The Economy, stupid

[SoxFan562004]

Can someone explain the bounce today? Was it confidence stemming from the meetings over the weekend or were there concrete numbers that came out?

[Balta1701]

Can someone explain the bounce today? Was it confidence stemming from the meetings over the weekend or were there concrete numbers that came out?

The Eurozone basically decided it was going to put somewhere over a trillion Euros in to buying shares of their struggling banks, and Secretary Paulson sort of got his head out of his rear and said he was going to maybe do some of the same stuff with the $700 billion the U.S. gave him (although he still intends to convert most of it to gold coins, build a giant tower, and swim in them).

[Texsox]

In light of the economic crunch and the fact that many ordinary folk as well as millions of seniors will have lost much of their hard earned savings, I believe we should lobby for a relaxation of the passive income laws in order to allow all or some of these losses to be used against other income. Capital losses can be deducted at $3,000 per year and can only be deducted against Capital gains. Further, I don’t think this figure has been changed since the Internal Revenue code of 1986 was enacted.

 

I am almost 50 years old and will never in my lifetime be able to deduct all of my losses at $3,000 per year. I also know many who will not ever be able to fully deduct their losses.

 

 

I believe it is time to start lobbying Congress.

 

 

 

[Balta1701]

So, is it time yet to admit that Secretary Paulson doesn't know any better than you or I do how to do his job?

 

Let's just go over the last 2 or so key months.

 

Paulson decides he's going to teach everyone a lesson and let Lehman Bros. fall. While this seems like a good idea on the surface, if you had any understanding at all of the Credit Default Swap interconnections between all of these firms, which you'd sort of expect maybe a SecTreas would learn something about, then you never let that happen because it will blow everyone else up.

 

Suddenly, AIG blows up from these credit default swaps, and Merrill winds up in the hands of BofA. So you nationalize AIG, without having a clue how much they're worth or how over their head they are on those default swaps. They blow through $50 billion of the $60 billion bailout you give them in less than a month, and they embarrass you by holding fancy retreats on the public dollar.

 

The market implodes suddenly after everyone realizes how over their heads they are on the Lehman bros. CDS linkages and how at risk they are over every other company they have them for. Paulson yanks a plan off the shelf for a gigantic bailout, 2 weeks after saying "no more bailouts for anyone" and pretends they intended to do that all along. Problem is, his bailout isn't targeting the new problem, it's pretending the CDS problem doesn't exist and trying to solve the mortgage problem. Oh, and his bailout package is so stupidly designed (no one gets authority but me!) that Congress scoffs at it and rejects the first attempt to pass it, with his own party leading the way on the rejection.

 

Paulson goes before Congress and publicly says that everyone who thinks there's a better way of doing this bailout, buying equity in firms or using the money in different ways, simply doesn't understand the situation. He gets the bailout passed with an additional $200 billion in tax breaks thrown in as a sweetener, then sits around for another couple weeks trying to figure out what the Hell to do with the money he's been given. Meanwhile, the market tanks while he twiddles his thumbs trying to solve the mortgage mess, when it's not the mortgage mess that's driving the situation any more.

 

Finally, Europe, led by Brown, figures out that Paulson isn't going to fix this, comes up with a trillion Euro bailout package of its own, the markets take a huge deep breath and say "Yay, someone is doing something right!" and then Paulson suddenly snaps to it and decides he's going to do exactly what he said he'd never do 2 weeks ago, again.

[southsider2k5]

Read between the lines here. Under Barack Obama's tax plans 56% of the country will be fully supporting 44% of the country. Stop and think about that. That means almost half of the country, including many who are close to median income in this country will be paying ZERO taxes. A large chunk of that 44% will actually PROFIT from the tax code. That and the old welfare style disincentive to work are by far the two biggest problems I have had with his fiscal policies from day one. I'll be damned if I should support middle class families simply because I am a little more middle class than they are.

 

The end of the article is 100% right when it wonders why this hasn't been hammered by the McCain campaign.

 

http://online.wsj.com/article/SB122385651698727257.html

 

One of Barack Obama's most potent campaign claims is that he'll cut taxes for no less than 95% of "working families." He's even promising to cut taxes enough that the government's tax share of GDP will be no more than 18.2% -- which is lower than it is today.

[Review & Outlook] AP

 

It's a clever pitch, because it lets him pose as a middle-class tax cutter while disguising that he's also proposing one of the largest tax increases ever on the other 5%. But how does he conjure this miracle, especially since more than a third of all Americans already pay no income taxes at all? There are several sleights of hand, but the most creative is to redefine the meaning of "tax cut."

 

For the Obama Democrats, a tax cut is no longer letting you keep more of what you earn. In their lexicon, a tax cut includes tens of billions of dollars in government handouts that are disguised by the phrase "tax credit." Mr. Obama is proposing to create or expand no fewer than seven such credits for individuals:

[Review & Outlook]

 

- A $500 tax credit ($1,000 a couple) to "make work pay" that phases out at income of $75,000 for individuals and $150,000 per couple.

 

- A $4,000 tax credit for college tuition.

 

- A 10% mortgage interest tax credit (on top of the existing mortgage interest deduction and other housing subsidies).

 

- A "savings" tax credit of 50% up to $1,000.

 

- An expansion of the earned-income tax credit that would allow single workers to receive as much as $555 a year, up from $175 now, and give these workers up to $1,110 if they are paying child support.

 

- A child care credit of 50% up to $6,000 of expenses a year.

 

- A "clean car" tax credit of up to $7,000 on the purchase of certain vehicles.

 

Here's the political catch. All but the clean car credit would be "refundable," which is Washington-speak for the fact that you can receive these checks even if you have no income-tax liability. In other words, they are an income transfer -- a federal check -- from taxpayers to nontaxpayers. Once upon a time we called this "welfare," or in George McGovern's 1972 campaign a "Demogrant." Mr. Obama's genius is to call it a tax cut.

 

The Tax Foundation estimates that under the Obama plan 63 million Americans, or 44% of all tax filers, would have no income tax liability and most of those would get a check from the IRS each year. The Heritage Foundation's Center for Data Analysis estimates that by 2011, under the Obama plan, an additional 10 million filers would pay zero taxes while cashing checks from the IRS.

 

The total annual expenditures on refundable "tax credits" would rise over the next 10 years by $647 billion to $1.054 trillion, according to the Tax Policy Center. This means that the tax-credit welfare state would soon cost four times actual cash welfare. By redefining such income payments as "tax credits," the Obama campaign also redefines them away as a tax share of GDP. Presto, the federal tax burden looks much smaller than it really is.

 

The political left defends "refundability" on grounds that these payments help to offset the payroll tax. And that was at least plausible when the only major refundable credit was the earned-income tax credit. Taken together, however, these tax credit payments would exceed payroll levies for most low-income workers.

 

It is also true that John McCain proposes a refundable tax credit -- his $5,000 to help individuals buy health insurance. We've written before that we prefer a tax deduction for individual health care, rather than a credit. But the big difference with Mr. Obama is that Mr. McCain's proposal replaces the tax subsidy for employer-sponsored health insurance that individuals don't now receive if they buy on their own. It merely changes the nature of the tax subsidy; it doesn't create a new one.

 

There's another catch: Because Mr. Obama's tax credits are phased out as incomes rise, they impose a huge "marginal" tax rate increase on low-income workers. The marginal tax rate refers to the rate on the next dollar of income earned. As the nearby chart illustrates, the marginal rate for millions of low- and middle-income workers would spike as they earn more income.

 

Some families with an income of $40,000 could lose up to 40 cents in vanishing credits for every additional dollar earned from working overtime or taking a new job. As public policy, this is contradictory. The tax credits are sold in the name of "making work pay," but in practice they can be a disincentive to working harder, especially if you're a lower-income couple getting raises of $1,000 or $2,000 a year. One mystery -- among many -- of the McCain campaign is why it has allowed Mr. Obama's 95% illusion to go unanswered.

 

Please add your comments to the Opinion Journal forum.

[NorthSideSox72]

Read between the lines here. Under Barack Obama's tax plans 56% of the country will be fully supporting 44% of the country. Stop and think about that. That means almost half of the country, including many who are close to median income in this country will be paying ZERO taxes. A large chunk of that 44% will actually PROFIT from the tax code. That and the old welfare style disincentive to work are by far the two biggest problems I have had with his fiscal policies from day one. I'll be damned if I should support middle class families simply because I am a little more middle class than they are.

 

The end of the article is 100% right when it wonders why this hasn't been hammered by the McCain campaign.

 

http://online.wsj.com/article/SB122385651698727257.html

There are some good points there, and I agree with you in general. but one clarification - the bottom bracket (44% or whatever the number will be) will not be paying INCOME taxes. They will still be paying all sorts of other taxes.

 

[NorthSideSox72]

So, is it time yet to admit that Secretary Paulson doesn't know any better than you or I do how to do his job?

 

Let's just go over the last 2 or so key months.

 

Paulson decides he's going to teach everyone a lesson and let Lehman Bros. fall. While this seems like a good idea on the surface, if you had any understanding at all of the Credit Default Swap interconnections between all of these firms, which you'd sort of expect maybe a SecTreas would learn something about, then you never let that happen because it will blow everyone else up.

 

Suddenly, AIG blows up from these credit default swaps, and Merrill winds up in the hands of BofA. So you nationalize AIG, without having a clue how much they're worth or how over their head they are on those default swaps. They blow through $50 billion of the $60 billion bailout you give them in less than a month, and they embarrass you by holding fancy retreats on the public dollar.

 

The market implodes suddenly after everyone realizes how over their heads they are on the Lehman bros. CDS linkages and how at risk they are over every other company they have them for. Paulson yanks a plan off the shelf for a gigantic bailout, 2 weeks after saying "no more bailouts for anyone" and pretends they intended to do that all along. Problem is, his bailout isn't targeting the new problem, it's pretending the CDS problem doesn't exist and trying to solve the mortgage problem. Oh, and his bailout package is so stupidly designed (no one gets authority but me!) that Congress scoffs at it and rejects the first attempt to pass it, with his own party leading the way on the rejection.

 

Paulson goes before Congress and publicly says that everyone who thinks there's a better way of doing this bailout, buying equity in firms or using the money in different ways, simply doesn't understand the situation. He gets the bailout passed with an additional $200 billion in tax breaks thrown in as a sweetener, then sits around for another couple weeks trying to figure out what the Hell to do with the money he's been given. Meanwhile, the market tanks while he twiddles his thumbs trying to solve the mortgage mess, when it's not the mortgage mess that's driving the situation any more.

 

Finally, Europe, led by Brown, figures out that Paulson isn't going to fix this, comes up with a trillion Euro bailout package of its own, the markets take a huge deep breath and say "Yay, someone is doing something right!" and then Paulson suddenly snaps to it and decides he's going to do exactly what he said he'd never do 2 weeks ago, again.

 

Paulson wasn't a great choice for SecTreas, in terms of resume. Yes, he was a managing partner at GS. But look at his background - he got there via an English degree, an MBA, the Pentagon and then working for Nixon. This is not a true finance man - he was put in a finance position later on, probably because of his political credentials.

 

This, by the way, has been a repeated theme with BushCo. Dubya has been REALLY bad at choosing who to surround himself with. Always chooses political obedience first, and screw the actual knowledge value. Every Prez wants loyal folks - but most have been smart enough to make sure they hire people who will be loyal AND know what they are doing.

 

[mr_genius]

It's a clever pitch, because it lets him pose as a middle-class tax cutter while disguising that he's also proposing one of the largest tax increases ever on the other 5%. But how does he conjure this miracle, especially since more than a third of all Americans already pay no income taxes at all? There are several sleights of hand, but the most creative is to redefine the meaning of "tax cut

 

 

i'm sure i'll be seeing a large tax increase, rather than cut. Obama's supposed tax cuts are all smoke and mirrors. just like when the Democrats raise taxes but say "It's not a tax increase, merely a tax rate adjustment".

[kapkomet]

But we have to have health care. And welfare. And bank support. And a war (the dirty little secret he's lying his ass off about). And social security. And medicaid. And medicare. And highways. And let's tax those evil corporations more. And whatever else the government can control.

 

I love socialism.

[mr_genius]

But we have to have health care. And welfare. And bank support. And a war (the dirty little secret he's lying his ass off about). And social security. And medicaid. And medicare. And highways. And let's tax those evil corporations more. And whatever else the government can control.

 

don't forget about free housing, free transportation, free food, and free utilities

 

 

it's gonna rule. so much stuff for free!

[NorthSideSox72]

But we have to have health care. And welfare. And bank support. And a war (the dirty little secret he's lying his ass off about). And social security. And medicaid. And medicare. And highways. And let's tax those evil corporations more. And whatever else the government can control.

 

I love socialism.

Now we're blaming Obama for the Iraq debacle?

 

[BigSqwert]

You guys seem to hate this country so much. Perhaps you should consider moving elsewhere.

[mr_genius]

You guys seem to hate this country so much. Perhaps you should consider moving elsewhere.

 

and miss out on the Obama giveaway bonanza? no way.

 

lower taxes for everyone and everything is free, can't beat that!

[southsider2k5]

You guys seem to hate this country so much. Perhaps you should consider moving elsewhere.

 

I thought you liberals were moving to Canada after the 2004 election?

[NorthSideSox72]

lower taxes for everyone and everything is free, can't beat that!

This is basically what we've seen from BushCo and his Congress'. Lower taxes, higher spending. Bush and the GOP Congress of 2000 to 2006 walked away from the small government concept that used to be core to the Republican agenda. Now, instead, its spend and spend some more.

 

Neither party now has any rightful claim to the concept of financial discipline.

 

[mr_genius]

This is basically what we've seen from BushCo and his Congress'. Lower taxes, higher spending. Bush and the GOP Congress of 2000 to 2006 walked away from the small government concept that used to be core to the Republican agenda. Now, instead, its spend and spend some more.

 

Neither party now has any rightful claim to the concept of financial discipline.

 

not much of a ringing endorsement for Obama. So G.W. Bush is the new standard for spending? ouch.

 

 

Edited October 14, 2008 by mr_genius

[NorthSideSox72]

not much of a ringing endorsement for Obama. So G.W. Bush is the new standard for spending? ouch.

Just saying that what used to be an alternative, isn't.

 

[mr_genius]

Just saying that what used to be an alternative, isn't.

 

i agree that there is no fiscal conservative party in the US. my criticism of Democrat spending isn't meant to be implicit support for GOP spending.

[kapkomet]

Now we're blaming Obama for the Iraq debacle?

No, but he's not going to "get us out of Iraq" quite as easy as he says he is. Better yet, when he "brings them home" ON HIS WATCH he can claim "victory". You watch. It's exactly what this guy's going to do.

[Balta1701]

No, but he's not going to "get us out of Iraq" quite as easy as he says he is. Better yet, when he "brings them home" ON HIS WATCH he can claim "victory". You watch. It's exactly what this guy's going to do.

Frankly, it's what Bush should have done 4 years ago.

[NorthSideSox72]

No, but he's not going to "get us out of Iraq" quite as easy as he says he is. Better yet, when he "brings them home" ON HIS WATCH he can claim "victory". You watch. It's exactly what this guy's going to do.

Well sure. Its what either one will do. Frankly, as far as what we do from here with Iraq, I think what Obama and McCain would ultimately do would be very similar.

 

[bmags]

No, but he's not going to "get us out of Iraq" quite as easy as he says he is. Better yet, when he "brings them home" ON HIS WATCH he can claim "victory". You watch. It's exactly what this guy's going to do.

 

Obama saying victory?

[Cknolls]

So, is it time yet to admit that Secretary Paulson doesn't know any better than you or I do how to do his job?

 

Let's just go over the last 2 or so key months.

 

Paulson decides he's going to teach everyone a lesson and let Lehman Bros. fall. While this seems like a good idea on the surface, if you had any understanding at all of the Credit Default Swap interconnections between all of these firms, which you'd sort of expect maybe a SecTreas would learn something about, then you never let that happen because it will blow everyone else up.

 

Suddenly, AIG blows up from these credit default swaps, and Merrill winds up in the hands of BofA. So you nationalize AIG, without having a clue how much they're worth or how over their head they are on those default swaps. They blow through $50 billion of the $60 billion bailout you give them in less than a month, and they embarrass you by holding fancy retreats on the public dollar.

 

The market implodes suddenly after everyone realizes how over their heads they are on the Lehman bros. CDS linkages and how at risk they are over every other company they have them for. Paulson yanks a plan off the shelf for a gigantic bailout, 2 weeks after saying "no more bailouts for anyone" and pretends they intended to do that all along. Problem is, his bailout isn't targeting the new problem, it's pretending the CDS problem doesn't exist and trying to solve the mortgage problem. Oh, and his bailout package is so stupidly designed (no one gets authority but me!) that Congress scoffs at it and rejects the first attempt to pass it, with his own party leading the way on the rejection.

 

Paulson goes before Congress and publicly says that everyone who thinks there's a better way of doing this bailout, buying equity in firms or using the money in different ways, simply doesn't understand the situation. He gets the bailout passed with an additional $200 billion in tax breaks thrown in as a sweetener, then sits around for another couple weeks trying to figure out what the Hell to do with the money he's been given. Meanwhile, the market tanks while he twiddles his thumbs trying to solve the mortgage mess, when it's not the mortgage mess that's driving the situation any more.

 

Finally, Europe, led by Brown, figures out that Paulson isn't going to fix this, comes up with a trillion Euro bailout package of its own, the markets take a huge deep breath and say "Yay, someone is doing something right!" and then Paulson suddenly snaps to it and decides he's going to do exactly what he said he'd never do 2 weeks ago, again.

 

 

I don't blame Paulson as much as the Fed. After the theft of Bear Stearns by JPM, the Fed had multiple employees in each bank and investment house on the street. They should have known enough about the counter-party risk to know if letting LEH go was smart.

[Texsox]

and miss out on the Obama giveaway bonanza? no way.

 

lower taxes for everyone and everything is free, can't beat that!

No, how about another round of economic stimulus checks? That's even better than cutting taxes.

[mr_genius]

No, how about another round of economic stimulus checks? That's even better than cutting taxes.

 

Why stop there? TWO MORE ROUNDS OF STIMULUS CHECKS!