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12/19/2008
Try arguing against Bailout II at Christmas gatherings

“Obama to keep stimulus under $1 trillion.” Holy giveaways, Batman. That was the lead-in to one of this morning’s Wall Street Journal articles. The New York Times, and every other major newspaper today carried similar stories.
$100 billion here, $100 billion there. Wow. FoxPolitics News included several pieces in the last month about those with their hands out for stimulus money. I’m sure I’m missing some – but I did a search on FoxPolitcs.net and came up with these:

States – of course, Wisconsin led the way here
Cities and towns – including specifics from…
Milwaukee
Home Builders
Highway Builders
Auto makers
Auto workers
Auto dealers (including John Bergstrom)
Hospitals
State banks
Higher Education
Pre-K to 12 Education
Nonprofits
Medicaid
State unemployment compensation funds

Earlier this month, Steve Prestegard at Marketplace Magazine cited Westbury and Stein, who argue against a government bailout – and propose alternative solutions.

Taking money from profitable companies to give to unprofitable ones will harm the economy.

….Keynes said that when an economy falls into such a trap, the government must spend because individuals and businesses won't. Milton Friedman disagreed …. Friedrich Hayek said prices and wages should be allowed to find their own equilibrium, and that government intervention was actually central planning.

For today's crisis, just about every potential tool in the toolbox is being used. Politicians are embracing Keynes and Friedman, but Hayek is being ignored.

….In addition, when government-directed money enters the economy, political motivations rule the day. For example, a window manufacturer closed down in Chicago recently when Bank of America decided to stop financing the business. Workers are protesting, and members of Congress are saying that because BoA got money from Treasury, it should use those funds to support the manufacturer. In other words, politics has entered the free market in an even more intrusive way.

How about these for their solutions? (Emphases are mine.)

Why not eliminate corporate taxes all together? During fiscal year 2008, the U.S. Treasury collected $304 billion in corporate taxes--elimination would cost roughly half of what the Obama stimulus plan may cost and just 30% of this year's budget deficit. Imagine how the elimination of corporate taxes would change investor perceptions about investment, even for auto companies. Another option would be full (100%) expensing for any investment made by any company in 2009. This would encourage spending and investment.

Individual income tax receipts were $1.15 trillion in fiscal year 2008. A 50% reduction in tax rates would cost less than the Treasury's TARP proposal. Lower tax rates would take the sting out of any pay cuts that unionized workers at auto companies might be forced to accept. Another option would be to allow all capital losses by individuals to be written off in full for 2008, rather than limiting them to just $3,000. This would limit the selling of profitable investments this year to absorb those losses for tax purposes only.

If arguing for individual and corporate tax cuts falters among your Christmas crowd, the CATO Institute gives a quick and easy Top Ten list of why a “grab-bag for the states is ill-advised…” (Ok, so it’s not as exciting as an Onion or Letterman list…)

The Federal government is broke.
Rising federal debt is fiscal child abuse.
Spending is the problem.
A Keynesian stimulus ignores the long run.
A bailout would flout state fiscal traditions.
A bailout may delay state reforms.
State infrastructure is already adequately funded
State situations vary.
Bailouts beget more bailouts.
A bailout shifts attention from needed federal reforms.

No religion or politics allowed to be discussed at your gatherings? Hmmm. How about humor?

Jo Egelhoff, FoxPolitics.net

COMMENTS

Those scamps at the CATO Institute always have all the answers.

How about this one: Eliminate the income tax altogether instead of corporate taxes.

There has been a good case made that A.) the income tax is illegal and not codified into law-- anywhere -- and B.) the income tax was never intended to attack or be attached to wages but rather to rents and properties and, yes, you heard it here first: other income such as capital gains.

Income tax rebels have long maintained (and there is at least one documentarian who has scrutinized this problem with interviews at the IRS) that there is no basis in law for the income tax.

So one of two things needs to be done: codify into law the vast amount of what can only be called "suggestions" in the 800 pages of 'rules' for collecting taxes or get rid of it.

Slithering around the law and canned talking points from the think tank machine does little to adequately explicate the amount and depth of the perversity of pro corporate spokespeople.

The suggestion to eliminate corporate taxes is just such a perversity.

I suppose it depends on what sort of family gathering at which one would raise these suggestions.

But every year at this time I recall the version of the Christmas Carol which starred Henry Winkler as Scrooge. That made for tv movie was set in The Depression. The opening scene is
of a family being evicted by Scrooge onto the street in a snow storm. At a further point in the film Scrooge takes the credit (in this adaptation) for creating a new source of revenue. He called it "time payments."

Lon Ponschock (Fri Dec 19 12:57:54 2008)

Lon, moving the tax burden to corporations is ass-backwards. They will only add it to the price of their product and pass it on to consumers. And in the process we'll make them even less competitive with foreign products than they already are, and they'll just send more manufacturing off shore.

Best to eliminate corporate taxes AND implement a Medicare-for-all system that will save businesses $6000 per employee per year in healthcare costs. Yea, it means more personal taxes but it will be cheaper in the long run.

Jack Lohman (Sat Dec 20 12:09:19 2008)

Jack, if you can get Lon to stop haranguing against corporations, that would be great! - and probably a miracle...

Jo (Sat Dec 20 12:19:20 2008)

What we really need to do is go back to the original concepts of the 13 States. The States fund the Federal government. That does several things.
First the Federal government would pay more attention to their source of revenue.
Second it would assure people that if they didn't like the tax policeys, they could move to another state ( Works now, but isn't dynamic enought)
Federalism is growth oriented without any restrictions !

Richard Carlstedt (Sat Dec 20 23:19:37 2008)

Jo, the same is true for health care costs.

If corporations were not burdened with employee health care, they could lower their costs and add more employees. As it is, they add these health costs to their product price, or alternatively, they offshore the jobs to countries that already have universal healthcare systems.

But many who favor zero taxes for corporations do not favor zero health care costs for employers. Go figure.

Jack Lohman (Sun Dec 21 07:16:35 2008)

Jack, I've said it a million times. Before you go putting the burden of health care on the government, you've got to figure out a way to control costs. And please don't go giving me the old "Medicare" example. It doesn't wash Jack.

Jo (Sun Dec 21 07:41:42)

So, we can affect the government burden by removing or limiting taxes for the corporate owners, but we can’t ask the same government to restructure health care to benefit business and society? Give me a break.

You clearly must know this by now, Jo. Health care costs are inflated by 31% to (wastefully) compensate for our insurance bureaucracy (billing departments in hospitals, clinics and insurers), and only going to a central system of payments will reduce those costs. Currently Medicare is contracted to privately owned WPS in Madison.

We cannot reasonably reduce the “costs” of the tests, and it would be foolhardy to try. But we can limit the over-utilization of them. Overuse, abuse and fraud represent 20% of healthcare costs today. HALF of our healthcare costs are due to mismanagement (and political ideology). :-)

Medicare is bad but the wasteful billing to private insurers is worse because it rarely involves jail time. And they don’t have a fixed fee schedule, as does Medicare.

I love the quote by Winston Churchill: "America will always do the right thing, but only after everything else fails."

Jack Lohman (Sun Dec 21 08:51:34 2008)

And oh, sorry... You didn't want to talk about Medicare and I did.

But Jo, you're in the minority on this one. We've seen what the free-for-all market has done to us; and a free-for-all healthcare system is not going to fare any better.

Jack Lohman (Sun Dec 21 10:09:58 2008)

Quite an exchange here today. As far as haranguing goes, Jo seems to have the sentiment that there is justification for a faith-based corporate economy. Whenever there is a reduction in
costs the fiduciary responsibility of the corporation is to pass it on to shareholders. What is a fantasy is thinking that reducing overhead costs will ever lower the final cost of
services.

Have you noticed that over the past days Thomas Friedman is now talking about hard work to recover the economy? When Friedman talks about putting our backs into it, he's not talking about himself or Henry Paulson or Madoff or anyone else in the haves and have-more class.

News on the bailout for GM (which I'm also against along with the first one) is that GM is ready to become an importer of cars. Their European plants already make fuel efficient cars.
So they have dumped the cost of health care on the state and are figuring out how to eliminate the American workforce altogether.

Vigilance rather than faith is required to make sure that corporations toe the line.

It might be better to view the GM "loans" as the fee for the U-Haul. Restructuring is a very flexible term.

Lon Ponschock (Sun Dec 21 10:56:21 2008)

Lon, I agree with Jo that reducing overhead costs will lower prices. That's the benefit of free market competition. Where we differ is that I think it applies both to corporate taxes AND health care costs.

Jack Lohman (Sun Dec 21 11:11:00 2008)

Let me correct that, because she knows that health care costs are burdening employers, and I misstated that.

Where we disagree is the "kind" of healthcare system we need (single payer versus free market).

I have not seen a system as efficient and practical as a single-payer system, but I'd sure like to hear if there is a better alternative.

Jack Lohman (Sun Dec 21 12:20:12 2008)

Jack, we do NOT and haven't for a long time, have a "free-for-all" market re. healthcare. We have a 3rd party payer system, which removes people from responsibility, and emcourages wastefulness.

YES, insurance for every little thing is wasteful, so WHY do the "healthcare for all" crowd constantly harp on the need for more insurance!?! We need less!!! I am sick of the ads claiming "X" peope have "no access to healthcare". YES THEY DO--all they need to do is make an appointment or go to urgent care or ER.

How about catastrophic coverage only, and all other "ordinary" expenses be covered by the individual? Then if you decide to eat gluttonously, smoke 2 packs per day, and drink a six-pack a night, and end up with heart, alcohol, or obesity-related issues, you can pay all your dr visits yourself.

In fact, I know people who CHOOSE not to buy insurance, except for catastrophic only. And they pay upfront for each dr. visit. And YES, dr's fees are negotiable if you pay that way! These people actually save a lot of money by doing so.

Put it another way: how effective do you think it would be for the government to assume the cost of running your cars? If they paid everyone's car insurance? And repair bills when you failed to take care of the vehicle?

emily matthews (Mon Dec 22 15:34:12 2008)

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