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Unemployment is the Real Threat, Not Iran

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It is a popular belief in some quarters that the United States invaded Iraq because they began trading oil in euros instead of dollars and that we are on the verge of invading Iran for the very same reason — to defend the dominance of the dollar as the medium of exchange for buying and selling oil.

This belief goes hand-in-hand with the theory that the dollar is effectively indexed to the price of petroleum in the way it once had a value based on gold and silver. Under this theory, as the oil trade moves away from the dollar it will put the currency into free-fall, with devastating effects on the US economy. The paranoid fringe believes that the need to defend the dollar as the international reserve currency of choice is behind coups and wars all over the world, including in Venezuela and Iraq and now Iran.

Iran has indeed been moving away from the dollar, but contrary to the exclamations of alarmists, it isn't exactly a recent development. Iran has been considering the move since 2004 and actually stopped trading in dollars and started trading in euros in April of 2008. Last month they went a step further to begin to convert their $54 billion cash reserve from dollars to euros as well, an amount which is relatively insignificant compared to the $300 billion or more of oil which they pump every year and which they have been selling for euros for eighteen months.

The predicted outcome of Iran converting from dollars to euros is a falling dollar, and it's certainly true that the dollar is down significantly. In the last 6 months it has dropped 10% and is approaching the point where its value is half what it was in 2000. Yet it is hardly all Iran's doing and wouldn't be reversed just by taking Iran out of the picture, because important though oil is, given the enormous size of the world's economy, a few hundred billion dollars in oil revenue switching from one currency to another really isn't that significant.

In reality many other forces are driving the dollar down, including a perception that it is relatively stable compared to other currencies and what appears to be a recovering trend in the US economy. Many investors are moving away from dollars to more volatile investments because the dollar is not offering the high returns which come from riskier investments.

The weakness of the dollar is also beneficial to other sectors of the US economy. As was demonstrated during the Bush administration, keeping the dollar weak can create liquidity for the government by attracting investors in government debt. Similarly, a weak dollar stimulates the economy and the stock market by attracting foreign investors to the United States looking for bargains. Stimulating economic growth and maintaining government solvency are a lot more important to the Obama administration in its desperate quest for economic recovery than Iran's largely symbolic decision to trade in euros rather than dollars.

The real danger in the economy and for the government is not what currency Iran is trading in, but the high level of unemployment, which reached a 26 year high of 9.8% this week. More unemployment means smaller payrolls, which means less tax revenue for a government that is desperately overextended in debt. Raising taxes will just lead to more problems for business, more layoff and ultimately even less government revenue. This also drags the value of the dollar down, because despite the claims of some theorists on the fringe, whatever real value the dollar has derives from GDP — not oil — and lower employment and fewer operating businesses means a lower GDP.

The solution to the decline of the dollar is not to invade Iran, but to address the problems with the domestic economy. Just attracting more foreign investment with a weak dollar is insufficient for real recovery because it does not create a significant growth in employment or the domestic economy. The key to real economic recovery is ending the flight of businesses and their operations to other countries. This can only be done by making it more profitable to do business in America than to do it elsewhere. This can most easily be accomplished by reducing overhead. The obvious way for the government to achieve that is by lowering corporate taxes.

Right now the US has the second highest overall corporate tax rate in the world at an average of 39.3%, varying somewhat on a state by state basis. That high rate of tax drives companies overseas, but if that corporate tax were reduced substantially or even eliminated it would make companies want to operate in this country rather than in other ones, creating jobs, expanding the economy and ultimately leading to more tax revenue for the government. This would do far more to improve the economy and strengthen the dollar than any action taken against Iran could ever have.

Sadly this does not seem to be in the administration's game plan as it searches desperately for more revenue. They are looking at ideas like a Value Added Tax which would take money directly out of the pockets of consumers or a carbon tax which would essentially act like another corporate tax on the most vulnerable businesses, or confiscatory tax rates on the rich whose fortunes finance the businesses which create jobs. Any of these approaches will lead to more unemployment and less money in the pockets of those who don't lose their jobs. More so-called stimulus also isn't the answer. All it does is move money around without creating anything new except pork projects to get Democrats reelected.

If you don't like a low dollar and high unemployment, don't blame Iran. The real villain is the government, which sits like a bloated leech on top of our economy, sucking it dry.

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About Dave Nalle

  • http://ruvysroost.blogspot.com Ruvy

    Straw man city, Dave!

    If the Americans actually do something to Iran (which is highly unlikely), it will not be over euros versus dollars, it will be over nukes.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Dave,

    One of your best moments, Dave, yet, if I may say. A very balanced, informative and nonpartisan article. You know you can do it if you only try.

    I think your assessment of our economic woes is spot on, identifying the unprecedented unemployment, not likely to be addressed in the near future, as our malaise number one. The all-important correlative factor is of course the unfriendly business environment. And when seen in this light, the failure of the Obama administration to deal with the continuing economic crisis – without a doubt the nation’s foremost problem and still unabated – is indeed monumental. The least one should have expected from the monumental stimulus package was to stop the unemployment skid, create new jobs, and create a climate favorable for business growth and development. None of those things have materialized, and in retrospect it is almost axiomatic that the program has been a total failure. And we continue on the road of not meeting our uttermost problems head on.

    If I find any fault in your presentation, it is only when you argue on behalf of the weaker dollar: your argument is an argument from weakness rather than from the position of strength. Of course there are positives and negatives to a weak dollar, but it’s a doubled-edged sword that, in my opinion, we had better do without.

    So once again, I congratulate you on a well- balanced and thought-provoking article.

    Roger

  • Glenn Contrarian

    Smoke and mirrors…and lots and lots of grape Kool-Aid. That, Dave, is your article.

    Note that I’m not directly blaming you – because you simply don’t know what’s really going on. You’re taking the Republican meme – “Right now the US has the second highest overall corporate tax rate in the world at an average of 39.3%” – which is absolutely true…but you’re not looking at the rest of the story.

    Let’s check some EVIDENCE:

    * More than 60 percent of U.S. corporations failed to pay ANY federal taxes from 1996 through 2000 when corporate profits were soaring and that corporate tax receipts had fallen to just 7.4 percent of overall federal tax revenue in 2003 – the lowest since 1983 and the second-lowest rate since 1934.

    * Just as importantly, the General Accounting Office (GAO) report also found that an astonishing 94 percent of corporations reported tax liability of less than 5 percent of their total income during the same time period.

    Dave, that’s like a regular taxpayer only reporting five percent of his income and paying taxes only on that five percent.

    BUT THAT’S NOT ALL!

    * Corporate tax receipts dropped from an average of 4.8 percent of GDP during the 1950s to 1.3 percent of GDP in FY2003. Treasury Department figures show that actual corporate income tax revenues fell 36 percent from FY2000 to FY2003. And while the statutory corporate income tax rate is 35 percent, the effective corporate tax rate – the actual share of corporate taxes paid on corporate profits – has averaged just 26 percent since 1993, according to the Congressional Research Service.

    What’s REALLY an outrage is that this “twenty-six percent” is being paid ONLY on what’s being reported…which is only FIVE PERCENT of the income of 94 percent of U.S. Corporations!!!!

    * [Most of the current corporate tax revenue shortfall can be attributed to the] Bush administration’s corporate tax cuts enacted in 2002 and 2003 and the loopholes in the tax code that have allowed corporations to shelter income offshore. The 2002 and 2003, tax bills cost $177 billion in corporate tax breaks in fiscal years 2002 through 2005, $44 billion in 2002, $53 billion in 2003, $64 billion in 2004 and $16 billion in 2005 (all figures estimated by the Joint Committee on Taxation).

    * In 2004, the IRS Oversight Board released a special report imploring Congress to go beyond the president’s 2005 budget request of a 4.6 percent increase in funding for IRS and detailing what it identified as a consistent underfunding of tax enforcement activities during the Bush administration. The report also found that the Bush budget for the IRS would lead to about a half-million unresolved delinquent tax cases and create a national tax gap of $311 billion or 65 percent of the projected 2004 budget deficit.

    And just to add insult to injury:

    * Yet the Bush administration was able to find room in its 2004 budget to dramatically increase funding for compliance with the Earned Income Tax Credit (EITC) for low-income families. The Bush budget requested a 68.5 percent increase in EITC enforcement, despite the fact that EITC avoidance represents only 2.8 percent of the overall uncollected tax gap.

    So what’s ‘driving’ corporations overseas? Ask Dick Cheney:

    * During Dick Cheney’s tenure as Halliburton’s CEO, the number of company subsidiaries located in offshore tax havens increased from 9 (in 1995) to 44 (in 1999). One of these subsidiaries (Halliburton Products and Services Ltd.), was incorporated in the Cayman Islands, and was used to get around sanctions on doing business in Iran. (Erwin Seba, Reuters, March 20, 2003)

    But why did they move to Dubai? Well, in addition to little things like covering up gang rape and holding the victim hostage, it turns out that Dubai has no extradition treaty with America…which fact is probably of great comfort to CEO David Lesar who once worked directly for Dick Cheney.

    That, and by re-locating its CEO and other top executives to Dubai, Halliburton can argue that a portion of its profits should be attributed to the no-tax jurisdiction it receives by being ‘based’ in Dubai.

    Summary –

    The terrible, terrible ‘thirty-six percent tax rate’ you referred to is a chimera…because MOST corporations pay NO income tax at all! The reasons why corporations move overseas are (1) cheap labor, (2) lax safety regulations, (3) tax shelters, (4) lax regulations in general…and let’s not forget the MAIN reason – it’s good to open businesses overseas because there’s a PROFIT to be made. Whether you like it or not, the American people NEED that tax income – for such are the price of living in a modern industrialized democracy.

    And when it comes to unemployment, in my opinion the businesses moving our industries overseas is the MAIN culprit for our high unemployment rate…and – as with EVERY other recession in American history since 1900 – our present unemployment rate will NOT ease until one to two years after the recovery (which we’re now experiencing).

    Good Morning, Dave.

  • Glenn Contrarian

    And Dave –

    Not beating up on you in this comment – just thought you’d like to see the current plan by the Arab countries to stop using the dollar for oil trading.

  • http://www.republicofdave.com Dave Nalle

    Note that I’m not directly blaming you – because you simply don’t know what’s really going on. You’re taking the Republican meme –

    I’m not sure what the Republican meme is. The party seems to lack one as far as I can tell. I’m just saying what I’ve been saying now for years. If they’re cathing on then fantastic. But it was Bush who raised the corporate tax rate to this level, so I’m not buying your argument.

    More than 60 percent of U.S. corporations failed to pay ANY federal taxes from 1996 through 2000 when corporate profits were soaring and that corporate tax receipts had fallen to just 7.4 percent of overall federal tax revenue in 2003 – the lowest since 1983 and the second-lowest rate since 1934.

    They largely avoided paying these taxes through moving operations overseas and sheltering income, practices we could discourage by creating a more appealing environment here in the US. And remember, I’m not suggesting lowering corporate tax. I’m suggesting eliminating it entirely.

    Just as importantly, the General Accounting Office (GAO) report also found that an astonishing 94 percent of corporations reported tax liability of less than 5 percent of their total income during the same time period.

    Talk about parroting the party line. You’re echoing Obama and his recent campaign to shut down tax havens, pushing corporations and those who have capital even farther away from the US.

    Dave, that’s like a regular taxpayer only reporting five percent of his income and paying taxes only on that five percent.

    Sounds good to me.

    Corporate tax receipts dropped from an average of 4.8 percent of GDP during the 1950s to 1.3 percent of GDP in FY2003. Treasury Department figures show that actual corporate income tax revenues fell 36 percent from FY2000 to FY2003. And while the statutory corporate income tax rate is 35 percent, the effective corporate tax rate – the actual share of corporate taxes paid on corporate profits – has averaged just 26 percent since 1993, according to the Congressional Research Service.

    You might want to look at more recent figures, because in the later part of the Bush administration we were receiving record amounts of corporate tax.

    What’s REALLY an outrage is that this “twenty-six percent” is being paid ONLY on what’s being reported…which is only FIVE PERCENT of the income of 94 percent of U.S. Corporations!!!!

    So why put corporations in a situation where they have to hide their income to operate in the US. Take that onus off of them and let them operate and make profit freely in the US.

    Most of the current corporate tax revenue shortfall can be attributed to the] Bush administration’s corporate tax cuts enacted in 2002 and 2003 and the loopholes in the tax code that have allowed corporations to shelter income offshore. The 2002 and 2003, tax bills cost $177 billion in corporate tax breaks in fiscal years 2002 through 2005, $44 billion in 2002, $53 billion in 2003, $64 billion in 2004 and $16 billion in 2005 (all figures estimated by the Joint Committee on Taxation).

    In 2005 the US Treasury received over $250 billion in corporate taxes. In 2006 receipts were over $300 billion. So these tax breaks were tiny in comparison to the much improved level of corporate taxes received.

    During Dick Cheney’s tenure as Halliburton’s CEO, the number of company subsidiaries located in offshore tax havens increased from 9 (in 1995) to 44…

    Halliburton is hardly a typical company, though I know you enjoy the opportunity to bash on it. It needs to locate many of its operations overseas and does things which few other companies are even capable of doing. It can’t be used to explain the flight of other companies from the US.
    Summary –

    The terrible, terrible ‘thirty-six percent tax rate’ you referred to is a chimera…because MOST corporations pay NO income tax at all!

    So why continue the hypocrisy and a tax which is only paid by those smaller businesses who cannot relocate overseas?

    The reasons why corporations move overseas are (1) cheap labor, (2) lax safety regulations, (3) tax shelters, (4) lax regulations in general…and let’s not forget the MAIN reason – it’s good to open businesses overseas because there’s a PROFIT to be made.

    Ok, so let’s lower wages and reduce regulation too.

    The first draft of this article actually had a whole section on how we need to lower wages, but I decided it was a distraction.

    Whether you like it or not, the American people NEED that tax income – for such are the price of living in a modern industrialized democracy.

    The Americnan people don’t get any of that tax income and neither does industrialized America. In a capitalist society government revenue is not supposed to be part of the formula of business success.

    And when it comes to unemployment, in my opinion the businesses moving our industries overseas is the MAIN culprit for our high unemployment rate…and – as with EVERY other recession in American history since 1900 – our present unemployment rate will NOT ease until one to two years after the recovery (which we’re now experiencing).

    So you agree that a key element in reducing unemployment would be to bring businesses back to the US, then? I’ll go along with your plan to lower wages if you go along with my plan to lower taxes.

    Dave

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Dave,

    The following article by Robert Reich confirms your thoughts about the phantom recovery.

  • Glenn Contrarian

    Dave –

    I think the root of your error can be found in this one statement:

    The Americnan people don’t get any of that tax income and neither does industrialized America. In a capitalist society government revenue is not supposed to be part of the formula of business success.

    Americans don’t get any of that tax income? Neither does industrialized America? Without going down to the state level (which provides the just-as-crucial lower-level services such as schools, police, fire departments, land title recording, et cetera), then how do you propose we pay for the (quite bloated thanks to YOUR guys) military, the social security checks (and the Medicare coverage) going out to elderly who can longer work, the nationwide interstate freeway system, NASA (which has brought FAR greater benefits than it has cost), the west coast tsunami alert system (which saved my family’s life 40-odd years ago), the Small Business Administration, the aid given to other countries (also known as bribes) that keep them on our side for FAR less than the cost of regional military conflicts)…

    …the list is effectively endless, and you know it. How do you propose we pay for all of that? End Social Security and Medicare? Talk about ‘death panels’ and ‘killing off Granny’….

    These are the things that YOUR tax dollars go to, Dave – and relying on on the working man to pay these taxes is not enough.

    I’ll finish with what you referred to as a logical error: since 1900, every single time America has had huge tax cuts below the 35% level for the top marginal tax rate, we’ve gone into serious recession or depression. With the exceptions of what happened following the Arab oil embargo and the return of forces following WWII, every single time America has had a HIGH top marginal tax rate, we have NOT gone into recession at all.

    Call that a logical error if you like – but if something bad always happens with “A” and something bad rarely (but sometimes) happens with “B”, sooner or later you start to realize that those tax dollars DO come back to the American people and industrialized America in the form of INFRASTRUCTURE that allows America and Americans to achieve far more than they could otherwise.

  • Glenn Contrarian

    Roger –

    If we want to truly recover, we have to do two things – properly (and consistently) regulate our financial system, and RAISE TAXES.

    The ONLY problem with raising taxes isn’t that it would really hurt business – witness all the times that lowering taxes has come just prior to recession, where raising taxes has almost never done so – but it would hurt psychologically…thanks to all the conservatives who would be absolutely positive that all the world would come to an apocalyptic end if they had to sacrifice the cost of another Friday-night six-pack.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Glenn,

    Apparently we have two different concepts as to what (economic) recovery means. To me, it means next-to-full employment and vigorous business activity. Apparently, the present administration has done jack shit about the first, and it’s surely appearing to be doing its best to see to it that the second won’t happen.

    I have no problem with your argument for proper government control of the financial sector, and that’s one thing. But we’re not going to stimulate business activity – and yes, on this soil, because we want to do something about unemployment – by taxing business to no end. Quite the contrary, we’ve got to do our best to offer incentives and tax credits for business development and hiring.

    There’s only so much the government can do about putting people to work (and FDR’s programs are a case in point); this administration has done nothing of the kind, nor on any scale that counts. And even so, such measures are only temporary.

    In the final analysis, government cannot grow business; only business can do that. But what the government can do is to create conditions where this would be possible (which isn’t to say it must also relinquish the necessary controls); indeed, the very idea of stimulus or tax credits is both a carrot and a stick.

    So that’s how I see it, Glenn, in terms of ideas and concepts. (Unless of course you’re ready to scrap capitalism and nationalize all industries, but you haven’t said that.)

  • Glenn Contrarian

    Roger –

    To me, it means next-to-full employment and vigorous business activity. Apparently, the present administration has done jack shit about the first, and it’s surely appearing to be doing its best to see to it that the second won’t happen.

    Again – gains in employment nationwide ONLY follow AFTER gains in the nationwide businessplace…and the lag is always – always! – one to two years after a recovery from a recession.

    So your expectation that Obama hasn’t done jack is a bit high – since NO such recovery has EVER taken place in America (or anywhere else I can think of) since 1900.

    Patience, friend. You should not be bitter. Obama’s done what was necessary to stimulate the economy, and now that the economy is in the process of getting back on track, we can look forward to positive gains in the job market next year, hopefully as soon as the summertime.

    The only misgiving we should have is the missed opportunity to reinstate much-needed oversight. Hopefully that will come as the months go by.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    It’s not for me that I’m impatient, Glenn, but for the millions that have lost their jobs. Al least with FDR, people were visibly put to work, and the perception was there that something is being done. Nada here.

    Why do you think there’s such an unrest and opposition to Obama’s programs? Precisely for that very reason. There are no successes to show to, nothing to indicate that things are going to get better – other than bailing out those who were deemed to big to fail.

    The radical Left was critical from the get-go about Obama not going far enough. Economic woes were more important to deal with than anything else. He was ill-advised and never got the right feel for the pulse of the nation. The opportunity has been squandered. I wouldn’t be surprised to see a Republican elected to the White House come November 2012.

  • http://thingsalongtheway.blogspot.com/ Cindy

    I watched the stockmarket in the doctor’s waiting room yesterday, banks were the only thing moving up. Goldman Sachs was leading the market. Good thing old Obama gave those guys bucks, they’re saved! Probably making plenty of interest on all that bailout money.

    Okay, so the richest bankers and market speculators are good, who’s next in line?

    the economy is in the process of getting back on track, we can look forward to positive gains in the job market next year, hopefully as soon as the summertime

    Not from where I’m looking. It looks like another big round of down from here.

  • http://ruvysroost.blogspot.com Ruvy

    Cindy,

    banks were the only thing moving up. Goldman Sachs was leading the market.

    Gerald Celente warned that what would happen was that for a time banks’ share values would rise. But inevitably the pressures of contantly borrowing money – or printing it out of thin air – would drive share values down. You are seeing exactly what Celente predicted. Not only that, but the guys who benefited the most from Obama’s program – Goldman Sachs – are leading the delusion of pseudo-recovery….

    Nobody has been saved.

  • http://www.republicofdave.com Dave Nalle

    Americans don’t get any of that tax income? Neither does industrialized America?

    You seem to be trying to change the subject, which you yourself introduced. I was not talking about legitimate government spending of tax dollars on infrastructure. Your statement was that taxes are supposed to support industry, which I don’t agree with and which I think most people would agree is a terrible idea.

    then how do you propose we pay for the (quite bloated thanks to YOUR guys) military,

    I would suggest a radical reduction of the military and the closing of almost all overseas bases.

    the social security checks (and the Medicare coverage) going out to elderly who can longer work,

    It’s an obligation we’re stuck with, unfortunately. I’d try to phase it out or privatize it.

    the nationwide interstate freeway system,

    Again, infrastructure spending is legitimate. I’d prefer all highways were paid for with gas tax money, however.

    NASA (which has brought FAR greater benefits than it has cost), the west coast tsunami alert system (which saved my family’s life 40-odd years ago),

    Neither is very expensive, but NASA should be privatized.

    the Small Business Administration,

    No reason for it to exist in a free market.

    the aid given to other countries (also known as bribes) that keep them on our side for FAR less than the cost of regional military conflicts)…

    Should be cut completely and immeidately.

    …the list is effectively endless,

    And that is the root of the problem, isn’t it. Government can always find something to spend money on, and the only way to stop it is to take away the money.

    and you know it. How do you propose we pay for all of that? End Social Security and Medicare? Talk about ‘death panels’ and ‘killing off Granny’….

    I never said anything about getting rid of all taxes, but we can no longer afford to ignore the reality that taxes are killing our economy.

    These are the things that YOUR tax dollars go to, Dave – and relying on on the working man to pay these taxes is not enough.

    I am the working man, Glenn. And if you tax corporations they just pass the cost on to you and me, so what is the point?

    I’ll finish with what you referred to as a logical error: since 1900, every single time America has had huge tax cuts below the 35% level for the top marginal tax rate, we’ve gone into serious recession or depression.

    A popular fallacy promoted by the left. In fact, cuts in the top rates have almost always been followed by substantial economic growth. Take a look at this chart and you’ll see that each period of increased taxes is followed by a decline in GDP.

    Call that a logical error if you like

    Nah, I’ll just call it wrong.

    Dave

  • Arch Conservative

    Our current commander in cheif is the biggest threat to this nation……

    Oh…… I went there………….

  • zingzing

    cheif?

    yeah, you went there.

  • http://www.joannehuspek.wordpress.com Joanne Huspek

    We have monetized our debt to the point where it’s our dollar that will be the joke currency, not the Canadian dollar or the Mexican peso. And then where will we be when all the bucks come home to roost? The world is beginning to see that we’re nuts and will start cashing in.

    It’ll be a scary world indeed.

  • Baronius

    Joanne makes a good point. The article doesn’t mention the impact of our currency-printing binge on the dollar’s value.

  • Glenn Contrarian

    Dave –

    You seem to be trying to change the subject, which you yourself introduced. I was not talking about legitimate government spending of tax dollars on infrastructure. Your statement was that taxes are supposed to support industry, which I don’t agree with and which I think most people would agree is a terrible idea.

    Concerning the bold statement, you’re the one who stated “The Americnan people don’t get any of that tax income and neither does industrialized America.” I pointed out a whole list of ways that Americans (including industrialized America by which I took you to mean American industry) DID receive those tax dollars they paid out…in terms of infrastructure.

    When it comes to tax dollars for infrastructure, then, you’d better talk to the REPUBLICANS who have historically been all about giving tax subsidies to industry – witness the billions in taxes given as subsidies to Big Oil while they were making record profits…and then there’s the ‘back door’ subsidy given to Big Pharma by not allowing the biggest drug customer in the world – Medicare – to negotiate for lower prices.

    I would suggest a radical reduction of the military and the closing of almost all overseas bases.

    In this you are more liberal (or more likely libertarian) than I, because while I’d support removing most of our bases in Europe and a continuation of our withdrawal from the Middle East, the presence of many of our bases are essential in other areas. For instance, our bases in Korea does weigh on Kim Jong Il’s mind. Our bases in Japan keep China from being too belligerent against Taiwan. We’ve got many bases in the developing world (outside the Middle East), and they serve two purposes: one, to help stabilize the country (the effectiveness of which is debatable), and two, to keep from leaving a power vacuum into which China or Russia could enter after we leave. Yes, we could indeed drastically cut our military – starting with MY Navy and particularly MY aircraft carriers – I love the Navy…but she’s far too expensive, too bloated for America’s good.

    It’s an obligation we’re stuck with, unfortunately. I’d try to phase it out or privatize it.

    Phase it out? How are you going to ‘phase out’ old age and the inability of elderly to work? Especially in this age where so many of the elderly wind up in nursing homes? When you come up with a way to phase out old age and infirmity, let me know.

    And when it comes to privatization, here’s another challenge! Add up ALL the fraud, waste, and abuse in both Social Security and Medicare, organize it by year, and compare the yearly total to the yearly salary and benefits of JUST ONE CEO – the CEO of United Health Care.

    Then get back to me and let me know how much more efficient and fiscally responsible the private sector is.

    Again, infrastructure spending is legitimate. I’d prefer all highways were paid for with gas tax money, however.

    Boy, your fellow Republicans would hate you – especially after the prices at the supermarket skyrocket because of the transportation costs. BUT I’d agree with you – because sky-high gas taxes are the main reason why Europe’s mass transit system is SO much better than our own. It would also be a great way to fight global warming. Gonna make a liberal out of you yet….

    Neither is very expensive, but NASA should be privatized.

    Dave, no offense, but that’s rather naive. Private industry is part and parcel of every part of NASA – but NASA works hand-in-hand with every other country in space, with academia across America and the world, and with the most sensitive areas of the government (NSA, CIA, DOD).

    Privatization in everything is just as pollyannish as is privatization in nothing…and just as wrong. Moderation in everything – you know this.

    No reason for [the Small Business Administration] to exist in a free market.

    The SBA, Dave, is not so much about giving financial loans to new business ventures as it is about providing GUIDANCE to those just starting businesses who have wonderful ideas but don’t know how to go about making them happen. How about Googling SBA success stories – what they achieve pays far more back in jobs and commerce (and taxes) than what is invested in them by the SBA.

    [financial aid to other countries] Should be cut completely and immeidately.

    Again, that is rather simple naivete. Sounds good, makes for great sound bites, but in the real world it does not work. Many times that aid (AKA bribes) not only helps open up foreign markets, but also goes towards exposing terrorists, or otherwise decreases the influence of those who would work America ill. Those bribes, Dave, are part and parcel of American DEFENSE.

    …the list is effectively endless,

    And that is the root of the problem, isn’t it. Government can always find something to spend money on, and the only way to stop it is to take away the money.

    And wherever you take away the money, someone gets hurt. Your privatization goal so desirous of Republicans and libertarians does not work nearly so well as you’d have us believe – and the challenge I issued you above should demonstrate this clearly.

    I never said anything about getting rid of all taxes, but we can no longer afford to ignore the reality that taxes are killing our economy.

    Taxes are ‘killing our economy’? Please.

    Dave, you gotta stay off the ‘tax cuts are the cure for all that ails you’ Kool-Aid. The Reagan tax cuts did not ‘pay for themselves’, and neither did the Bush tax cuts. Since 1900, there have been three times our tax rate has fallen below 35% – in the late 1920’s, in 1981, and in the early Dubya years…and what happened after each of those?

    Here’s something that might help you to see the difference between supply-side economic claims and historical economic reality.

    I am the working man, Glenn. And if you tax corporations they just pass the cost on to you and me, so what is the point?

    As if I’m not a working man, too. But if only the working man is taxed, he’s got less money to spend on those products anyway, huh? BUT if only the working man is taxed, because he has LESS money to use, he then has LESS of an option of where to use those funds, huh? However, if corporations are taxed, not only do they pass some of those costs on to the consumer, but they also don’t pay those executives quite as high a salary.

    A popular fallacy promoted by the left. In fact, cuts in the top rates have almost always been followed by substantial economic growth. Take a look at this chart and you’ll see that each period of increased taxes is followed by a decline in GDP.

    I looked at your reference and studied it a while…and the website author has it backwards. Do the tax receipts determine the GDP? Or does the GDP determine the tax receipts? A simple critical look at ALL the dips in the tax receipts (and not just the ones highlighted) shows that the the fall in tax receipts comes in the year of – or the year following – the dip in the GDP. Remember, taxes come FROM the GDP and not the other way around.

    AND the chart itself obviates the error in your claim…because the five years of increasing tax receipts in the 90’s didn’t result in a GDP dip. The dot-com bubble DID…and the tax receipts dropped precipitously immediately thereafter (assisted by Bush’s demolition of the tax code for the wealthy).

    Try again, Dave. And to repeat your claim:

    cuts in the top rates have almost always been followed by substantial economic growth

    This is only partially true…because the cuts in the top rates that went at or below the 35% margin occurred in the late 20’s (followed by depression), in 1981 (followed by the then-worst recession since the depression), and 2002 (followed by what IS the worst recession since the depression).

    The ‘almost’ in your ‘almost always’ claim left some pretty significant wiggle-room, didn’t it? Namely, the three worst economic times in American history since 1900.

    Nah, I’ll just call it wrong.

    You’re entitled to your opinion – but it would be better if you let the facts determine your opinion, rather than insisting that your opinion determine the facts.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Glenn,

    Let me clarify my disagreement with you – it pertained only to the points I talked about, nothing else. And I was impression that as long as Dave stuck to those points only, I was in agreement with him on conceptual grounds — which is to say, on what makes sense to me in term of economic recovery. And in that respect, Dave was, IMO, on his best behavior (again, so long as he stuck to those points and not ventured beyond).

    Well, I see now that this was too much to hope for, as evident by your last response to you. The statement that struck me the most “We don’t need SBA in a free market system.” (I’m paraphrasing, of course.)

    To my thinking, this discredits the entire position, so here we are again: Dave’s back to his old tricks.

    I have a sort of diagnosis to offer –though I know I’ll be criticized severely by all and sundry for playing an amateur psychologists, but I’ll venture it anyway.

    It’s a case of a person not doing his own thinking (or at least sufficiently so), a case of swallowing up economic and or political theories wholesale, as it were, without the proper exercise of their own critical faculties and deciding on the merits and demerits of those theories according to the person’s own lights.

    Sorry, Dave. But please understand: I’m offering this in the spirit of constructive criticism. You might want to look at this.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    was … under the impression …

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Breaking news from Politico:

    Whodunit? Sneak attack on U.S. dollar.

  • http://www.republicofdave.com Dave Nalle

    I pointed out a whole list of ways that Americans (including industrialized America by which I took you to mean American industry) DID receive those tax dollars they paid out…in terms of infrastructure.

    Your definition of infrastructure and mine are clearly different. As with most of this, your definition would be very broad, while mine is much more narrow.

    When it comes to tax dollars for infrastructure, then, you’d better talk to the REPUBLICANS who have historically been all about giving tax subsidies to industry – witness the billions in taxes given as subsidies to Big Oil while they were making record profits…and then there’s the ‘back door’ subsidy given to Big Pharma by not allowing the biggest drug customer in the world – Medicare – to negotiate for lower prices.

    Again, industry is not infrastructure. Roads and bridges and tunnels and reservoirs are infrastructure. The government has a legitimate role in providing services and facilities which cannot be effectively provided or managed by the private sector. There is no legitimate role for government in subsidizing other industries which can be self-sufficient. Since you don’t share this limited view of government then I’d think you’d be applauding the big spending Republicans of recent years. I certainly don’t support them.

    In this you are more liberal (or more likely libertarian) than I, because while I’d support removing most of our bases in Europe and a continuation of our withdrawal from the Middle East, the presence of many of our bases are essential in other areas. For instance, our bases in Korea does weigh on Kim Jong Il’s mind. Our bases in Japan keep China from being too belligerent against Taiwan. We’ve got many bases in the developing world (outside the Middle East), and they serve two purposes: one, to help stabilize the country (the effectiveness of which is debatable), and two, to keep from leaving a power vacuum into which China or Russia could enter after we leave.

    Why is it almost exclusively our obligation to bear all of this responsibility and all of this expense? If we were not doing this then other nations would have to step in to fill the void or at least do their fair share. We are not and should not be the world’s policeman. Replace the UN with a functional world peace organization and then fund it properly and let them do the job.

    Phase it out? How are you going to ‘phase out’ old age and the inability of elderly to work? Especially in this age where so many of the elderly wind up in nursing homes? When you come up with a way to phase out old age and infirmity, let me know.

    Please. Do try to limit your intentional misinterpretations of my comments to the lower ranges of ridiculousness.

    And when it comes to privatization, here’s another challenge! Add up ALL the fraud, waste, and abuse in both Social Security and Medicare, organize it by year, and compare the yearly total to the yearly salary and benefits of JUST ONE CEO – the CEO of United Health Care.

    Why? I never said one word about fraud, waste or abuse in these programs and comparing them to someone’s salary in private industry is just comparing apples and oranges. Nonsensical.

    The need to transition social security to a privatized sysem is about returning control to the taxpayer and getting them a better return on their investment. Even the most conservative investment in government securities would more than double the retirement income seniors get from social security.

    Boy, your fellow Republicans would hate you – especially after the prices at the supermarket skyrocket because of the transportation costs.

    So? We need to transition from large scale agriculture to regional distributed agriculture anyway. I’ll take the thanks of the small farmers over the cries of the agromonopolies.

    BUT I’d agree with you – because sky-high gas taxes are the main reason why Europe’s mass transit system is SO much better than our own. It would also be a great way to fight global warming.

    It also has a lot to do with cities being older and located closer together. Nothing in Europe is laid out like Texas and no amount of spending will change that.

    Gonna make a liberal out of you yet….

    As I’ve said before, I already am a liberal. It’s just that the left has moved away from liberalism towards statist socialism and left me behind.

    Dave, no offense, but that’s rather naive. Private industry is part and parcel of every part of NASA – but NASA works hand-in-hand with every other country in space, with academia across America and the world, and with the most sensitive areas of the government (NSA, CIA, DOD).

    All of thse groups also work with private industry. There are multiple companies which are interested in doing what NASA does, but they are constrained by what is effectively a government monopoly. Our companies are sending their satellites up on Indian rockets now and doing it cheaper and faster than NASA can. NASA has severely retarded our progress into space.

    The SBA, Dave, is not so much about giving financial loans to new business ventures as it is about providing GUIDANCE to those just starting businesses who have wonderful ideas but don’t know how to go about making them happen. How about Googling SBA success stories – what they achieve pays far more back in jobs and commerce (and taxes) than what is invested in them by the SBA.

    A job which numerous private organizations like Chambers of Commerce already do admirably. If the SBA were to go away someone would fill the need it serves because there is money to be made doing it.

    [financial aid to other countries] Should be cut completely and immeidately.

    Again, that is rather simple naivete. Sounds good, makes for great sound bites, but in the real world it does not work. Many times that aid (AKA bribes) not only helps open up foreign markets, but also goes towards exposing terrorists, or otherwise decreases the influence of those who would work America ill. Those bribes, Dave, are part and parcel of American DEFENSE.

    Those bribes go to support dictators like Robert Mugabe. We don’t spend that money well or wisely and we spend too much of it. Private industry should pay to open up its own markets. This is no longer a colonial world where the government has to subsidize the enormous cost of exploration and development in distant lands. This idea of foreign aid is fundamentally broken and needs to be rethought.

    And wherever you take away the money, someone gets hurt. Your privatization goal so desirous of Republicans and libertarians does not work nearly so well as you’d have us believe – and the challenge I issued you above should demonstrate this clearly.

    I see no evidence of this. In the cases where privatization has been attempted the results are generally positive.

    However, if corporations are taxed, not only do they pass some of those costs on to the consumer, but they also don’t pay those executives quite as high a salary.

    There’s zero evidence to support this supposition. If they are just passing the taxes on, why would that change the salaries of their executives.

    And this whole idea that executive salaries are inflated is basically bullshit. Only a very few top executives at a very few huge companies have inflated salaries and compensation packages and in those companies if you were to take their salaries away entirely and redistribute them to the average worker it would add only pennies a day to their earnings. Those huge salaries are usually proportional to the hugeness of the company which generates them.

    I looked at your reference and studied it a while…and the website author has it backwards. Do the tax receipts determine the GDP? Or does the GDP determine the tax receipts?

    Irrelevant. The important relationship is not tax receipts to GDP, which is obvious, but tax RATE to GDP. And if you give a year or two for lag time there is generally a rise in GDP growth after a cut in the tax rates. But as with all these economic issues there are so many other factors that no sensible economist would commit one way or another on any single factor determining GDP growth.

    But what I do know as a non-economist is that letting people spend more of their own money is better for them than letting the government spend it for them and that applies to every income group.

    the cuts in the top rates that went at or below the 35% margin occurred in the late 20’s (followed by depression),

    Do you really want to try to argue that tax cuts caused the depression? Good luck with that.

    BTW, you conveniently skipped the tax cuts in 1964.

    in 1981 (followed by the then-worst recession since the depression),

    Which clearly got its start in 1979 as anyone alive then can remember.

    and 2002 (followed by what IS the worst recession since the depression).

    Again, do you seriously want to try to blame tax cuts for the recession, because you’ll be hard pressed to find an economist, including Paul Krugman who agrees.

    Dave

  • Glenn Contrarian

    Dave –

    Incredible. Absolutely freaking incredible.

    Some quotes below are paraphrases…but the meanings are accurate.

    “YOU are talking about a BROAD interpretation of infrastructure and I’m talking about a NARROW interpretation!”

    Talk about dodging the point.

    “I certainly don’t support the big-spending Republicans.”

    So…who did you vote for? I hope it was Ron Paul, because if you voted for Bush/Bush/McCain since 2000, you DID support those ‘big-spending Republicans’.

    “Do try to limit your intentional misinterpretations of my comments to the lower ranges of ridiculousness.”

    I did not misinterpret. I pointed out to you the consequences of your statement that you wanted to phase out Social Security and Medicare. And I caution you to remember that I do NOT deceive others by ‘intentional misinterpretation’. I am not a liar.

    “I never said one word about fraud, waste or abuse in these programs and comparing them to someone’s salary in private industry is just comparing apples and oranges. Nonsensical.”

    No, you didn’t say one word about it. I did…and I did so hoping that you would get a clue that (1) there is NO effective difference in having a certain amount of fraud, waste, and abuse in one system and in of another system of identical scope paying the boss more than the amount of fraud, waste, and abuse in the first system. AND that’s not counting the fraud, waste, and abuse that WILL be part and parcel of the second system! When it comes to dollars, Dave, there’s NO DIFFERENCE!

    “Our companies are sending their satellites up on Indian rockets now and doing it cheaper and faster than NASA can. NASA has severely retarded our progress into space.”

    LOL!!!!! Um, Dave, I don’t know if anyone’s told you, but the Indian space agency is STATE-OWNED. Furthermore, their entire logistics chain from iron ore mine to rocket on the launching pad is FAR cheaper…and the only way we can compete with their wages is if the American people are paid Indian wages! You think your privately-owned space agency is going to compete with India? Man…where’d I put that deed to that bridge in New York?

    Furthermore, Dave, read up on private space agencies – there’ve been quite a few of them (even bankrolled by billionaires)…and to my knowledge not one of them is making a whole lot of money. But I guess all the proof you need is your belief that you are right.

    “Those bribes go to support dictators like Robert Mugabe. We don’t spend that money well or wisely and we spend too much of it.”

    Um, remember Idi Amin? We had a choice – either allow him to continue to eviscerate his country to feed his hunger, invade, or bribe him to get him out of there. We paid him $1B to leave. Which was money more wisely spent – $1B to get rid of Idi Amin? Or nearly $1T (and 5K American lives and >100K Iraqi lives) to get rid of Saddam? He did offer to leave if we paid him like we did Idi Amin, you know.

    A job which numerous private organizations like Chambers of Commerce already do admirably. If the SBA were to go away someone would fill the need it serves because there is money to be made doing it.

    Ah, the COC – which several major companies are now leaving due to the COC’s insistence that global warming is not of concern. They also support the current case before the Supreme Court – and if they win, corporations will be allowed to spend all they want to influence elections. You think we have an oligarchy now, just wait and see what happens if the COC wins. You claim you’re against government providing subsidies to industries…and the proof for or against your claim will be in your support for or opposition against that Supreme Course case.

    I see no evidence of this. In the cases where privatization has been attempted the results are generally positive.

    Surely! Just like the nation’s prison system, huh? Where the companies in charge will even bribe a judge to give harsher sentences! Yeah, that’s REAL positive!

    There’s zero evidence to support this supposition. If they are just passing the taxes on, why would that change the salaries of their executives.

    The EVIDENCE, Dave, is the FACT that CEO’s presently earn more in relation to the base workers than at any other time in American history…and more (in relation to their workers) than in any other democracy on the planet! I don’t idly make these claims, Dave – I can back them up. So YES, there IS evidence that higher taxes (like in other countries and in America before Reaganomics) DO lead to lower CEO salaries.

    And if you give a year or two for lag time there is generally a rise in GDP growth after a cut in the tax rates.

    You’re RIGHT! It’s called RECOVERY after a RECESSION!

    But what I do know as a non-economist is that letting people spend more of their own money is better for them than letting the government spend it for them and that applies to every income group.

    Which is WHY I said that it’s better that corporations are taxed too instead of having ONLY the working man taxed!

    Do you really want to try to argue that tax cuts caused the depression? Good luck with that. BTW, you conveniently skipped the tax cuts in 1964.

    Um, FYI, the 1964 tax cut did NOT go below the 35% margin, did it? NO. Taxes still remained well above 40%. It was the below-35% tax cuts to which I referred…and the 1964 tax cut DID NOT APPLY.

    When you cut taxes too deeply, Dave, the government’s ability to provide proper infrastructure (including everything from roads to regulation to enforcement to diplomacy) is insufficient to support the function of the nation’s economy. ANY economist worth his salt would tell you the same. In America’s case, so far that threshold seems to be at or about 35%…and the longest sustained boom market in American history came when our tax rate was 39% (thanks to GHWB and Clinton).

    Are tax cuts solely to blame? Of course not. But it is folly to pretend that they do not play a major role.