Raising Taxes: Who Poisoned The Well?

[FaninAma]

It seems that even the democrats are timid about raising taxes because of the repucussions with voters at the polls. Even with a fairly liberal president we only see proposals to raise taxes masked under the guise of "taxing the rich" while fully realizing this type of tax will not even begin to solve our budget problems.

Looking back to past GOP presidents who had the political capital and will to go against their party and raise taxes it turned into a fiasco. I refer you back to Reagan during his 2nd term. He agreed to raise taxes in return for pledges
to trim the budget. The taxes passed and the pledge to
trim spending did not.

The real deal breaker happended when George HW Bush went back on a campaign promise(Read My Lips) in return for spending cuts. Once again the democrats reneged on their promise to control spending and then turned around and used this as a campaign issues against Bush, not to mention the dip in the economy which was made worse by the tax increase allowing Clinton to run on "it's the economy, stupid!" slogan. I think this event is what really tore the sheets in regards to the GOP negotiating on tax increases in the future.......and I don't
blame them.

The only time it worked out was not by design. Clinton raised taxes resulting in a change of control of Congress which allowed the GOP to take over the budget process and hold the President to his promise of controlling spending. It worked out well for both parties, so much so that it fueled such an economic boom that reulted in a few Fed assisted bublbles which of course had to deflate at some point.

And as always, the policticians of both parties overreacted to this normal economic cycle and once again accelerated spending. Only now, because of having the football pulled away multiple times before, the GOP was unwilling to put tax increases on the table.

Just my take on things.

[KantoSooner]

Largely agree with your take. One point of difference, the economic growth seen during Clinton's term(s) were a result of computers being fully integrated into our society (everything from industrial controls to internet shopping). It was unpredicted, unpredictable and governmental policy had very little to do with it.

[pphilfran]

Largely agree with your take. One point of difference, the economic growth seen during Clinton's term(s) were a result of computers being fully integrated into our society (everything from industrial controls to internet shopping). It was unpredicted, unpredictable and governmental policy had very little to do with it.

This...along with long term declining interest rates and the emerging markets stepping up....

Raising taxes during an economic boom with declining interest rates is far different than our current situation...if we go back to the Clinton rates for all, not just those making over 250k, we would see revenue gains as a percent to GDP in the range of one half of one percent...

If we don't get the economy up and running then no amount of tax increases will make any difference...

[FaninAma]

I agree with both of you. I do think the balanced budget facilitated investment in the technology boom.

Pphil, I sincerely don't know what the government can do at this point. Cut taxes and drive the deficit higher? This will certainly have the consequences of inflation, a lower dollar value and eventually higher costs of servicing the debt.

Raise taxes and cut spending and risk a worsening recession and debt collapse?

Raise taxes and continue spending at our current rate which would buy time? This still runs the risks of deppening the recession if you raise taxes too much or cause a worsening deficit if tax increases don't exceed spending increases. It is a tightrope .

And it would require discipline....a quality in short supply among our electorate and the politicians they vote for.

[KantoSooner]

Agreed, and I also feel that we can't do a Grover Norquist and take taxes off the table. We're in doodoo so deep that pointing blame fingers is borderline treasonous. We're going to need to cut spending AND raise taxes, in my view, to dig out. And will I like paying the taxes? No, I will not. Will I do it, and willingly, if I think there's a plan in place that gets us out of the hole? Yep, I will.
What I am going to scream about is:
1. Paying more taxes so that dumb**** wastage and BS programs can be continued endlessly.
and
2. Watching important programs get cut or eliminated so that corporate welfare and write-offs for truly rich people can be extended.

Whether Obama or Romney is elected, I want to see either ******* roll up his sleeves and start working on the economy/national debt immediately and I want to start hearing progress reports WITH CONTENT on a weekly basis. And if a Pelosi or a McConnell (sp?) want to get cute and partisan, I want the President to go completely LBJ on their *** and END the perpetrator's career.

[pphilfran]

Imo we are screwed...

In 2008 our backs were on the wall and we had to do everything right...failure to get the economy up and running was not an option...

But the stimulus was weak in critical areas where it needed to be strong and ultimately it did not do the job...extending jobless benefits (I don't consider jobless benefits as stimulus) was not the type of stimulus that was going to create the jobs needed to increase tax revenue...

So now we are in a situation were debt is about to consume us and an economy bordering on another recession...raising taxes will not help spur the economy...and the deficit and debt burdens have our hands tied on doing anything significant to get the economy up and running...

In 2008 I would have targets a couple dozen major infrastructure projects and poured the money into them...I would have outspent Obama for the first year or two...

All we can currently do is another QE program but rates are so low currently that I doubt if if will offer any help...

Add in a Eurozone that is in worse shape than us and a China that has growth much lower than the past decade and we have nothing going for us..

I think we are screwed with no Vaseline...

[pphilfran]

Oh, and the icing on the cake is an incompetent Congress...

[FaninAma]

Kanto, I think you and I agree that somebody needs ro step up and say,"Enough of the political gotcha games. We owe it tour children to focus on what is best for the country instead os appealing to our political bases."

Today Obama said he was willing to work with the GOP if they would agree to cut taxes. Why couldn't he say he was willing to Work with the GOP becuase he was willing to put everything on the table including tax increases AND entitlement cuts.

pphil, the problem with the fiscal stimulus of both the goverment and the FED is that it went largely to banks and corporations who understand what kind of trouble we are in financially so they are using it to shore up their balance sheet by refinancing debt with lower interest loans. Thry aren't investing it anywhere except maybe the stock market and commodity markets.

And the dirty little secret is the Fed is ok with that. Their parties of interest are ,after all, the big banks that sit on their board.

[Skysooner]

Imo we are screwed...

In 2008 our backs were on the wall and we had to do everything right...failure to get the economy up and running was not an option...

But the stimulus was weak in critical areas where it needed to be strong and ultimately it did not do the job...extending jobless benefits (I don't consider jobless benefits as stimulus) was not the type of stimulus that was going to create the jobs needed to increase tax revenue...

So now we are in a situation were debt is about to consume us and an economy bordering on another recession...raising taxes will not help spur the economy...and the deficit and debt burdens have our hands tied on doing anything significant to get the economy up and running...

In 2008 I would have targets a couple dozen major infrastructure projects and poured the money into them...I would have outspent Obama for the first year or two...

All we can currently do is another QE program but rates are so low currently that I doubt if if will offer any help...

Add in a Eurozone that is in worse shape than us and a China that has growth much lower than the past decade and we have nothing going for us..

I think we are screwed with no Vaseline...

The one thing different than 2008 is the much lower energy cost (talking natural gas) and potentially oil in the next couple of years. There is a bunch happening behind the scenes that is going to drive the Brent Crude differential with West Texas Intermediate wider which means lower oil costs domestically. If we don't squander this opportunity, the cheap energy can be a huge rebound for manufacturing, lowering energy costs to everyone, etc.

I completely agree with your analysis by the way. The stimulus was too small and not put into the right areas. Now that Europe is in trouble we have a world of hurt for a few more years with very little to no rise in GDP.

[pphilfran]

You are combining the stimulus with the bailouts...

The financial sector bailouts (TARP 2008) amounted to something like 700 billion dollars...they were in such a rush to avoid a total meltdown they basically handed the money over with little oversight..so the results should surprise no one...

The stimulus (AARA) was a separate entity...somewhere around a trillion...

Tax incentives around 300 billion...
Healthcare 155 billion...
Education 100 billion...
Unemployment and various aid 100 billion...
Infrastructure 100 billion...
Another 100 billion or so in various other stuff...energy, housing, transportation, communication, fed buildings, etc...

Thousands upon thousands of projects...

[pphilfran]

Double post

[pphilfran]

The one thing different than 2008 is the much lower energy cost (talking natural gas) and potentially oil in the next couple of years. There is a bunch happening behind the scenes that is going to drive the Brent Crude differential with West Texas Intermediate wider which means lower oil costs domestically. If we don't squander this opportunity, the cheap energy can be a huge rebound for manufacturing, lowering energy costs to everyone, etc.

I completely agree with your analysis by the way. The stimulus was too small and not put into the right areas. Now that Europe is in trouble we have a world of hurt for a few more years with very little to no rise in GDP.

You have hinted a couple of times about declining energy costs...I can't wait to see the details when they finally are out for public consumption...

[diverdog]

It seems that even the democrats are timid about raising taxes because of the repucussions with voters at the polls. Even with a fairly liberal president we only see proposals to raise taxes masked under the guise of "taxing the rich" while fully realizing this type of tax will not even begin to solve our budget problems.

Looking back to past GOP presidents who had the political capital and will to go against their party and raise taxes it turned into a fiasco. I refer you back to Reagan during his 2nd term. He agreed to raise taxes in return for pledges
to trim the budget. The taxes passed and the pledge to
trim spending did not.

The real deal breaker happended when George HW Bush went back on a campaign promise(Read My Lips) in return for spending cuts. Once again the democrats reneged on their promise to control spending and then turned around and used this as a campaign issues against Bush, not to mention the dip in the economy which was made worse by the tax increase allowing Clinton to run on "it's the economy, stupid!" slogan. I think this event is what really tore the sheets in regards to the GOP negotiating on tax increases in the future.......and I don't
blame them.

The only time it worked out was not by design. Clinton raised taxes resulting in a change of control of Congress which allowed the GOP to take over the budget process and hold the President to his promise of controlling spending. It worked out well for both parties, so much so that it fueled such an economic boom that reulted in a few Fed assisted bublbles which of course had to deflate at some point.

And as always, the policticians of both parties overreacted to this normal economic cycle and once again accelerated spending. Only now, because of having the football pulled away multiple times before, the GOP was unwilling to put tax increases on the table.

Just my take on things.

Man I get sick and tired of how you guys always blame spending increases on the Democrats. The Republicans are every bit as bad and in fact maybe worse. Reagan spent like a drunken sailor on shore leave.

[pphilfran]

Who is "You Guys"?

Am I a "You Guy"?

:)

[diverdog]

Who is "You Guys"?

Am I a "You Guy"?

:)

No you are yute?

[pphilfran]

I think I would rather be a "You Guy"....

[Tulsa_Fireman]

http://memberfiles.freewebs.com/43/28/86362843/photos/undefined/vinny7.jpg

Uhhh, what's a yute?

[SouthCarolinaSooner]

two whaaat?

[sappstuf]

Man I get sick and tired of how you guys always blame spending increases on the Democrats. The Republicans are every bit as bad and in fact maybe worse. Reagan spent like a drunken sailor on shore leave.

Hey.... When we run out of money, we stop spending. :)

[FaninAma]

You are combining the stimulus with the bailouts...

The financial sector bailouts (TARP 2008) amounted to something like 700 billion dollars...they were in such a rush to avoid a total meltdown they basically handed the money over with little oversight..so the results should surprise no one...

The stimulus (AARA) was a separate entity...somewhere around a trillion...

Tax incentives around 300 billion...
Healthcare 155 billion...
Education 100 billion...
Unemployment and various aid 100 billion...
Infrastructure 100 billion...
Another 100 billion or so in various other stuff...energy, housing, transportation, communication, fed buildings, etc...

Thousands upon thousands of projects...

I actually think both primarily benefitted the banks and fortune 500 companies. Ther are plenty of studies that indicate the tax breaks to companies simply went to shore up their balance sheets and not toward investmnets aimed at ramping up production or producing
jobs.

Some of the stimulus was spent to purchase things but a lot of individuals, including me, used it to pay off debt.

[FaninAma]

Man I get sick and tired of how you guys always blame spending increases on the Democrats. The Republicans are every bit as bad and in fact maybe worse. Reagan spent like a drunken sailor on shore leave.

Yes he did. But he had a little help from the democrats who went back on their promise to reduce spending in exchange for Reagan supporting tax cuts.

[Skysooner]

You have hinted a couple of times about declining energy costs...I can't wait to see the details when they finally are out for public consumption...

It is actually out there in the mainstream if you know where to look. Basically we have over 100 years supply of natural gas right now with at least 17 years of full usage in the US at a marginal cost of $0.00/MCF. This doesn't mean that it will all come online at the same time as there are infrastructure issues, etc. Still it means we can increase our usage significantly and not really dent it. We are finding more all the time. There is a new play called the Liard in British Columbia that is truly mind-boggling but can't afford to be developed at current pipeline capacity and price.

On the oil side, we have been able to leverage the horizontal technology and new fracking designs to be able to produce oil in places like the Bakken and now the Mississippian play. The Mississippian play is north of 4.5 million acres. Even conservative estimates put our primary reserves at 110 billion barrels in North America. This doesn't include the Atlantic coast or most of the California coast as those are relatively unexplored. It also doesn't include the Arctic reserves which should be significant.

What will drive the price of oil down is a glut of oil trying to get into the refineries that are primarily along the Gulf Coast. Many of these refineries aren't geared for light sweet crude but are instead geared to process the heavy crude from Canada. When there is a glut of oil and limited refining capacity and no ability to export (US bans export of unrefined crude oil produced in the lower 48) then you are looking at a situation where prices have to come down. This is good for the consumer but does limit the ability of operators to extract the product at a price that gives us a profit. Without profit incentive, drilling shifts. It is a balancing act, but if the government handles this well (doubtful), we could be completely energy independent in 10 years.

[badger]

I think that tax increases would go over better if we trusted the elected officials the money is given to. We don't, even if we voted for them.

When they take money from our paychecks for social security, the government uses that money for something else and puts an IOU in for social security.

When they take money for gas taxes for fund roads and bridges, the state diverts the funds to wherever the politicians of the time want it --- education under Gov. Henry, Rainy Day Fund under Gov. Fallin.

If we give them more tax money, we all know it will get put in another Solyndra.