle over tax rates, since the Obama administration accepted in the end that it is a bad idea to raise tax rates in a weak economy and that lower tax rates are stimulative. On the other hand, the Democrats won an ideological battle, too, since the Republicans have argued that the prior stimulus bill passed in February 2009 was an expensive failure (it was) but are now accepting that a new stimulus package is needed.

The compromise reached this week will have about $300 billion in what could be called new stimulus out of the trillion in total cost over two years, all to be financed with new debt. Extending tax rates and unemployment insurance already in place does not count as new stimulus.

Will that new stimulus money do the trick for the economy in the next year or two, when $862 billion did not do much the last two years?

If the GOP had been willing to accept the Schumer compromise (a rate increase only for those with incomes over $1 million) and an estate tax rate of 45% on estates over $3.5 million, could the package have passed without all the new spending and the Social Security tax rate cut for one year that Obama demanded in return for the lower rates? The evidence of the last two years is that much of the stimulus bill spending — transfers to the states and local governments — did not create any new jobs, but did allow these governments to reduce their own level of borrowing. In essence, federal borrowing replaced state and local borrowing. On the other hand, the temporary tax giveaways — Bush’s $150-billion handout in early 2008, and the stimulus bill’s “Making Work Pay” tax cut, were largely used by individuals to reduce their personal debt levels — part of the national deleveraging going on in all sectors in the economy except for the federal government. The 2% one-year reduction in the Social Security tax rate will probably have the same result.

It is an article of faith on the right that permanent reductions in tax rates have far more impact on economic behavior than one-time reductions in tax rates or the federal government sending out one-time checks. But the GOP just agreed to a two-year extension of tax rates, a two year extension of the AMT “fix,” a thirteen-month extension of payment of up to 99 weeks of unemployment insurance, and one or two years of extensions to lots of other spending and tax programs tailored to reward special interests. All of this was demanded by Harry Reid and Senate Democrats to make the overall deal more palatable to Democrats in Congress.

The Deficit Commission recommended eliminating many, if not most, of all the special rules in the tax code that favor particular industries (e.g., real estate, oil and gas, Hollywood, ethanol, private equity-carried interest), all of which serve to produce higher individual and corporate tax rates. If the GOP really believes that permanent lower tax rates are the way to help get the economy going again, then this should be their theme song. The Deficit Commission said that a 23% top rate is possible by eliminating all deductions. Even keeping some of the most popular deductions and eliminating others would allow for a 29% top rate. Corporations have a high top tax rate of 35% (almost all of our economic competitor nations have a lower top rate) but pay little in overall corporate taxes due to all the special deals their lobbyists win for them. Did the GOP sell its “deficit reduction” soul this week in order to keep a top rate of 35% for individual earners with $1 million or greater income for two more years?

Politicians love complexity. So do lobbyists, who get paid to produce it. And lobbyists help elect the politicians who write the bills they want or let the lobbyists themselves write them. During the Reagan years, the president and New Jersey’s Democrat Senator Bill Bradley agreed on changes in the tax code and the elimination of some deductions and credits that enabled the top tax rate to fall to 28%. If Republicans support a similar approach, one recommended by the Deficit Panel — lower rates with fewer deductions to produce equal or higher revenue (a surefire way to test the power of supply-side economics) — then they have an opportunity, when they take control of the House in January, to make this their agenda and resist the call for more special favors from the K Street crowd. If they go the easy route, now that tax rates are set for two years, and dance with the lobbyists, President Obama may preempt them by offering such an approach, as he has already assigned a White House task force to examine this.

At the moment, total federal revenues are 15% of GDP, well below their historic level of 18%. There is no one in D.C. who believes that federal spending can get down to 15% of GDP. It is now at about 25%, 5% more than when Obama came into office. If entitlement spending is not contained, the country will go broke in short order, and the Greek/Irish/Icelandic solution — sharply lower federal spending and increased taxation producing a lower standard of living — will be forced on us by creditors. In other words, the government can produce a plan (as Paul Ryan has) and adopt it, giving the country the means to moderate government spending curve over time, or we can continue to push things down the road two years at a time until we are forced to adjust in a much more abrupt manner. Deficits matter, and politicians time and again refuse to address the issue.

Both parties like to say they are serving the middle class. The Democrats do not want to be perceived as helping merely the poor, and the Republicans do not want to be seen as helping merely the rich. And both have to a large extent participated both in expanding middle-class entitlements and reducing tax rates for the middle class. And this is why it will be so hard to break the pattern. The middle class likes all the benefits and likes the lower tax rates, and the middle class constitutes most of the voters.

I agree with the Deficit Commission: federal spending is a far larger problem than insufficient tax revenue. The Democrats in Congress and the president passed the new health care reform bill in March that will add about $250 billion a year on average for the first ten years after being fully implemented in 2014. Most of that new spending will subsidize the cost of health insurance for the middle class. The Democrats are betting that once the benefits begin to be received, it will be politically impossible to take them away.

Our recent political history suggests that we will keep on punting our spending/deficit problems down the road. If that is the case, we may want to have our children and grandchildren learn Chinese. For the Chinese will be our economic masters.

Comments

No comments yet.

RSS feed for comments on this post.

Leave a comment

Sorry, the comment form is closed at this time.







Search

 
Baltimore Weather

Current Conditions:
Cloudy, 66 F
TheCaffeinatedMind.com
Toilet Paper - What are you?
A folder
A crumbler
A folder-crumbler


View results
Version 2.03
FACING UP TO THE
Nation's Finances
National Debt Clock

Ravens may face choice between Clinton-Dix and Pryor (Comcast SportsNet Mid Atlantic)
The Ravens will have an interesting choice if both Ha Ha Clinton-Dix of Alabama and Calvin Pryor of Louisville are available with the 17th pick. NFL Network analyst Charles Davis prefers Clinton-Dix. Not to say that Clinton-Dix doesnt tackle, he does. Can Calvin Pryor do those things?

Source: Utah OLB Trevor Reilly has met with Jaguars, Panthers (National Football Post)
Outside linebacker had 100 tackles, 8.5 sacks last season

Source: Florida DT Dominique Easley to visit Patriots, Cowboys next week (National Football Post)
Florida defensive lineman recovering well from torn ACL in September

Will Bengals, A.J. Green work out long-term deal? (Comcast SportsNet Mid Atlantic)
One of the things on the Cincinnati Bengals plate, business-wise, is dealing with a long-term contract for Pro Bowl wide receiver A.J. Green, their most potent offensive weapon. Even if the Bengals do nothing about a new deal, Green is contractually bound to them for 2014 and 2015 even 2016 if they wanted to go the franchise tag route. Should Green be at all displeased about a lack of progress on a new contract, his options are limited, as PFT says. So thats why coach Marvin Lewis told PFT he isnt worried about a holdout.

Ravens, 49ers to hold joint practices (National Football Post)
Will happen after preseason game.

Ravens, 49ers to hold joint practices in August (Comcast SportsNet Mid Atlantic)
The Ravens and 49ers will hold four combined practices in Maryland following their Thursday, Aug. 7 preseason game at M&T Bank Stadium. They will hold a light practice together at M&T the day after the game, followed by three joint sessions at the Ravens practice facility in Owings Mills from Aug. 9-11. It will give Ravens coach John Harbaugh and 49ers coach Jim Harbaugh a chance to spend more time together, while their teams compete against each other. I called Jim about a month ago and asked him if he wanted to do it, and I wasnt really sure if hed want to, John Harbaugh told the Ravens website.

Webb getting healthy, anxious to start (Comcast SportsNet Mid Atlantic)
Webb has been working with the trainer, "trying to get back to where I left off."

49ers, Ravens to participate in four preseason practices (Comcast SportsNet Bay Area)
The 49ers will remain on the East Coast to practice with the Baltimore Ravens for four days after their opening exhibition game on Thursday, Aug. 7, Ravens coach John Harbaugh said.

Q&A with Florida International corner Sam Miller (National Football Post)
Florida International cornerback worked out at Dolphins' local Pro Day

Source: Rams worked out Martavis Bryant, Sammy Watkins today (National Football Post)
Bryant has a visit with the 49ers, visit list includes Dolphins, Steelers, Lions

Saints worked out quarterback Rusty Smith (National Football Post)
Quarterback auditions for NFC South club

Northwestern kicker Jeff Budzien worked out for Bears today (National Football Post)
Northwestern kicker auditions for Beats

Ravens pick up option on CB Smith (The SportsXchange)
The Baltimore Ravens have exercised their option on cornerback Jimmy Smith, according to media reports.

Source: USC WR Marqise Lee visited Patriots, Lions this week (National Football Post)
USC wide receiver making the rounds
Maryland News
Links To Others
Maryland Blogger Alliance

National News
Support the Baltimore Reporter. Buy a C.D.



Thank You












Advertise with Us!
Baltimore Reporter is looking for advertisers to help keep this site going. Email us here.
]
Please ignore the screen cleaner!