Budget talks: This is getting nasty

Big American business is already gaming the system. It doesn't matter how favorable a climate I create for them here, the money isn't reinvested on behalf of a healthy US middle class. It's concentrated into greater and greater wealth for fewer and fewer people. Onshore and off.

Henry Ford understood that he had to pay his workers a sufficient wage that they could buy his own product.

That sort of common sense logic has long since ceased to apply to American business.

 

No - I am speaking of the future if capital gains taxes are increased. Not the present.

 

Az / Bubs with all due respect you guys are looking at this with too much malice.

 

The "capital gains tax increase" could be an increase I suppose, but what I have read is more a proposal to roll the rates back to 28 percent. Clinton cut it to 20 percent in 1997, and Bush further cut it to 15 percent in 2003. So we can look at job creation/loss since 1997 and draw some conclusions about how much impact the capital gains tax rate affects that.

 

But so are those who think the world is going to come crashing down if the capital gains tax is raised. And, unfortunately, those inmates are running the asylum right now.

 

Should they not look at possible consequences?

If the capitol gains tax is adjusted to normal income it will have a severe effect on private equity investments. It's not a threat, just reality.

 

Private equity has been about the worst thing to happen to the American worker in the last half-century, as newspaperfolk are just starting to see for themselves.

 

But it's sure been good for the hi tech industry.

 

Trickle-down economics is still bullshit, no matter how many imaginary scenarios you create.

 

I think you start with several loopholes that were never meant to be permanent. For example, the jet exemption the president talks about. I think it's clear the president uses the "corporate jet owners" rhetoric to stir up the middle class. But that's unnecessary, in my opinion. That was a break from after 9-11 that was created to try to boost the airplane manufacturing industry. It worked, but after a while it was no longer needed, but just never revisited. In lingered long enough to still be around when the economy crashed and no doubt it was good for the airline industry that it was around for the recession.

But now that we are in the cost-cutting mode, one thing that needs to be at the front of the line is tax exemptions that were originally designed to be temporary.

I look at tax exemptions like spending. Whatever your tax code is is what's decided as being fair. Any "exemption" from that is meant to stimulate spending. It's no different from getting a check from the government, just like first-time home buyers got an extra $8,000 in their refund check for the first-time home buyers credit.

Let me ask this: Why is the first-time homebuyers tax credit "spending" and the exemption for plane purchases "a tax break." They are both spending. If we keep the corporate jet exemption, we should bring back the homebuyer tax credit too.

 

For the profit-takers yes, but not for workers. I live in Silicon Valley and the unemployment rate here is 11 percent. In the longer view, for the past 15 years anyone over 45 in the tech industry has lived in a constant state of fear of being labeled too old or unadaptable. Startup tech companies fail at about the same rate as new restaurants. And a private equity group's first move upon takeover is always, always, always layoffs.

 

I think outside of those who had a direct interest in pimping the plan, there was no expectation that it would do more than stop a free fall. That it did on many fronts.

If anybody expected it to do more than that, they weren't paying attention to what the original proposals were and what the compromises were. Many on the left, probably most of the serious economists, said it would be inadequate to spur growth and we would still be in danger of long-term unemployment issues and lingering slow growth like Japan in the 1990s when they sat back and stubbornly waited for the magical market to take care of things. It never happened. To make matters worse was, by keeping Bush tax cuts, it would "spend money" (because tax exemptions are seen as spending on "stimulus") that does nothing to spur the economy. So you end up with a high price tag with large chunks of the price going to things that did nothing to help, except allow for a compromise to pass the bill.

Here was the expectation of the bill: It would help end the recession, prop up some free-falling sectors and minimize government cutbacks through some new infrastructure programs that would help offset impending government cuts. But it would also lead to the danger of deflation, remaining high unemployment and slow growth (all things that certainly also would have happened without it. In fact, it would be deflation, rising unemployment and continued recession, or at least a double-dip).

So what has happened? Short term, some sectors were propped up, the recession ended (if it wasn't already over), growth began slowly, unemployment remained high. Very Japan-like.

The best hope for those on the left was that its limited successes would make people realize it wasn't bold enough and austerity would lead to stagnation -- lowered revenue leading to more cuts and more lowered revenue, all making dealing with debt near impossible (it would, in many ways, mirror the newspaper industry).

But so far, the rule of the day is to follow orthodoxy with religious-like faith.