The real solution to debt and downgrades
By Brian Kirwin | Sunday, August 7th, 2011 |I’ve waited for someone, anyone, in the mainstream media to say something closely resembling the obvious truth in the days following the S & P downgrade.
One side is saying the key is cutting spending. The other is tempting higher taxes.
Folks, that isn’t the problem. Spending needs to be cut, without doubt. Washington only cuts the level of growth in spending. It never really cuts spending. Heck, the 100 Senators can’t even pass a darn budget!
Even if they do, is it going to happen tomorrow? We need to take action now.
Can we pass a ECONOMIC GROWTH plan???
Let’s slash capital gains taxes, some of which are as high as 35%.
Heck, let’s make it zero. See what happens? We can’t do worse than we are now. The tax revenue for knocking unemployment down to 5% would be worth the trade. Does anyone seriously think there are a lot of capital gains taxes being paid right now anyway?
Economies are momentum-based. When spiraling down, it is tough to reverse the trend. Game changers are needed. Let’s do something novel and encourage investments for people to put capital at risk.
Let’s reform the regulatory environment so it doesn’t take decades to build a bridge tunnel.
Around 1960, the 20-mile Chesapeake Bay Bridge Tunnel took four years to study and four years to build. Conversely, the 3.5 mile Third Crossing proposal estimated over 16 years to build. You’d think modern technology would make productivity better, but government doesn’t work that way.
It took 3 years to build the Atlanta airport, but it took 23 years of regulatory wrangling to add a runway.
Sorry, folks, but we can’t afford to spend 10 years of red tape because a tree is in the way of a new highway. If Eisenhower had to build the Interstate Highway System today, we’d all have dirt roads for 50 years while the environmental community stalled permits and public hearings.
I live in Virginia Beach, a city which probably wouldn’t have been allowed to be built today. The impediments to make progress make it impossible to grow our nation anymore. It’s insane.
We can’t drill for oil or natural gas, or even explore for it, because the lefties are in love with lack of progress. But even the “alternative” energy ideas are impossible to implement. Ever try to get a permit for offshore wind?
America has an anti-business regulatory climate that gives every investing interest all the reason in the world to not invest in America.
These are simple ideas. There are others. But let’s agree on a simple premise.
If we don’t make America a convenient place to invest capital and create jobs, no spending cuts or tax increases will solve our budgetary problems.
Can government, just for a short while, pretend that it wants business and investment in America?
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About the author
The right wants to jeer him. The left wants to censor him. Moderates usually want both. Brian Kirwin is a political consultant and public relations strategist in Virginia Beach with a lightning-rod flair. Brian also serves on the VB Arts & Humanities Commission and frequently appears on Hampton Roads theatrical stages, if only to prove that all actors aren’t liberals. Kirwin’s columns stir up debate and hit the political scene with no punches pulled.
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38 Responses to "The real solution to debt and downgrades"
“If we don’t make America a convenient place to invest capital and create jobs, no spending cuts or tax increases will solve our budgetary problems.”
And profitable. Don’t forget profitable. Profit is not a dirty word. Say it proudly. Want tax revenue? What enables taxes to be collected?
PROFIT.
Agree with you on the regulatory requirements. Some environmental (and other types of) protection is needed but there has to be a more efficient way to accomplish it.
I disagree on capital gains. Most long term gains are now taxed at 15% (down from 28% in the mid 90′s-which I agree was too high); and there are a few exceptions such as the sale of collectibles (artwork, baseball cards etc.) which are still taxed at 28%. the 35% you mention is for short term gains which are taxed at your ordinary income bracket. Most job creating investments are going to be held longer than one year.
I think a better idea (to the extent that it would be revenue neutral) would be to stop taxing carried interest (which in substance is earned income) as a capital gain, and raise the AMT exemption to the point of revenue neutrality. This would help the upper middle class which has disproportionately been hit by this recession. Another possibility would be to allow corporations to deduct dividends paid to shareholders with the offset being dividends get taxed at ordinary income rates.
Brian- You came right to the edge but didn’t cross the line in another important reform that needs to be made: End baseline budgeting. Al budgets should be based on funding as it currently exists without any assumptions as to how much it might be by some future congress that cannot be controlled by any current congress. Controlling the budgetary language is the most important first step to controlling the budgetary process.
Hey, I said there are more ideas. Keep ‘em coming. Congress, take notes!
Washington doublespeak and political smoke and mirrors from the DC establishment will keep smart capital managers away from our markets. This is a political problem and we are one election away from turning the tide. Our problem (GOP) is that the typical republican is anything but..
Just say No to the Yes voting Congressmen. The Yes Men deserve to be targeted for primaries and conventions. Yes men voted for this disaster and tomorrow you may see yet another bloodletting if asian and other markets today are any indication (they often are).
Think of Yes Vote Rigell and so many others who threw away their party majoritys negotiating leverage while watching your 401K’s shrivel away.. Unless of course you pull out of the market and hold cash, another disaster in the making, speaking of which, didn’t Scott Rigell promise to support an audit of the FED? Seems he signed a tea party pledge indicating he would.. Whats the hold up? No pun intended.
http://hamptonroads.com/2010/08/rigell-sign-tea-party-oath Read the pledge on the left side of the page.
As a real estate developer, I too have complained about rules and regulations, but so long as they apply to everyone, that’s fair and square, and frankly, the major impediments to development are not rules, regulations, taxes, or fees. No, the major impediment is customers because the economy is growing so slowly. And the solution? Well, how many times do we have to be advised; cut discretionary spending, raise taxes, and stimulate growth. That’s what Moodys said; unless we are serious about cutting the deficit without causing more job loss, our bonds will be downgraded again. Now this is in total contradiction to the republican mantra, enforced by Grover Norquist, to cut expenses, cut taxes. That was never a governing strategy, just a tactic to get elected. But now, all of us, including the very nuts that brought our country to its knees in the debt extension debacle, are suffering from a slogan, and Brian has to talk about anything but the elephant in the room. Despicable.
BK asks these questions: “Can we pass a ECONOMIC GROWTH plan?” “Can government, just for a short while, pretend that it wants business and investment in America?”
Actually your questions bracket the nub of the problem better than any specific program fiddle. Yes even a far left guy like Obama can pretend a bit that he wants private enterprise to prosper when of course he doesn’t.
But there is a tension between govt and business that cannot be glossed over even when a more conservative govt is in place. Govt by definition is above business. Subordinates will always try to resolve disputes by “going to the boss”. When govt is buddies with business you quickly end up with crony capitalism or gangster socialism. When govt is hostile you end up with hard times or totalitarianism.
Fundamentally govt is not much different than any other org or business if they could print money and had a police or army to enforce their operations. None of them have “ECONOMIC GROWTH” as a mission superseding their own maintenance. Longterm economic growth is an Outcome of certain kinds of activity that can only arise when no org has autocratic predominance. Economic growth as a goal also presupposes an optimistic frame of mind. If someone believes that they won’t benefit from economic growth then they don’t care if it happens. This is why leftists always encourage schadenfreude and class warfare. This inculcates the idea that wealth has to be taken rather than generated.
Since govt will always have an inherent superiority my feeling is that the best way to constrain it is by sharply limiting the Number of personnel in govt. On the theory that 10% of any group are the movers and shakers, if you have a large number of people, say 100,000, that means 10,000 movers and shakers. Each mover and shaker in govt will busy themselves with all kinds of projects the effects of which they will not experience. Since there is an inherent competition between business and govt this will inevitably lead to regulatory gridlock. (The other action that would be useful but which is very difficult to implement is to get more movement of workers between private enterprise and govt.) Leftists who argue that govt needs more and more people to perform oversight are contradicted by recent history (eg wall Street, BP spill.
Valentinus, great comment!
Mike, you talk about Grover more than a child watching Sesame Street.
You can write a bigger check to government any time you’d like, Mike. Actually, you like government to write a six-figure “incentive” check to you for a building you already built.
Two words: flat tax.
Mike, Moody’s again? You are two for two wrong on your comments about who did the credit downgrade. As to your point, the lack of customers is due to the shackles of “rules, regulations, taxes or fees.” placed on business. Economic Growth is the natural order of business in a market place where a business and political environment is conducive to growth. We don’t have a real “market place” anymore since it has been picked apart and replaced by an artificial market place that is government-centric, not business-centric.
It’s simple… a “market place” is where people who want stuff pay people who sell stuff. The trickle down from the “want – sell” fundamental is jobs, increasing GDP and all “good” things which are given lip service by those who can do something about it. Large companies like Apple, Microsoft, GE and lots of smaller companies are continuing to abandon our economy by moving offshore, selling, going bankrupt, or just going out of business. This is because Government has built a wall between those who want and those who sell and has forced us to deal with each other through “Checkpoint Charlie’s” (regulatory agencies, Fed, multiple taxation, etc.) under Government control. As our Government continues to build this wall higher and wider, like in Greece, Italy and other distressed economies, the natural tendencies of the market place will move towards a real “black market” and barter economy. Already, people and business are starting to deal with each other directly and at increasing legal risk, to provide goods and services from countries where businesses are free to innovate and to manufacture stuff we want to pay for.
So, “ECONOMIC GROWTH” will occur by adaptation to the current attempts to strangle it, not by any sort of above-board plan worked out by the “who’s-who” of the current crop of political and economic hacks. As we move towards this new “economy”, if you think we have seen serious bribe and corruption scandals already, just wait.
“How do great societies historically fall? Infighting to point of paralysis. A house divided amongst itself cannot stand. We need to be Americans first. If we work together we will be strong. If we listen to political rhetoric and politians who just want to get re-elected, we are doomed.” – K.K.
Yes, it was S & P, whatever. Point is, the denial of responsibility by conservatives on this forum is no surprise; afterall, your Norquist inspired mantra has worked at the ballot box, and you can always tell your spouse that your ideology has nothing to do with the slide in your portfolio. But the funny thing is that bumper sticker slogans used to motivate voters work, until they don’t. Since republicans now totally own the mantra, just as Gilmore owned No Car Tax, they will live or die in politics by cut taxes. Now that most americans believe that is not the answer, the mantra may join Gilmore in the dust bin of history.
Actually, Mike, the Democrat Senate is the most like Gilmore. They can’t produce a budget, either.
Obama has said on numerous occasions that he is looking for regulations to cut out…has he found any yet? He also has said that there is a lot of waste and fraud in government that can be cut, particularly in Medicare. Has he cut that yet? We have heard many politicians complain about government waste and regulations, but little seems to get done to reduce both.
Grover’s observations about the insane left telegraphed a lot of us to get out of the market and into cash at S&P 500 1340 back on July 21 once the leftist Democrats were stonewalling the Republican debt proposals in the Senate. He mentioned to watch for insane tirades of blame on the blogs and the news media who were setting up a political watershed event that leftists were hoping to pin on the Tea Party. Mike, you helped me make that decision because you were a one-stop-source that was parroting the Armageddon talking points that many of you mind-numbed O’bots were spreading to get people to panic. My wife and I are doing great and are looking for the right moment to enter the market again with all of that money we saved in this crash. Sell high, buy low… is your business for sale yet?
Some how Norquist’s name brings to mind all that is wrong with lobbyists but still around pounding false propaganda. I find it offensive that candidates would sign a pledge with a known money launderer and power peddler the likes of Norquist and Ralph Reed.
Most of Brian’s identified restrictions, regulations, and hampering procedures are fruits of effective lobbying by profit-minded sponsors. Altruism takes a back seat to legislation that un-levels the playing field.
Well Tim J, if you think I was wrong in my warnings, perhaps you should read the S&P report. Or alternately, just keep reading the same old denials from the same old posters on this page. Your choice.
Mike, Grover called it and you were the canary in the his coal mine. Thanks for your “Armageddon comments” as your insanity brought us clarity of purpose and action.
Some how Soros’ name brings to mind all that is wrong with lobbyists but still around pounding false propaganda. I find it offensive that candidates would accept money with a known financial swindler and power peddler the likes of George Soros.
Well Tim J, enjoy your ill gotten gains, and be sure to pay the taxes you will owe on them.
valentinus: You are absolutely right.
“Does anyone seriously think there are a lot of capital gains taxes being paid right now anyway?”
Since corporate profits are up and the stock market was too until last week, there should have been some capital gains taxes being paid.
I’d prefer to raise the the cap gains rate to the tax rate for regular income, coupled with an elimination of the corporate income tax.
That will lure multinational profits back on shore and taxes the resulting wealth at the correct juncture.
Let me explain…in taxing corporate profits we’re doing two things…we’re exacting a hidden tax on consumers because business will treat the tax rate as another cost of doing business and raise prices ….and we’re taxing money that could be going back into the company to expand its markets, build new plants, hire more people, increase benefits, etc.
In taxing those profits instead as higher taxes on capital gains (remember we only tax realized capital gains…except in the case of real estate taxation, which I’d also like to see reformed) and dividends, we’d be taxing wealth that was actually being taken out of the company.
Steve V, Impressive…are you becoming a conservative?
We hear all the crisis because we’re not being fiscally responsible. Anyone suspect a VAT tax will be introduced with the SuperCongress?
JJ-Actually, most of the conservatives I’ve run this past don’t like the idea of increasing taxes on capital gains, even if that was paired with eliminating the the corporate income tax.
Most liberal shudder at the idea of repealing the corporate income tax, usually because their understanding of it is fairly shallow.
So I guess you can call me a tax moderate.
Mike, I am happy to pay those taxes on “ill gotten” gains as I immediately rolled them over to silver which is also exploding in price with gold. By preying on the psychology of fixed income and others who are scared easily, you leftist Democrats with your blaming, whining, sniveling and dark rhetoric have been the best thing for precious metals investors in history. The only things of value the US Mint is producing these days is gold and silver coins. It takes over double the amount of paper to buy gold or silver that it took on Inauguration Day, Tuesday, Jan 20, 2009. The Fed should be arrested and jailed at Gitmo for counterfeiting our currency.
S&P is continuing their credit downgrade rampage today by cutting the ratings of Fannie Mae, Freddie Mac, (10) Federal Home Loan Banks, Banks of Chicago and Seattle, Depository Trust Co., National Securities Clearing Corp., Fixed Income Clearing Corp, and the Options Clearing Corp. which are described as the “main arteries” of the US financial system. Next on S&P’s agenda… credit rating downgrades of State and local governments.
TJ- that will follow. If the U.S., which can print money to pay its debts isnt’ a AAA risk, how can state and local govts. that can not be AAA rated. Of course that raises the question of how any borrower can be AAA rated if the U.S. government is not.
S&P is working from the trunk down to the roots of our financial system in the systematic downgrade of our economy. Now Moody’s is mumbling about doing the same thing. On November 18, 1956 Nikita Khrushchev proclaimed “My vas pokhoronim!” (We will bury you!). Who would have thought that 55 years later that leftists (including RINO Republicans) in league with a rogue, leftist President would accomplish that same goal.
We are being “buried” by the enemies of our country from within. Our enemies pose as Politicians, bloggers, media pundits and reporters with a goal that is no different than that blustering dictator over a half a century ago. They are yelling, screaming, lying and rhetorically pounding their shoes on podiums in Congress, the Presidency and the media to “bury” us in debt, taxes, misery and despair.
Well of course Tim J, exactly the opposite is true. Until Bush reversed pay go, and used a credit card instead, and dismantled the regulatory system, we were cooking along just fine. But of course, he did us in, and while americans always like a quick fix, this was a structural problem that required intelligence and discipline. Of course, republicans realized they had a political solution, that is, cut taxes, at exactly the time that was the wrong thing to do. We are continuing to pay the price. Until we agree to drink the castor oil, the rating agencies will be the least of our worries. The Presidents Plan may have avoided all this unpleasantness, but since Boehner and republicans refused, this record is stuck, playing the same tune over and over again.
We’re also stuck focusing on the wrong problem.
Unlike several countries in Europe, the U.S. does NOT hav ea problem that it doesn’t have enough money to pay what it owes. We have a stagnant economy that needs to get moving. The most important issue in the U.S. right now is JOBS, but our political system has just spent the past three months talking about nothing but DEBT.
Yes, the new class of republicans got elected based on jobs, and immediately shifted to conservative social issues, and this innane focus on deficit relief, which of course, they have shown is only a political issue for them, not one that actually has to be solved. For if they are serious, revenue increases and tax reform must be part of the formula, yet Norquist will target anyone of them that admits that. Frankly, the only thing the republicans really stand for is threats and fear to force the political system to bend to their will; no matter the fiscal consequences.
It’s best said that the plan to use the debt ceiling increase as a bargaining chip succeeded in a loss of confidence. This latest correction may have been avoided, but fear not, there was plenty of profits to make on the down side. Volatility is your friend. For those in company investment plans, the market will rebound again, just make your monthly contributions to take advantage of dollar cost averaging aspects.
“since Boehner and republicans refused”… “Norquist will target”… tsk, tsk. Harry Reid and the leftist Democrats “refused”, and the leader of the Democrat Party i.e. the President “refused”. Your President, tried to pose as a leader today by recycling the wet and smelly material out of his leftist compost pile and the measure of his “success” was that the market collapsed another 635 points. People have lost confidence in this President, they think he is lying, they think he is incompetent and they don’t like his handlers, his party or those in his administration. Leftist Democrats think that they can destroy personal dignity and pride and divide citizens by placing this nation risk.
With names popping up to characterize the Obama collapse like “Obamageddon” and “Barackalypse Now”, he had better figure out who his friends are because he is turning millions of people into victims by destroying the economic fabric of our nation. Most people in our country aren’t looking for handouts, and Obama and his leftists are trying to trying to break our national spirit by forcing people into dependency with extended unemployment, food stamps, and “jobs training programs”. “Jobs Training” is another way to launder unemployment benefits for “training” employees to work at phantom businesses that have either been destroyed, don’t exist or have moved out of the country. It is just a matter of time before those “victims” start showing up in front of the White House and Congress with torches and pitchforks to reclaim what Obama and the leftists have taken from them.
Why didn’t Obama do all the wonderful things* he now wants the Repubs to do when he had 255 reps, 60 senators and the fastest autopen ever in the WH?
* footnote 1 (such as tax increases, punishing oil companies, infrastructure bank, card check, immigration and a million other leftist fantasies)
Let’s cut the B.S. Mike, it isn’t “For if they are serious, revenue increases and tax reform must be part of the formula…”
Say what you mean, “If they were serious they’s raises taxes so government can keep spending more money.”
Hey Mike (and Henry-the-Freeloader), here’s a good idea for tax “reform” – end the Socialist practice of EITC and exempting 50% of the U.S. working population from paying Federal taxes.
End tax exemptions for so-called “non-profits” and not-for-profit scams. That includes churches.
You said it, DJ. If we are going to take a risk, let’s make it a risk to unleash entrepreneurship, spur private investment, grow the economy and create jobs.
Let’s see here:
1. Reid the faux Christian now wants to tax churches.
2. Reid the faux Libertarian wants to tax non-profits, which would cripple them in trying to perform works which would then need to be picked up by government.
smh
Henry, everyone should pay their fair share of taxes. Instead we have a whole lot of folks NOT paying their fair share – and then they vote to raise taxes so they can reaped more benefits.
Henry, are you opposed to everyone paying their fair share of taxes?
Reid,
Your planted axiom is that it’s up to Reid Greenmun to determine what constitutes a “fair share”. It isn’t.
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