Monday, December 28, 2009

A rant on Bailouts + Taxes + Education

Do you remember when President Bush pushed through a landmark bailout plan saying:

"This legislation will safeguard and stabilize America's financial system and put in place permanent reforms so these problems will never happen again"

The citation is the shocker - as this is a quote from George H. W. Bush (senior) in 1989 during the Savings and Loans scandal. This bailout was for an unprecedented sum (at the time) of $66 billion. Sounds a lot like George W. Bush in September of 2008 when he pushed through a landmark bailout saying:

"We'll make sure, as time goes on, this doesn't happen again. In the meantime we got to solve the problem. And that's why people send me the Washington D.C."

Like father like son 20 years apart. But don't worry - this isn't a bust on the Bush's for government spending - as we all know Clinton repealed the Glass-Steagall Act of 1933 which had put up a firewall between savings banks and investment banks after the great depression.

I think it's a great point to look at political stereotypes - which are that Republicans are against government spending - though in additon to the two bailouts mentioned the Bush presidents and Regan count for a huge majority of the national debt. Though credit Bush senior for recognizing that we needed to raise taxes to lower the debt - though he broke his promise of "read my lips - no new taxes" and his own party revolted against him making him a one term president and paving the way for Clinton. Credit Clinton for having left a huge budget surplus which would have cut the national debt in half from $10 trillion to $5 trillion had Bush Jr. not passed his famous (and overwhelmingly popular) Bush tax cuts (mostly for the wealthy) that ran the national debt up to the $10 trillion dollar figure.

The other stereotypes are that Democrats are all for big government and increasing regulations - but Clinton's administration de-regulated banks allowing the crazy derivative investments that seem to have been a major cause of the current recession.

NET - my point is voting by ideology is misguided as we Americans (in general) don't vote for the tough medicine. It is popular to cut government spending but no one wants to cut medicare to the elderly. In fact the Republicans recently balked at the Health care reform provisions seeking to cut $500 billion dollars of "waste" out of medicare stating that the elderly will suffer. Fine! I am all for spending money if we all agree to fund it - by raising taxes. But NO ONE can run on raising taxes - it is immensely unpopular. But then poeple who voted against it then say "I am affraid of the national debt and passing that burden on to our children!" Well - start voting with you mind and not your ideology. You may disagree with large government - but if we have ALREADY spent $12 trillion dollars more than we brought in over the past 30 years - then guess what - it's time to raise taxes!

I am in a minority who don't react violently to the thought of higher taxes - and we would pay one of the highest tax brackets on our money. We live comfortably, save for retirement, and even enjoy splurges like vacations. An additional 3% tax (moving from 38% to 41% bracket) on money over $250,000 (which we don't make) is what is proposed, but let's assume it was an additional 3% tax on money over $50,000 - it's really not a life changing sum for us (and I argue for anyone making over $50,000 per year) but would help solve numerous budget issues not the least of which being the national debt, but then would fund health care reform (if you are opposed to the government spending part since the public option is gone) as well as educational programs.

In fact I'd like our government to pay off the national debt and then create a government surplus to pay for disasters or wars with savings - like normal people do when they have unplanned expenses. Though I believe it is bad national policy when you can print money - so I think carrying some debt helps invest and you build for today - though it is unpopular. There are also those who don't think the government should have a savings built up as that is "our" money as tax payers and the government shouldn't have it.

And Finally - an unorganized rant on education - I believe if fundamentally an economy is all about GDP (if you make the assumption that your production matches your consumption but that is another blog) - so you can transpose GDC ( as in consumption) though it's not as easy an index that is tracked like GDP so NET - if our country is a person, our GDP is like our salary - or a measure of our productivity to society - and the best way to raise that is through education. So I am all for the government providing low interest loans directly to students. The win-win is that tax payers make money (maybe 2-3% on the investment) and students get lower rates than the currently crippling 6-7% student loan rates just because many feel ideologically that it is un-American for the government to profit a little - but "American" for bank CEOs to get huge bonuses off of the back of students and stick the money in their "fat-cat" pockets.

I think there is a fair skepticism to say that the government is not an efficient way to use our money - and there is waste and corruption in politics - I just don't believe the solution to this issue is to line the pockets of elite private citizens who are efficient in funneling money to their own bonuses. I'm not against corporations or "free markets" in general - but not necessarily for public works, especially when free market forces don't translate to doing the right thing for the economy - as you can see that bank CEOs motivations were not in the best interest of the economy - but rather in their own. People are outraged to hear that banks receiving bailout are paying out huge bonuses - but those in power in companies are not prone to "market forces" as much as personal gain. Hence driving businesses into the ground. regular employees lose their jobs, these guys get millions in parachutes - and we complain about the inefficiencies of government as a justification to continue this cycle?

Fear of big government (in my opinion) has been an ideology that has made the rich richer supported on the ideological votes of the poor who "don't trust the government".

1 comment:

The Tax Club said...

With tax season coming up now is the time to get started. There is so much stuff on the news about taxes, but now one can keep up with everything. People should be saving as much money as they can and the best way to do that is to get help.