Vol 1. No. 25.Baltimore, MD  Thu August 21st 2014GIVING YOU THE NEWS THE MSM IGNORES 
Our Contributors:
Comments:
Categories


Gausman on the hill for O's trip to Chicago's North Side
The Orioles will try to remain perfect during their stay in Chicago when Kevin Gausman starts opposite Cubs right-hander and former O's pitcher Jake Arrieta at Wrigley Field on Friday afternoon.

O's win fourth straight with trio of HRs, Chen
Wei-Yin Chen pitched his way to win No. 13 and Steve Pearce, Nelson Cruz and Adam Jones homered as the Orioles completed a three-game of the White Sox with a 4-3 victory Wednesday night in Chicago.

Orioles set to face Cubs' Arrieta, Wada
The Orioles will face a pair of familiar foes this weekend at Wrigley Field, with right-hander Jake Arrieta slated to start Friday and Tsuyoshi Wada on Sunday.

Ubaldo hopes to regain form in bullpen
Signed to a four-year, $50 million deal -- the largest for a free-agent pitcher in franchise history -- Ubaldo Jimenez has struggled with inconsistency. For now, he'll have to wait for opportunities out of the Orioles' bullpen.

Tillman twirls a gem for rolling O's
Chris Tillman continued an impressive stretch with an eight-inning gem that kept first-place Baltimore rolling to a 5-1 win -- and series victory -- over Chicago.

Traffic: Collision on BW Parkway
A collision on the southbound Baltimore Washington Parkway at Interstate 195 has closed the southbound right shoulder at 8:42 a.m. on Thursday, according to the state Department of Transportation.








Man killed in apparent murder-suicide attempt in Laurel
One man is dead and another is in custody

A man allegedly shot and killed another man who was dating his estranged wife before attempting to take his own life in Laurel Wednesday night, Anne Arundel County police said.








Man Tased by deputies dies in custody in Baltimore County
A man who allegedly fled from Harford County sheriff's deputies died Wednesday after being struck with a Taser and placed under arrest, Baltimore County police said.








More storm chances, high humidity Thursday | VIDEO
Oppressively muggy air over the region Thursday is forecast to help fuel storm chances in the afternoon and evening.








More harm than good from crab ban, experts say
For scientific reasons, they say harvest moratorium will yield diminishing returns

For scientific reasons, they say harvest moratorium will yield diminishing returns.







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
~ 11653 ~
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:
Light Rain, 71 F
TheCaffeinatedMind.com
The Tea Party - Should they be a Party?
Yes - We should have another Party.
No - Three is enough.
Yes - We should seperate conservatives from GOP.
No - But keep the movement going.


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

A Pick Six of new passing combos (The Associated Press)
Six NFL teams have made significant alterations in their passing games. Denver, Indianapolis, Washington and Baltimore did so with proven wideouts. Tampa Bay and Houston chose new quarterbacks to combine with an established target. A Pick Six of new passing combinations: Denver: Eric Decker left Manning for Geno Smith and the Jets.

Team Report - SAN FRANCISCO 49ERS (The SportsXchange)
49ers outclassed in first two preseason games

Team Report - DALLAS COWBOYS (The SportsXchange)
Cowboys' Romo re-emerges: near perfect performance

Team Report - WASHINGTON REDSKINS (The SportsXchange)
Redskins defense off to good preseason start

Cardinals work to replace Dockett; Mathieu returns (The Associated Press)
On the day the Arizona Cardinals went back to work for the first time since Darnell Dockett went down with a knee injury, the impact of losing the big defensive tackle for the season was softened a bit by the return of safety Tyrann Mathieu and nose tackle Alameda Ta'amu. The 'Honey Badger' Mathieu, a crucial component of Arizona's talented secondary, went down in the 13th game of his impressive rookie season a year ago with a torn ACL and LCL. With just Frostee Rucker and two rookies at Dockett's position, the Cardinals signed two free agent defensive linemen on Wednesday - 6-foot-2, 330-pound Isaac Sopoaga and 6-6, 305-pound Ryan McBean. Sopoaga is a 10-year NFL veteran who split last season with Philadelphia and New England.

Cowboys shuffle LBs with McClain skipping workouts (The Associated Press)
One day Rolando McClain is getting first-team work with the Dallas defense after owner Jerry Jones offers yet another hopeful plug that the former top 10 pick can fill a big void at linebacker. The next, McClain is sitting out practice again, raising more questions about the desire of a player who walked away from the sport twice in Baltimore before the Ravens traded him to a team desperate to replace Sean Lee after a season-ending knee injury. Justin Durant is the swingman as the Cowboys search, playing his more natural spot on the weak side when McClain is on the field and mostly filling the middle when McClain isn't.

RG3's ungraceful slide remains hot Redskins topic (The Associated Press)
Robert Griffin III stood at his locker and answered five consecutive questions about sliding. ''I could keep going over this, over and over,'' the Washington Redskins quarterback said with a touch of good-natured exasperation. ''Gah! I slid correctly on the third time.'' Coach Jay Gruden also faced five questions about Griffin's far-from-graceful sliding technique. Griffin on Wednesday acknowledged that he put himself on the line a bit too much when he took some big hits while scrambling in open field against the Cleveland Browns on Monday night.

AFC North trying to regain reputation as the best (The Associated Press)
They do things a little differently in the AFC North. They're patient with their coaches and quarterbacks - well, with the exception of Cleveland, which is in a league of its own when it comes to change. The AFC North is coming off what amounts to a down year for the NFL's most successful division over the past six years. Only one team reached the playoffs, Cincinnati, which lost in the opening round for the third year in a row.

Cowboys, Patriots top Forbes NFL franchise value list; Bills, Rams on bottom (Shutdown Corner)
Want to buy an NFL franchise? Better liquidate grandma's AT&T stock. Forbes has come out with its annual list of the NFL's most valuable franchises , and there are some familiar names at the top. The Dallas Cowboys and New England Patriots top the list, coming in well above the exorbitant $2 billion that the NBA's Los Angeles Clippers were recently sold for. [ Smack talk season is back at Yahoo Sports: Sign up and play free Fantasy Football! ] The Cowboys, which Forbes estimates will generate a combined $8.6 million in revenue for the team over the next five years with its massive JerryWorld stadium and fans the world over, are tops at a whopping $3.2 billion. The Patriots check in at a still-impressive $2.6 billion — not bad for a franchise Robert Kraft bought back in 1994 for a measley $172 million. The average franchise now is valued at $1.43 billion, the highest figure in the past 17 years that Forbes started tracking NFL team finances. That average took a massive boost of 23 percent from one year ago, which was the biggest one-year increase percentage since 1999. With reports out that the for-sale Buffalo Bills are garnering offers well north of $1 billion, it might surprise you to find out that they came in 31st of the 32 teams at a value of $935 million. But if that same trend of value increase continues, the Bills' new owner likely can feel better about their purchase in the golden-egg-laying NFL. Bringing up the rear on the list: the St. Louis Rams, whose stadium issues loom as a concern, at $930 million. Oft mentioned as a possible Los Angeles candidate should Rams owner Stan Kroenke seek to move the team folliowing the expiration of the Edward Jones Dome, that value could skyrocket with the right stadium situation and league support — i.e. hosting a Super Bowl down the road. Here's the list in its entirety: Forbes rank NFL franchise Estimated value 1 Dallas Cowboys $3.2 billion 2 New England Patriots $2.6 billion 3 Washington Redskins $2.4 billion 4 New York Giants $2.1 billion 5 Houston Texans $1.85 billion 6 New York Jets $1.8 billion 7 Philadelphia Eagles $1.75 billion 8 Chicago Bears $1.7 billion 9 San Francisco 49ers $1.6 billion 10 Baltimore Ravens $1.5 billion 11 Denver Broncos $1.45 billion 12 Indianapolis Colts $1.4 billion 13 Green Bay Packers $1.38 billion 14 Pittsburgh Steelers $1.35 billion 15 Seattle Seahawks $1.33 billion 16 Miami Dolphins $1.3 billion 17 Carolina Panthers $1.25 billion 18 Tampa Bay Buccaneers $1.23 billion 19 Tennessee Titans $1.16 billion 20 Minnesota Vikings $1.15 billion 21 Atlanta Falcons $1.13 billion 22 Cleveland Browns $1.12 billion 23 New Orleans Saints $1.11 billion 24 Kansas City Chiefs $1.1 billion 25 Arizona Cardinals $1 billion 26 San Diego Chargers $995 million 27 Cincinnati Bengals $990 million 28 Oakland Raiders $970 million 29 Jacksonville Jaguars $965 million 30 Detroit Lions $960 million 31 Buffalo Bills $935 million 32 St. Louis Rams $930 million     - - - - - - - Eric Edholm is a writer for Shutdown Corner on Yahoo Sports. Have a tip? Email him at edholm@yahoo-inc.com or follow him on Twitter! Follow @Eric_Edholm

Kubiak has Ravens' ground game is up and running (The Associated Press)
The Baltimore Ravens seem to be adjusting well to new offensive coordinator Gary Kubiak. The Ravens have averaged a league-best 194 rushing yards in two preseason games. The running game is ''where everything starts for us,'' said Kubiak, who was hired after Jim Caldwell took the Lions head coaching job. ''We've got to be able to run the football to make the rest of it go.'' The preseason numbers have been skewed a bit by the running of backup quarterback Tyrod Taylor, who has 65 rushing yards in two games.

Cowboys extend reign as NFL's most valuable team: Forbes (Reuters)
(Reuters) - The Dallas Cowboys are the most valuable National Football League (NFL) team for an eighth consecutive year, more than double the average league value, according to an annual survey by business magazine Forbes The Cowboys, whose total revenue during the 2013 season was $560 million, are worth $3.2 billion, a whopping rise of 39 percent over last year, Forbes said in a statement on Wednesday. ...

Cowboys most valuable by Forbes at $3.2B (The SportsXchange)
The Dallas Cowboys lead the Forbes NFL Team Values list for the eighth consecutive season, rising in value by 39 percent to $3.2 billion.

ALS-stricken Shaw 'not scared to die' (The SportsXchange)
Former Tennessee Titans defensive lineman Tim Shaw was diagnosed with ALS, and first experienced debilitating symptoms in April. "I would never say I am not afraid of anything,'' Shaw said Wednesday at Saint Thomas Sports Park, the Titans' team headquarters and practice facility. Shaw, 30, retired from the NFL on his birthday earlier this year. Because Shaw is under age 45, he would be awarded a maximum benefit of $5 million from the NFL under the proposed head injuries settlement.
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!