Archive for October, 2010
I don’t know what a good Texas girl is doing reading The New York Times, but my dear friend Peggy sent me a link to this story. I think it’s right on target, of course, but I doubt it will find any traction amidst all the noise and the “Nazi,” “Socialist,” “Marxist” name calling. But, on the upside, the Republicans will take charge and we’ll have this economy humming in no time. It’s all good.
Can’t Keep a Bad Idea Down
I confess, I find it dispiriting to read the polls and see candidates, mostly Republicans, leading in various midterm races while promoting many of the very same ideas that got us into this mess. Am I hearing right?
Let’s have more tax cuts, unlinked to any specific spending cuts and while we’re still fighting two wars — because that worked so well during the Bush years to make our economy strong and our deficit small. Let’s immediately cut government spending, instead of phasing cuts in gradually, while we’re still mired in a recession — because that worked so well in the Great Depression. Let’s roll back financial regulation — because we’ve learned from experience that Wall Street can police itself and average Americans will never have to bail it out.
Let’s have no limits on corporate campaign spending so oil and coal companies can more easily and anonymously strip the Environmental Protection Agency of its powers to limit pollution in the air our kids breathe. Let’s discriminate against gays and lesbians who want to join the military and fight for their country. Let’s restrict immigration, because, after all, we don’t live in a world where America’s most important competitive advantage is its ability to attract the world’s best brains. Let’s repeal our limited health care reform rather than see what works and then fix it. Let’s oppose the free-trade system that made us rich.
Let’s kowtow even more to public service unions so they’ll make even more money than private sector workers, so they’ll give even more money to Democrats who will give them even more generous pensions, so not only California and New York will go bankrupt but every other state too. Let’s pay for more tax cuts by uncovering waste I can’t identify, fraud I haven’t found and abuse that I’ll get back to you on later.
All that’s missing is any realistic diagnosis of where we are as a country and what we need to get back to sustainable growth. Actually, such a diagnosis has been done. A nonpartisan group of America’s most distinguished engineers, scientists, educators and industrialists unveiled just such a study in the midst of this campaign.
Here is the story: In 2005 our National Academies responded to a call from a bipartisan group of senators to recommend 10 actions the federal government could take to enhance science and technology so America could successfully compete in the 21st century. Their response was published in a study, spearheaded by the industrialist Norman Augustine, titled “Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future.”
Charles M. Vest, the former M.I.T. president, worked on the study and noted in a speech recently that “Gathering Storm,” together with work by the Council on Competitiveness, led to the America Competes Act of 2007, which increased funding for the basic science research that underlies our industrial economy. Other recommendations, like improving K-12 science education, were not substantively addressed.
So, on Sept. 23, the same group released a follow-up report: “Rising Above the Gathering Storm Revisited: Rapidly Approaching Category 5.” “The subtitle, ‘Rapidly Approaching Category 5,’ says it all,” noted Vest. “The committee’s conclusion is that ‘in spite of the efforts of both those in government and the private sector, the outlook for America to compete for quality jobs has further deteriorated over the past five years.’ ”
But I thought: “We’re number 1!”
“Here is a little dose of reality about where we actually rank today,” says Vest: sixth in global innovation-based competitiveness, but 40th in rate of change over the last decade; 11th among industrialized nations in the fraction of 25- to 34-year-olds who have graduated from high school; 16th in college completion rate; 22nd in broadband Internet access; 24th in life expectancy at birth; 27th among developed nations in the proportion of college students receiving degrees in science or engineering; 48th in quality of K-12 math and science education; and 29th in the number of mobile phones per 100 people.
“This is not a pretty picture, and it cannot be wished away,” said Vest. The study recommended a series of steps — some that President Obama has already initiated, some that still need Congress’s support — designed to increase America’s talent pool by vastly improving K-12 science and mathematics education, to reinforce long-term basic research, and to create the right tax and policy incentives so we can develop, recruit and retain the best and brightest students, scientists and engineers in the world. The goal is to make America the premier place to innovate and invest in innovation to create high-paying jobs.
You’ll have to Google it, though. The report hasn’t received 1/100th of the attention given to Juan Williams’s remarks on Muslims.
A dysfunctional political system is one that knows the right answers but can’t even discuss them rationally, let alone act on them, and one that devotes vastly more attention to cable TV preachers than to recommendations by its best scientists and engineers.
A dear friend sent me this article, with the following observations. “The Republicans run a better theater – told us LOUDLY in 2003 we were getting a refund, let us anticipate it for 3 or 4 months, made sure when it came that it had George W. Bush’s name written all over it so we knew exactly who was giving it to us – and it arrived as a timely reminder just before the 2004 election.
The Democrats are so stupid that no one even heard a press conference about this tax cut. The Democrats just don’t get the show business of politics anymore, and as a result, for all the good they might do, they will continue to be marginalized.”
From Obama, the Tax Cut Nobody Heard Of
HUNTERSVILLE, N.C. — What if a president cut Americans’ income taxes by $116 billion and nobody noticed?
It is not a rhetorical question. At Pig Pickin’ and Politickin’, a barbecue-fed rally organized here last week by a Republican women’s club, a half-dozen guests were asked by a reporter what had happened to their taxes since President Obama took office.
“Federal and state have both gone up,” said Bob Paratore, 59, from nearby Charlotte, echoing the comments of others.
After further prodding — including a reminder that a provision of the stimulus bill had cut taxes for 95 percent of working families by changing withholding rates — Mr. Paratore’s memory was jogged.
“You’re right, you’re right,” he said. “I’ll be honest with you: it was so subtle that personally, I didn’t notice it.”
Few people apparently did.
In a troubling sign for Democrats as they head into the midterm elections, their signature tax cut of the past two years, which decreased income taxes by up to $400 a year for individuals and $800 for married couples, has gone largely unnoticed.
In a New York Times/CBS News Poll last month, fewer than one in 10 respondents knew that the Obama administration had lowered taxes for most Americans. Half of those polled said they thought that their taxes had stayed the same, a third thought that their taxes had gone up, and about a tenth said they did not know. As Thom Tillis, a Republican state representative, put it as the dinner wound down here, “This was the tax cut that fell in the woods — nobody heard it.”
Actually, the tax cut was, by design, hard to notice. Faced with evidence that people were more likely to save than spend the tax rebate checks they received during the Bush administration, the Obama administration decided to take a different tack: it arranged for less tax money to be withheld from people’s paychecks.
They reasoned that people would be more likely to spend a small, recurring extra bit of money that they might not even notice, and that the quicker the money was spent, the faster it would cycle through the economy.
Economists are still measuring how stimulative the tax cut was. But the hard-to-notice part has succeeded wildly. In a recent interview, President Obama said that structuring the tax cuts so that a little more money showed up regularly in people’s paychecks “was the right thing to do economically, but politically it meant that nobody knew that they were getting a tax cut.”
“And in fact what ended up happening was six months into it, or nine months into it,” the president said, “people had thought we had raised their taxes instead of cutting their taxes.”
There are plenty of explanations as to why many taxpayers did not feel richer when the cuts kicked in, giving typical families an extra $65 a month. Some people were making less money to begin with, as businesses cut back. Others saw their take-home pay shrink as the amounts deducted for health insurance rose.
And taxpayers in more than 30 states saw their state taxes rise, according to the Center on Budget and Policy Priorities.
That is what happened here in North Carolina. The Treasury Department estimated that the federal tax cut would put $1.7 billion back in the hands of North Carolina taxpayers this year. Last year, though, North Carolina, facing a large budget shortfall, raised a variety of state taxes by roughly a billion dollars.
“It was a wash,” said Mr. Tillis, the state representative.
The guests at the Pig Pickin’ rally here could rattle off the names of the House speaker and the Senate majority leader with ease, if with disdain, and were up on many of the political controversies of the day. They studied the campaign fliers at their tables, and pocketed the 1.5-ounce jars of strawberry preserves with special labels urging them to vote for Judge Bill Constangy for Superior Court (“Preserving Justice,” the labels read).
Many volunteered that they thought the Bush tax cuts should be extended for all taxpayers, even for the wealthy ones whom Mr. Obama would like to exclude. But few had heard that there had also been Obama tax cuts — which will also expire next year unless extended, but have generated far less public debate.
Bob Deaton, 73, who wore a “Fair Tax” baseball cap, was surprised to hear that there were tax cuts in the $787 billion stimulus bill, which was wildly unpopular with many at the rally even though roughly a third of it was in the form of tax cuts.
“Tax cuts?” he asked. “Where were the tax cuts?”
Ron Julian, 50, a Huntersville town commissioner, said he thought his taxes had gone up under Mr. Obama. And Mr. Paratore, a former Hearst executive, said he might have noticed the tax cuts if his paycheck had jumped more in the weeks before he retired last year: “I couldn’t even tell you what it was, to be honest with you.”
The Obama administration wants to extend the little-noticed tax cut next year. Jason Furman, the deputy director of the National Economic Council, said the administration still believes that changing the withholdings was a more effective form of stimulus than sending out rebate checks would have been.
“In retrospect, we think that judgment was right,” he said. “It’s harder to predict what’s good for politics. Ultimately, the best thing for politics is going to be helping the economy.”
But at least one prominent economist is questioning whether the method really was more effective. Joel B. Slemrod, a professor of economics at the University of Michigan, analyzed consumer surveys after the last rebate checks were sent out in 2008 by the Bush administration, and after this tax cut, called Making Work Pay, went into effect under the Obama administration.
After the 2008 rebates, he found that about a quarter of the households surveyed said they would use the money primarily to increase their spending. After the Obama tax cut took effect, he said, only 13 percent said they would use the money primarily to increase their spending. The Obama administration believes that people did spend the money, and cites analyses calling the cut one of the more effective forms of stimulus.
Mr. Slemrod said it was not unheard of for voters to miss tax cuts. Just a few years after a 1986 overhaul of the tax system made significant cuts to most people’s taxes, he said, a survey asked people what had happened to their taxes. “Most people didn’t answer that they went down,” he said.
Peter Baker contributed reporting from Washington.