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February 26, 2009

Obama Wants Higher Capital Gains Tax Rate: Too Far Or Not Enough?

Raising capital gains taxes from 15% to 20% is a step in the right direction, but they should just be taxed as ordinary income (exception below).  The vast majority of this are not capital investments: it is me buying a stock from you and it doesn't provide the company with new capital except in the most indirect fashion.  If the value increases, I make money.  I should pay income taxes on it.  We just have different ideas of the future value of the stock and its importance to each of us given our evaluation of our circumstances.

The argument for the lower rate sometimes turns on it increasing interest in the stock market and helping it grow.  But I think we know enough now to realize that inflating bubble prices for the sake of increasing prices isn't what government policy should be doing.  If we are going to support something, it should be something that produces tangible lasting value to the common good.

The exception I've argued for would be for true risk capital: investing directly in businesses and holding that investment a long time -- startups, and the like.  But not regular stock trading.

Obama Wants Higher Capital Gains Tax Rate: Too Far Or Not Enough?:

The president's plan would raise the tax rate on capital gains and dividends to 20 percent from the 15 percent levels imposed by the Bush administration.
In his budget, Obama did take another action on capital gains tax by phasing out the elimination of such taxes for startup and small businesses. But, as pointed out by Ben Smith, the president had promised to do this upon taking office, but the cut was deferred in his budget to 2014.

February 24, 2009

The Obama Synthesis - The Atlantic Politics Channel

The Obama Synthesis:

Virtually every Republican response has included something like this, which comes from Rep. Tom Price (R-GA) "...However, the President must recognize that demanding higher taxes and more government involvement are not the solutions Americans seek."  Well, the problem for Republicans is that, (a), Americans support Obama's tax plan as laid out during the campaign. (b), Americans are demanding more government involvement. Remember October 2008: the specter of socialism, as dredged up by the GOP, failed. And the problems weren't as bad as they are now! It's not as if the GOP didn't scream the phrase from the mighty mountain -- they had a presidential candidate's platform. In the closing weeks of the presidential campaign, Sen. McCain asked the American people to choose between smaller government of the conservative flavor or liberal government from Obama. Most chose the Obama option, even as the country retained some measure of a partisan cartography. 

An appropriate rebuttal would be to ask why, if Americans are so sold on government, Obama felt the need to justify its intervention in a speech. Well, the answer is that Obama and the Democratic Congress, having expanded the size of government, will now use its powers to reform institutions and systems -- really, the first time a government has done so since either the 1980s or the late 1960s.

Moving the Center to the Left

I think this article does the best job I've seen yet of putting Obama's "bipartisanship" work into proper perspective as an effort to reach over the heads of Washington pols and pundits and create an enduring progressive realignment.  Agree or disagree, it is worth understanding.

Moving the Center to the Left - WSJ.com:

The president has his eye on a bigger prize than winning a few Republican votes for his stimulus package or having a conservative in his cabinet. He aims to move the political center in America to the left, much as Ronald Reagan moved it to the right. The only way he can achieve this goal is to harness the energies and values of both parties.
As a practical matter, this means that Mr. Obama has to reach across the aisle. But as a matter of policy, he knows this necessity is in fact a virtue, because what America needs now is more complex than the straightforward expansion of government demanded by events in the '30s and '60s. Yes, we need a broader safety net and more public investment. But we also need radical efficiency improvements in our wasteful health-care and education sectors, and sensible ways to slow the growth of spending on the elderly.

This marriage of equity and efficiency will not naturally be advanced by Democrats alone. What's needed is a modern synthesis of the thirst for social justice with the drive for economic growth, a hybrid Mr. Obama can bring forward under the Democratic banner only by incorporating some traditional Republican values in a new, "ideologically androgynous" agenda for American capitalism.
Yet health care offers the best example of how the challenges Mr. Obama knows we need to tackle no longer fit the old boxes. In his address to the joint session of Congress tonight and his new budget being unveiled on Thursday, Mr. Obama will call on the nation to end the shame of the 50 million uninsured (equity) even as he lays out innovative ways to control costs (efficiency). He'll say Americans finally need access to group health insurance outside the employment setting, a shift that over time will boost business competitiveness (a GOP focus) even as it assures better coverage for folks who don't get health care on the job (a Democratic cause).

To be sure, the Republican Party today is hardly a promising reform partner; its leaders seem bent only on repeating the GOP comeback of 1994. But as Mr. Obama knows, that doesn't mean that conservative economic thinking, shorn of certain discredited excesses, has nothing useful to offer. It just means Republicans are too blinded by fear and ambition right now to offer serious ideas on growth and efficiency as opposed to bogus grandstanding on "spending" and "pork." This vacuum gives Mr. Obama an opportunity to appeal to parts of the electorate that might otherwise be beyond his reach.
Seen in this light, Mr. Obama's search for a true "Third Way" isn't a stylistic choice or a cynical exercise in triangulation. Nor is it naive, except in the sense that leaders willing to make big bets to move history can be deemed dreamy by definition. Liberals who mock Mr. Obama's Republican flirtations fail to appreciate that his bipartisanship is an effort to play for bigger stakes. He's daring to link a political strategy to an attempt to actually solve America's major policy challenges.

Though it sounds like an oxymoron, "visionary centrism" is the name Mr. Obama's problem-solving pragmatism deserves, because that's what consequential presidents do -- define a new political center and mobilize support for it. When the dust clears in a few years, Mr. Obama's new center will be well to the left of the old one.

Or as Ed Kilgore says,

Matt doesn't quite put it this way, but the more concrete Obama objective is to expand the Democratic electoral base by consolidating high levels of support among independents and exploiting the growing divide between Republican politicians and a significant minority of GOP voters.

February 23, 2009

Poll Shows Broad Support for Obama’s Leadership

Poll Shows Broad Support for Obama’s Leadership:

President Obama is benefiting from remarkably high levels of optimism and confidence among Americans about his leadership, providing him with substantial political clout as he confronts the nation’s economic challenges and opposition from nearly all Republicans in Congress, according to the latest New York Times/CBS News poll.

A majority of people surveyed in both parties said Mr. Obama was striving to work in a bipartisan way, but most Americans faulted Republicans for their response to the president, saying the party had objected to the $787 billion economic stimulus plan for political reasons. Most Americans said Mr. Obama should pursue the priorities he campaigned on, the poll found, rather than seek middle ground with Republicans.

Obama's Goal: Halving the Budget Deficit by 2012. Really?

Robert Reich's Blog: Obama's Goal: Halving the Budget Deficit by 2012. Really?:

Can we continue to borrow and borrow and borrow? Yes, but eventually we'll have to pay higher interest rates to continue to attract global savings, mostly from the Chinese and Japanese. But that's not anytime soon. The Chinese and Japanese are not going to yank their money out of Treasury bills because the slump is worldwide and T-bills are about the best and safest place to park savings. Besides, the Chinese don't want the dollar to plunge. They'd be stuck with a lot of paper worth far less than they got it for, and their exports would be in even worse shape than now.
As to the economics, remember that when it comes to deficits and debt, the real issues over the long term are (1) the ratio of debt to GDP (we're still under 50 percent, which ain't bad, considering all the spending that's been going on; at the end of World War II it was substantially above 120 percent). And (2) whether and when we're back to growing the GDP, which is the most reliable way of improving the ratio.

Rift Over Stimulus Embroils G.O.P.

Hm.  So the message these Republican governors want to send is: "We don't care about the unemployed."?  OK.

Rift Over Stimulus Embroils G.O.P. :

After initially saying they might reject any federal aid, several conservative governors said in interviews over the weekend that they were likely to reject only the money for expanded unemployment compensation because of federal strings that could require them to provide relief to part-time workers who lose jobs as well as to full-time workers. Many other states already provide such aid.

February 20, 2009

Video: Oregon's 2009-11 biennium faces about $3 billion shortfall | StatesmanJournal.com | Statesman Journal

Grim news, but no surprise to me.  Here's what I said 1 1/2 years ago (September 2007) about the Oregon economy and recession:

Oh -- in Oregon, the market hasn't been hit as badly.  Some people say that's because we have a different economy here and it didn't get overblown and we won't be hurt as badly.  BS.  We just have a have trailing economy so the boom started later, won't go as high, and will end later.

I just forgot to add: and hit us harder, as it usually does.

Oregon's 2009-11 biennium faces about $3 billion shortfall:

"The perfect storm is here, and Oregon is feeling the recession more than other states," State Economist Tom Potiowsky said to lawmakers assembled in the House chamber.
Potiowsky said Oregon's economy may reach bottom sometime this year, but is unlikely to see much recovery before well into 2010.

“We’re basically falling into a pit, and we will hit the bottom sometime this year,” he said.

Oregon Republican leaders obstruct efforts to reconcile budgets

Oregon Republican leaders obstruct efforts to reconcile budgets:

“For a time, we held off the national economic tsunami brought on by the failures of Republican governance.  For a time we were able to avoid the effects of a conservative ideology that gave tax cuts to the rich and allowed corporations to operate without boundaries,” said House Majority Leader Mary Nolan (D-Portland).  “But now that tsunami is at our shores and Democrats must craft responsible solutions to the problems caused by an irresponsible Party.”

Despite comments to the contrary, Democratic leaders have made a good faith effort to include Republicans in the current budget process.  Both parties participated in discussions about potential cuts due to rapidly falling revenues.  The Democratic co-chairs of Ways and Means have met with both Republicans and Democrats, seeking out input, and giving both sides of the aisle the same briefings about potential cuts to state government.

“Democratic leadership has extended opportunities to our colleagues across the aisle to work with us productively to find a resolution to the state’s financial crisis,” said Devlin. “We sincerely hope that they will decide to contribute constructively to these discussions.  As yet, they have not.”

Devlin and Nolan said the Republican Leadership has not offered a list of specific cuts or specific sources of new revenue to balance the budget, nor have they said how they plan to fund education, healthcare or public safety.  So far this session Republicans spoke against the state’s economic stimulus plan and against measures to protect the state’s budget.

“Right now, we are dealing with the mess created from years of disastrous economic mismanagement by Republicans in the White House on down.  Now they are sitting on the sidelines throwing more garbage on the pile while we try to clean it up,” said Nolan.

February 17, 2009

Mr. President, They're Just Not That Into You

This debate is somewhat tiresome.  I believe that Obama is working the bipartisanship because he (a) believes in getting a broader view and (b) (the point the commentators almost entirely miss) because he is playing this over the heads of the Washington punditry and political class to the people.  We get it: Obama is trying and is rebuffed.  The blowback reflects badly on Republicans, not Obama.  Everyone sees whose fault the failure is.  And that is the critical thing in changing the political dynamic: placing the blame at the feet of the Republicans by their not coming to the table to negotiate in good faith.

Obama would be foolish to drop it now because "it doesn't work".  It does work: either he gets their help or they get the blame.  He is changing the dynamic.

Why is it Democrats don't understand strategy??

Harry Reid needs to take this lesson and understand that he needs to make the Republicans in the Senate take the blame for filibusters obstruction of progress in the Senate.  Instead, because he lets them off the hook, they get away with it instead of getting the blame laid at their feet.

Mr. President, They're Just Not That Into You:

Yes, the President can keep calling [Republicans] and saying all the right things. He can woo them and invite them over, like that hyped White House "bipartisan super bowl party." He can go to their home, like his trek to Maryland for two and a half hours of lamb chops and neocons. He can even add their ideas to his legislation and their nominees to his cabinet, as The Nation's Ari Berman recounts.

If Obama is taking all those actions based on their own intrinsic value -- for healthy debate and a wide circle of advisers -- then fine. The notion that this bipartisan process will yield more GOP support, however, has been officially shredded. If it doesn't work now, with Obama's recent election mandate, booming approval ratings and a public eager for government action to address the economic crisis, it's not going to work. And anyone who thinks the G.O.P. will get more cooperative is placing a bet on politicians growing less political as the next elections draw closer.

February 16, 2009

Re: Obama Riding the Wave

Op-Ed Columnist - Obama Riding the Wave - NYTimes.com:

[President Obama said,] “My job is to help the country take the long view — to make sure that not only are we getting out of this immediate fix, but we’re not repeating the same cycle of bubble and bust over and over again; that we’re not having the same energy conversation 30 years from now that we had 30 years ago; that we’re not talking about the state of our schools in the exact same ways we were talking about them in the 1980s; and that at some point we say, ‘You know what? If we’re spending more money per-capita on health care than any nation on earth, then you’d think everybody would have coverage and we would see lower costs for average consumers, and we’d have better outcomes.’ ”

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